real estate: December 2007

Saturday, December 22, 2007

Suits target lots sold on the cheap in Newark

Newark Mayor Cory Booker yesterday fired his first legal salvo to reclaim scores of discounted municipal lots that were sold to builders by the previous administration but never developed.

Corporation Counsel Aney Chandy said the lawsuits filed against five builders yesterday -- seeking to regain 19 lots -- represent "the first wave" in Newark's efforts to reclaim and then develop languishing city land.

"This administration will not tolerate people who have abused the process for acquiring city-owned parcels," Booker said. "We are ending policies of the past administration and affirmatively working to regain land from those who did not fulfill their commitment to the city and to our residents."

Chandy said two more lawsuits are imminent, including one against TRI, a company owned by Tamika Riley. Riley was indicted with former Mayor Sharpe James last summer on charges that the two conspired to defraud Newark by selling Riley discounted city land. She, in turn, flipped the properties, reaping profits in excess of $700,000, according to the indictment.

Riley could not be reached for comment.

The lawsuits filed yesterday in Essex County Superior Court result from a survey of city land sales from 2000 through 2003. The city is working out settlements with 31 others developers, Chandy said, and also has begun a survey of city land deals from 2004 through 2006, which could yield more legal action.

Stefan Pryor, the city's director of housing and economic development, said eight of the 31 developers were in the process of developing their land and a handful began soon after receiving notification letters. Another six were nonprofits, which had the will but not the ability to develop, so the city is assisting them in those efforts, he said.

Most of the developers contacted yesterday said they were unaware the lawsuit had been filed, while several said they planned to try to resolve the matter with City Hall.

From the late 1990s until James left office in 2006, his administration sold thousands of city lots at $1 to $4 per square foot to jumpstart a housing boom in all five wards of the city. A Star-Ledger analysis concluded that comparable property was selling for an average of $25 per square foot.

When the real estate market heated up in 2003 and beyond, houses were selling for more than $500,000, earning the developers huge profits, and prompting criticism of the discounted land sales.

When the market cooled, some developers sat on their lots, city officials charge, and engaged in land speculation, which is prohibited in redevelopment contracts. Most contracts call for developers to build within 18 months of purchase.

Booker, who has long criticized the discounted land deals, is expected to unveil a new policy today for the sale of city-owned land, which would eliminate discounted prices unless it benefits the city.

Some of the developers said the lawsuits took them by surprise.

Willie Hall, president of Greater Refuge Redevelopment Corp., said the city informed him of only one of the seven addresses it seeks to reclaim.

"I'm going to sign a contract tomorrow morning (Tuesday) at 10 a.m." to develop that site, he said, referring to property on South 19th Street.

Peter Santos, owner of Artco Contracting & Development, said a reporter's inquiry was the first he had heard about the matter. The city is seeking to reclaim six lots from Artco.

Jack DaSilva, one of the leading developers of city-owned land, said he was not familiar with the lots the city is seeking to reclaim.

"If it's a buildable lot, I'll fight this," said DaSilva, president of Brick City Development Group, which has built 24 multifamily homes on property bought from the city.

Joe Romagnino of Bismark Construction Corp. declined comment. The city is seeking to reclaim one lot from Bismark.

No one could be reached from Clove Development Corp., from which the city seeks to take seven lots.

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source:nj.com

Gyms muscle into fringe neighborhoods

Couch potatoes, brace yourselves -- gyms are muscling into underserved areas all over New York City, from the Lower East Side to Bay Ridge to Jamaica to the Bronx.

Powerhouse chain New York Sports Clubs will open a roughly 20,000-square-foot location on 86th Street in Bay Ridge in the first quarter of next year. This follows fast on its Bronx debut on Bronxdale Avenue last month, and an October opening on 145th Street, billed as the first big health club above 125th Street.

After saturating much of Manhattan with approximately 40 clubs, the company is now aggressively going after more Bronx spaces, as well as sites in Washington Heights and Williamsburg. NYSC is also pursuing space on Third and Fourth avenues in Park Slope. Plans call for six to 10 more sites in the New York region annually.

"There is plenty of room for growth in the boroughs," said Gerard Buckley, director of development for New York Sports Clubs' parent company, Town Sports International Holdings Inc.

Even as NYSC beefs up its presence, smaller operators such as Ludlow Fitness and budget-priced chain Planet Fitness are bulking up in these neighborhoods, too. Steady growth in health club membership and revenue over the last decade is fueling the boom.

As tenants, gyms are tapping into demand from fitness-conscious residents of gentrifying areas, and banking on the bottom-line benefit of lower-than-Midtown rents. Landlords, meanwhile, like the foot traffic of a business that serves early birds, a lunch crowd and those who burn off the day's stress after work.

"It brings in additional shoppers," said Laurence Roberts, partner at Arch Brokerage, which represents the ownership of the River Plaza shopping center on West 225th Street in the Bronx, where a 15,000-square-foot Planet Fitness opened in October.

All the activity, however, means newly steep competition in these neighborhoods that is likely to drive up rents. Also, smaller operators hoping to build a few clubs and cash out to a mega-chain like NYSC -- and landlords who sign them on with an eye to this kind of future -- may find it tougher to realize than a new year's resolution to start working out.

According to Buckley, the chain does consider acquisitions, but is now focused on upscale amenities like the four-lane lap pool, juice bar and special family changing room for parents and children offered at the new Morris Park location in the Bronx.

"Unless it's of that quality, we are really not looking to acquire clubs," Buckley said. "Similar quality to what we're building new, that's what our members are expecting."

Yet some customers prefer independent gyms with low monthly fees. That's the case at Ludlow Fitness, which signed up more than 1,000 members since its December 2006 opening by charging just $400 for an annual membership.
Landlord Isaac Escava, whose family has owned property on the Lower East Side for 40 years, did not seek out a gym for the 5,000-square-foot space at 100 Delancey Street. But he realized that an independent gym would serve the gentrifying population while maintaining some Lower East Side charm.

"I don't think that a chain would give the same feel to the street," Escava said, adding that Ludlow Fitness has been a good addition to Delancey.

Mason Goldberg, owner of Ludlow Fitness, is now negotiating for a sublease of an additional 4,000 square feet of basement space at 102 Delancey next door, and seeking a second club in another up-and-coming area. Asking rent for the basement space is $23 to $24 a square foot, a rate he can support with the $400 membership fee. Goldberg is also scouting in Williamsburg, Ditmas Park, Dumbo, Greenpoint and Third and Fourth avenues in Park Slope.

A Bronx native, Goldberg admitted that his knowledge of gentrifying Brooklyn neighborhoods is limited.

"It's a challenge to go through the process again, [finding out] where there is new development but not six gyms in a two-block radius," he said.

He may run into scouts for competitor Planet Fitness during his search. The national chain of budget clubs is looking for additions to its dozen metro-area clubs, including a unit in Staten Island's West Shore Plaza Shopping Center, and the 15,000-square-foot club in the Bronx.

Planet Fitness' local broker, Raymond Villanova, is scouring Queens, Staten Island and Brooklyn. He recently inked a Staten Island lease on Forest Avenue with an asking rent of $20 per square foot for 6,000 square feet on the ground and 6,000 square feet on the second floor. Planet Fitness has letters of intent for locations in downtown Brooklyn and Jamaica, Queens. Villanova aims to complete five deals by year's end for Planet Fitness, which caters to people who are not hard-core workout buffs.

"I'm actively pursuing Brooklyn every day," said Villanova, president of Franchise Realty.

source: therealdeal.net

The Real Deal Webcast: Where is the market heading?

Manhattan has been mostly insulated from the subprime mortgage crisis that has wreaked havoc elsewhere in the country so far, but what lies ahead for the city's real estate market? A slowdown in the financial services industry, the main driver of the city's economy, has some observers worried about the city's real estate prospects going forward -- not to mention the recent rise in outer borough foreclosures.

In a recent Webcast interview, The Real Deal's Jen Benepe spoke to an esteemed panel of experts for the scoop on whether New York City residential real estate will suffer any immediate or long-term damage. Guests included lawyer Stuart Saft of Dewey and LeBoeuf, a real estate veteran of 30 years and author of numerous books on commercial real estate; Frank Braconi, chief economist for the New York City comptroller's office of William Thompson; and Paul Purcell, co-founder of real estate consultants Braddock and Purcell and former president of Prudential Douglas Elliman.

The Real Deal: OK, first question is for you, Frank. In a New York Times article, recently you said, "There's a very high likelihood that, yes, several years of very healthy and well-balanced economic growth in the city are probably behind us." What do you mean by that, and can you give us some numbers?

Frank Braconi: In the recent economic recovery coming out of the recession of 2001, the city gained steam more slowly than the rest of the country, but eventually got a very good head of steam to its economy. In 2006 and 2005, we approached 4 percent real change in the city's gross city product. We're expecting it to slow somewhat this year and, probably, in 2008, to slow considerably.

TRD: Are we really that immune to what's happening in the rest of the country? I've heard yes, I've heard no, I've heard maybe; what's the truth?

Stuart Saft: If you go to Miami, you see empty buildings all over. And they have 150,000 units of condominiums coming on the market in a market of about 1.7 million [people]. All that housing is coming on the market in the next 18 months. In New York City, in a market of almost 8.5 million people, we have fewer than 20,000 units of housing coming onto the market in that same period of time. So from my perspective at least, I haven't seen any signs of a softening in the New York market.

Paul Purcell: I'll add to that. I'm more Manhattan-centric, but our inventory (of homes on the market) actually in the third quarter of 2007 is down about 32 percent versus the same quarter a year ago. Our sales in Manhattan are up about 65 percent in the third quarter of this year versus the same quarter a year ago. That doesn't tell me we've made any kind of negative switch yet.

SS: We're seeing an interesting dynamic, and it's multifaceted. We have a lot of empty nesters who are selling their homes in the suburbs and moving into Manhattan -- and all of the city -- because they think it's an easier quality of life. And we also see a tremendous amount of foreign money coming into New York, because the dollar is so cheap.

PP: And this is not the euro only. As we were discussing earlier, this is Russian money, Indian money, Asian money. You know the expression "New York is on sale?" It continues to be for the foreign buyer.

TRD: Let's drill down to very specific issues here. We talked about the international guys; they definitely are a big factor. But what about Wall Street? They've lost 42,000 jobs.

FB: I don't think that relates directly to New York City. I think that might be the firms nationally. Now, there is some concern that some of the recent layoffs that were in-house will be disproportional to here.

SS: And the other thing is that Wall Street is really just one component of the New York City economy. You also have travel and entertainment, which is a huge portion of the economy; you have the health industry that employs a very large segment of the population; you have our educational institutions; and you have all of the professional firms: law firms, accounting firms, advertising agencies -- and they're still growing.

TRD: You guys do sort of buck the trend I've heard previously that Wall Street bonuses drive the real estate business. What about that?

PP: There's no doubt that there's a correlation; we're in New York. In fact, that's probably one of the negative things about our real estate. We're so closely related to Wall Street that we almost think of real estate as a stock.

TRD: What about bonuses?

PP: Oh, I didn't get to that. [Laughter] I'll make one quick comment. I have many friends that work on the Street, and it is hard for me to feel sorry for someone who's going from an $8 million bonus to a $6 million bonus. So bonuses may be down in some instances, but as far as I'm concerned, they're still doing well.

FB: The first half of the year on Wall Street was also extremely good; it was better than the first half of 2006.

SS: You have to remember that our economy is far more dynamic than that. If you look at real estate prices, they track the employment rate more. And our unemployment rate is the lowest it's been in 20 years. That makes a big difference.

The other thing is what's happening in the outer boroughs. We have 2 million first- and second-generation Americans living primarily in Brooklyn, Queens and the Bronx, and they are buying up properties as quickly as they possibly can, because they believe that's a part of the American dream.

TRD: I beg to differ, in a sense, because that's where the largest amount of subprime is happening. And also, as we had discussed previously, prior to this meeting, you don't have a lot of numbers in the boroughs.

FB: Before we get too sanguine about this situation, one corollary to the economic data I was giving earlier is it really depends on whether the national economy goes into a recession or not. The question, I think, is, "How does cooling off turn into a negative trend?" And my office is not projecting that in any significant degree.

TRD: Okay, taking bets: Give me your forecast for the next year, next two years, and if you're brave, the next three years, starting with you, Stuart.

SS: Shouldn't we do this in alphabetical order? [Laughter] I see in terms of 2008, the market will be quieter than it is right now, because there's such uncertainty. By 2009, I think the buoyancy will be back. And certainly, we don't presently have planned enough product coming onto the market in 2010 through 2012 for there not to be substantial increases in price. So, looking at it that way, I would say the market will be maybe a 5 percent increase in 2008, a 10 percent increase in value between 2008 and 2010, and then back to where we were, at 10 percent to 15 percent a year, from 2012 forward.

PP: I'll give you year-out. I think we're going to be sideways to up about 5 to 7 percent in 2008. Beyond that, I don't think I can venture a guess just yet.

Silverstein Nails Another at 7 World Trade: Ad Firm Arnell Takes 37th Floor

Thirty-one down, 11 to go. Larry Silverstein has penned away another of the 42 leasable floors at his 7 World Trade Center, signing a lease with the advertising firm Arnell Group, according to a source familiar with the deal.

The deal had been pending for a number of weeks, but the lease has now been signed, with the group led by marketing veteran Peter Arnell agreeing to pay about $70 a square foot, according to the source.

The lease for the entire 40,000-square-foot 37th floor leaves unfilled about 440,000 square feet on 11 floors in the 52-story, 1.7 million-square-foot building, which was completed in early 2006. Ten of those 11 remaining unclaimed floors are at the top of the glass tower—the most expensive space left, with asking rents hitting upward of $75 a foot.

Of course, it’s not as though the line for potential tenants is running around the block. The deal with Arnell represents the largest deal since last spring, when anchor tenant Moody’s Corporation agreed to take another two floors in the building. But Mr. Silverstein has been standing his ground, demanding rents once unfathomable for downtown, and it appears that tenants are still filing in, if gradually.

That the deal came from an advertising firm is a telling sign of the market. Given 7 World Trade Center’s tenant roster and location, it would seem like a natural magnet for financial firms. But the financial industry isn’t budging right now, and downtown advocates have been urging communications firms to help diversify the area.

Indeed, it marks the second recent large lease in Lower Manhattan for Omnicom, the parent company of Arnell. Omnicom agreed to take about 185,000 square feet at 195 Broadway in November, moving its subsidiary OMD into the building from multiple Manhattan locations.

CB Richard Ellis represented Silverstein Properties on the Arnell deal at 7 World Trade Center. Representatives from CB Richard Ellis and Silverstein declined to comment.

source: nyobserver.com

APPLE OF THE W. SIDE EYE

an iconic corner on the Upper West Side will be attacked by Macs, iPods and iPhones.

The location on the northwest corner of West 67th Street hosts the current Victoria's Secret store at 1981 Broadway, which Apple is planning to tear down and entirely rebuild.

Since the computer maker loves glass, rectangles and cubes, it could be that the 8,500 foot, slightly irregular plot will end up supporting a classy glassy structure smaller than the current 23,997 feet on three levels.

The land is owned by the Brandt Organization, whose brothers previously tore down the building that housed the Cineplex Odeon Regency Theater and other neighborhood staples in order to put up the current white box for Victoria's Secret.

The sexy lingerie retailer's parent, Limited Brands, has been trying to sublease the space for some time.

In fact, two years ago, we heard that Apple was hot on that trail but apparently got sidetracked amid the permutations of creating its flagship store at the General Motors Building on Fifth Avenue.

The space on Broadway was being offered by Richard Hodos, who this month left the Madison Retail Group to become an executive vice president at CB Richard Ellis.

We understand Apple finally did a direct deal with the Brandts, but neither they nor Hodos returned calls for comment.

Ground floor rents in the Lincoln Square area are running $275 to $300 a foot.

*

Hot on the heels of the $300 million American Eagle Outfitters pact with retail magician Jeff Sutton for the old Howard Johnson's site at 1551 Broadway - which we announced earlier this month - comes word of yet another American icon joining the Times Square selling frenzy.

This time it's the 154-year-old Levi's brand that's earmarked for 6,500 feet, plus a 3,200 foot lower level, at 1501 Broadway.

The 10-year deal with options had an asking rent of $4.225 million a year, according to CoStar Group.

The ground floor asking rent alone was $650 a foot - a substantial price for an area that continues to prove its worth everyday with chain-leading sales fig ures.

Jeffrey Roseman and Paul Berkman of Newmark Knight Frank Retail headed the negotiations for the building owners, who are combining the closed Ollies noodle shop and a camera store for the jean maker.

"We saw an opportunity to create a powerful corner," said Roseman.

Levi's would be located right under Bubba Gump Shrimp Co.

source: nypost.com

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