Wave of new development gains momentum
By Roland Li
On the west side of Union Square, a glass box stands out from the historic streetscape.
The building, 15 Union Square West, was the original cast-iron Tiffany & Co. headquarters. It was later acquired by Amalgamated Bank, which covered the façade with white brick after a piece of iron fell and killed a pedestrian.
After Brack Capital acquired the site, with intentions of converting to residential, it began stripping away the façade, unveiling the original arches. The developers sought to preserve the original structure, encasing the original walls in glass, and adding additional upper floors. Eran Chen of ODA Architecture and Perkins Eastman were the architects, and Vicente Wolf was the interior designer.
Marketing for the building began in March 2008, said Shlomi Reuveni, senior managing director and executive vice president of Brown Harris Stevens SELECT, the listing agent. But after the collapse of the economy in the fall, sales activity froze throughout the market, and 15 Union Square West was taken off the market in 2009.
But since relaunching last fall, the building has gained momentum. According to StreetEasy, there have been six closings in May and three in April, with asking prices ranging from $4.1 million to $9.1 million. The closings make up a quarter of the building’s 36 units, one of which is occupied by a superintendent. Some one-bedroom units are only being offered to existing tenants, and Reuveni expects around 25 to 30 occupants when the building is fully occupied.
“As long as the product is that of quality, and they perceive value – regardless of price point – there’s going to be demand for it,” said Reuveni. “There’s a tremendous amount of capital now being placed in real estate.”
Reuveni is also marketing the Laureate, a 70-unit development on the Upper West Side that is 70% sold, after coming on the market in March.
Across the city, the recent wave of new developments – both ground-up construction and conversions – is being absorbed, as sales prices stabilize and rents increase. Although concerns remain over financing and interest rates, the picture has improved, according to brokers and developers. For the rental market, concessions have disappeared and vacancy rates have tightened. For both rentals and sales, bidding wars have returned. And the next wave of new construction appears to be gathering.
According to Hal Fetner, president and CEO of Durst Fetner Residential, strong sponsorship and good location is a crucial part of success for new condos. Durst Fetner’s 1212 Fifth Avenue is set to begin sales, with one bedrooms starting at $735,000. The property is a renovation of a Mt. Sinai building, purchased by Durst for $42 million in 2009.
Meanwhile, Durst Fetner’s much-lauded West 57th Street plan, a pyramid-like rental designed by Bjarke Ingels, is undergoing land use review. It also has plans for a $350 million, 40-story rental tower, with a commercial base at Herald Square. The tower will be located at a long-stalled development site on Sixth Avenue, spanning West 31st and 30th Streets. The project is to be designed by Cook + Fox, architects of Durst’s One Bryant Park, and more details will be revealed around October, said Fetner.
“Right now, we’re very bullish,” said Fetner.
The surging rental market has propelled recent buildings to near-capacity.
The Mercedes House, Two Trees Management’s zig-zagging tower, designed by Enrique Norten, was named for its commercial tenant. In its first phase, 202 of the development’s 222 have been rented after two months. Rents begin at $2,200 per month, and the development includes a 20% affordable housing component. An additional 400 rental units and 200 condos will be built in the second phase.
“We are thrilled, but not surprised, by the overwhelmingly positive response to Mercedes House,” said Asher Abehsera, managing director of residential properties for Two Trees Management, in a statement. “To have so few residences remaining after just two months confirms our belief that this is one of the best places to live in New York City.”
For some developers, the reviving market has been an opportune time to capitalize on a successful project, while planning for the next.
The Gotham Organization and its partners, Philips International and Rhodes Associates, recently sold the Corner at 200 West 72nd Street for $209 million to TIAA-CREF, the pension fund manager and institutional investor. Virtually all of the building’s 196 units have been rented, with the most expensive apartments around $20,000 per month.
Now, Gotham is building a massive, four-building complex with 1,240 units, with over 500 units designated for affordable housing. Between West 44th and 45th Streets and Tenth and Eleventh Avenues, the project is known as Gotham West, and will include 17,000 s/f of retail. In June, Gotham secured a $530 million construction loan from Wells Fargo, and units are expected to come on the market in 2013.
Although stalled sites and unfinished apartments remain throughout the city, the success of some recent projects may help thaw construction financing. Perhaps as importantly, large developers have demonstrated a renewed appetite for ground-up construction.
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