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.
Thursday, September 06, 2007
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.
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.
Wednesday, August 22, 2007
It wasn’t supposed to happen this way.
The Manhattan Real Estate Slump That Wasn’t
By TERI KARUSH ROGERS
Published: August 19, 2007
Just a year ago, as real estate brokers fretted through an ominously quiet third quarter, many Manhattanites waited for the housing market to reverse its madcap ascent and fall into line with the rest of the country.
But something happened on the way to the Great Manhattan Housing Slump. After what brokers optimistically termed a “pause” in the second half of 2006, buyers swarmed into the market. The torrent was so intense that by the end of this past June, it was clear that an astonishing gulf had opened up between Manhattan and nearly everywhere else.
On the national level, sales of existing homes slowed by 17 percent in the second quarter of 2007, compared with the second quarter of 2006, while inventory swelled by 16 percent, according to figures provided by the National Association of Realtors. New homes fared even worse: they fell by almost 19 percent, according to Commerce Department figures.
In Manhattan, by comparison, sales of new and existing apartments more than doubled. In a trend that could shift quickly in light of the recent problems in the credit and stock markets, inventory shed a third of its bulk. It dropped to 5,237 units, despite the influx of several thousand new condos, according to Miller Samuel Inc., the Manhattan appraisal company
Prices have been starkly different as well. By last month, the national picture was so dire that Angelo R. Mozilo, the chairman and chief executive of Countrywide Financial, the country’s largest mortgage lender, said things had not been so bleak since the Depression.
Cut to Manhattan. After a boom with annual price increases of 20 percent or more ended in mid-2005, prices have continued to rise over all, but not as sharply. In the second quarter of 2007, Miller Samuel said the average sale price of a Manhattan studio climbed 16.5 percent compared with the second quarter of 2005. The average for a one-bedroom climbed by 18.4 percent and a two-bedroom by 5.9 percent.
Apartments with three bedrooms, which make up about 6 percent of the market but appeal to an ever-more-moneyed class of buyers, rose by 17.9 percent in the same period.
Major brokerages, including Halstead Property, Bellmarc Realty, Brown Harris Stevens, Prudential Douglas Elliman and the Corcoran Group, say they are recording sales and profits that rival boom-time results. In fact, Douglas Elliman and Corcoran predict that this will be their most lucrative year by far.
Whether this momentum can be sustained remains to be seen, particularly in light of the recent gyrations in the debt market, which have led to a reduction in the availability of large mortgages and to an increase in their rates. A deepening credit-market crisis and national housing slump could squeeze the economy, the stock market and bonus pools.
“For the first time in over a year, there is some negative talk — about the credit markets and whether or not this will permeate the New York City real estate market,” said Pamela Liebman, president of Corcoran. “As of right now, it hasn’t. There has been no slowdown.” She said the biggest concern among her agents is finding enough inventory to satisfy demand.
But a buying binge alone does not a housing boom make. “I’m still not characterizing the market right now as a housing boom except in the upper echelon,” said Jonathan Miller, president of Miller Samuel.
So how has Manhattan (and, to a lesser extent, sought-after pockets of Brooklyn) managed to avoid a slump?
“Obviously, the market was helped first by the rumor and the reality of bonus money,” said Frederick W. Peters, president of Warburg Realty. He was referring to the fourth straight year of substantial bonus increases, particularly on Wall Street, that along with a rising stock market helped push buyers off the sidelines at the end of 2006 and caused some agents to cancel their winter vacations.
“But I also think we’re just in one of those demographic upswing periods,” Mr. Peters added. “More people are moving into the city, fewer people are moving out, and the rental market got much tighter over the course of 2006, which once again made buying a more attractive option. You put all those things together, and the market sort of entered the narrow part of the hourglass.”
There were other factors to consider, too. Tourism is at record highs, and the local economy is doing well in general. And it’s nearly as hard to find premium office space or a spot in private school as it is to find a family-size apartment.
But that’s exactly what more and more families have set their sights on.
It has been years since Samantha Kleier Forbes, a broker at Gumley Haft Kleier, lost a client to the suburbs. “My last casualty was in ’04,” she said. As two-career couples work longer hours and as the city grows safer and more family-friendly, there is a big demand for large apartments like Classic 6’s — a two-bedroom apartment with living room, dining room, kitchen and maid’s room (where children can be found bunking like sailors).
Families who want to stay, brokers say, are only one segment of the more stratified and well-heeled masses clamoring for a piece of Manhattan. While the dollar’s seemingly endless slide may have crimped the foreign vacation plans of many Americans, the purchasing power of Europeans has strengthened. They are increasingly matched, if not outmatched, by buyers from countries like China and India. And foreign buyers find Manhattan real estate very appealing when they compare prices in other large international cities like London.
“I’ve had 20 percent more business from international clients in the past couple of years,” said Sallie Stern, a senior vice president and managing director of Brown Harris Stevens. “They probably account for 30 to 35 percent. It’s a world market now.”
Shaun Osher, the chief executive of CORE Group Marketing, which is handling 11 condominium projects in Manhattan, said the number of foreign apartment-seekers had doubled since the end of 2005. Foreign buyers now constitute 5 to 10 percent of the sales in the buildings marketed by his firms.
“When you look at hotel rates and what it costs to come into Manhattan, it makes sense now to buy a pied-à-terre,” he said.
Besides foreign buyers, brokers say, more parents are snapping up apartments for their children, and some retirees are choosing Manhattan over the likes of Boca Raton.
“The baby boomer generation isn’t ready to give up and live in a swamp,” said Darren Sukenik, an executive vice president of Prudential Douglas Elliman. In fact, they are living the lives their nearby children would like to lead if only they weren’t working so hard, he said.
Meanwhile, renters have emerged as a force in the market, particularly for entry-level apartments. “Rents are rising again, and that pushes people back into the condo and co-op market if they have more than a one- or two-year time frame for living in Manhattan,” said Stephen G. Kliegerman, the executive director of marketing for new developments at Halstead Property.
Fanning the flames have been job and population growth, historically low interest rates and a trove of personal wealth minted by hedge funds, private equity firms and, to a lesser extent, the investment banks that serve them. Add to that the psychological comfort of knowing that Manhattan flourished after the Sept. 11 terrorist attacks, and further, that it appears to have shrugged off a national housing slump.
Even the condo glut that so many real estate executives feared has turned out instead to be a boon of sorts. “If we didn’t have new development coming on at the pace we did, we’d have a chronic shortage across all sectors, and we’d see 20 percent price growth,” said Mr. Miller, the appraiser.
Mr. Peters of Warburg Realty agreed. “You can’t even imagine how awful it would be,” he said. On the other hand, he added, things may feel pretty awful already for buyers who want a prewar apartment, since inventory in this sector continues to evaporate. In the last two years, co-ops, about half of which were built before World War II, have slipped from 63 percent of the market to 47 percent as new condos have been built, Miller Samuel said.
“There are so many new units coming on the market and being sold, but the real heart and soul of the co-op market is really depleted,” said Barbara Fox, the president of the Fox Residential Group, a Manhattan brokerage.
Consequently, brokers say, many prewar apartments in good condition, along with family-size apartments of any vintage, are being snatched up in bidding wars whose aggressiveness outrivals those of two years ago.
“The new rule is that there are no rules, and when you’re lying bleeding on your way to the emergency room, you’re still shouting, ‘Higher offer, higher offer!’ ” said Julie Friedman, a senior associate broker at Bellmarc.
She was among the many brokers who said that “best and final” offers have largely become neither, with buyers and sellers routinely negotiating after another bid has been accepted. “You remind sellers that there is a moral component, but my duty is to get the highest amount, and ‘moral’ and ‘the highest amount’ don’t necessarily overlap,” she said.
Some brokers complained that the demise of the sealed bid, which has been replaced over the last two or three years by e-mail offers to the seller’s agent, has further undermined fair play. “Buyers don’t trust them as much,” said Michele Kleier, president of Gumley Haft Kleier.
Whether Manhattan continues to be the land the slump forgot or is merely sunning itself before a hurricane is something of a guess. A strengthening dollar, a severe terrorist attack or a national economy hobbled by housing market woes could inflict blows of varying strengths.
More immediate is the worry about the availability of credit. “While I don’t think we were propped up to the extent other markets were by subprime and adjustable-rate mortgages, it does make credit hard to get for everyone to some degree,” said Gregory J. Heym, an economist for Brown Harris Stevens and Halstead Property. “Most people are probably expecting mortgages to be tougher to get.”
Mortgage lenders everywhere are going back to pre-boom lending standards, so obtaining a mortgage is harder for buyers with pockmarked credit or sketchy employment. But there is no panic over rising mortgage rates on jumbo loans (those exceeding $417,000), at least not now.
Large lenders like Chase and HSBC that typically sell mortgages after they make them can no longer do so because the credit crisis has dried up the secondary market, said Jeffrey Appel, a senior vice president and the director of new development financing at the Preferred Empire Mortgage Company in New York. Many large institutional lenders have raised their rates as a hedge against uncertainty, but rates at smaller regional savings banks, the so-called portfolio lenders who hang on to their loans, have hardly budged.
Last Monday, Melissa L. Cohn, the president of the Manhattan Mortgage Company, the largest residential mortgage broker in the New York, New Jersey and Connecticut, said her best rate on a 30-year $1 million mortgage was 6 7/8 percent, offered by a portfolio lender. And her worst rate, offered by a lender that sells mortgages on the secondary market, was 8 3/8 percent.
“Despite this incredible hysteria,” Ms. Cohn said, “there’s plenty of money for qualified borrowers.”
The credit-market meltdown could yet cloud Manhattan’s real estate prospects because of stock-market jitters. And an end to the leveraged buyout boom, if that happens, could trigger layoffs on Wall Street and eat away at bonuses.
But the fiscal year is far enough along that financial services workers can expect gains of 10 to 15 percent when bonus season rolls around later this year, said Alan Johnson, the managing director of Johnson Associates, a Wall Street compensation consultant. The real pain, if there is any to be felt, would come in the 2008-09 bonus season, he said, and a year or two later for private equity firms, which typically make their profits several years after a takeover.
“Pay is going to probably drop, but if it’s dropping from a really, really high level, we’re probably not going to have any charity dinners for these people,” Mr. Johnson said.
By then, too, the flow of new development is expected to slow significantly, judging from the dwindling number of construction permits filed this year. To the extent Manhattan’s housing market is threatened by a weak national economy and by declining bonuses, said Mr. Miller of Miller Samuel, “then the fact that we have a lower level of supply coming on would help keep the market from correcting.”
Neil Binder, a principal in Bellmarc Realty and a 30-year industry veteran, typically views upturns with a jaundiced eye. But in a residential market with tight supply and intense demand, he doesn’t see Manhattan’s real estate karma changing anytime soon, even in the face of mortgage-market turmoil.
“My brokers are saying their biggest frustration is to have buyers when there’s no product and that there’s nothing out there but new construction,” Mr. Binder said. “We may have bumps, but I don’t feel the underpinnings are weakening. My biggest problem this month is that I have all my salespeople taking vacations because they made so much money. My East Side office is a ghost town.”
Monday, February 05, 2007
A Quick Guide to Property Titles
By JAY ROMANO
Published: February 4, 2007
When a husband and wife buy property, they usually take title as “tenants by the entirety.” With this form of ownership, each spouse owns an undivided 100 percent interest in the property.
Real estate lawyers say that married couples sometimes change the way they hold title to property to avoid or minimize estate taxes. But this strategy may not always be appropriate.
“I see this happen on a regular basis,” said Stanley Simon, a Manhattan lawyer who reviews co-op loans for lenders. “As the bank’s attorney, it’s not my place to tell people what they should or shouldn’t do. But I’m not sure that the people who are doing this have really thought it through.”
Mr. Simon said one of the benefits of holding title as tenants by the entirety is the ability to protect the property from creditors. He explained that when title is held as tenants in common — the form of ownership typically used by co-owners who are not married to each other — each owner’s interest belongs to that individual.
So with a tenancy in common, any owner can sell his or her interest to someone else, or if an owner dies, his or her share passes to heirs or beneficiaries. In addition, Mr. Simon said, any owner can petition a court to partition the property, a legal action that can result in a forced sale and distribution of the proceeds among the owners.
At the same time, Mr. Simon said, with a tenancy in common, if a creditor gets a judgment against an owner, that creditor also can ask a court to partition the property. In other words, the actions of one co-owner can result in the loss of the property by the other owner or owners.
But with title held in a tenancy by the entirety, when one spouse dies, the survivor automatically becomes the sole owner. And in New York, Mr. Simon said, a tenancy by the entirety cannot be partitioned by third parties. The practical effect of this is that if one spouse gets sued, the creditor cannot force a sale of the property.
“A tenancy by the entirety provides the best protection for the home,” Mr. Simon said.
There are, however, reasons that a married couple might want to hold title as tenants in common. William A. Cahill, Jr., an estate-planning lawyer in Brooklyn, said that under the federal tax law’s “marital deduction,” when property passes to one spouse upon the death of the other, no federal tax is due if the survivor is a United States citizen. In addition, he said, there is a federal exemption on the first $2 million of an estate left to anyone. So, if a home owned by a married couple is worth, say, $4 million, the property passes tax-free to the survivor when one spouse dies, regardless of how it is owned.
But when the second spouse dies, things get tricky. Since the federal exemption is $2 million, the value of the home above that amount — in this case, $2 million — is subject to tax when the property passes from the surviving spouse to beneficiaries.
Estate lawyers get around this, Mr. Cahill said, this way: instead of holding title as tenants by the entirety, a married couple owns as tenants in common. Then, the first spouse to die can pass his or her interest to the children in trust, allowing the survivor to remain in the property for life. And both spouses are able to take advantage of the $2 million exemption instead of one.
Ralph M. Engel, a Manhattan estate-planning lawyer, said that while a surviving joint owner may be able to renounce the interest owned by a deceased joint owner for tax purposes, it is generally more expedient to change the form of title ahead of time if estate taxes will be an issue. So, he said, property owners should carefully examine their financial situation to determine which form of ownership makes the most sense.
“Not everyone is going to get sued,” Mr. Engel said, “but we’re all going to die.”
Next Article in Real Estate (17 of 24) »
Published: February 4, 2007
When a husband and wife buy property, they usually take title as “tenants by the entirety.” With this form of ownership, each spouse owns an undivided 100 percent interest in the property.
Real estate lawyers say that married couples sometimes change the way they hold title to property to avoid or minimize estate taxes. But this strategy may not always be appropriate.
“I see this happen on a regular basis,” said Stanley Simon, a Manhattan lawyer who reviews co-op loans for lenders. “As the bank’s attorney, it’s not my place to tell people what they should or shouldn’t do. But I’m not sure that the people who are doing this have really thought it through.”
Mr. Simon said one of the benefits of holding title as tenants by the entirety is the ability to protect the property from creditors. He explained that when title is held as tenants in common — the form of ownership typically used by co-owners who are not married to each other — each owner’s interest belongs to that individual.
So with a tenancy in common, any owner can sell his or her interest to someone else, or if an owner dies, his or her share passes to heirs or beneficiaries. In addition, Mr. Simon said, any owner can petition a court to partition the property, a legal action that can result in a forced sale and distribution of the proceeds among the owners.
At the same time, Mr. Simon said, with a tenancy in common, if a creditor gets a judgment against an owner, that creditor also can ask a court to partition the property. In other words, the actions of one co-owner can result in the loss of the property by the other owner or owners.
But with title held in a tenancy by the entirety, when one spouse dies, the survivor automatically becomes the sole owner. And in New York, Mr. Simon said, a tenancy by the entirety cannot be partitioned by third parties. The practical effect of this is that if one spouse gets sued, the creditor cannot force a sale of the property.
“A tenancy by the entirety provides the best protection for the home,” Mr. Simon said.
There are, however, reasons that a married couple might want to hold title as tenants in common. William A. Cahill, Jr., an estate-planning lawyer in Brooklyn, said that under the federal tax law’s “marital deduction,” when property passes to one spouse upon the death of the other, no federal tax is due if the survivor is a United States citizen. In addition, he said, there is a federal exemption on the first $2 million of an estate left to anyone. So, if a home owned by a married couple is worth, say, $4 million, the property passes tax-free to the survivor when one spouse dies, regardless of how it is owned.
But when the second spouse dies, things get tricky. Since the federal exemption is $2 million, the value of the home above that amount — in this case, $2 million — is subject to tax when the property passes from the surviving spouse to beneficiaries.
Estate lawyers get around this, Mr. Cahill said, this way: instead of holding title as tenants by the entirety, a married couple owns as tenants in common. Then, the first spouse to die can pass his or her interest to the children in trust, allowing the survivor to remain in the property for life. And both spouses are able to take advantage of the $2 million exemption instead of one.
Ralph M. Engel, a Manhattan estate-planning lawyer, said that while a surviving joint owner may be able to renounce the interest owned by a deceased joint owner for tax purposes, it is generally more expedient to change the form of title ahead of time if estate taxes will be an issue. So, he said, property owners should carefully examine their financial situation to determine which form of ownership makes the most sense.
“Not everyone is going to get sued,” Mr. Engel said, “but we’re all going to die.”
Next Article in Real Estate (17 of 24) »
Monday, January 29, 2007
By VIVIAN S. TOY
Published: January 28, 2007
RENÉE MIZRAHI suspects that the first real estate agent she worked with deliberately didn’t tell her that a building was only 49 percent owner-occupied.
Her bank subsequently refused to give her a mortgage, and she lost the apartment.
Her second broker was worse. He stood her up at an apartment showing, she said, and he lied about the building’s financial requirements and about having put in her bid for the co-op. Then when she told him that she didn’t want to work with him anymore, he kept calling her — she has caller ID — and hanging up without leaving a message. “So he was like stalking me,” Ms. Mizrahi said. “What a nightmare!”
She is now working with a broker, referred by a friend, with whom she feels comfortable, but her bad broker experiences have nonetheless made her wonder if any broker can really be trusted. “I just want to work with someone who shows up when they say they will and who will tell me the information I need,” she said. “Why is this so hard?”
Ms. Mizrahi is not alone in her hard-earned broker wariness.
A Harris poll conducted last year that ranked occupations in terms of prestige placed real estate brokers at the very bottom of a list of 23 professions. (Firefighters and doctors were at the top.)
Brokers themselves seem well aware that their business isn’t always held in very high regard. The National Association of Realtors has an advertising campaign called “Someone You Can Trust,” which stresses that Realtors are subject to mandatory ethics training. “Not many professionals can claim that on their résumé,” the ads read.
Svetlana Choi, a senior sales associate at Bellmarc Realty, estimated that at least a quarter of her clients are skeptical when they first come to her.
“I just try to draw them out and relate to them in a way that lets them know that I’m not the enemy,” she said. “I’m not trying to snow them. I’m really just trying to be helpful.”
So why do people often have trouble trusting a broker?
To start with, brokers are salespeople, so buyers with suspicious minds would naturally suspect brokers of trying to sell them something they don’t necessarily want or need. But brokers also admit that some real estate agents help to perpetuate stereotypes with classic bait-and-switch schemes and by putting their own desires to close a deal over a client’s best interests. The fact that brokers themselves sometimes find it hard to trust one another only compounds the level of suspicion in real estate.
There are two major sources of broker-to-broker mistrust. The first is the fear that one broker may be trying to poach another’s client. The second is that a seller’s broker may be deliberately avoiding phone calls or refusing to submit an offer because he or she wants to avoid having to share the commission. The cynicism may well stem from the fiercely competitive marketplace and the fact that there are more than 28,700 brokers and sales agents in Manhattan alone and 66,700 in all five boroughs.
Erik Serras, a sales agent at Pari Passu Realty in Manhattan, said another agent recently stood outside an open house that Mr. Serras was holding just to hand out his business card. “It was the equivalent of ambulance chasing, and it sheds a negative light on the industry on the whole,” he said. “There are just too many untrained agents out there doing things that are unethical and unprofessional, and once a client is exposed to that, the damage is done because it’s easy for people to generalize.”
Ann Rothman, a Bellmarc agent, said that some people were quick to judge brokers because they “just have a queasy feeling about real estate.” She added that she sometimes finds herself saying, “I do real estate, so yes, I sell used cars, and people are going to think the speedometer has been changed.”
But Ms. Rothman tries to be philosophical about it. “Any person in a service business is going to be up against that,” she said. “Even if you go to a doctor or a dentist, there are going to be people who think they’re only doing a procedure because they have their kid’s college education or a trip to finance.”
When she comes across skeptical clients, Ms. Rothman said, “I’ll bring it up, and I’ll say, ‘What’s the problem here?’ ” That seems to work, she added, citing as proof an entire family of doubting buyers. “They all have a distrust gene,” she said, “but they keep referring other family members to me.”
Another instance when a broker might appear to be evasive is at an open house. When brokers hold open houses, they represent the sellers, but they also routinely use the events as an opportunity to pick up other clients. So if a potential buyer walks in and doesn’t seem right for that particular apartment, the broker can offer to help the buyer find something else. But under the unwritten rules of the game, the broker does not have to disclose whether there are any other open houses in the same building, particularly if the events are being held by competing firms.
These kinds of situations can easily lead to mistrust on the part of sellers and buyers alike.
Managers at real estate agencies say that the only way to minimize misunderstandings is to train new agents to be highly professional and to establish and enforce industry standards. To that end, the Real Estate Board of New York has established a list of 17 resolutions aimed at addressing ethical questions in residential real estate.
The resolutions cover issues as basic as the definition of an “exclusive” and the need to have backup brokers available when the exclusive broker is not available. They also try to cut down on typical broker squabbles by declaring it improper to foist a business card on someone else’s client and asserting that brokers should give co-brokers and their customers at least 20 minutes’ grace time if they’re late for an appointment.
Diane Ramirez, the president of Halstead Property and a governor of the real estate board, said, “Some of these things may seem silly, but it creates a framework of proper decorum.”
The board and its policies have evolved to make it clearer that “we are an industry that works for our sellers and buyers, and that should be our primary goal,” Ms. Ramirez said. “That’s the only way to dispel the distrust that comes in, not because it’s earned but because of what our reputation may have been.”
The real estate board also has an ethics committee that handles complaints filed by brokers against other brokers. Stephen Kliegerman, Halstead’s executive director for development marketing and a former chairman of the ethics committee, said the committee handles only a handful of cases each year, but he added that most complaints do not get to the board because agency managers tend to resolve complaints among themselves.
One of the biggest current complaints involves brokers who post listings on their Web sites for the exclusive properties of other brokers. “They’ll advertise a property they don’t represent, or sometimes the property doesn’t even exist,” Mr. Kliegerman said. “So when the buyer calls, it’s a bait-and-switch — the broker knows nothing about the property and winds up trying to take them to something completely different.”
He said the ethics committee is developing a new resolution to deal with the problem. “This kind of thing happens daily, and it taints the consumer’s impression of the entire broker community,” he said.
Consumers can file complaints about real estate agents with the Department of State in New York, the Real Estate Commission in New Jersey and the Department of Consumer Protection in Connecticut.
The New York Department of State can punish agents for infractions ranging from practicing without a license to a catchall category labeled “untrustworthiness and incompetency.” The latter can include things like lying about the school district for a particular address or misleading a buyer about future development in the area.
If the number of complaints filed in New York in recent years is any indication, brokers may actually be becoming more trustworthy. From 2001 to 2005, the last year with complete statistics, the annual number of complaints declined from 1,589 to 1,176.
The complaint category that showed the sharpest drop and that accounts for most of the decline was in “agency disclosure,” indicating that real estate agents have gotten better at disclosing whether they are a seller’s broker or buyer’s broker and what that means in terms of where their loyalty lies.
Of the completed cases from 2005, 109 real estate agents were fined, 3 had their licenses suspended, and 14 had their licenses revoked. Fines can run as high as $1,000, and suspension periods are determined on a case-by-case basis.
But most ethical breaches probably never reach either the real estate board or the Department of State. Ms. Rothman of Bellmarc recalled a case in which she represented a buyer who made an all-cash, full-price offer on an apartment, only to have the seller’s agent stall and falsely claim that the sellers wanted time to consider the offer.
“I later found out that he was waiting for a customer of his own to make an offer and he never even told the sellers about my offer,” she said. She filed a complaint with the other agent’s manager, and her buyers eventually got the apartment.
When training new agents, larger real estate companies stress the need for proper broker etiquette, both with clients and with other brokers.
Vasco Da Silva, the director of sales at Halstead’s Riverdale office, says Halstead’s broker boot camp tells agents when they should keep their business cards in their pockets, advises them to turn off cellphones while showing an apartment and instructs them never to talk about an apartment inside an elevator if there are other people around.
“We go through a logical step-by-step process, and it’s all about winning a customer’s loyalty and trust,” he said. “You don’t get it with your first meeting, so what you have to do is win your customers over with service and with confidence in your ability.”
In its training, Bellmarc urges new agents to be as straightforward as possible and to avoid pushing an apartment on a reluctant customer. “If someone doesn’t want an apartment, you don’t want to try to talk them into it,” said Janice Silver, an executive vice president at Bellmarc. “You can’t say, ‘But it’s fabulous — here’s why you should buy it.’ ”
Instead, she trains agents to ask simple questions like: Do you like this apartment? Can you see yourself living here? Do you want to buy this?
“Don’t be pushy, but be very direct,” she said. “Because if they don’t like the apartment, you should move on and not waste everybody’s time.”
Some brokers say their colleagues should not try to hide a property’s blemishes. Jill Sloane, a senior vice president at Halstead who is Ms. Mizrahi’s new broker, said she once represented a seller whose apartment came with a 33 percent flip tax, and she made a point of including that in her advertising materials.
“There was no point in hiding something like that because buyers would eventually find out about it anyway,” she said. “It’s just not worth the damage it would do to your reputation to be deceptive.”
Patricia Warburg Cliff, a senior vice president of the Corcoran Group, agreed. “If I know that there’s a bus that idles under the living room window, I have to get it out first thing,” she said. “Because if a buyer finds out about it midway into a transaction, you have egg all over your face, and the seller isn’t served because they’re not out to swindle someone.”
Sometimes, even when a transaction provides a happy ending for everyone, a buyer can still be left with lingering doubts about the broker and his or her motives.
Take Rob and Lauren Mank, who are now happily living in an Upper West Side apartment they bought last year. Mr. Mank said they had no qualms about their agent, a buyers’ broker, until final negotiations, when she pushed them to offer the full asking price, which would have meant raising their bid by $45,000. They ultimately went up by $35,000 and got the apartment because two competing buyers did not raise their bids.
“I felt like it was very high pressure and her loyalty to us was compromised by her desire to do the deal,” he said. “It left us with a bad taste.”
But Ms. Mank said she didn’t believe there was any malice involved and noted that without a crystal ball, there is no way of knowing if they could have gotten the apartment for less.
“Maybe you’re always going to want to blame someone for some infraction because you’re always going to feel taken advantage of in some way,” she said. “It’s a delicate and intimate situation because it’s your home and it’s your finances — the whole thing is just so fraught.”
Published: January 28, 2007
RENÉE MIZRAHI suspects that the first real estate agent she worked with deliberately didn’t tell her that a building was only 49 percent owner-occupied.
Her bank subsequently refused to give her a mortgage, and she lost the apartment.
Her second broker was worse. He stood her up at an apartment showing, she said, and he lied about the building’s financial requirements and about having put in her bid for the co-op. Then when she told him that she didn’t want to work with him anymore, he kept calling her — she has caller ID — and hanging up without leaving a message. “So he was like stalking me,” Ms. Mizrahi said. “What a nightmare!”
She is now working with a broker, referred by a friend, with whom she feels comfortable, but her bad broker experiences have nonetheless made her wonder if any broker can really be trusted. “I just want to work with someone who shows up when they say they will and who will tell me the information I need,” she said. “Why is this so hard?”
Ms. Mizrahi is not alone in her hard-earned broker wariness.
A Harris poll conducted last year that ranked occupations in terms of prestige placed real estate brokers at the very bottom of a list of 23 professions. (Firefighters and doctors were at the top.)
Brokers themselves seem well aware that their business isn’t always held in very high regard. The National Association of Realtors has an advertising campaign called “Someone You Can Trust,” which stresses that Realtors are subject to mandatory ethics training. “Not many professionals can claim that on their résumé,” the ads read.
Svetlana Choi, a senior sales associate at Bellmarc Realty, estimated that at least a quarter of her clients are skeptical when they first come to her.
“I just try to draw them out and relate to them in a way that lets them know that I’m not the enemy,” she said. “I’m not trying to snow them. I’m really just trying to be helpful.”
So why do people often have trouble trusting a broker?
To start with, brokers are salespeople, so buyers with suspicious minds would naturally suspect brokers of trying to sell them something they don’t necessarily want or need. But brokers also admit that some real estate agents help to perpetuate stereotypes with classic bait-and-switch schemes and by putting their own desires to close a deal over a client’s best interests. The fact that brokers themselves sometimes find it hard to trust one another only compounds the level of suspicion in real estate.
There are two major sources of broker-to-broker mistrust. The first is the fear that one broker may be trying to poach another’s client. The second is that a seller’s broker may be deliberately avoiding phone calls or refusing to submit an offer because he or she wants to avoid having to share the commission. The cynicism may well stem from the fiercely competitive marketplace and the fact that there are more than 28,700 brokers and sales agents in Manhattan alone and 66,700 in all five boroughs.
Erik Serras, a sales agent at Pari Passu Realty in Manhattan, said another agent recently stood outside an open house that Mr. Serras was holding just to hand out his business card. “It was the equivalent of ambulance chasing, and it sheds a negative light on the industry on the whole,” he said. “There are just too many untrained agents out there doing things that are unethical and unprofessional, and once a client is exposed to that, the damage is done because it’s easy for people to generalize.”
Ann Rothman, a Bellmarc agent, said that some people were quick to judge brokers because they “just have a queasy feeling about real estate.” She added that she sometimes finds herself saying, “I do real estate, so yes, I sell used cars, and people are going to think the speedometer has been changed.”
But Ms. Rothman tries to be philosophical about it. “Any person in a service business is going to be up against that,” she said. “Even if you go to a doctor or a dentist, there are going to be people who think they’re only doing a procedure because they have their kid’s college education or a trip to finance.”
When she comes across skeptical clients, Ms. Rothman said, “I’ll bring it up, and I’ll say, ‘What’s the problem here?’ ” That seems to work, she added, citing as proof an entire family of doubting buyers. “They all have a distrust gene,” she said, “but they keep referring other family members to me.”
Another instance when a broker might appear to be evasive is at an open house. When brokers hold open houses, they represent the sellers, but they also routinely use the events as an opportunity to pick up other clients. So if a potential buyer walks in and doesn’t seem right for that particular apartment, the broker can offer to help the buyer find something else. But under the unwritten rules of the game, the broker does not have to disclose whether there are any other open houses in the same building, particularly if the events are being held by competing firms.
These kinds of situations can easily lead to mistrust on the part of sellers and buyers alike.
Managers at real estate agencies say that the only way to minimize misunderstandings is to train new agents to be highly professional and to establish and enforce industry standards. To that end, the Real Estate Board of New York has established a list of 17 resolutions aimed at addressing ethical questions in residential real estate.
The resolutions cover issues as basic as the definition of an “exclusive” and the need to have backup brokers available when the exclusive broker is not available. They also try to cut down on typical broker squabbles by declaring it improper to foist a business card on someone else’s client and asserting that brokers should give co-brokers and their customers at least 20 minutes’ grace time if they’re late for an appointment.
Diane Ramirez, the president of Halstead Property and a governor of the real estate board, said, “Some of these things may seem silly, but it creates a framework of proper decorum.”
The board and its policies have evolved to make it clearer that “we are an industry that works for our sellers and buyers, and that should be our primary goal,” Ms. Ramirez said. “That’s the only way to dispel the distrust that comes in, not because it’s earned but because of what our reputation may have been.”
The real estate board also has an ethics committee that handles complaints filed by brokers against other brokers. Stephen Kliegerman, Halstead’s executive director for development marketing and a former chairman of the ethics committee, said the committee handles only a handful of cases each year, but he added that most complaints do not get to the board because agency managers tend to resolve complaints among themselves.
One of the biggest current complaints involves brokers who post listings on their Web sites for the exclusive properties of other brokers. “They’ll advertise a property they don’t represent, or sometimes the property doesn’t even exist,” Mr. Kliegerman said. “So when the buyer calls, it’s a bait-and-switch — the broker knows nothing about the property and winds up trying to take them to something completely different.”
He said the ethics committee is developing a new resolution to deal with the problem. “This kind of thing happens daily, and it taints the consumer’s impression of the entire broker community,” he said.
Consumers can file complaints about real estate agents with the Department of State in New York, the Real Estate Commission in New Jersey and the Department of Consumer Protection in Connecticut.
The New York Department of State can punish agents for infractions ranging from practicing without a license to a catchall category labeled “untrustworthiness and incompetency.” The latter can include things like lying about the school district for a particular address or misleading a buyer about future development in the area.
If the number of complaints filed in New York in recent years is any indication, brokers may actually be becoming more trustworthy. From 2001 to 2005, the last year with complete statistics, the annual number of complaints declined from 1,589 to 1,176.
The complaint category that showed the sharpest drop and that accounts for most of the decline was in “agency disclosure,” indicating that real estate agents have gotten better at disclosing whether they are a seller’s broker or buyer’s broker and what that means in terms of where their loyalty lies.
Of the completed cases from 2005, 109 real estate agents were fined, 3 had their licenses suspended, and 14 had their licenses revoked. Fines can run as high as $1,000, and suspension periods are determined on a case-by-case basis.
But most ethical breaches probably never reach either the real estate board or the Department of State. Ms. Rothman of Bellmarc recalled a case in which she represented a buyer who made an all-cash, full-price offer on an apartment, only to have the seller’s agent stall and falsely claim that the sellers wanted time to consider the offer.
“I later found out that he was waiting for a customer of his own to make an offer and he never even told the sellers about my offer,” she said. She filed a complaint with the other agent’s manager, and her buyers eventually got the apartment.
When training new agents, larger real estate companies stress the need for proper broker etiquette, both with clients and with other brokers.
Vasco Da Silva, the director of sales at Halstead’s Riverdale office, says Halstead’s broker boot camp tells agents when they should keep their business cards in their pockets, advises them to turn off cellphones while showing an apartment and instructs them never to talk about an apartment inside an elevator if there are other people around.
“We go through a logical step-by-step process, and it’s all about winning a customer’s loyalty and trust,” he said. “You don’t get it with your first meeting, so what you have to do is win your customers over with service and with confidence in your ability.”
In its training, Bellmarc urges new agents to be as straightforward as possible and to avoid pushing an apartment on a reluctant customer. “If someone doesn’t want an apartment, you don’t want to try to talk them into it,” said Janice Silver, an executive vice president at Bellmarc. “You can’t say, ‘But it’s fabulous — here’s why you should buy it.’ ”
Instead, she trains agents to ask simple questions like: Do you like this apartment? Can you see yourself living here? Do you want to buy this?
“Don’t be pushy, but be very direct,” she said. “Because if they don’t like the apartment, you should move on and not waste everybody’s time.”
Some brokers say their colleagues should not try to hide a property’s blemishes. Jill Sloane, a senior vice president at Halstead who is Ms. Mizrahi’s new broker, said she once represented a seller whose apartment came with a 33 percent flip tax, and she made a point of including that in her advertising materials.
“There was no point in hiding something like that because buyers would eventually find out about it anyway,” she said. “It’s just not worth the damage it would do to your reputation to be deceptive.”
Patricia Warburg Cliff, a senior vice president of the Corcoran Group, agreed. “If I know that there’s a bus that idles under the living room window, I have to get it out first thing,” she said. “Because if a buyer finds out about it midway into a transaction, you have egg all over your face, and the seller isn’t served because they’re not out to swindle someone.”
Sometimes, even when a transaction provides a happy ending for everyone, a buyer can still be left with lingering doubts about the broker and his or her motives.
Take Rob and Lauren Mank, who are now happily living in an Upper West Side apartment they bought last year. Mr. Mank said they had no qualms about their agent, a buyers’ broker, until final negotiations, when she pushed them to offer the full asking price, which would have meant raising their bid by $45,000. They ultimately went up by $35,000 and got the apartment because two competing buyers did not raise their bids.
“I felt like it was very high pressure and her loyalty to us was compromised by her desire to do the deal,” he said. “It left us with a bad taste.”
But Ms. Mank said she didn’t believe there was any malice involved and noted that without a crystal ball, there is no way of knowing if they could have gotten the apartment for less.
“Maybe you’re always going to want to blame someone for some infraction because you’re always going to feel taken advantage of in some way,” she said. “It’s a delicate and intimate situation because it’s your home and it’s your finances — the whole thing is just so fraught.”
San Francisco
Average annual home price appreciation (1949-2006)*:4.2%
If developers were allowed to go all out with building on San Francisco's Treasure Island, Presidio and the Marin Headlands across the Golden Gate Bridge, the price of housing would fall close to the cost of construction. But those pristine natural amenities are the product of one of the most anti-development political cultures in the country - and a perennial magnet for the highest earners.
Los Angeles
Average annual home price appreciation (1949-2006)*: 3.7%
Along with San Francisco, Los Angeles was the first major metro in the United States to become "filled up” during the 1960s and 1970s because of geographic constraints and political restrictions on building. Three-quarters of new construction is now in-fill development, and much of it is high end. The gentrification is pricing out middle and lower income families, who are moving in-land.
Seattle
Average annual home price appreciation (1949-2006)*: 3.2%
The newest graduate to join this elite class of super-expensive cities, Seattle is the least likely to hold its place. New zoning laws approved by the city council this year lift restrictions on building heights in the downtown core, and promise to generate $100 million worth of affordable housing.
Boston
Average annual home price appreciation (1949-2006)*:3.0%
Boston had the strongest wage growth of these cities through the tech bust and jobless recovery. Over the next five years, it will have the highest per capita income, next to San Francisco.
New York City
Average annual home price appreciation (1949-2006)*: 3.0%
The force with which middle class households here are getting replaced by wealthier ones was reflected in the recent hysteria over the Tishman Speyer group's $5.4-billion acquisition of 110 apartment buildings in lower Manhattan, the largest real estate deal in recent history. The apartment blocks are home to thousands of rent-controlled tenants who should have been priced out of the city years ago - and fear they now will be by market rents under the new owner.
*National average: 2.3 percent
Average annual home price appreciation (1949-2006)*:4.2%
If developers were allowed to go all out with building on San Francisco's Treasure Island, Presidio and the Marin Headlands across the Golden Gate Bridge, the price of housing would fall close to the cost of construction. But those pristine natural amenities are the product of one of the most anti-development political cultures in the country - and a perennial magnet for the highest earners.
Los Angeles
Average annual home price appreciation (1949-2006)*: 3.7%
Along with San Francisco, Los Angeles was the first major metro in the United States to become "filled up” during the 1960s and 1970s because of geographic constraints and political restrictions on building. Three-quarters of new construction is now in-fill development, and much of it is high end. The gentrification is pricing out middle and lower income families, who are moving in-land.
Seattle
Average annual home price appreciation (1949-2006)*: 3.2%
The newest graduate to join this elite class of super-expensive cities, Seattle is the least likely to hold its place. New zoning laws approved by the city council this year lift restrictions on building heights in the downtown core, and promise to generate $100 million worth of affordable housing.
Boston
Average annual home price appreciation (1949-2006)*:3.0%
Boston had the strongest wage growth of these cities through the tech bust and jobless recovery. Over the next five years, it will have the highest per capita income, next to San Francisco.
New York City
Average annual home price appreciation (1949-2006)*: 3.0%
The force with which middle class households here are getting replaced by wealthier ones was reflected in the recent hysteria over the Tishman Speyer group's $5.4-billion acquisition of 110 apartment buildings in lower Manhattan, the largest real estate deal in recent history. The apartment blocks are home to thousands of rent-controlled tenants who should have been priced out of the city years ago - and fear they now will be by market rents under the new owner.
*National average: 2.3 percent
It’s a broker’s market, real estate bigs claim
by amy zimmer / metro new york
JAN 29, 2007
BARUCH COLLEGE. There were no charts outlining low mortgage rates or predicting changes in Manhattan apartment prices at a seminar held here last week entitled “Why Buy Now.”
Instead, the standing room only crowd of real estate brokers — some sat on the floor with their Shearling and fur coats folded next to them — listened to industry leaders dole out professional advice. To succeed in a city with a glut of brokers — the state has licensed more than 66,000 in the city — the players suggested the rank-and-file should be up to date on the market, professional and well-dressed.
“Our industry has never been known for its professionalism,” said Hall Willkie, president of Brown Harris Stevens, explaining the importance of appearance and phone etiquette.
“Consumers now have so much at their fingertips and you have to be ahead of them. You have to know more,” added Diane Ramirez, president of Halstead Property.
“This is not going to be a buyers’ market or sellers’ market,” said Pamela Liebman, president and CEO of the Corcoran Group. “It’s a broker’s market. You need to play multiple roles. You’re a therapist, a friend.”
She told the group about the benefits of a new internal listings service her company makes available to brokers via BlackBerry. When one of her brokers received a listing while on a ski trip in Aspen, he slid to the side of the slope and was on the phone with his client within five minutes.
John Crafton, a 29-year-old broker at the boutique firm Barak Realty, could relate to the BlackBerry story. He is available to clients at all hours, sometimes showing apartments at 2 a.m.
“I work 20 hours a day, seven days a week,” said Crafton, a former producer at Bad Boy Records who turned to real estate because there’s no “long-term wealth” opportunities in music. “I’m seven months into this and I’m already marketing $5 million in terms of exclusives.”
Damion Williams, a broker with NY Living Solutions — who calls himself an “affordable luxury specialist” — bemoaned the number of brokers in town, saying many people get into real estate as a hobby.
“The industry is obviously oversaturated with brokers, but not necessarily quality brokers,” he said. “You can have 900 brokers at a firm where 850 turn out to be idiots.”
Why buy now?
All agreed that “now” was always the time to buy in New York. “People will say, ‘You’re in real estate so of course you’re going to be Pollyanna-ish,’ but numbers are numbers,” said Dottie Herman, president and CEO of Prudential Douglas Elliman. “You’d be hard-pressed to make a case against New York.”
Portal prep
Brokers are gearing up for a big change to their industry. The Real Estate Board of New York plans to unveil a Web site this spring enabling the public to see up to 15,000 exclusive listings for Manhattan and Brooklyn to which only its members have access.
Smaller firms balked over the original fees proposed to join the service — $3,500 for small firms and $7,000 for large ones. Though that has been tabled for a more equitable fee structure, which has yet to be announced, some firms are still worried their listings will be overshadowed by larger firms.
Yet Barak Dunayer, of Barak Realty, believes the site could be a real boon.
“This is going to give boutique firms equal exposure,” he said. “Right now, the big firms get all the traffic on their Web sites because they have millions of dollars to optimize them.”
He also said it will be cheaper to advertise on REBNY’s site than on the New York Times’ listings — which REBNY hopes to eclipse. But, Dunayer added, “It’s going to take a lot of time and money to make the site the one and only destination.”
JAN 29, 2007
BARUCH COLLEGE. There were no charts outlining low mortgage rates or predicting changes in Manhattan apartment prices at a seminar held here last week entitled “Why Buy Now.”
Instead, the standing room only crowd of real estate brokers — some sat on the floor with their Shearling and fur coats folded next to them — listened to industry leaders dole out professional advice. To succeed in a city with a glut of brokers — the state has licensed more than 66,000 in the city — the players suggested the rank-and-file should be up to date on the market, professional and well-dressed.
“Our industry has never been known for its professionalism,” said Hall Willkie, president of Brown Harris Stevens, explaining the importance of appearance and phone etiquette.
“Consumers now have so much at their fingertips and you have to be ahead of them. You have to know more,” added Diane Ramirez, president of Halstead Property.
“This is not going to be a buyers’ market or sellers’ market,” said Pamela Liebman, president and CEO of the Corcoran Group. “It’s a broker’s market. You need to play multiple roles. You’re a therapist, a friend.”
She told the group about the benefits of a new internal listings service her company makes available to brokers via BlackBerry. When one of her brokers received a listing while on a ski trip in Aspen, he slid to the side of the slope and was on the phone with his client within five minutes.
John Crafton, a 29-year-old broker at the boutique firm Barak Realty, could relate to the BlackBerry story. He is available to clients at all hours, sometimes showing apartments at 2 a.m.
“I work 20 hours a day, seven days a week,” said Crafton, a former producer at Bad Boy Records who turned to real estate because there’s no “long-term wealth” opportunities in music. “I’m seven months into this and I’m already marketing $5 million in terms of exclusives.”
Damion Williams, a broker with NY Living Solutions — who calls himself an “affordable luxury specialist” — bemoaned the number of brokers in town, saying many people get into real estate as a hobby.
“The industry is obviously oversaturated with brokers, but not necessarily quality brokers,” he said. “You can have 900 brokers at a firm where 850 turn out to be idiots.”
Why buy now?
All agreed that “now” was always the time to buy in New York. “People will say, ‘You’re in real estate so of course you’re going to be Pollyanna-ish,’ but numbers are numbers,” said Dottie Herman, president and CEO of Prudential Douglas Elliman. “You’d be hard-pressed to make a case against New York.”
Portal prep
Brokers are gearing up for a big change to their industry. The Real Estate Board of New York plans to unveil a Web site this spring enabling the public to see up to 15,000 exclusive listings for Manhattan and Brooklyn to which only its members have access.
Smaller firms balked over the original fees proposed to join the service — $3,500 for small firms and $7,000 for large ones. Though that has been tabled for a more equitable fee structure, which has yet to be announced, some firms are still worried their listings will be overshadowed by larger firms.
Yet Barak Dunayer, of Barak Realty, believes the site could be a real boon.
“This is going to give boutique firms equal exposure,” he said. “Right now, the big firms get all the traffic on their Web sites because they have millions of dollars to optimize them.”
He also said it will be cheaper to advertise on REBNY’s site than on the New York Times’ listings — which REBNY hopes to eclipse. But, Dunayer added, “It’s going to take a lot of time and money to make the site the one and only destination.”
Sunday, January 28, 2007
Where is all this Money?
Easy Cash Uplifting Investors
By MICHAEL STOLER
January 25, 2007
The fuel behind New York's record-setting real estate bonanza is the sizzling market for capital, and both buyers and lenders predict that cheap financing will be available for real estate investors into the foreseeable future. The availability of investment capital set fire to the real estate investment sales market last year, when transactions topped $30 billion. Considering the preliminary sales that are in contract for 2007, I would not be surprised to see the following advertisement: "For sale in New York City, office buildings, rental apartment complexes, hotels, and retail locations, priced from $100 million to $2 billion. Financing available for up to 100% of total purchase price, nonrecourse, interest only, and flexible terms."
Real estate investors are confident capital will continue to flow into New York's office market, where vacancy rates are dropping and rents are on the rise. One of the most active lenders in 2006 was Wachovia Securities. Last year, the bank was the leading lender in the $5.9 billion financing for Peter Cooper Village and Stuyvesant Town, the largest mortgage ever provided for a single property. "Capital is plenty; it also is now a freely tradable commodity," a managing director at Wachovia Securities, Robert Verrone, said. "We only originate financing for what we can sell; so long as we can sell it, we will originate it."
The director of commercial and real estate lending for the New York City division of M&T Bank, Gino Martocci, said the city's office market "compares favorably against alternative investments for banks. Lenders are competing to provide such a significant portion of deal capitalization because they too are flush with capital, have few alternative investment options, and have not seen a significant credit event in real estate in more than 10 years. The net effect is to reduce risk premiums, reduce spread, loosen structures, and increase proceeds."
One of the most active buyers and sellers of office buildings in Manhattan in 2006 was Murray Hill Properties, which, with its joint venture partners, divested 135 W. 50th St. and 450 Lexington Ave., and acquired the building at One Park Ave. and the Brill Building. This year, it is marketing for sale the office building 417 Fifth Ave. A co-founder and principal at Murray Hill, Norman Sturner, said banks — like typical investors — need to put their deposits to work. " New York City being the real estate and finance capital, the banks are comfortable with raising the levels of the capital stack with owners and operators that they had ongoing successful relations in the past. I do not believe that there is a change in the foreseeable future for Manhattan," Mr. Sturner said.
He said the availability of capital is grounded in basic economics. "I have used the analogy before: If tomorrow there were no new diamonds being mined or added to the existing inventory, the price of diamonds would skyrocket. Similarly, there is very little office space being added to the Manhattan commercial real estate inventory, and prices are increasing at extraordinary rates. Rents have begun to increase at the same rapidity to balance the higher prices being paid for assets."
Not everyone is quite so bullish. The head of real estate in North America for HSH Nordbank, James Fitzgerald, likens the current market to a religious experience. "The last shall be first and the first shall be last," he said. "Hoping and praying is never a good business strategy, but that is exactly what some lenders and investors need to do based on their current spending spree. The last ones into this game will be the first one to lose — and lose big." The head of an investment fund who prefers not to be identified said lenders are aiming to offer more capital as a way to inflate their year-end bonuses. "Real estate developers and entrepreneurs will find deals to build and to invest as long as the money flows, the more the better. As long as the debt providers get paid their bonuses at the end of each year for the volume of business they produce, with no consequences for failure of the transaction down the road, then it will take a larger event for the capital to slow down," the source said. In 2006, RBS Greenwich Capital provided more than $12.5 billion in financing throughout the country, including the properties at 350 Madison Ave. and 1441 and 1410 Broadway. The managing director at Greenwich Capital, Chuck Rosenzweig, said the market characteristics have pushed lenders toward new extremes in their practices.
"It is the first time in recent memory that you see a large number of Wall Street lenders comfortable at 90 percent leverage and even higher, as bridge equity has become a product that many firms now offer. This is all a function of liquidity in the market as firms have been able to sell that debt in the capital markets, and place the high yield paper with real estate investment funds and hedge funds," Mr. Rosenzweig said.
One area of concern for many lenders is financing for new condominiums and land loans. A number of lenders have ceased lending in this asset class; most prudent ones stopped lending up to 18 months ago, experts say. Investment capital will be plentiful on the "near-term horizon," Mr. Rosenzweig said, but not for all real estate classes. "There has been a recent pullback from any markets for condominium deals and residential land," he added.
Mr. Martocci of M&T Bank said lenders "have tightened underwriting for new construction residential for sale and condo conversion deals over the past 12 months."
Mr. Verrone of Wachovia supports this assessment. "I don't like condominium loans, and don't do them anymore," he said.
The pause in condominium financing will allow the market to absorb the thousands of residential units in the pipeline, experts say. Currently, there are few defaults in the condominium conversion and construction loans, since the lenders have set up interest reserves for the projects. If a change in valuation of the project has occurred or costs have risen to complete the project, the day of reckoning for potential default may be still be 12 and 24 months away.
Mr. Rosenzweig says the lending climate in the capital markets can change quickly. "It is fair to say that prices for assets right now are very much driven by the cheap cost of debt capital. This liquidity, and the very tight pricing that comes with it, can change due to events that are completely outside the real estate industry, like the Russian debt crisis and the collapse of long-term capital in the fall of 1998. Borrowers understand this and are borrowing very aggressively right now, especially on a fixed-rate basis," he said.
A principal at Stellar Management, one of New York's most active investors, Robert Rosania, said the demand for real estate at historically low cap rates is a factor of the copious supply of money.
"This is not rocket science: With the market fresh with nearly $60 billion of ‘institutional equity' for acquisitions, the light appears to be green. However, anyone who tells you they know precisely what will happen is a liar, because of a thing called ‘event risk,'" Mr. Rosania said.
As long as the market is fueled by high leverage and cheap financing, backed by underlying higher leverage and still cheaper collateralized debt obligations, Mr. Rosania said "the bulls will run in Pamplona."
"When an event of significant enough magnitude occurs, like a credit blow up, a housing dive, asset default, or, God forbid, a geopolitical disaster, then folks will get gored," he said.
Last month, the chairman of BRT Realty Trust, Fred Gould, appeared on my television show and said real estate has become more like the stock market. These days, he said, the concept of cash flow is a lot less important than value, and everything is based on perceived value.
Mr. Fitzgerald of HSH Nordbank, who also appeared on my TV show, said, "Buy low, sell high, trade, trade, today."
" Mr. Gould's comments make sense, but the problem is that unlike the stock market, leverage still plays a most significant role. The liquidity of freely trading shares is not a plausible exit for real estate. All cash buyers may be coming — but not yet — especially when we have so much stupid money out there in the first loss position," Mr. Fitzgerald said.
"Or is it the venture capital formula, Do 10 deals, get three right, and it makes up for the seven losers? I don't know and neither do the investors putting up the dough. Several of my friends run hedge funds and have been complaining how they missed the real estate boat and they need to get in the game. I am sure they will find someone to help them spend their money. Last in, first out; an accounting rule or a prognostication for the coming capital losers in the real estate marketplace."
The practice of mezzanine lending, in which niche lenders accept more risk than a traditional lender but charge a premium to allow an investor to finance up to 100% of a deal, continues to fuel sales. "Mezzanine lenders are prepared to take the capital stacks to 90% or more, knowing that they can take over the properties if a default occurs because most of these lenders have operating subsidiaries that can operate the properties if they cover ownership," Mr. Sturner said.
"Condominium developments and land transactions have a bit harder time finding mezzanine, as a potential decline in value could easily erode the mezzanine player's capital position," he said.
While Mr. Sturner is bullish on New York City — where he says business is improving; employment continues to grow; fixed, long-term money is inexpensive, and the future continues to look bright — I have to concur with some prominent owners and investors who are cautiously optimistic about the capital markets in 2007.
Mr. Stoler, a contributing editor to The New York Sun, is a television broadcaster and senior principal at a real estate investment fund. He can be reached at mstoler@newyorkrealestatetv.com.
By MICHAEL STOLER
January 25, 2007
The fuel behind New York's record-setting real estate bonanza is the sizzling market for capital, and both buyers and lenders predict that cheap financing will be available for real estate investors into the foreseeable future. The availability of investment capital set fire to the real estate investment sales market last year, when transactions topped $30 billion. Considering the preliminary sales that are in contract for 2007, I would not be surprised to see the following advertisement: "For sale in New York City, office buildings, rental apartment complexes, hotels, and retail locations, priced from $100 million to $2 billion. Financing available for up to 100% of total purchase price, nonrecourse, interest only, and flexible terms."
Real estate investors are confident capital will continue to flow into New York's office market, where vacancy rates are dropping and rents are on the rise. One of the most active lenders in 2006 was Wachovia Securities. Last year, the bank was the leading lender in the $5.9 billion financing for Peter Cooper Village and Stuyvesant Town, the largest mortgage ever provided for a single property. "Capital is plenty; it also is now a freely tradable commodity," a managing director at Wachovia Securities, Robert Verrone, said. "We only originate financing for what we can sell; so long as we can sell it, we will originate it."
The director of commercial and real estate lending for the New York City division of M&T Bank, Gino Martocci, said the city's office market "compares favorably against alternative investments for banks. Lenders are competing to provide such a significant portion of deal capitalization because they too are flush with capital, have few alternative investment options, and have not seen a significant credit event in real estate in more than 10 years. The net effect is to reduce risk premiums, reduce spread, loosen structures, and increase proceeds."
One of the most active buyers and sellers of office buildings in Manhattan in 2006 was Murray Hill Properties, which, with its joint venture partners, divested 135 W. 50th St. and 450 Lexington Ave., and acquired the building at One Park Ave. and the Brill Building. This year, it is marketing for sale the office building 417 Fifth Ave. A co-founder and principal at Murray Hill, Norman Sturner, said banks — like typical investors — need to put their deposits to work. " New York City being the real estate and finance capital, the banks are comfortable with raising the levels of the capital stack with owners and operators that they had ongoing successful relations in the past. I do not believe that there is a change in the foreseeable future for Manhattan," Mr. Sturner said.
He said the availability of capital is grounded in basic economics. "I have used the analogy before: If tomorrow there were no new diamonds being mined or added to the existing inventory, the price of diamonds would skyrocket. Similarly, there is very little office space being added to the Manhattan commercial real estate inventory, and prices are increasing at extraordinary rates. Rents have begun to increase at the same rapidity to balance the higher prices being paid for assets."
Not everyone is quite so bullish. The head of real estate in North America for HSH Nordbank, James Fitzgerald, likens the current market to a religious experience. "The last shall be first and the first shall be last," he said. "Hoping and praying is never a good business strategy, but that is exactly what some lenders and investors need to do based on their current spending spree. The last ones into this game will be the first one to lose — and lose big." The head of an investment fund who prefers not to be identified said lenders are aiming to offer more capital as a way to inflate their year-end bonuses. "Real estate developers and entrepreneurs will find deals to build and to invest as long as the money flows, the more the better. As long as the debt providers get paid their bonuses at the end of each year for the volume of business they produce, with no consequences for failure of the transaction down the road, then it will take a larger event for the capital to slow down," the source said. In 2006, RBS Greenwich Capital provided more than $12.5 billion in financing throughout the country, including the properties at 350 Madison Ave. and 1441 and 1410 Broadway. The managing director at Greenwich Capital, Chuck Rosenzweig, said the market characteristics have pushed lenders toward new extremes in their practices.
"It is the first time in recent memory that you see a large number of Wall Street lenders comfortable at 90 percent leverage and even higher, as bridge equity has become a product that many firms now offer. This is all a function of liquidity in the market as firms have been able to sell that debt in the capital markets, and place the high yield paper with real estate investment funds and hedge funds," Mr. Rosenzweig said.
One area of concern for many lenders is financing for new condominiums and land loans. A number of lenders have ceased lending in this asset class; most prudent ones stopped lending up to 18 months ago, experts say. Investment capital will be plentiful on the "near-term horizon," Mr. Rosenzweig said, but not for all real estate classes. "There has been a recent pullback from any markets for condominium deals and residential land," he added.
Mr. Martocci of M&T Bank said lenders "have tightened underwriting for new construction residential for sale and condo conversion deals over the past 12 months."
Mr. Verrone of Wachovia supports this assessment. "I don't like condominium loans, and don't do them anymore," he said.
The pause in condominium financing will allow the market to absorb the thousands of residential units in the pipeline, experts say. Currently, there are few defaults in the condominium conversion and construction loans, since the lenders have set up interest reserves for the projects. If a change in valuation of the project has occurred or costs have risen to complete the project, the day of reckoning for potential default may be still be 12 and 24 months away.
Mr. Rosenzweig says the lending climate in the capital markets can change quickly. "It is fair to say that prices for assets right now are very much driven by the cheap cost of debt capital. This liquidity, and the very tight pricing that comes with it, can change due to events that are completely outside the real estate industry, like the Russian debt crisis and the collapse of long-term capital in the fall of 1998. Borrowers understand this and are borrowing very aggressively right now, especially on a fixed-rate basis," he said.
A principal at Stellar Management, one of New York's most active investors, Robert Rosania, said the demand for real estate at historically low cap rates is a factor of the copious supply of money.
"This is not rocket science: With the market fresh with nearly $60 billion of ‘institutional equity' for acquisitions, the light appears to be green. However, anyone who tells you they know precisely what will happen is a liar, because of a thing called ‘event risk,'" Mr. Rosania said.
As long as the market is fueled by high leverage and cheap financing, backed by underlying higher leverage and still cheaper collateralized debt obligations, Mr. Rosania said "the bulls will run in Pamplona."
"When an event of significant enough magnitude occurs, like a credit blow up, a housing dive, asset default, or, God forbid, a geopolitical disaster, then folks will get gored," he said.
Last month, the chairman of BRT Realty Trust, Fred Gould, appeared on my television show and said real estate has become more like the stock market. These days, he said, the concept of cash flow is a lot less important than value, and everything is based on perceived value.
Mr. Fitzgerald of HSH Nordbank, who also appeared on my TV show, said, "Buy low, sell high, trade, trade, today."
" Mr. Gould's comments make sense, but the problem is that unlike the stock market, leverage still plays a most significant role. The liquidity of freely trading shares is not a plausible exit for real estate. All cash buyers may be coming — but not yet — especially when we have so much stupid money out there in the first loss position," Mr. Fitzgerald said.
"Or is it the venture capital formula, Do 10 deals, get three right, and it makes up for the seven losers? I don't know and neither do the investors putting up the dough. Several of my friends run hedge funds and have been complaining how they missed the real estate boat and they need to get in the game. I am sure they will find someone to help them spend their money. Last in, first out; an accounting rule or a prognostication for the coming capital losers in the real estate marketplace."
The practice of mezzanine lending, in which niche lenders accept more risk than a traditional lender but charge a premium to allow an investor to finance up to 100% of a deal, continues to fuel sales. "Mezzanine lenders are prepared to take the capital stacks to 90% or more, knowing that they can take over the properties if a default occurs because most of these lenders have operating subsidiaries that can operate the properties if they cover ownership," Mr. Sturner said.
"Condominium developments and land transactions have a bit harder time finding mezzanine, as a potential decline in value could easily erode the mezzanine player's capital position," he said.
While Mr. Sturner is bullish on New York City — where he says business is improving; employment continues to grow; fixed, long-term money is inexpensive, and the future continues to look bright — I have to concur with some prominent owners and investors who are cautiously optimistic about the capital markets in 2007.
Mr. Stoler, a contributing editor to The New York Sun, is a television broadcaster and senior principal at a real estate investment fund. He can be reached at mstoler@newyorkrealestatetv.com.
Tuesday, January 16, 2007
An MTA land sale could imperil last four blocks of planned park, cut into developers' profits
January 2007
High Line's highest end faces trouble
An MTA land sale could imperil last four blocks of planned park, cut into developers' profits
By Gabby Warshawer
The Caledonia, a luxury building near the High Line, will have 200 condo units and 250 rental apartments. Plans to turn the northern MTA-owned section of the High Line into parkland may get derailed.The High Line, the former elevated rail line that ran though the backs of warehouses from the Meatpacking District through West Chelsea, is being readied for a transformation into a second-story level promenade and park along the old railbed. But last month, the city's transit authority revealed that its planned sale of the Hudson Yards marshaling and maintenance area could also leave the northern portion of the High Line, from 30th to 34th streets along 10th Avenue, vulnerable to demolition, rather than parkland redevelopment.No buyer has yet emerged, but the agency reserves the right to sell off its real estate holdings as it sees fit, and the possibility that four blocks of projected park would be clipped makes developers nervous.An MTA sale to a demolition-minded buyer would not only reduce the final size of the High Line, but could cut into developer profits if their planned projects aren't connected to the expected public space.Construction along the future High Line has been frenzied, and many developers use the pending park as their primary selling point.While optimism dominates talk and plans along the old trackbed, developers are wary of the MTA's plans to sell the northern parcel."I'm very sorry if the park cannot extend the whole way, but if it cannot, it will make the remaining portion more unique," said Andre Balazs, who is developing the Standard New York hotel at 844 Washington Street and a private club on 10th Avenue and 14th Street. "I think the public will be shortchanged if it happens, and I think it would be a shame."Balazs' projects are on the far south end of the future park, so they would not be directly impacted by an abbreviated version of the park. A residential development planned by the Related Companies, however, at 30th Street and 10th Avenue, would rise next to the affected segment.David Wine, vice chairman of the Related Companies, said Related is taking a wait-and-see approach with regards to the MTA's plans."The timing of the MTA's plans for the north end of the High Line is of interest to us because we don't want to do something that doesn't make sense in terms of what they do," said Wine, adding that Related expects the building's units to primarily be rentals.Regardless of what transpires above 30th Street, the overall feeling among industry professionals is that the buildings under construction in the High Line corridor will fare well."It's such a unique area; it's not going to be the next Soho or the next anywhere else," said broker Eric Anton, a senior vice president at Eastern Consolidated who has worked on several deals in the area. "Nowhere else in the city are you going to have this accumulation of art and a unique park. The views are going to be amazing."Wine said the excitement surrounding High Line developments is part of a larger trend of buyers looking along the entire far West Side, and that apartment seekers are now willing to consider buildings all the way from Battery Park City to the Upper West Side. He called the interest generated by another Related tower along the High Line, the Caledonia at 450 West 17th Street, "incredible" and said the building was 75 percent sold as of mid-December."The product and location have captivated people," he said. The Caledonia, which will have 200 condo units and 250 rental apartments, is a joint venture between Related and Taconic Investment Partners. It will feature a ground-floor, 3,500-square-foot Equinox health club, a chain owned by Related.According to Anton, it's luxury buildings like the Caledonia that will do best near the High Line."I'm not so bullish about the smaller buildings that don't have views, but I think the larger buildings that can provide amenities and luxury touches will do well," he said. "If people are going to pay a high price they want amenities."Buyers will have many choices. While a number of projects are still in the planning stages, hundreds of condo units are currently under construction in the area, most of them slated for large, full-service buildings (see below).Aside from the Caledonia, these include an 11-story condo at 520 West 19th Street; a 20-story condo tower at 535-541 West 19th Street; the 11-story High Line 519 on West 23rd Street; a tower planned on 10th and 23rd by Leviev Boymelgreen; and the 14-story Vesta 24 at 231-233 10th Avenue.Anton of Eastern Consolidated said that pricing for residential units along the High Line has been more or less holding steady, while "retail pricing is very good. And hotel pricing is great: The sky's the limit with that."In general, he said, buildings can't come up quickly enough: "There's just tons of demand."High Line developments, north to south30th Street and 10th AvenueSite of future residential tower developed by the Related Companies.Chelsea Arts Tower545 West 25th Street20-story commercial condo being developed by Jack Guttman and Young Woo & Associates.Vesta 24231-233 10th Avenue14-story condo being developed by the Vesta Group.High Line 519519 West 23rd Street11-story condo developed by Sleepy Hudson LLC.10th Avenue and 23rd StreetResidential tower developed by Leviev Boymelgreen.General Theological Seminary TowerNinth Avenue from 20th to 21st streets17-story tower with residential topping seminary developed by the Brodsky Organization.535-541 West 19th Street20-story condo tower being developed by Alf Naman Real Estate Advisors and Cape Advisors.IAC/InterActiveCorp headquarters540 West 19th Street10-story tower being developed by the Georgetown Company.520 West 19th Street11-story condo being developed by Bishopscourt Realty.The Caledonia450 West 17th Street26-story rental/condo being developed by the Related Companies and Taconic Investment Partners.14th Street and 10th Avenue10-story addition to warehouse will become a private club developed by Andre Balazs.The Standard New York844 Washington Street330-room hotel being developed by Andre Balazs.Southern entrance to the High Line820 Washington StreetPlanned Whitney Museum of American Art satellite.
High Line's highest end faces trouble
An MTA land sale could imperil last four blocks of planned park, cut into developers' profits
By Gabby Warshawer
The Caledonia, a luxury building near the High Line, will have 200 condo units and 250 rental apartments. Plans to turn the northern MTA-owned section of the High Line into parkland may get derailed.The High Line, the former elevated rail line that ran though the backs of warehouses from the Meatpacking District through West Chelsea, is being readied for a transformation into a second-story level promenade and park along the old railbed. But last month, the city's transit authority revealed that its planned sale of the Hudson Yards marshaling and maintenance area could also leave the northern portion of the High Line, from 30th to 34th streets along 10th Avenue, vulnerable to demolition, rather than parkland redevelopment.No buyer has yet emerged, but the agency reserves the right to sell off its real estate holdings as it sees fit, and the possibility that four blocks of projected park would be clipped makes developers nervous.An MTA sale to a demolition-minded buyer would not only reduce the final size of the High Line, but could cut into developer profits if their planned projects aren't connected to the expected public space.Construction along the future High Line has been frenzied, and many developers use the pending park as their primary selling point.While optimism dominates talk and plans along the old trackbed, developers are wary of the MTA's plans to sell the northern parcel."I'm very sorry if the park cannot extend the whole way, but if it cannot, it will make the remaining portion more unique," said Andre Balazs, who is developing the Standard New York hotel at 844 Washington Street and a private club on 10th Avenue and 14th Street. "I think the public will be shortchanged if it happens, and I think it would be a shame."Balazs' projects are on the far south end of the future park, so they would not be directly impacted by an abbreviated version of the park. A residential development planned by the Related Companies, however, at 30th Street and 10th Avenue, would rise next to the affected segment.David Wine, vice chairman of the Related Companies, said Related is taking a wait-and-see approach with regards to the MTA's plans."The timing of the MTA's plans for the north end of the High Line is of interest to us because we don't want to do something that doesn't make sense in terms of what they do," said Wine, adding that Related expects the building's units to primarily be rentals.Regardless of what transpires above 30th Street, the overall feeling among industry professionals is that the buildings under construction in the High Line corridor will fare well."It's such a unique area; it's not going to be the next Soho or the next anywhere else," said broker Eric Anton, a senior vice president at Eastern Consolidated who has worked on several deals in the area. "Nowhere else in the city are you going to have this accumulation of art and a unique park. The views are going to be amazing."Wine said the excitement surrounding High Line developments is part of a larger trend of buyers looking along the entire far West Side, and that apartment seekers are now willing to consider buildings all the way from Battery Park City to the Upper West Side. He called the interest generated by another Related tower along the High Line, the Caledonia at 450 West 17th Street, "incredible" and said the building was 75 percent sold as of mid-December."The product and location have captivated people," he said. The Caledonia, which will have 200 condo units and 250 rental apartments, is a joint venture between Related and Taconic Investment Partners. It will feature a ground-floor, 3,500-square-foot Equinox health club, a chain owned by Related.According to Anton, it's luxury buildings like the Caledonia that will do best near the High Line."I'm not so bullish about the smaller buildings that don't have views, but I think the larger buildings that can provide amenities and luxury touches will do well," he said. "If people are going to pay a high price they want amenities."Buyers will have many choices. While a number of projects are still in the planning stages, hundreds of condo units are currently under construction in the area, most of them slated for large, full-service buildings (see below).Aside from the Caledonia, these include an 11-story condo at 520 West 19th Street; a 20-story condo tower at 535-541 West 19th Street; the 11-story High Line 519 on West 23rd Street; a tower planned on 10th and 23rd by Leviev Boymelgreen; and the 14-story Vesta 24 at 231-233 10th Avenue.Anton of Eastern Consolidated said that pricing for residential units along the High Line has been more or less holding steady, while "retail pricing is very good. And hotel pricing is great: The sky's the limit with that."In general, he said, buildings can't come up quickly enough: "There's just tons of demand."High Line developments, north to south30th Street and 10th AvenueSite of future residential tower developed by the Related Companies.Chelsea Arts Tower545 West 25th Street20-story commercial condo being developed by Jack Guttman and Young Woo & Associates.Vesta 24231-233 10th Avenue14-story condo being developed by the Vesta Group.High Line 519519 West 23rd Street11-story condo developed by Sleepy Hudson LLC.10th Avenue and 23rd StreetResidential tower developed by Leviev Boymelgreen.General Theological Seminary TowerNinth Avenue from 20th to 21st streets17-story tower with residential topping seminary developed by the Brodsky Organization.535-541 West 19th Street20-story condo tower being developed by Alf Naman Real Estate Advisors and Cape Advisors.IAC/InterActiveCorp headquarters540 West 19th Street10-story tower being developed by the Georgetown Company.520 West 19th Street11-story condo being developed by Bishopscourt Realty.The Caledonia450 West 17th Street26-story rental/condo being developed by the Related Companies and Taconic Investment Partners.14th Street and 10th Avenue10-story addition to warehouse will become a private club developed by Andre Balazs.The Standard New York844 Washington Street330-room hotel being developed by Andre Balazs.Southern entrance to the High Line820 Washington StreetPlanned Whitney Museum of American Art satellite.
Wednesday, November 08, 2006
Greenspan: Worst housing woes are behind us
Former Fed chief warns that the housing market will continue to weaken but says sector has already posted its sharpest decline.
November 6 2006: 4:43 PM EST
WASHINGTON (Reuters) -- The U.S. housing market will weaken further, but the sharpest decline is over as inventories of unsold homes decrease, former Federal Reserve Chairman Alan Greenspan said on Monday.
"This is not the bottom, but the worst is behind us," Greenspan said at a conference organized by financial services firm Charles Schwab.
Greenspan retired from the U.S. central bank in January, but his comments have still had the power to move financial markets.
A decline in U.S. home sales and construction has contributed to an overall slowing of economic growth to 1.6 percent in third quarter. But Greenspan said housing market activity is likely no longer to be a drag on overall economic growth as unsold inventories clear out and stabilize against sales levels.
The slowdown has hurt profits and sales for the nation's major homebuilders, including Pulte Homes (up $0.08 to $30.18, Charts), Centex (Charts), D.R. Horton (Charts), Lennar (Charts), K.B. Home (Charts) and Toll Brothers (Charts).
Fed policy-makers are watching closely to see if the slowdown in the economy will ease a little of the worrisome upward pressure that a tight labor market has been exerting on prices. Fed officials have said they are confident the housing slowdown has not spread into other areas of the economy and that slightly higher rates of growth will return in 2007.
Hopes for Fed rate cuts die
The former central banker said he is "reasonably confident" the United States will not slide into recession because businesses appear to be strong, as evinced by strong corporate profit margins and healthy levels of capital investment.
Greenspan, whose every move as Fed chairman was scrutinized for clues about monetary policy and the economic outlook, laid to rest the legend that Fed interest rate decisions could be divined by how full his briefcase appeared to be when he went to work.
"The extent to which my briefcase was fat or thin depended on whether my wife had time to make me lunch," he said.
On interest rates, the former Fed chair cautioned that global factors that helped push down long-term interest rates, fueling the U.S. housing boom of the early part of the decade, are not permanent features of the economic landscape.
Greenspan once famously described the phenomenon of stubbornly low long-term interest rates, despite the Fed's steady increases in short-term benchmark rates, as a conundrum.
On Monday, he said that forces such as a flood of new workers into the world economy after the collapse of communism and the global integration of China were one-time events that will eventually stop playing a role in keeping long-term interest rates as persistently low.
"There is a turning point but I don't know where it is," he said.
November 6 2006: 4:43 PM EST
WASHINGTON (Reuters) -- The U.S. housing market will weaken further, but the sharpest decline is over as inventories of unsold homes decrease, former Federal Reserve Chairman Alan Greenspan said on Monday.
"This is not the bottom, but the worst is behind us," Greenspan said at a conference organized by financial services firm Charles Schwab.
Greenspan retired from the U.S. central bank in January, but his comments have still had the power to move financial markets.
A decline in U.S. home sales and construction has contributed to an overall slowing of economic growth to 1.6 percent in third quarter. But Greenspan said housing market activity is likely no longer to be a drag on overall economic growth as unsold inventories clear out and stabilize against sales levels.
The slowdown has hurt profits and sales for the nation's major homebuilders, including Pulte Homes (up $0.08 to $30.18, Charts), Centex (Charts), D.R. Horton (Charts), Lennar (Charts), K.B. Home (Charts) and Toll Brothers (Charts).
Fed policy-makers are watching closely to see if the slowdown in the economy will ease a little of the worrisome upward pressure that a tight labor market has been exerting on prices. Fed officials have said they are confident the housing slowdown has not spread into other areas of the economy and that slightly higher rates of growth will return in 2007.
Hopes for Fed rate cuts die
The former central banker said he is "reasonably confident" the United States will not slide into recession because businesses appear to be strong, as evinced by strong corporate profit margins and healthy levels of capital investment.
Greenspan, whose every move as Fed chairman was scrutinized for clues about monetary policy and the economic outlook, laid to rest the legend that Fed interest rate decisions could be divined by how full his briefcase appeared to be when he went to work.
"The extent to which my briefcase was fat or thin depended on whether my wife had time to make me lunch," he said.
On interest rates, the former Fed chair cautioned that global factors that helped push down long-term interest rates, fueling the U.S. housing boom of the early part of the decade, are not permanent features of the economic landscape.
Greenspan once famously described the phenomenon of stubbornly low long-term interest rates, despite the Fed's steady increases in short-term benchmark rates, as a conundrum.
On Monday, he said that forces such as a flood of new workers into the world economy after the collapse of communism and the global integration of China were one-time events that will eventually stop playing a role in keeping long-term interest rates as persistently low.
"There is a turning point but I don't know where it is," he said.
Might Have to Wait til 2008 to Relax
High-End or Starter Homes, Builders Remain in a Slump
By EDUARDO PORTER
Published: November 8, 2006
Two of the nation’s major home builders reported dismal results in their most recent quarters yesterday, confirming that the slump in the once-hot housing market is far from over.
Toll Brothers, the country’s largest builder of luxury homes, said revenue from home building fell 10 percent, to $1.81 billion in its fourth quarter, ended Oct. 31, compared with $2.01 billion in the period a year earlier. The results are preliminary; the company will report earnings on Dec. 5.
Toll Brothers’ backlog of projects declined 25 percent and its signed contracts plunged 55 percent as the company suffered from a rash of cancellations concentrated in the formerly hot markets of Florida and Northern California.
“I don’t think we can call where the floor is,” said Joel Rassman, chief financial officer of Toll Brothers. “We have not seen a turnaround yet.”
The decline was not limited to the luxury segment of the housing market. The Atlanta-based Beazer Homes USA, a smaller rival that builds many homes for first-time buyers, reported that net income fell 44 percent, to $91.9 million, or $2.19 a share, in the quarter ended Sept. 30, from $164.4 million, or $3.61 a share, in the period in 2005.
Revenue increased 4 percent, to $1.88 billion. But new orders plummeted 58 percent, and the company forecast a substantial decline in earnings for 2007.
More than a year into a housing market bust, the home builders’ deteriorating fortunes are hardly a surprise. In September, sales of both new and existing homes were running around 14 percent below their level a year earlier.
Home prices have not fallen uniformly across the nation; in some areas, they have, however, declined steeply. By September, the average price of a newly built home was about 2 percent below the price of a year earlier, according to government figures.
Stuck with unsold inventory that is the equivalent of more than six months of sales, builders have slammed on the brakes. New-housing starts in September were running about 18 percent below their level in September 2005.
Toll Brothers, which is based in Horsham, Pa., cut its forecast for home deliveries in 2007 by 9 percent to 10 percent, compared with its previous forecast. And it trimmed its portfolio of land to 74,000 lots, 19 percent below its high in the fiscal second quarter, which ran from February through April.
James O’Leary, chief financial officer at Beazer Homes, said the company reduced its number of lots by 15 percent in the quarter. It also cut about 1,000 jobs in September and October, about 25 percent of the company head count.
The slump in construction has hurt the broader economy. Residential investment, which accounts for about 5 percent of the nation’s total economic production, plummeted 17.4 percent in the third quarter of the year, according to government data. It was the biggest quarterly decline in more than 15 years, single-handedly reducing the growth in gross domestic product by roughly 1.1 percentage points.
Mr. Rassman at Toll Brothers argued that the housing market’s chill is a question of confidence, “led by the consumer being afraid” that prices might fall. But he argued that still-low interest rates combined with continued employment growth should eventually feed through into growing demand for homes.
Economists, however, point out that it will take some time for builders to clear out their bloated inventory of unsold houses — a requisite for them to break their fall. With home prices still high by historical standards compared with potential buyers’ incomes, this may be a protracted process, requiring more income gains or price declines.
Richard DeKaser, chief economist at the National City Corporation, predicted that it would take about 9 to 12 months for the supply and demand of homes to come back into balance. “We are probably two-thirds of the way down the slope,” Mr. DeKaser said. “The bulk of the decline is behind us, but we are not yet out of the woods.”
Wednesday, September 13, 2006
Housing decline to bottom out in mid-2007, says industry group
Marketwatch - September 13, 2006 7:16 PM ET
WASHINGTON (MarketWatch) -- A downswing in home sales and building should bottom out sometime during the middle of 2007 before recovering in the latter part of 2008, a home-building industry economist said Wednesday.
In the meantime, said another economist, consumers shouldn't expect a "widespread" bust in home prices as some of the strength begins to dwindle from regional housing markets.
The National Association of Home Builders' David Seiders and the Federal Deposit Insurance Corporation's Richard Brown were among four economists testifying Wednesday before two Senate Banking subcommittees' hearing about the housing bubble and its implications for the U.S. economy.
All four -- including analysts from the National Association of Realtors and the Office of Federal Housing Enterprise Oversight -- agreed housing activity is slowing. Economists added the slowdown poses some risks to the U.S. economy but that a drop-off in activity isn't nationwide.
Seiders said a "below-trend" performance for home sales and building is likely over the next two years.
"The downswing in home sales and housing production should bottom out around the middle of next year before transitioning to a gradual recovery that will raise housing market activity back up toward sustainable trend by the latter part of 2008," Seiders told the subcommittees in prepared testimony.
Brown, meanwhile, told senators that historically, widespread price busts haven't necessarily followed price booms.
But, he cautioned, today there are more boom markets than in the past, and more consumers who have borrowed using "nontraditional" mortgage products, like interest-only loans.
"Borrowers who took on nontraditional loans as a means to afford a more expensive home may be particularly vulnerable to adverse housing market conditions," Brown told the subcommittee in written testimony.
Mortgage applications up
Meanwhile, as the economists were acknowledging a slowdown in housing, another industry group was reporting that mortgage applications were up in the last week.
The number of applications for mortgages filed with major U.S. banks rose a seasonally adjusted 3.2% last week, the Mortgage Bankers Association reported Wednesday. See full story.
However, application volumes are still down 22.8% compared with the same week a year ago, in line with other data showing the nation's housing market cooling significantly. But applications have rebounded in recent weeks.
Applications for mortgages to purchase homes rose 5.3% on a week-to-week, seasonally adjusted basis, while applications for refinance loans increased 0.1%, the MBA's data showed.
The economic impact of the housing slowdown will vary by region, economists noted. Tom Stevens, the Realtors' president, said solid job growth in Florida, California, Arizona and other states should keep price declines short-lived "as new job holders provide demand and support for the housing market."
Overall, the impact of a slowing housing market on the nation's economy may be comparatively muted, said Seiders.
"The downswing in home sales and housing production will continue to detract from overall economic growth through mid-2007," Seiders testified.
"However," he said, "much of this negative impact should be offset by strengthening activity in other sectors of the U.S. economy, keeping GDP growth reasonably close to a sustainable trend-like performance."
Home price growth slows
Home prices grew at their slowest pace in six and a half years during the second quarter of the year, recently released government figures show.
Last week, the Office of Federal Housing Enterprise Oversight reported that home prices increased at a 4.7% annual rate during the second quarter. Prices had risen at an 8.8% annual rate in the first quarter and peaked at a 17.8% annual pace in the third quarter of 2004. See full story.
Ofheo director James Lockhart said the data are "a strong indication that the housing market is cooling in a very significant way."
Earlier Wednesday, Lockhart once again pressed Congress to pass reforms on Fannie Mae (FNM) and Freddie Mac (FRE), the two giant government-sponsored housing enterprises that are major sources of money for U.S. homebuyers. See full story.
Lawmakers have been working to fashion new rules following accounting scandals at both companies. Among the reforms being sought are a new regulator that would have authority to approve the issuing of new products by Fannie and Freddie, and a limit on the amount of mortgage-backed securities each company may hold. Some lawmakers and the Bush administration are concerned that the $1.4 trillion in securities held by the companies is too large and poses a risk to the U.S. financial system.
Congress's reform effort has been stymied and faces uncertainty as lawmakers prepare for elections in November.
Echoing Lockhart, Ofheo's chief economist told senators Wednesday that healthy housing markets could "soften seriously" from unexpected disruptions at Fannie and Freddie. "While both companies have made progress [on reform], much more needs to be done," said economist Patrick Lawler.
WASHINGTON (MarketWatch) -- A downswing in home sales and building should bottom out sometime during the middle of 2007 before recovering in the latter part of 2008, a home-building industry economist said Wednesday.
In the meantime, said another economist, consumers shouldn't expect a "widespread" bust in home prices as some of the strength begins to dwindle from regional housing markets.
The National Association of Home Builders' David Seiders and the Federal Deposit Insurance Corporation's Richard Brown were among four economists testifying Wednesday before two Senate Banking subcommittees' hearing about the housing bubble and its implications for the U.S. economy.
All four -- including analysts from the National Association of Realtors and the Office of Federal Housing Enterprise Oversight -- agreed housing activity is slowing. Economists added the slowdown poses some risks to the U.S. economy but that a drop-off in activity isn't nationwide.
Seiders said a "below-trend" performance for home sales and building is likely over the next two years.
"The downswing in home sales and housing production should bottom out around the middle of next year before transitioning to a gradual recovery that will raise housing market activity back up toward sustainable trend by the latter part of 2008," Seiders told the subcommittees in prepared testimony.
Brown, meanwhile, told senators that historically, widespread price busts haven't necessarily followed price booms.
But, he cautioned, today there are more boom markets than in the past, and more consumers who have borrowed using "nontraditional" mortgage products, like interest-only loans.
"Borrowers who took on nontraditional loans as a means to afford a more expensive home may be particularly vulnerable to adverse housing market conditions," Brown told the subcommittee in written testimony.
Mortgage applications up
Meanwhile, as the economists were acknowledging a slowdown in housing, another industry group was reporting that mortgage applications were up in the last week.
The number of applications for mortgages filed with major U.S. banks rose a seasonally adjusted 3.2% last week, the Mortgage Bankers Association reported Wednesday. See full story.
However, application volumes are still down 22.8% compared with the same week a year ago, in line with other data showing the nation's housing market cooling significantly. But applications have rebounded in recent weeks.
Applications for mortgages to purchase homes rose 5.3% on a week-to-week, seasonally adjusted basis, while applications for refinance loans increased 0.1%, the MBA's data showed.
The economic impact of the housing slowdown will vary by region, economists noted. Tom Stevens, the Realtors' president, said solid job growth in Florida, California, Arizona and other states should keep price declines short-lived "as new job holders provide demand and support for the housing market."
Overall, the impact of a slowing housing market on the nation's economy may be comparatively muted, said Seiders.
"The downswing in home sales and housing production will continue to detract from overall economic growth through mid-2007," Seiders testified.
"However," he said, "much of this negative impact should be offset by strengthening activity in other sectors of the U.S. economy, keeping GDP growth reasonably close to a sustainable trend-like performance."
Home price growth slows
Home prices grew at their slowest pace in six and a half years during the second quarter of the year, recently released government figures show.
Last week, the Office of Federal Housing Enterprise Oversight reported that home prices increased at a 4.7% annual rate during the second quarter. Prices had risen at an 8.8% annual rate in the first quarter and peaked at a 17.8% annual pace in the third quarter of 2004. See full story.
Ofheo director James Lockhart said the data are "a strong indication that the housing market is cooling in a very significant way."
Earlier Wednesday, Lockhart once again pressed Congress to pass reforms on Fannie Mae (FNM) and Freddie Mac (FRE), the two giant government-sponsored housing enterprises that are major sources of money for U.S. homebuyers. See full story.
Lawmakers have been working to fashion new rules following accounting scandals at both companies. Among the reforms being sought are a new regulator that would have authority to approve the issuing of new products by Fannie and Freddie, and a limit on the amount of mortgage-backed securities each company may hold. Some lawmakers and the Bush administration are concerned that the $1.4 trillion in securities held by the companies is too large and poses a risk to the U.S. financial system.
Congress's reform effort has been stymied and faces uncertainty as lawmakers prepare for elections in November.
Echoing Lockhart, Ofheo's chief economist told senators Wednesday that healthy housing markets could "soften seriously" from unexpected disruptions at Fannie and Freddie. "While both companies have made progress [on reform], much more needs to be done," said economist Patrick Lawler.
Wednesday, September 06, 2006
Tale of Two Cities
Have your say in the NY Sun's interactive State/Local Forum.
Is London the New New York? Or Is It the Other Way Around?
New York & London: Tale of Two Cities
By JILL GARDINER - Staff Reporter of the Sun
September 5, 2006
It's a city of nearly 8 million where Mayor Bloomberg owns a townhouse. Paul McCartney, Gwyneth Paltrow, and Madonna all own homes here, too. It competed to host the 2012 Olympic Games. Architects Daniel Libeskind, Norman Foster, and Richard Rogers are all working here or have recently completed buildings. Rupert Murdoch owns a big, conservative, tabloid newspaper here. The art scene is sizzling, real estate is super-pricey, and sushi-lovers can choose from at least two Nobu restaurants. The business world revolves around a big stock market and lots of new hedge funds.
The list of parallels between New York and London has always been long, but lately, with booming economies in both cities and trendy restaurants moving into old industrial neighborhoods, the two are looking more like mirror images.
Some say the two have more in common than any other international cities on the planet, making them both allies and, increasingly, competitors in the global economy.
In the past few years, both have been terrorist targets, competed for the 2012 Olympics (London won), and passed smoking bans for bars, pubs, and restaurants. London's ban, which is modeled after New York's, is scheduled to go into effect next year.
Academics, financial analysts, restaurateurs, art gallery owners, architects, and people who've lived in both cities say while London is still blatantly British in personality, its finance, restaurant, and art industries look more like New York's now than they did five to 10 years ago.
Tuesday, September 05, 2006
August 2006
A stretch of Fifth shakes off inferiority complex
Dub it whatever you want, but blocks of Fifth Avenue in 20s and 30s drawing higher-end retail as condos rise
By John Celock
Richard Cantor, principal of Cantor Pecorella, in front of 325 Fifth Avenue.
Maybe they should call it HiFi.
With a rise in condominium conversions and new residential construction, the section of Fifth Avenue north of Madison Square Park is in the middle of a changeover in its retail stock.
The area, which has long been considered a "no man's land" of vacant storefronts, Class B office space and wholesale retailers catering to decorators, has been a stepsister of the more famous posh Fifth Avenue shopping district 20 blocks north. In the past, retail spaces in the neighborhood have rented for as little as $20 a square foot.
Fifth Avenue between 23rd and 30th streets is now lined primarily with small showrooms for rugs, furniture, decorating supplies and art. The average for retail space in the area now is between $100 and $150 a square foot.
Yet with the arrival of new residential projects including Elad Properties' conversion of the 12-story Gift Building at 225 Fifth Avenue at 26th Street; the Chetrit Group's pending conversion of the 1.2-million-square-foot International Toy Center at 200 Fifth Avenue at 23rd Street; and the Clarett Group's 54-story Sky House rising at 11 East 29th Street, the neighborhood is beginning to see a transition in its retail spaces.
Concurrently, gentrifiers are attempting to find a name for the new neighborhood that will stick. The area, which is sandwiched among several successful real estate boomlets, has been alternately called NoFi (for "North of Flatiron") and SoFi (for "Southern Fifth").
"It has been a deep discount area and a deep manufacturing area," says Faith Hope Consolo, chairwoman of the retail leasing and sales division at Prudential Douglas Elliman. "It has struggled for an identity."
Currently, several retail vacancies dot the landscape between 25th and 27th streets: there are slots at 212 Fifth, 220 Fifth and 226 Fifth.
Consolo, who is handling leasing for 226 Fifth Avenue, says she expects the 1,000-square-foot space to be leased out within the next quarter. The space is currently asking $100 a square foot.
According to Patrick Breslin, president of the retail group at GVA Williams, retail on this portion of Fifth Avenue has long suffered in the shadows at the end of the tourist district at the Empire State Building, along with the shopping pathway leading toward Macy's and Herald Square to the west. The shops of the Flatiron District to the south have been a draw, with customers rarely venturing north.
Chase Welles, senior vice president with Northwest Atlantic Partners, says the changeover is centered now in development of service businesses for the new residents. Banks have been the first arrivals with restaurants beginning to arrive not that far behind.
The banks, including Chase Manhattan (which is leasing 6,000 square feet at the corner of Fifth and 27th), have been locked in bidding wars for the space, paying upward of $250 a square foot in some locations.
Welles sees the new retail spaces being not-too-upscale for the neighborhood, with the area becoming mainly a shopping district for residents, rather than a destination shopping district like Flatiron.
The new residential units are anchored on the northern stretch of the neighborhood by 325 Fifth Avenue, a 50-story condominium building built by Douglaston Development at 32nd Street.
Richard Cantor, principal of Cantor Pecorella, is handling the marketing of the building's residential units and three street-level retail spaces. Cantor's retail marketing strategy has been aimed at bringing in high-end stores for the new residents.
"That neighborhood is a hot area for your traditional Downtown purchaser," Cantor says, noting that the area is becoming an extension of Chelsea and Flatiron. "These are bankers and artists who want a hipper market."
Still, the complete demographic segment of the new residential population has not been completely determined; no definite breakdown can be given between singles and families. Cantor noted that at 325 Fifth, he has seen a wide mix of singles, families and childless couples purchasing units.
Two of the three retail spaces in 325 Fifth have been rented out to a gourmet deli and a hair salon, each paying $150 a square foot. The retail chain 7-Eleven, which offered 25 percent over the asking price to move into the third space, was turned down for not fitting the image the building's owners were looking for.
Cantor sees the third space going to a high-end retailer, most likely a service-related business.
Meanwhile, the decorating wholesalers who have long dominated this stretch of Fifth are beginning to relocate as they are priced out. Welles says many of them have begun to move east toward Madison Avenue and the various side streets, which have retail spaces renting out at prices more conducive to the wholesale decorating budget.
Industry watchers expect more street life in the future. "That part of Fifth at night was quiet," says GVA Williams' Breslin. "But now, with the new development and conversions around Madison Square Park, it will bring people into the neighborhood at night."
Joshua Strauss, managing director for Robert K. Futterman & Associates, agrees. "That was an in-between market with a little bit of office, a little bit of residential and a little bit of hotel," he says. Now, "it's a very hot area, despite what the street looks like."
impossible today to get a property of that scale in an urban location
Curbed Cheatsheet: Stuyvesant Town/Cooper Village Sale
Tuesday, September 5, 2006, by Lockhart
As was first rumored on Curbed back in July, MetLife officially put the 11,200 apartments that comprise Stuyvesant Town and Peter Cooper Village on the block last week. Presumed asking price: $4 billion to $5 billion. How'd the news imact around town? Let's see...
1) Awe. "No doubt in my mind. It’s truly an unprecedented offering and an irreplaceable property. It would be impossible today to get a property of that scale in an urban location. And that neighborhood has become so desirable." [NYTimes]
2) Disbelief. "Stuy Town's two-bedroom apartments have only a single bathroom. The walls of my place were so paper-thin, I got to know everything about my neighbors' family feuds and sex lives... An executive of one company among the prospective bidders said that 'in a normal market,' those weaknesses could seriously lower the price - 'but we're not in a normal market.'" [NYPost]
3) Wistfullness. "It does evoke sadness that more middle income people are going to be forced out of Manhattan. Another step toward Manhattan becoming an exclusive island for the wealthy. How long before Central Park is converted into a golf course?" [True Gotham]
4) Rebellion. "Stuyvesant Town is a middle-class community, and we do not want to lose that identity to the highest bidder." [NYTimes]
That last quote encapsulates today's news on the deal—that a group of residents, backed by the City Council speaker, will try to buy the two complexes to keep them affordable to the middle class. How to fund it? The AFL-CIO's housing investment trust could be used, at least to cover part of the price. Other ideas?
· Official Sees Way to Buy Two Developments [NYTimes]
· Coalition forms, hopes to keep apartment complex affordable [AP via IHT]
Tuesday, September 5, 2006, by Lockhart
As was first rumored on Curbed back in July, MetLife officially put the 11,200 apartments that comprise Stuyvesant Town and Peter Cooper Village on the block last week. Presumed asking price: $4 billion to $5 billion. How'd the news imact around town? Let's see...
1) Awe. "No doubt in my mind. It’s truly an unprecedented offering and an irreplaceable property. It would be impossible today to get a property of that scale in an urban location. And that neighborhood has become so desirable." [NYTimes]
2) Disbelief. "Stuy Town's two-bedroom apartments have only a single bathroom. The walls of my place were so paper-thin, I got to know everything about my neighbors' family feuds and sex lives... An executive of one company among the prospective bidders said that 'in a normal market,' those weaknesses could seriously lower the price - 'but we're not in a normal market.'" [NYPost]
3) Wistfullness. "It does evoke sadness that more middle income people are going to be forced out of Manhattan. Another step toward Manhattan becoming an exclusive island for the wealthy. How long before Central Park is converted into a golf course?" [True Gotham]
4) Rebellion. "Stuyvesant Town is a middle-class community, and we do not want to lose that identity to the highest bidder." [NYTimes]
That last quote encapsulates today's news on the deal—that a group of residents, backed by the City Council speaker, will try to buy the two complexes to keep them affordable to the middle class. How to fund it? The AFL-CIO's housing investment trust could be used, at least to cover part of the price. Other ideas?
· Official Sees Way to Buy Two Developments [NYTimes]
· Coalition forms, hopes to keep apartment complex affordable [AP via IHT]
Tuesday, May 23, 2006
Apartment market a bit worse than it looks
May 2006
Some Manhattan price and volume numbers stay high, but can't hide sharp inventory growth
By Tom Acitelli
Source: Miller Samuel Appraisers Manhattan's apartment market is now not moving up nor down, but rather "sideways," according to brokers and appraisers.
While the most recent apartment data shows what appears to be a continuation of the boom times -- with the median price of a Manhattan apartment and the average price per square foot setting records in the first quarter of 2006 -- the effect on the broader market is more ambiguous. Despite strong numbers posted as a result of Wall Street bonus money, the number of listings on the market -- and the time they stay there -- is climbing significantly.
The median sales price hit an all-time record of $825,000 in the first quarter, up 8.6 percent from the fourth quarter of 2005. The average price per square foot was $1,004, up $2 from the quarter before, according to a report from appraisal firm Miller Samuel and brokerage Prudential Douglas Elliman.
The number of sales jumped an impressive 27.4 percent, but the number of listings rose 16 percent over the quarter before and is up sharply from the same time last year -- by more than 60 percent.
"We have an upside on some of the statistics, but some of them are a little misleading," said Jonathan Miller, president of appraisal firm Miller Samuel. "I would characterize the market overall as moving sideways."
Miller said the annual wave of Wall Street bonus money boosted sales volume and gave the appearance of prices heading upward, but that was because those buyers purchased larger apartments.
"Like prior first quarters, this quarter was about the influx of Wall Street bonus money," he said. "You had a gain in market share of larger apartments. It wasn't that they were appreciating. It's that there were more of those types of units sold."
Fifty-one percent of all apartments sold in the first three months of the year in Manhattan were two-bedrooms or larger; that's up from 45 percent in the fourth quarter of 2005. Larger condos, especially, were popular among buyers. Nearly 60 percent of condo deals closed in the first quarter were for units with at least two-bedrooms, about a 12 percentage increase over the larger-condo market share in the fourth quarter.
Still, the most notable statistic Miller pointed out for the quarter was also the most gloomy -- the rise in listings on the market. There were 6,904 apartments available for sale during the first quarter, a huge jump from the same time last year.
"Probably the biggest story of the first quarter has been the surge of listing inventory," he said. "It's something other than mortgage rates we have to look at closely.
"The number of listings available for sale was up 60 percent over the same quarter last year," he added. "However, the 60 percent figure is somewhat exaggerated in that the prior year quarter results were at near record lows."
But there is a silver lining: Apartment prices are still ahead of last year. The average sales price for a Manhattan apartment stood at $1,300,928 at the end of the first quarter, up 9.6 percent from the fourth quarter and still up 7 percent over the first quarter of 2005, according to Miller Samuel.
Meanwhile, the average number of days it takes to sell an apartment increased slightly during the first quarter, going to 138 days compared to 137 the quarter before. That's well above the average of 94 days during the first quarter of 2005.
Prices of both co-ops and condos increased at the start of the year.
The average price of a co-op went up 7.2 percent over the fourth quarter to $1,093,361, according to Miller Samuel. The average price of a Manhattan condo went 7.1 percent higher quarter over quarter to $1,481,219. This figure still represented a dip compared to the first quarter of 2005, however.
And while the beginning of the year was about larger apartment sales as a result of Wall Street bonus money, brokers say the summer market will be about smaller apartments.
"Summer is usually a time for the smaller apartments," said Diane Ramirez, president of brokerage Halstead Property. "It's when people are looking to buy their first apartment or maybe even move up to their second one -- they tend to have a little more time at their workplaces during the summer. So they typically feel they can look more."
In three out of the last five years -- 2001, 2003, and 2004 -- sales closed have increased from the spring to the summer, though this may be more of a reflection of deals that went into contract in the spring, which is usually the strongest time of year in terms of sales.
In both 2003 and 2004, nearly 30 percent of all apartment sales in the borough closed over the summer, according to Miller Samuel. From 2001 through 2005, at least 24 percent of the sales for each year were summer deals.
Ariel Cohen, a broker with the Shvo Group, deals mostly with smaller apartments, two-bedrooms through studios. He said that, like Ramirez from Halstead, smaller apartments are going to dominate Manhattan summer sales. The sales market won't necessarily be any busier than it was in the first months of 2006, Cohen said, but will nonetheless be brisk. "It all depends," he said, "on what the price is."
Some Manhattan price and volume numbers stay high, but can't hide sharp inventory growth
By Tom Acitelli
Source: Miller Samuel Appraisers Manhattan's apartment market is now not moving up nor down, but rather "sideways," according to brokers and appraisers.
While the most recent apartment data shows what appears to be a continuation of the boom times -- with the median price of a Manhattan apartment and the average price per square foot setting records in the first quarter of 2006 -- the effect on the broader market is more ambiguous. Despite strong numbers posted as a result of Wall Street bonus money, the number of listings on the market -- and the time they stay there -- is climbing significantly.
The median sales price hit an all-time record of $825,000 in the first quarter, up 8.6 percent from the fourth quarter of 2005. The average price per square foot was $1,004, up $2 from the quarter before, according to a report from appraisal firm Miller Samuel and brokerage Prudential Douglas Elliman.
The number of sales jumped an impressive 27.4 percent, but the number of listings rose 16 percent over the quarter before and is up sharply from the same time last year -- by more than 60 percent.
"We have an upside on some of the statistics, but some of them are a little misleading," said Jonathan Miller, president of appraisal firm Miller Samuel. "I would characterize the market overall as moving sideways."
Miller said the annual wave of Wall Street bonus money boosted sales volume and gave the appearance of prices heading upward, but that was because those buyers purchased larger apartments.
"Like prior first quarters, this quarter was about the influx of Wall Street bonus money," he said. "You had a gain in market share of larger apartments. It wasn't that they were appreciating. It's that there were more of those types of units sold."
Fifty-one percent of all apartments sold in the first three months of the year in Manhattan were two-bedrooms or larger; that's up from 45 percent in the fourth quarter of 2005. Larger condos, especially, were popular among buyers. Nearly 60 percent of condo deals closed in the first quarter were for units with at least two-bedrooms, about a 12 percentage increase over the larger-condo market share in the fourth quarter.
Still, the most notable statistic Miller pointed out for the quarter was also the most gloomy -- the rise in listings on the market. There were 6,904 apartments available for sale during the first quarter, a huge jump from the same time last year.
"Probably the biggest story of the first quarter has been the surge of listing inventory," he said. "It's something other than mortgage rates we have to look at closely.
"The number of listings available for sale was up 60 percent over the same quarter last year," he added. "However, the 60 percent figure is somewhat exaggerated in that the prior year quarter results were at near record lows."
But there is a silver lining: Apartment prices are still ahead of last year. The average sales price for a Manhattan apartment stood at $1,300,928 at the end of the first quarter, up 9.6 percent from the fourth quarter and still up 7 percent over the first quarter of 2005, according to Miller Samuel.
Meanwhile, the average number of days it takes to sell an apartment increased slightly during the first quarter, going to 138 days compared to 137 the quarter before. That's well above the average of 94 days during the first quarter of 2005.
Prices of both co-ops and condos increased at the start of the year.
The average price of a co-op went up 7.2 percent over the fourth quarter to $1,093,361, according to Miller Samuel. The average price of a Manhattan condo went 7.1 percent higher quarter over quarter to $1,481,219. This figure still represented a dip compared to the first quarter of 2005, however.
And while the beginning of the year was about larger apartment sales as a result of Wall Street bonus money, brokers say the summer market will be about smaller apartments.
"Summer is usually a time for the smaller apartments," said Diane Ramirez, president of brokerage Halstead Property. "It's when people are looking to buy their first apartment or maybe even move up to their second one -- they tend to have a little more time at their workplaces during the summer. So they typically feel they can look more."
In three out of the last five years -- 2001, 2003, and 2004 -- sales closed have increased from the spring to the summer, though this may be more of a reflection of deals that went into contract in the spring, which is usually the strongest time of year in terms of sales.
In both 2003 and 2004, nearly 30 percent of all apartment sales in the borough closed over the summer, according to Miller Samuel. From 2001 through 2005, at least 24 percent of the sales for each year were summer deals.
Ariel Cohen, a broker with the Shvo Group, deals mostly with smaller apartments, two-bedrooms through studios. He said that, like Ramirez from Halstead, smaller apartments are going to dominate Manhattan summer sales. The sales market won't necessarily be any busier than it was in the first months of 2006, Cohen said, but will nonetheless be brisk. "It all depends," he said, "on what the price is."
Friday, December 02, 2005
Glad my family listens to me
Bryant Park back in fashion
Needle Park, R.I.P.: Area's residential renaissance includes prized views of spiffed-up square and spate of new projects
Not your father's Bryant Park: Ricardo Sobrevinas, president of the Bryant Park Place co-op, stands on the banister of the building's central staircase.
Ricardo Sobrevinas remembers the bad times on Bryant Park, when its most prominent feature was a floating population of drug dealers and their clientele.
Now the president of Bryant Park Place, the only co-op on the edge of the Midtown Manhattan park, Sobrevinas said the genteel way the park is now – a seasonal ice-skating rink was installed in October, outdoor movies are shown during warmer months, and much of the park has wi-fi for earnest cubicle dwellers from nearby office buildings – feels eons away from what it once was.
"There is no other building around Bryant Park that clearly parallels the experience of Bryant Park itself," said Sobrevinas, who has lived since 1995 in the co-op once known as The Columns. "Remember, Bryant Park was 'Needle Park.' Remember that? It used to be a drug haven. No one could go there safely."
The park's namesake co-op was also dangerous – financially. Sobrevinas said attorneys for would-be Bryant Park Place buyers would dissuade their clients from closing deals. Some apartments were simply uninhabitable, he added, and an entrenched co-op board, along with a managing agent eventually indicted, presided over a crumbling early 20th-century building originally constructed to grandly house Andrew Carnegie's Engineers Club.
In the late 1990s, though, just as the park across 40th Street began its revival, Bryant Park Place, too, under a revamped co-op board with Sobrevinas at the helm, underwent drastic improvements. The improvements, said a clearly proud Sobrevinas, have translated into financial advantages for the co-op's owners – 15 to 20 percent of which, he estimated, have been there since at least the early 1990s. A one-bedroom on the fifth floor sold for $145,000 in 2000. In late 2005, an apartment one floor below – "same layout," Sobrevinas said – sold for $670,000. A one-bedroom without park views now generally starts at $550,000. "In the mid-1990s," he said, "you could get them for $60,000."
This shift in the housing reality around Bryant Park has happened at the same time as – if not because of – a shift in the perception of the area. And developers and marketers have taken notice: At least four new condo developments are planned around the park's edges.
"Bryant Park today is probably one of the hippest neighborhoods in the city," said Michael Shvo, whose eponymous firm is marketing the luxury condos of the new Bryant Park Tower at 100 West 39th Street, the first such condos on the park. "Things are going in the nighttime, daytime, summer, winter."
Expected to open in January, Bryant Park Tower will feature a 24-concierge, a gym, on-site parking access, and a lobby designed by Costas Kondylis – unheard of amenities around Bryant Park only a decade ago. More than two-thirds of the tower's 94 units sold in four days in July. Half, according to the Shvo Group, sold for at least $1,300 a square foot.
The top 20 floors of 1450 Broadway, a 42-story office building at the southeast corner of 41st Street owned by the Moinian Group, are being converted to condos, said Shvo, whose group will be marketing them. The units will be ready for sale in about eight months. The rest of the tower will be left commercial.
The owners of the old headquarters of clothier Tommy Hilfiger at 485 Fifth Avenue plan to convert that 185,000-square-foot building into luxury loft condos overlooking the central branch of the New York Public Library. After buying the building in October, joint venture investors Belfonti Capital Partners and the Carlyle Group announced a $160 million conversion that would include a complete renovation of the building. While details of the conversion remain scarce, a spokesperson for the project did say that fashion designer Peter Som would design the interiors of the condos.
Finally, last month, Mermel & McLain Management and pension fund ASB Capital announced their $120 million purchase of the 20-story Springs Mills Building at 104 West 40th Street with plans to expand the 200,000-square-foot glass tower by 70,000 feet for apartments. Architects Skidmore Ownings Merrill have been signed up for the job, the New York Post reported.
Such hearty developer interest in the Bryant Park area seems almost routine now. It wouldn't have to Joy Greene some short years ago.
Greene, who's lived in Bryant Park Place since 1983, said "the area was rather unpleasant" until at least the early 1990s, when a redesign of the park added two restaurant pavilions, concession kiosks, and, perhaps most importantly, more entrances for a greater visibility that, along with a police crackdown, curbed rampant drug-dealing. By the late 1990s, then, she said, the shootings, drug dealing, and rat infestation of Bryant Park had decidedly given way to a more pleasant atmosphere.
"If you look at the gentrification over the last 20 years," Greene said, "it's really extraordinary."
Needle Park, R.I.P.: Area's residential renaissance includes prized views of spiffed-up square and spate of new projects
Not your father's Bryant Park: Ricardo Sobrevinas, president of the Bryant Park Place co-op, stands on the banister of the building's central staircase.
Ricardo Sobrevinas remembers the bad times on Bryant Park, when its most prominent feature was a floating population of drug dealers and their clientele.
Now the president of Bryant Park Place, the only co-op on the edge of the Midtown Manhattan park, Sobrevinas said the genteel way the park is now – a seasonal ice-skating rink was installed in October, outdoor movies are shown during warmer months, and much of the park has wi-fi for earnest cubicle dwellers from nearby office buildings – feels eons away from what it once was.
"There is no other building around Bryant Park that clearly parallels the experience of Bryant Park itself," said Sobrevinas, who has lived since 1995 in the co-op once known as The Columns. "Remember, Bryant Park was 'Needle Park.' Remember that? It used to be a drug haven. No one could go there safely."
The park's namesake co-op was also dangerous – financially. Sobrevinas said attorneys for would-be Bryant Park Place buyers would dissuade their clients from closing deals. Some apartments were simply uninhabitable, he added, and an entrenched co-op board, along with a managing agent eventually indicted, presided over a crumbling early 20th-century building originally constructed to grandly house Andrew Carnegie's Engineers Club.
In the late 1990s, though, just as the park across 40th Street began its revival, Bryant Park Place, too, under a revamped co-op board with Sobrevinas at the helm, underwent drastic improvements. The improvements, said a clearly proud Sobrevinas, have translated into financial advantages for the co-op's owners – 15 to 20 percent of which, he estimated, have been there since at least the early 1990s. A one-bedroom on the fifth floor sold for $145,000 in 2000. In late 2005, an apartment one floor below – "same layout," Sobrevinas said – sold for $670,000. A one-bedroom without park views now generally starts at $550,000. "In the mid-1990s," he said, "you could get them for $60,000."
This shift in the housing reality around Bryant Park has happened at the same time as – if not because of – a shift in the perception of the area. And developers and marketers have taken notice: At least four new condo developments are planned around the park's edges.
"Bryant Park today is probably one of the hippest neighborhoods in the city," said Michael Shvo, whose eponymous firm is marketing the luxury condos of the new Bryant Park Tower at 100 West 39th Street, the first such condos on the park. "Things are going in the nighttime, daytime, summer, winter."
Expected to open in January, Bryant Park Tower will feature a 24-concierge, a gym, on-site parking access, and a lobby designed by Costas Kondylis – unheard of amenities around Bryant Park only a decade ago. More than two-thirds of the tower's 94 units sold in four days in July. Half, according to the Shvo Group, sold for at least $1,300 a square foot.
The top 20 floors of 1450 Broadway, a 42-story office building at the southeast corner of 41st Street owned by the Moinian Group, are being converted to condos, said Shvo, whose group will be marketing them. The units will be ready for sale in about eight months. The rest of the tower will be left commercial.
The owners of the old headquarters of clothier Tommy Hilfiger at 485 Fifth Avenue plan to convert that 185,000-square-foot building into luxury loft condos overlooking the central branch of the New York Public Library. After buying the building in October, joint venture investors Belfonti Capital Partners and the Carlyle Group announced a $160 million conversion that would include a complete renovation of the building. While details of the conversion remain scarce, a spokesperson for the project did say that fashion designer Peter Som would design the interiors of the condos.
Finally, last month, Mermel & McLain Management and pension fund ASB Capital announced their $120 million purchase of the 20-story Springs Mills Building at 104 West 40th Street with plans to expand the 200,000-square-foot glass tower by 70,000 feet for apartments. Architects Skidmore Ownings Merrill have been signed up for the job, the New York Post reported.
Such hearty developer interest in the Bryant Park area seems almost routine now. It wouldn't have to Joy Greene some short years ago.
Greene, who's lived in Bryant Park Place since 1983, said "the area was rather unpleasant" until at least the early 1990s, when a redesign of the park added two restaurant pavilions, concession kiosks, and, perhaps most importantly, more entrances for a greater visibility that, along with a police crackdown, curbed rampant drug-dealing. By the late 1990s, then, she said, the shootings, drug dealing, and rat infestation of Bryant Park had decidedly given way to a more pleasant atmosphere.
"If you look at the gentrification over the last 20 years," Greene said, "it's really extraordinary."
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