New Developments
The re-zoning of Midtown is to affect the area from Lexington to Fifth avenues and East 39th to East 57th streets. Developers can buy additional air rights from the city. Within a smaller Grand Central Sub district developers can buy from owners of landmarked properties that are under built. Argent Ventures controls nearly all of those air rights through its ownership of the Grand Central terminal.The record sale price was about $6,000 a square foot in 2008 in residential, and has now reached more than $10,000 a square foot. The very-rich have finally unleashed the liquidity that was well known to exist. Meanwhile the middle of the market, the $5 million to $20 million range, has been left behind. There were 388 sales in the $5 million area this year through August, down 7.4 percent year-over-year.
For Manhattan development deals so far in 2012, the price per buildable square foot is $323.43, up from $308.32 last year; in Brooklyn, it’s grown to $117.71 from $113.24 in 2011. In the first six months of 2012, there were 275 sales of vacant properties (including parking lots) in New York City. If that sales pace continues, the year will conclude with some 550 land buys, the most since 2008, when the city saw 620. There were 27 vacant Manhattan land purchases in the first half of this year. If that activity keeps up, 2012 will see more activity than last year, when the borough had a total of 46 deals for vacant land; 2010, when there were 41; 2009, when there were 23; and even 2008, when there were 37.
Sales of existing structures, or demo sites, Manhattan has already seen 44 deals for development sites in the first half of the year, worth $809.4 million. That puts the borough on track to far exceed last year’s 54 total transactions. The strong residential market is one of the main forces driving more investors to buy land. The average monthly rent for a Manhattan apartment, for example, hit a high of around $3,400. Prices for new condos in some areas, meanwhile, are now hovering around $2,000 per square foot.
Land prices have recovered. Development sites are trading for close to and even exceeding the levels they hit just before the 2008 financial crisis. Eager developers, encouraged by lenders with a newfound willingness to write loans for construction projects, are acquiring development sites across the city, pushing up land prices. The gains in price and volume are being driven by a flurry of activity in Manhattan and Brooklyn. In fact, the surge for land has some developers worried that a bubble is imminent. The asking prices for some properties are twice what they were just 12 months ago. Prices are clearly on the rise.
The priciest Manhattan development deal per square foot so far in 2012 was the sale of a parking lot at 24 Varick Street, also known as 11 North Moore. The deal closed in June for $47.7 million, or $707 per buildable square foot. The site is being developed into a 20-unit condominium.
While a particular stretch of Fifth Avenue in the 50s has long been home to the most expensive retail in New York City, it’s less impressive Fifth Avenue between 42nd and 49th streets has begun to rival it in terms of rents and high-profile tenants. High-end fashion retailers have recently signed leases in the stretch known as lower Fifth. The reason for the strip’s new-found appeal is the rise in international tourism in combination with a dearth of space in the upper Fifth region above it.
The site, at 210 Delancey Street on the corner of Pitt Street, is an assemblage of five parcels that 53 Chinese-American investors purchased last August for $8.48 million. Now they have won approval for a 12-story building designed by Michael Kang with 69 apartments, an amenities space, 11 parking spots and an 8,352-square-foot community facility.
Three East Side religious institutions, just outside the city’s proposed boundaries for the Midtown East rezoning, plan to petition the Bloomberg administration to permit them to sell air- rights to developers looking to build to the eventual new limits.
There are two Class B office towers in the Diamond area of Midtown that are facing foreclosure after the owners, run by the Manhattan-based Triangle Assets, seems to have defaulted on one of the buildings. The owners of the building appear to have not made loan payments since December of 2011. The balance of the loan is $51.9 million, which includes $46 million in principal, plus default interest and other charges.
A court has temporarily stopped the contracted sale of the Domino Sugar Factory development site to Two Trees Management. The sale has been tangled in a legal web ever since the Katan Group, a partner of CPC Resources in the development of the site, sued to block CPC’s sale of the site because it felt its partner did not pursue the highest possible price. In June, Two Trees agreed to pay $180 million in the transaction.
Last week the state’s Supreme Court dismissed Katan’s lawsuit because the firm did not have the right of first refusal on the property. Katan appealed that decision, and the Supreme Court Appellate Division allowed for an emergency stay to prevent the sale from closing until Katan’s appeal is addressed.
The Empire Stores, a 72,000-square-foot swath of land in Brooklyn Bridge Park, is finally going to be redeveloped. The city will issue a request for proposals for the redevelopment of the series of brick and timber buildings.
The Brooklyn Bridge Park Corp., the entity responsible for overseeing the park, would like a long-term plan to preserve the building even during its adaptive reuse. The buildings have sat vacant for 50 years.
Staten Island has taken the lead in the race for New York City’s first outlet shopping mall. BFC partners announced it officially signed a deal to develop a hotel and outlet mall, Harbor Commons, and will have up to 350,000 square feet of retail and 120,000 square feet for a 200-room hotel in St. George, Staten Island. The complex will include a 1,250 parking garage and will be next door to the Richmond County Ballpark, home of the Staten Island Yankees. The first outlet in New York City, Harbor Commons will include around 100 designer outlets in addition to restaurants and cafes.
The Department of Buildings took in $51 million more than it anticipated in the fiscal of year 2012, as the agency stepped up enforcement, increased fees and saw a slight uptick in construction applications.
The Bloomberg Administration estimated the profitable agency would take in $146.9 million in revenue. Instead, it took in $198.2 million, the highest in the agency’s history, and $33 million more than the previous record in fiscal year 2011.
The Helmsley Park Lane Hotel on Central Park South is now chasing the astronomical prices units surrounding Central Park have been commanding. The hotel is switching a portion of its rooms from hospitality to residential. The hotel plans to convert its 18th to 44th floors into residential units, a move estimated to cost around $56 million.
A debt program called BuildNYC allows non-profit and educational organizations to borrow at below-market rates to fund real estate related development and construction projects, has sourced another $26 million of deals. New loans include $21 million bond offering for the Marymount School of New York, a Pre-K through 12th grade Catholic school on the Upper East Side, and $5 million in financing for The Center for Family Support, a social services provider. The city does not lend out the capital in the program itself nor guarantee its repayment. Rather, BuildNYC allows bondholders, including financial institutions and individuals, to forgo having to pay city, state, or federal taxes on the proceeds of the debt, meaning they are willing to accept a lower rater of return, creating the discounted cost to the debt for the borrower.
The city is seeking a developer and operator to breathe new life into a vacant lot between the Scream Zone and what next summer will be Steeplechase Plaza, a 2.2-acre plaza what will be the home of the restored B&B Carousell, Coney Island's last historic carousel. For the lot, the city is seeking proposals for measures nearly an acre and is located at 502 Surf Avenue and 1501 Boardwalk West. The city wants to lease the site for a 10-year term as is. The selected respondent will be responsible for all costs and expenses involved in building and operating the site.
The tunnel that will connect Long Island Railroad trains to Manhattan is now complete. Workers finished excavation at the project, the largest infrastructure project currently underway in the country. The tunnel goes from Sunnyside, Queens, to a cavern 12 stories beneath Grand Central Terminal.
Landlords are now cutting up spaces to court smaller tenants. At the Graybar Building at 420 Lexington Avenue, they are dividing 10,000 to 20,000 square-foot spaces into 2,500- to 6,000-square-foot units, and building out the spaces for free.
The 125-year-old Harvard Club of New York is planning to add a rooftop bar and terrace, a doubles squash court and additional guest rooms to its landmarked building in Midtown. A plan is to be presented before the Landmarks Preservation Commission.
The city is looking to clean up another neglected New York infrastructure: its many piers and wharfs. The long-neglected wooden structures need further maintenance, in light of rising numbers of microscopic water worms, and other problems. The New York City Economic Development Corp. issued a request for proposals for ways to inexpensively fix up the piers.
If Walmart still has its eye on New York City, it is going to have to focus on another location. Related Companies’ Gateway II mall, the long-rumored East New York site of a city location for the retail giant, has signed a deal with Shop-Rite supermarkets to anchor the development.
City Planning approval of the rezoning of West Harlem and residents are voicing concerns that it will allow outsized development. Locals are concerned about the size of building allowed on West 145th Street, and have written to the City Council asking that they reject the proposal. The rezoning will reach City Council in the next month or so.
Much of New York’s essential infrastructure was built with private funds. But with state and local budgets under increasing strain, the port authority of NY/NJ believes that the private capital will dominate future PA developments.
Related Companies will bring a school for children with learning disabilities to the first five floors of its forthcoming residential development at 205 East 92nd Street. The Windward School had for years been searching for a location, but settled on the site of a 35-story tower Related plans to build between Second and Third avenues. The school caters to students with dyslexia and is expects to open the 60,000-square-foot facility by 2015.
A coalition of community groups is trying to block the Bloomberg administration’s plans to bring two professional sports arenas and a one million-square-foot mall to the area surrounding Flushing Meadows Corona Park in Queens.
Six groups, including Make the Road New York, are trying to hold up necessary approvals for the projects on the basis that the city is taking away open space without accounting for whether the neighborhood could support the significant increases in traffic and population the projects would bring. The community is also concerned the mall would drive out smaller local business.
In order to resume construction at the 9/11 museum, the biggest byproduct of that agreement may be in the development of a high-rise residential building at the former Deutsche Bank building site. The transaction had the Port Authority of New York & New Jersey turning over ownership of eight acres of the 16-acre World Trade Center site, which include the museum and the memorial, in exchange for Site 5, known as the land that once held the Deutsche Bank building at 130 Liberty Street. The site should be nearing completion by next year’s September 11 anniversary, and is slated to open late 2013 or early 2014.
The Jumeriah Essex House, a 509-room hotel on Central Park South, fell into special servicing. The owner had reached an agreement to sell the asset, may be able to catch up on payments for the loan, which is estimated to be for between $180 and $186 million.
Tishman Speyer is now backing the Rainbow Room’s “interior landmark” status: There is still no word on when the Commission will take a vote on the matter or on who will operate the space.
Companies such as BlackRock, Angelo Gordon & Co and Starwood Capital are beginning to sell off shovel-ready development sites they bought on the cheap when the economic downturn hit. These money managers, who purchased cheap plots of residentially zoned land in bankruptcy proceedings from troubled developers, are seeing returns in excess of 20 percent on their investments, thanks to the increasing value of land.
The city of New York, the City University of New York and Memorial Sloan-Kettering Cancer Center reached an agreement for the construction of two research and medical facilities on the Upper East Side. Sloan-Kettering will build a cancer care facility and CUNY’s Hunter College will build a new facility for science and nursing programs. The new building will eliminate the need for redundant infrastructure, such as cafeterias and libraries, at the school’s 25th Street campus, which the university will eventually vacate.
The city will sell a 66,000 square-foot site at 525 East 73rd Street to CUNY, which will build the 336,000-square-foot science and nursing facility there, for $215 million. The cancer center will span up to 750,000 square feet.
Brooklyn’s first “food incubator” has found a home: the Crown Heights commercial mixed-use development. The 3rd Ward, a Bushwick-based “multi-disciplinary workspace and education center,” is finalizing plans to open a what they bill an incubator in a 30,000 square-foot-space on the ground-floor at Butler’s 1000 Dean Street, along with 12,000 to 15,000 square feet of office space on the second floor. 3rd Ward and Butler are finalizing a 20-year lease.
Brooklyn has seen an even more dramatic spike in activity. Brooklyn’s most active since the financial crisis 206 vacant properties sold, that’s more than the 195 that traded in 2008.
Brooklyn’s popularity has grown throughout the downturn and residential rents in Brooklyn have been growing by about 10 percent per year.
The vacant lot at Johnson Street was supposed to be the site of Oro’s sister building, but developers appeared to have scrapped those plans when they put the land on the market this year.
In June, at 61 Park Place in Park Slope, a 5,000-square-foot building owned by the Catholic Church was purchased for $5.75 million, or $357.50 per buildable square foot, the priciest per-square-foot deal this year in Brooklyn. A demolition permit for the site has already been issued.
A local developer in Greenpoint, Brooklyn, wants to turn his auto parts store into a 140-unit mixed-use development and is seeking a zoning variance to build it. The developer owns a shop on McGuinness Boulevard between Greenpoint Avenue and Calyer Street. He is proposing an eight-story 80/20 project with 140 apartments, 90 parking spaces, and 23,000 square feet of ground floor retail space.
Hotel developers in New York City have become dependent on the EB-5 program that gives visas to international investors in job-creating projects. 15 Marriott projects in the last four years, including a Courtyard Marriott in Midtown Manhattan, Sam Nazarian’s Park Avenue South hotel and Felcor Lodging Trust’s $230 million redevelopment of the Knickerbocker Hotel are all relying on the program for funding. Now the program offers inexpensive capital in a market otherwise beset by tight credit. EB-5 investors frequently accept returns of less than 4 percent, where interest rates on debt can range from 6 percent to 10 percent and equity partners want 20 percent returns.
Foreigners are buying visas and are much less concerned about the rate of return they earn on their investment. Though other New York city projects, including the Barclays Center and the International Gem Tower, have relied upon this financing, they have been criticized for bending employment data to secure it.
Brooklyn is the second most expensive place to live in the country. Brooklyn is still cheaper than Manhattan, but compared to other traditionally expensive locales such as Honoloulu, San Francisco and San Jose, the borough is no bargain.
The Durst Organization will not seek LEED certification for its pyramid-shaped condominium project on West 57th Street, opting instead to use its own criteria to assess the environmental impact of the building. The decision, from a developer known for its embrace of “green” building practices, could alter the way other builders evaluate the sustainability of their developments.
Hunts Point Produce Market is again threatening to move to New Jersey. Despite having secured a $172.5 million incentive package from the city. The market and the city were believed to be on the verge of finalizing an agreement to keep the market, which generates $2.3 billion in sales annually and employs more than 3,500 people, in the Bronx, where it has been located since 1967. But the market cooperative and the city cannot agree on the role of the Business Integrity Commission, an agency charged with preventing organized crime in carting.
The leases at 10 former New York City locations of discount department store Daffy’s are now being marketed by JEMB Realty Corp. The firm has partnered with Aurora Capital Associates to sell off the leasehold interests, totaling 15 in the New York area, which it acquired for $43 million after the retailer filed for Chapter 11 bankruptcy in July. The largest location is the 50,000-square-foot flagship at 135 East 57th Street. Other interests included in the portfolio are located in the Flatiron District, the Financial District, Soho, Times Square, Madison Avenue and Columbus Circle.
Jamestown Properties’ controversial plan to expand the Chelsea Market got the green light although not without significant alterations. The City Planning Commission gave its unanimous approval for the project, despite opposition from Manhattan Borough President and ambivalence from City Council Speaker on the condition that Jamestown give approximately $12.7 million to the High Line, some $6.3 million to affordable housing in the area and reduce the scale of the additions.
Development Corp. approved Howard Hughes Corp.’ overhaul of the South Street Seaport retail complex, the local community is far from a done deal. The project still has to undergo the Uniform Land Use Review Procedure, which usually endures for seven months, and there are still significant concerns. The ULURP board will raise questions as to what the community would get in exchange for approving the complex, work to ensure there is enough open space and demand assurances that Howard Hughes has the financial wherewithal to complete the project. But it’s main concern is a master plan for the South Street Seaport area. The master plan is probably going to include a tower on the site of the Tin Building and the New Market Building, which our community, of course, is going to be opposed to.
Axel Stawski’s 579 Fifth Avenue has undergone a quiet, yet transformational, renovation. And its new look provides some insight into the building’s future use. It looks like the property, now home to small jewelers and a bank, is looking to attract tenants in search of full-floor spaces, as well as to fashion retailers.
Third Avenue’s weak office market compelled the Durst Organization to take a different approach to finding tenants for its building at 205 East 42nd Street, where Pfizer vacated about 250,000 square feet two years ago. It decided to try and sell the space rather than lease it. The landlord has found a buyer for 170,000 square feet of the space in the City University of New York. Terms of the agreement were not disclosed, Durst Organization would regain control of the space in 30 years.
