Big builders set to converge on far West Side

September 2007
Major players gobble up Hudson Yards sites

By Lauren Elkies

Development of the Hudson Yards area is still in its infancy, but big builders have been amassing large swaths of land on the far West Side with plans to infuse the area with major residential and commercial projects.

This month, The Real Deal set out to take a detailed look at what many see as the area of Manhattan poised for the greatest amount of development going forward, with a block-by-block chart and map of projects planned for the neighborhood as well as recent property sales.

Of course, the big boys of development -- including Vornado, Related, Brookfield, the Moinian Group, Rockrose and Extell Development -- have accrued sizeable holdings in the area, stretching roughly between 30th and 42nd streets from the Hudson River to Eighth Avenue.

Comparatively smaller players -- names like Circle Properties and Lalezarian Developers -- are also snapping up buildings and development sites.

Extell may lead the way with the greatest number of large planned projects, bids or recent buys, with a total of five. The firm has already completed one condo building in the area, the Orion; has plans for a mixed-use tower and an office tower; is bidding on a massive hotel project; and just purchased a tract of land on 34th Street.

But it's the Related Companies, Brookfield Properties and Vornado Realty Trust that may end up covering the widest amount of land, even with fewer total projects in the works.

All three companies are among the bidders to develop the massive 26-acre Hudson Rail Yards, owned by the MTA, which run from 30th to 33rd streets and from 10th to 12th avenues.

In addition, Vornado and Related are the companies planning to develop Moynihan Station, which includes rebuilding Penn Station and Madison Square Garden on the site of the Farley Post Office.

For its part, Brookfield is planning four office towers that would total 4.7 million square feet on Ninth Avenue between 31st and 33rd streets.


Just the beginning

Even with all the goings-on, there are still available sites in the Hudson Yards district.

"All the top developers in the city are looking in a very detailed way at what's going on in the neighborhood," said Robert Knakal, chairman and founding partner of Massey Knakal Realty Services.

While deals and projects have been in the works, there has been little by way of tangible results.

"It's an area that's going to be a major development site, but it's at the beginning," said Richard Bassuk, president of the real estate finance and brokerage firm the Singer & Bassuk Organization.

The Singer & Bassuk Organization has been in discussions with clients about development options in the area.

"Nothing's gotten built in that neighborhood ... because much of [the] zoning is commercial and it's not clear how to make that work yet," said Gary Barnett, president of Extell.

His company is developing a site at 31st Street and 10th Avenue. There will be an office and gallery on the bottom floors, a hotel in the middle and condos above the hotel, Barnett said.

On the site of famed Copacabana nightclub on 11th Avenue between 33rd and 34th streets, Extell plans a new, 1.5-million-square-foot office tower.


Twelfth Avenue freezeout

Some developers have become gun-shy because of the many unknown factors in the Hudson Yards area. A walk around the Hudson Yards reveals a district filled with derelict industrial buildings, vacant parking lots, functioning automobile shops and cordoned-off blocks of construction.

Some major public and quasi-public projects have yet to start. In addition to the rail yards, another major project for which the state will select a developer is the building of a headquarters hotel for the Jacob K. Javits Convention Center.

Meanwhile, the expansion of the Javits Center itself has yet to get under way. The Spitzer administration is now considering a proposal that would increase the new space from 300,000 square feet to 550,000 square feet -- and at $4 billion, double the cost of the overhaul proposed under Governor Pataki.

An even more massive public project yet to start is the extension of the No. 7 subway line to 34th Street and 11th Avenue.

On a smaller scale, there's also uncertainty about the future of the northern portion of the High Line, a one-and-a-half mile abandoned elevated railway that ends at 34th Street in the area of the western rail yards.

"There's a lot of wait-and-see attitude," said Jack Botero, a Manhattan-based associate director of the national multi-housing group of Marcus & Millichap.

Botero said he has been acting as a consultant to two successful parking lot owners in the Hudson Yards area who are trying to determine if they should hold onto their lots or sell them.

Brookfield Properties' CEO has said the company's plans on Ninth Avenue will be put on hold if there is no movement on the extension of the No. 7 train.

Meanwhile, Barnett said, "No one has a clear handle on what things are worth there."


Rentals aplenty

But there is no doubt that the Hudson Yards area is slated for major commercial and residential development, made possible by the 2005 rezoning of the area from a manufacturing district to a commercial and residential one.

Some developers are still proceeding with their plans.

Rockrose has started work on two projects in the area, which will have residential and commercial components. At 455 West 37th Street, which runs from 37th to 38th streets and from 10th Avenue halfway down the block to Ninth Avenue, the company has begun construction of a 394-unit rental building, according to Sofia Estevez, senior vice president at Rockrose.

On the west side of the street at 505 West 37th Street, the company has broken ground on a two-tower, 835-unit rental building, which will extend from 37th to 38th streets and from 10th Avenue halfway down the block to 11th Avenue.

Moinian has started construction on its rental and retail tower at 605 West 42nd Street.

Developers on the far West Side face a conundrum: In a market where construction and land costs are high, how do you keep rents low enough to draw tenants and retailers, but high enough to make a profit?

"People aren't going to take a less convenient location unless the price is right," Bassuk noted.

For the residential portions of its far West Side buildings, Rockrose is not planning on slashing rents dramatically to draw would-be dwellers to the still-remote location, Estevez said. Still, rents in the buildings will average $6 per square foot, or 10 percent less than at a new building in a more established area, such as at the company's 110-114 Horatio Street, where rents average $66 a square foot.

Rockrose is planning, however, to bring retail to the area at a slightly discounted rate, Estevez said. At 455 West 37th Street, there will be a supermarket and a high-end restaurant. (A Time Warner Center restaurateur is reportedly interested in the space.) Restaurant space will also be built at 505 West 37th Street.

"We'll decide what else the neighborhood needs when we're closer," Estevez said. But making room for those services will come at a cost. "I do anticipate we will have to subsidize" the rents, she noted.


Inn development

The far West Side also appears ripe for hotel development.

Moinian, Extell and Texas-based Faulkner USA are all jockeying for the right to develop the Javits hotel project.

Would-be developers of the hotel said they do not expect to adjust room rates because of the location.

"The pricing model is likely the highest convention center hotel rate in the nation. We made no concession for the location because we have determined that it is a high-value submarket in the city," Moinian's spokesperson said.

Moinian's current proposal calls for a massive 1,275-room hotel designed by architecture firm Gensler.

Barnett of Extell said that his company has proposed a 70-story-plus "iconic" Hyatt hotel with a more luxurious Grand Hyatt at the top, separated by a sky lobby.

The hotel market is faring well in the city, and if most hotels stay small and offer limited services, they will be easy to run and profitable on the far West Side, said Eric Anton, an executive director at Eastern Consolidated.

Extell is also including a hotel in its project at 31st Street and 10th Avenue. Prolific hotelier McSam Hotel Group, meanwhile, bought four parcels of land on West 38th and 39th Streets.

"Everyone's talking hotel, hotel, hotel, hotel," Anton said.

UP IN THE OLD HOTEL

FORGET SHINY AND NEW; THESE CLASSIC RESIDENCES STILL SET THE STANDARD
By KATHERINE DYKSTRA
SHERRY BABY: Resales of the Sherry-Netherland's residences tend to happen by word of mouth.
September 6, 2007 -- Apartment buyers who want a taste of the suite life now have more options than ever.

"If you look at the trends in hotels and hotel development, most being built will offer some form of ownership - whole or fractional or condo hotels," says David Matheson, vice president of corporate communications at Midtown's St. Regis Hotel, which has two floors of full-ownership condos.

Take Trump SoHo, the Financial District's W Downtown and TriBeCa's Smyth Upstairs. All are hotels. All offer some variation on ownership. All tout "hotel amenities" - housekeeping, room service, concierge.

Even under-construction condo-only projects have co-opted hotel-like perks, including free continental breakfast, newspapers and business centers, as major selling points.

But with all the buzz surrounding spanking-new buildings, it's easy to forget (even with the Plaza steadily unloading $25 million units) that hotel living doesn't only come in tall and glassy. In fact, the city's obsession with the five-star life was born from classic hotel living.

Many of the mainstays offer homes you can move into immediately; others are being converted into some of New York's most coveted residential buildings.

The Mark, originally opened in 1927 and now being renovated into 118 hotel rooms and 42 co-op residences - including a 9,799-square-foot penthouse with an estimated price of around $60 million - is not only the latest classic hotel-cum-residence. It's also poised to elevate the standard of service for residential conversions as a whole. When it's finished in 2008, the East 77th Street building's inhabitants will have access to valet parking, laundry and dry-cleaning valet, fresh flower service, and personal shopping among other don't-lift-a-finger amenities. Which might just give the St. Regis and the Plaza a run for their money.

"In all my years in this business, I have never seen this much interest. There are 18 letters of intent on the penthouse alone," says Louise Sunshine, development director of the Alexico Group, the firm responsible for the Mark. "All of the other suites have no less than 25 letters of intent for each."

Suites will open at $5,000 a square foot, but Sunshine says, "There will probably be bidding wars for each suite, and it wouldn't surprise me if we ended up at $6,000 at the very least, on average."

If you don't want to wait for the Mark, and the Time Warner Center's Mandarin Oriental is just too 21st Century, there are plenty of hotels oozing old-world glamour that you can buy a residence in today. There are co-ops like the Pierre, the Carlyle: A Rosewood Hotel, the Lombardy and the Sherry-Netherland; condo conversions like the St. Regis and the Jumeirah Essex House; and even rentals at the Waldorf-Astoria.

NEVER CHECK OUT

Hotel living is nothing new. Before the St. Regis, the Carlyle and the Sherry-Netherland added actual salable residences, Salvador Dali, Jackie Kennedy and Ronald Reagan had extended-stay leases in each, respectively. ("I Love You, Ronnie," a compilation of Reagan's correspondence with his wife Nancy includes a letter on Sherry-Netherland stationery.)

But it wasn't until the mid-'50s, when the city saw an economic slowdown, that a number of hotels - notably the Pierre, the Lombardy, the Carlyle and the Sherry-Netherland - figured out that they could survive the downturn by converting to co-op. Each co-op then turned around and leased keys to hotels.

"There were some residential aspects; there were some people living there on long-term rentals," says Richard Siegler, an attorney for a number of co-ops, including the Pierre. "The owners decided to cash in."

The allure of hotel living is obvious: maid service, room service, concierge, bellman, all at your beck and call.

"If you want your bed covers straightened because you don't like the way they look during the day, you call housekeeping ... or if a light bulb goes out," says Michael Littler, executive vice president and chief operating officer of the Sherry-Netherland. "If you're hungry, call room service. If you need something from the drugstore, call the concierge."

The high cost of hotel living allowed only the very wealthiest of people to buy units and made owning a home in one of these buildings a symbol of wealth and power. "Fifty or 60 years ago the [Sherry-Netherland] was very much a haven for people in the arts, movies," says Littler. "For instance, the producer Sam Goldwyn had an apartment here; Sofia Coppola grew up here."

These buildings' sterling reputations remain today.

"There is an exclusivity to the co-op hotels," says Hall Wilkie, president of Brown Harris Stevens. "These old prewar buildings are the most desirable in New York. It's prestige more than anything else, based on architectural history and location."

The Pierre, on Fifth Avenue and 61st Street, was built in 1930 by renowned Jazz Age architects Leonard Schultze and S. Fullerton Weaver. As was the Sherry-Netherland and the Waldorf Towers, the rental portion of the Waldorf-Astoria. The St. Regis, off Fifth Avenue at 55th Street, was developed by John Jacob Astor more than a century ago. The interiors of the Carlyle, on Madison Avenue and 76th Street, were done in 1930 by renowned designer Dorothy Draper.

Mostly, the hotels were designed to favor privacy over flash and flair, making them ideal for daily living.

"Even though it has a hotel element, it feels like private residences," says Littler. "The lobby is small; you reduce the size and it feels more intimate."

And though most hotels hold tight to their original aesthetic, many regularly update their services. The Jumeirah Essex House, which was originally constructed in 1931 (at the time it was Manhattan's tallest building at 40 stories) and which added its first condos in 1974, is renovating its lobby, restaurant and spa in conjunction with converting 90 hotel rooms into 32 condos, 60 percent of which have already sold. The Carlyle is adding a Sense spa. And the Waldorf-Astoria will open the country's first Guerlain Spa in November.

Currently on the market are units at the St. Regis, which average $5,200 a square foot, resales of Sherry-Netherland, Carlyle and Pierre residences, including the Pierre's notorious $70 million penthouse, which was a ballroom until the building was converted to co-op in 1959. Residents voted to shutter it because all the black-tie dinners and weddings were tying up the elevators. It remained vacant until the early '90s when Lady Fairfax from Australia bought the ballroom and the service room below it. She converted the spaces into an 11,000-square-foot triplex, which has been on the market for more than two years.

What does it mean to reside in one of these hotels today?

The hotels "provide worry-free living," says Wilkie. "If you're traveling or have other homes, those services can mean even more when you come in and everything is set. Food is there if you arrive at 3 in the morning."

Or more simply: "It means you're very, very comfortable," says Littler.

Condos, Brand-New Yet Not So Perfect

By CHRISTINE HAUGHNEY
Published: August 26, 2007
WHEN dozens of buyers put down payments on apartments in the glassy new condominium tower called the Link at 310 West 52nd Street, they were looking forward to living with features like floor-to-ceiling windows and a meditation garden. But six months after they started moving in, they are still living in a construction site with an unfinished lobby, uncarpeted hallways and no access to the garden that was supposed to help them escape from the city’s stresses.

If a Window Is Cracked, or a Toilet Leaks (August 26, 2007)

Carl G. Chernoff in the lobby at the Link in Manhattan on Aug. 8. After he and his wife moved in last February, they had no hot water for baths or showers.
The Link is one of many new condos in New York City whose owners complain that developers have been slow to deliver what they promised. “People are spending a lot of money and have high expectations,” said Robert Braverman, a real estate lawyer hired by buyers at the Link.

Anger toward developers is coming to a head as a record number of units are nearing completion. Manhattan will have 6,444 new condominiums completed this year, compared with 1,614 in 2005, according to Halstead Development Marketing. In Brooklyn, 3,768 units should be finished this year, compared with 480 in 2005.

About 40 owners at the Link became so frustrated with the developer, El Ad Properties, which is also renovating the Plaza Hotel, that they hired Mr. Braverman in an effort to get an executive at El Ad to meet with them.

Lloyd Kaplan, the company’s spokesman, said that El Ad’s head of construction would meet with owners as long as they didn’t bring their lawyer.

Mr. Kaplan said that the company had tried to address all of the individual owners’ problems and that the builder expected to complete everything by Nov. 15, nine months after the first residents’ arrival.

Mr. Braverman says he was hired because El Ad didn’t meet buyers’ expectations of moving into a finished or nearly finished apartment building. He said a block of unit owners were also hiring an engineer to make sure that buildingwide systems like heating, cooling and plumbing met the quality standards promised in the offering plan and were installed as the plan had indicated they would be.

But Mr. Braverman has told buyers that their recourse is limited. Developers have to deliver only what they outline in the offering plan — the book that buyers receive after putting down a deposit, allowing them to review all of a building’s fixtures and features. He said that beyond this, developers are not obliged to deliver on any promise. “The sponsor can say, ‘We’re building the Taj Mahal.’ ”

This means that buyers who are preparing to move into these condos are finding they have little power to get their units finished when they expect them or in the shape they anticipated.

Carl G. Chernoff, who in February moved into a $1.2 million two-bedroom apartment in the Link, said that for the first month, he and his wife, Rosalind, were unable to take a hot shower or bath. “You shouldn’t have to go through these agonies,” he said.

When the Chernoffs moved in, they called and wrote e-mail messages about several problems, from a chipped shower tile to an ill-fitting bathtub stopper. But they were most upset about not being able to bathe in hot water (they had hot water in one sink). Ms. Chernoff has cancer and did not want to have to shower at the nearby Gold’s Gym where they had memberships.

“Every new building has problems,” Mr. Chernoff said. “She was ill, and they knew it. They knew that all she wanted to do was to come home from chemotherapy and take a warm bath.”

Tim Wright, a 28-year-old stockbroker at Olympia Asset Management, said he was so frustrated with the continued construction at the Link that he sold his one-bedroom apartment for $975,000 four months after he moved in. (He had bought the apartment more than a year earlier for $795,000.)

Mr. Wright said he complained repeatedly to management about construction workers who smoked near his apartment and was frustrated that the building hadn’t installed a vanity mirror in the master bathroom for his girlfriend to use.

“I’m not really the kind of person who complained a lot,” he said. “I was sick and tired of walking in and out of a construction site.”

For some condo buyers, the main difficulty is finding out when they can move into their buildings. Cory FitzGerald, a 25-year-old lighting programmer for productions like the Christmas show at Radio City, thought he would be able to move into his two-bedroom apartment at 606 West 148th Street in Hamilton Heights late last year.
In anticipation, he moved out of his rental last November, had his mail sent to his parents’ address in California, and went off to work on concert tours around the country and in Japan, South Korea and Hong Kong. During that time, he lived out of two suitcases and kept his belongings in storage. But the completion date kept being delayed. He said that the most frustrating part was not knowing what caused the delays. He searched the city’s Buildings Department Web site for clues.

He considered walking away from the deal because he had included a “drop dead” clause in his contract that allowed him to pull out by March 31 if the developers hadn’t received the temporary certificate of occupancy. But by then, he said, he couldn’t find a similar two-bedroom for the $596,000 he had paid. He was finally able to move in in July, about eight months later than he had expected.

“Until I moved in, there was no end in sight,” he said. “It was like a shot in the dark, and nobody had any information to share.”

Greg Baron, one of the project’s developers, said he did not feel comfortable explaining reasons for delays to buyers who did not have construction backgrounds and therefore would not understand the project’s complexity. But he later told a reporter that the project involved constructing two buildings on one of the steepest hills in Manhattan.

Linda Rubin, the Prudential Douglas Elliman broker handling sales for the building, who is also Mr. Baron’s wife, said she did not want buyers to worry about construction.

Still, she said that developers may have to provide more information in the future — for example, setting up a Web site to explain what is delaying the project. “It’s just not the standard procedure for the developer to give updates,” she said. “But times are changing.”

Some buyers have had to become relentless nags to get problems fixed after moving in. Ethan Henerey and Kate Eales, who moved into a $645,000 three-bedroom condominium in Kensington, Brooklyn, on July 15, have been able to get a lot of problems in their apartment repaired, but still have more that have not been addressed. They had water damage in one bathroom and a leaky skylight, and they still have standing water on their roof deck.

Since they moved in, Ms. Eales and Mr. Henerey, both film editors, worked in shifts to get problems fixed. She devoted a week of vacation to repairs, and Mr. Henerey, who works at night and is at home during the day, can give workers access to the apartment.

“I feel a little bit trapped because many days I’m sitting here waiting to find out if the roofer is going to show up or if the contractors are going to come in,” Mr. Henerey said.

Eddie Hidary, an owner of Gracie Developers, which built the condos, said repairs were delayed because he had trouble getting his contractors to respond as quickly as necessary to all of the units that were closing at the same time.

Mr. Hidary said it took several weeks to figure out the source of the leak, but a new roof has now been installed. He said that his company was eager to fix these problems, especially because this is its first residential project.

Mr. Henerey and Ms. Eales confirmed that the roof no longer leaks and said that Mr. Hidary had been responsive to their complaints. He is still trying to replace a wall damaged by the skylight leak, and the couple have a list of smaller problems that Mr. Hidary has said he would fix, like installing smoke detectors and repairing the air-conditioning in the master bedroom.

“We’re trying to establish a name in the industry,” Mr. Hidary said. “If it costs a few dollars, it costs a few dollars.”

Some buyers, frustrated when they cannot get questions answered, pull out of deals before they move in. Tannaz Simyar, a 29-year-old real estate lawyer, was interested in buying a one-bedroom apartment at 184 Thompson Street, a new condo conversion. But she had read negative blog postings about the building that worried her.

Ms. Simyar had a number of questions that she said the building’s sales representative could not answer when she visited the sales office with her agent, Ben Morales of Barak Realty.

As she described the chain of events, she visited the office several times over about 10 days trying to get answers. After her third visit, she put down a $250 deposit on a $750,000 apartment. But Ms. Simyar said she would not make the $75,000 down payment until the sales representative confirmed that the ceiling height in a section of loft space was six feet, that it could be used as a bedroom and that it would have hardwood floors.

Ms. Simyar said she even had her broker call in advance of that third visit to arrange for a ladder so she could measure the loft herself. But when she arrived, the sales office provided a ladder that was too short.

Several days after her third visit, she heard from the sales representative that the ceiling in the loft space was only five feet high and that the floor would be carpeted. So she asked for her $250 deposit back. She got it only after threatening to complain to the attorney general’s office, she said.

“My gut instinct was that something wasn’t right,” Ms. Simyar said.

Sarah Burke, the vice president for sales and marketing at the Developers Group, which represents 184 Thompson, said that staff members had tried to respond to Ms. Simyar’s questions and to quickly return her deposit.

Hy Chalme, the building’s developer, said in a statement, “We’ve sold 90 percent of the homes in record time to buyers who were extremely happy with the service of our sales team and the quality of the units.”

But not Ms. Simyar. She later put down a deposit for an $860,000 one-bedroom at the District at 151 William Street, where she said the sales agent, Nikki Martin, was quite responsive.

“She answers all of your questions before you even ask them,” she said.