18.7.12
[Update] Caveat Emptor...
Todays Full Story below is less of a story and more of a listing. 79-89 Avenue D was originally listed by Eastern Consolidated back in May, with a very ambitious asking price of $22.5M. We picked up on this and applied our Cubed Advisory back-of-the-napkin-estimate system to the listing. By our quick numbers, the site would not be able to support an asking price of anything over $20M at the very high end.
Eastern Consolidated seems to have got the message from the market (since they didn't ask us!) and dropped the price a full 17% to $18.5M.
This is obviously a far more workable ask. The next few months will determine just how workable it is. The Arabella 101 at 101 Avenue D just started leasing- that means instant and very relatable comps that will surely be the basis of the model for 79-89 Avenue D.
Full Story
Eastern Consolidated seems to have got the message from the market (since they didn't ask us!) and dropped the price a full 17% to $18.5M.
This is obviously a far more workable ask. The next few months will determine just how workable it is. The Arabella 101 at 101 Avenue D just started leasing- that means instant and very relatable comps that will surely be the basis of the model for 79-89 Avenue D.
Full Story
Labels: affordable housing, development, East Village, Eastern Consolidated, multifamily
17.7.12
Who Owns How Much of Downtown?!
The Cubed Advisory blogging team is back from a break in Europe, spent largely wondering when will London start air conditioning buildings and when will Spain start sharing the really good anchovies and olives with the rest of the world by way of an export market.
We did have time to ponder another issue while in London- ground leases.
Although not unheard of in NYC, ground leases are still the exception and not the rule. They typically appear under the occasional piece of commercial real estate and are usually shied away from in the residential realm as they make unit financing a bit more difficult. Large scale ground leases have mostly been limited to infrastructure infill. MTAs ground lease of the Hudson Yards to Related is one example, coming in at around 40+ acres. The land above the rail yard feeding Grand Central is another. Turned from a railcut to prime NYC realestate in the early 20th century, there are still some buildings on Park Avenue whose fee simple owners are the heirs and successors of the original NY Central and Hudson Railroad.
Ground leases in London are another issue.
The Grosvenor company is a privately held international real estate firm with large ground lease holdings in central London. How large is large? Try 300 acres.
300.
Acres.
Those 300 acres comprise the high rent area of Mayfair and very high rent, diplomatic area known as Belgravia. This is not land that, like NYC was part of a swath of infrastructure... it is hereditary land, landed gentry land. Specifically, it is the Duke of Westminster's land acquired as part of the dowry of a 12 year old bride in 1677. It was apparently swampy meadows back then, but it has never been a railyard.
To add some NYC perspective to this kind of largely tax free (thats a whole other story) land holding, here is a map of the properties in London:
We did have time to ponder another issue while in London- ground leases.
Although not unheard of in NYC, ground leases are still the exception and not the rule. They typically appear under the occasional piece of commercial real estate and are usually shied away from in the residential realm as they make unit financing a bit more difficult. Large scale ground leases have mostly been limited to infrastructure infill. MTAs ground lease of the Hudson Yards to Related is one example, coming in at around 40+ acres. The land above the rail yard feeding Grand Central is another. Turned from a railcut to prime NYC realestate in the early 20th century, there are still some buildings on Park Avenue whose fee simple owners are the heirs and successors of the original NY Central and Hudson Railroad.
Ground leases in London are another issue.
The Grosvenor company is a privately held international real estate firm with large ground lease holdings in central London. How large is large? Try 300 acres.
300.
Acres.
Those 300 acres comprise the high rent area of Mayfair and very high rent, diplomatic area known as Belgravia. This is not land that, like NYC was part of a swath of infrastructure... it is hereditary land, landed gentry land. Specifically, it is the Duke of Westminster's land acquired as part of the dowry of a 12 year old bride in 1677. It was apparently swampy meadows back then, but it has never been a railyard.
To add some NYC perspective to this kind of largely tax free (thats a whole other story) land holding, here is a map of the properties in London:
And what it would look like if it were in NYC:
Thats everything south of City Hall. World Trade Center, World Financial Center, Wall Street, Battery Park, most of the South Street Seaport and all of FiDi. All of it.
Ahhhh travel... and real estate. Now, where can I get more of those Spanish anchovies?
Labels: FiDi, ground lease, London, NYC
22.6.12
[Update] Sweet News On the Waterfront
In the Full Story below we find the conclusion to a story we posted on back in March. Two Trees has purchased the Domino Sugar site for $185M. The Katan Group seems to be unwilling to let it go, but short of a specific term of contract, it is looking like a done deal.
That is a shockingly cheap price at only $40/SF buildable. Even so, it is still a likely break-even for the sellers (CPC and Katan) who owed their lenders in excess of the $130M or recorded debt. The low $/SF buildable price is a bit of a discount that takes into account the condition of the site. As we mentioned in our blog post of March, there is enough work to do to get the site 'shovel ready' to last at least a year. A year and a half would not be surprising at all. Because of this, the project carries a large cash burn before it can begin to make it's money back. It will be an interesting project to watch going forward for the same reasons we brought up previously, of funding, tax breaks, waterfront development, etc.
At Cubed Advisory, we are expecting the construction bill to top $1B and likely push $1.5B by the time it is done. Our Cubed Advisory 'back-of-the-napkin-estimate' is suggesting that residential is going to occupy around 2.8MSF with only 1.8M - 2MSF of that producing rents that will sustain the development. Expect as much retail as possible to be packed into the site to carry some of the financial load. Given the dearth of proper grocery facilities to serve the ever burgeoning Williamsburg neighborhood, a Whole Foods or similar brand would surely flourish and provide a solid rental income.
Labels: Community Preservation Corp, CPC, development, Domino Sugar, Katan, Two Trees, Williamsburg
18.6.12
The Tail That Wags the Dog
Sometimes it's the shape of a lot, more than anything else that can determine the use or the usability of a piece of NYC real estate. The Full Story below brings us just such an example. 246 Fifth Avenue is hitting the auction block in a sale managed by NGKF and Auction.com. A slightly neglected building with a defaulted loan of $14.5M, it now owes around $18.5M with interest and fees. With 32kSF extant and another 24kSF buildable as of right, the full value of the outstanding note works out to a reasonable $320/SF buildable. NGKF states that the property and it's potentially reasonable price could be a "opportunity for residential redevelopment, an office building or boutique hotel".
What isn't mentioned is the properties 'L' shape which relegates just over 10kSF of the existing floor area to a 25' wide "tail" that is interior to the block and tightly hemmed in by the adjacent buildings. Residences and hotels both like windows that open up to more than the brick wall of the next building. Offices that aspire to being more than simple tax payers do as well.
In many cases, a problem can be the root of opportunity. An oddly shaped lot such as 246 Fifth Avenue, would be the perfect seed lot for the start of an assemblage. Slowly purchasing adjacent Fifth Avenue lots that back on to 246s "tail" would eventually lead to a very nice sized corner lot. Unfortunately, sitting in the North Madison Historic District ensures that nothing could ever be done with such an assemblage and therefore this is not one of those opportunities. A landmarked district means no transformative changes to the property, no assemblage redevelopments and limited use of unbuilt FAR. A lack of useful windows on the interior tail severely limits any residential or hotel options and the narrow dimensions of the lot ensures only lower rent offices will take space.
The only thing this property is truly useful for would be transferable development rights- TDRs.
The limitations of the historic district prevent any utility from being gained by a typical transfer to an adjacent lot or to a lot directly across the street. This frees up the FAR to become TDRs and move a bit further afield. Such a move would require the approval of the local CB, the CPC and a ULURP process but it would be easier than trying to squeeze residential units of any value out of the tail of 246 Fifth Ave. A more adventurous play would remove the useless tail completely and roll that SF into TDRs as well.
At Cubed Advisory, we not only help purchasers plot out the potential of new developments, but we also help brokers properly position properties they have for sale. As 246 Fifth Avenue goes to auction, would you rather bid on $18.5M of debt on 22kSF of useful building and have the tail wag the dog to a price of over $800/SF of useful buildable SF? Or would you rather bid on the same debt for the same amount of useful building and a minimum of 24kSF of TDRs possibly up to 34kSF?
We know which sounds better to us.
Full Story
In many cases, a problem can be the root of opportunity. An oddly shaped lot such as 246 Fifth Avenue, would be the perfect seed lot for the start of an assemblage. Slowly purchasing adjacent Fifth Avenue lots that back on to 246s "tail" would eventually lead to a very nice sized corner lot. Unfortunately, sitting in the North Madison Historic District ensures that nothing could ever be done with such an assemblage and therefore this is not one of those opportunities. A landmarked district means no transformative changes to the property, no assemblage redevelopments and limited use of unbuilt FAR. A lack of useful windows on the interior tail severely limits any residential or hotel options and the narrow dimensions of the lot ensures only lower rent offices will take space.
The only thing this property is truly useful for would be transferable development rights- TDRs.
The limitations of the historic district prevent any utility from being gained by a typical transfer to an adjacent lot or to a lot directly across the street. This frees up the FAR to become TDRs and move a bit further afield. Such a move would require the approval of the local CB, the CPC and a ULURP process but it would be easier than trying to squeeze residential units of any value out of the tail of 246 Fifth Ave. A more adventurous play would remove the useless tail completely and roll that SF into TDRs as well.
At Cubed Advisory, we not only help purchasers plot out the potential of new developments, but we also help brokers properly position properties they have for sale. As 246 Fifth Avenue goes to auction, would you rather bid on $18.5M of debt on 22kSF of useful building and have the tail wag the dog to a price of over $800/SF of useful buildable SF? Or would you rather bid on the same debt for the same amount of useful building and a minimum of 24kSF of TDRs possibly up to 34kSF?
We know which sounds better to us.
Full Story
Labels: Auction.com, distressed sales, NGKF, NoMad, TDRs
13.6.12
SL Green- Rezoning Guinea Pig?
At Cubed Advisory, we have been chewing on the Full Story below for a little over a week now. It outlines how SL Green has tapped Hines to help it with a ground up development. Having purchased the last of four lots that comprise the block on the NE corner of Madison and 42nd Street in December, SL Green is talking up its plans. Those plans include a 'trophy' building of 1.2M SF with a transit tie in. The transit link makes perfect sense being across the street from Grand Central, but will also tap a zoning incentive that boosts the FAR on the 1 acre site from 15 to 18- for a total buildable SF of just over 779kSF. SL Green also plans on rolling over air rights it retained on the 2011 sale of 110 East 42nd Street, adding around 150kSF and raising the total to 929kSF.
You see the problem here right?
929kSF as of right does not equal 1.2MSF 'trophy' building.
Where is the extra space coming from? Our best guess here at Cubed Advisory is that SL Green is planning to take advantage of Bloomberg's expected midtown rezoning. No firm details have been released as of yet, but the area in question would be centered on Grand Central, comprise of around 85 blocks and is expected to provide a SF boost of around 25%.
929kSF x 1.25 = close enough to 1.2MSF for a press release.
With Bloomberg's term expiring in 18 months and the finalized proposal to go before city council before then, you can count on the fact that SL Green is banking heavily on this rezoning, if they aren't actually helping to write it themselves.
Current midtown zoning has some very stringent and mathematically complex rules that govern the shape of towers built in the area. SL Green's recently acquired midget block would limit a tower to floor plates of 22-24kSF. With current trends looking for floorplates starting at 25kSF, we at Cubed Advisory are expecting to see a rewrite of the zoning bulk rules that will affect the setback requirements along major avenues. If the intent of Bloomberg's midtown rezoning is for NYC to create globally competitive building stock through SF incentives, it is also going to have to address the usability of that space.
SL Green looks poised to be the first guinea pig of this upcoming rezoning- we will be watching closely.
Full Story
(summary link for those without a WSJ subscription)
You see the problem here right?
929kSF as of right does not equal 1.2MSF 'trophy' building.
Where is the extra space coming from? Our best guess here at Cubed Advisory is that SL Green is planning to take advantage of Bloomberg's expected midtown rezoning. No firm details have been released as of yet, but the area in question would be centered on Grand Central, comprise of around 85 blocks and is expected to provide a SF boost of around 25%.
929kSF x 1.25 = close enough to 1.2MSF for a press release.
With Bloomberg's term expiring in 18 months and the finalized proposal to go before city council before then, you can count on the fact that SL Green is banking heavily on this rezoning, if they aren't actually helping to write it themselves.
Current midtown zoning has some very stringent and mathematically complex rules that govern the shape of towers built in the area. SL Green's recently acquired midget block would limit a tower to floor plates of 22-24kSF. With current trends looking for floorplates starting at 25kSF, we at Cubed Advisory are expecting to see a rewrite of the zoning bulk rules that will affect the setback requirements along major avenues. If the intent of Bloomberg's midtown rezoning is for NYC to create globally competitive building stock through SF incentives, it is also going to have to address the usability of that space.
SL Green looks poised to be the first guinea pig of this upcoming rezoning- we will be watching closely.
Full Story
(summary link for those without a WSJ subscription)
Labels: Bloomberg, Grand Central, Hines, Midtown, Midtown rezoning, SL Green
5.6.12
Where to put a Convention Center?
There has been no shortage of news in the last couple of days regarding Governor Cuomo's failed bid to locate a casino and convention center at Aqueduct. The Full Story below covers some of the details in case you missed it.
The selection of Aqueduct seemed odd from the start. A facility ostensibly planned for a non NYC user base, it clearly suffered on three basic rules of real estate- location, location and location. Although the coming days are likely to bring many further stories in the press about just how this location came to be (it's the other rule of real estate- money), the bigger question is where will it now be located.
Bob Knakal has suggested Governors Island (3rd & 4th paragraph). A pie in the sky idea that would clearly redevelop an underutilized section of NYC, it unfortunately suffers from the need for 'a bridge or year round ferry service' and some heavy lifting of deed restrictions. Even Bloomberg's recent announcement of a $260M investment in Governor's Island wouldn't scratch the surface of required transportation infrastructure to start locating a serious hotel/convention center on the island.
Today brings news of up to seven casinos scattered through the state as part of the state constitutional amendment required that would permit Vegas style gambling and create a programmatic pairing for the NYC located convention center. Clearly, sprinkling seven casinos in locations as diverse as the Catskills, Belmont Racetrack, Manhattan and the vaguely define 'Western New York' are blatant carrots being dangled infront of voters in the form of regional investment to ease the debate around cost and location of a convention center. Blatant and cynical actually. Studies have shown that construction of a casino alone does little to spur local development without well considered planning and integration of the casino footprint and function with the surrounding neighborhood (pages 153 onwards).
At Cubed Advisory, we have said it before and we will say it again....
A casino/convention center/ hotel should be located at Coney Island- period. The proximate subway with an express train to Times Square for the tourists obviate the necessity of bridges across the harbor or dedicated ferry service. This alone saves hundreds of millions in transportation rethinks. The zoning that has already been put in place favoring large scale development. This means that consideration has already been given to the form of the area and how it can support convention/casino/hotel complexes. Years of further study and the associated cost wouldn't be required. Even the regional neighborhood unscientifically supports it. The beach, the amusements and the aquarium all create destination points in the area that are outside the possible main development, creating the foot traffic that would spur further smaller scale development between urban attractors.
With fundamentals like this in place, why is it even a discussion? Oh, right.
Joe Sitt... the Governor's palm is waiting to be greased.
Full Story
The selection of Aqueduct seemed odd from the start. A facility ostensibly planned for a non NYC user base, it clearly suffered on three basic rules of real estate- location, location and location. Although the coming days are likely to bring many further stories in the press about just how this location came to be (it's the other rule of real estate- money), the bigger question is where will it now be located.
Bob Knakal has suggested Governors Island (3rd & 4th paragraph). A pie in the sky idea that would clearly redevelop an underutilized section of NYC, it unfortunately suffers from the need for 'a bridge or year round ferry service' and some heavy lifting of deed restrictions. Even Bloomberg's recent announcement of a $260M investment in Governor's Island wouldn't scratch the surface of required transportation infrastructure to start locating a serious hotel/convention center on the island.
Today brings news of up to seven casinos scattered through the state as part of the state constitutional amendment required that would permit Vegas style gambling and create a programmatic pairing for the NYC located convention center. Clearly, sprinkling seven casinos in locations as diverse as the Catskills, Belmont Racetrack, Manhattan and the vaguely define 'Western New York' are blatant carrots being dangled infront of voters in the form of regional investment to ease the debate around cost and location of a convention center. Blatant and cynical actually. Studies have shown that construction of a casino alone does little to spur local development without well considered planning and integration of the casino footprint and function with the surrounding neighborhood (pages 153 onwards).
At Cubed Advisory, we have said it before and we will say it again....
A casino/convention center/ hotel should be located at Coney Island- period. The proximate subway with an express train to Times Square for the tourists obviate the necessity of bridges across the harbor or dedicated ferry service. This alone saves hundreds of millions in transportation rethinks. The zoning that has already been put in place favoring large scale development. This means that consideration has already been given to the form of the area and how it can support convention/casino/hotel complexes. Years of further study and the associated cost wouldn't be required. Even the regional neighborhood unscientifically supports it. The beach, the amusements and the aquarium all create destination points in the area that are outside the possible main development, creating the foot traffic that would spur further smaller scale development between urban attractors.
With fundamentals like this in place, why is it even a discussion? Oh, right.
Joe Sitt... the Governor's palm is waiting to be greased.
Full Story
Labels: Aqueduct, Bob Knakal, Casino, Coney Island, Convention Center, Cuomo, Genting, Joe Sitt
30.5.12
Silverstein Building a Residential Hat on a Tower?
It seems like such a possibility may come to pass based on the news in the Full Story below. Few facts that would describe the tower to be built at 514 11th Avenue are available. The Full Story below even makes mention of the overall size of the building not being laid out- right after suggesting that it will be around 60 stories.
So what educated guess can we make of what Silverstein has planned for this site?
Bounded by 11th Avenue, the Lincoln Tunnel Approach, 40th and 41st Street, 514 11th Avenue occupies the majority of the north easterly block in the recently rezoned Hudson Yards area. If any of you readers haven't dug through the zoning details of the Hudson Yards Special Purpose District, we would highly recommend it. Better yet, contact us at Cubed Advisory and we'll fill you in on the details. In broad brushstrokes it involves some hefty FAR bonuses and transferable development rights that should create a landrush similar to what was recently seen in Chelsea. It also has some tightly controlled use restrictions all with the intent of molding a bright future for approximately 100 acres of Manhattan.
For 514 11th Avenue, this translates into the following possibility:
With a lot area of 105,050SF and a base FAR of 10, it is already a large development with 1.05MSF as of right. The Hudson Yards District provides a bonus of an additional FAR of 10 (for a total of 20) if certain conditions are met.
The easy condition is that bonus FAR of 10 through 18 (840,400SF for a total of 1.89MSF) can only be obtained by contributing to the cities "District Improvement Fund". A clever, albeit naked, way to have private development shoulder some of the cities costs associated with Hudson Yards, the District Improvement Bonus is available at a cost of $100/SF in 2005 money. The code does provide a rule stating that the "contribution" is to be adjusted for inflation, which is around $118 in 2012 money. It also stipulates cash up front before any DOB or CPC approvals are received. Still, purchasing the equivalent of land in NYC for $118SF buildable is quite a steal.
The slightly more difficult- read expensive- condition to get the site from an FAR of 18 to 20 and max out the buildable area at 2.1MSF is to transfer land from the blocks between 10th and 11th Avenues, and 30th to 33rd Street- known as the "Eastern Railyards". Transfer means purchase and if a similar situation in Chelsea is any example, this could get pricey. Currently this land is owned in it's entirety by the MTA. This option is only available once the DIB capped FAR of 18 has been achieved through "contributions".
Of course there is a "but" in all this bonus area somewhere and it is where the residential hat mentioned in the title comes in. The Hudson Yard zoning also tightens up the usual zoning rules regarding residential use in commercial areas and vice versa. 514 11th Avenue is to be a commercial area per the new rules and must fufill an FAR of 14 as commercial use before any residential will be permitted on the site. Thats as-of-right FAR of 10, plus and additional FAR of 4 (420kSF for a $50M "contribution") for a total of 1.4MSF of commercial space before the first apartment can be built. NYC zoning clearly lays out that residential use goes above commercial and therein lies the hat.
At Cubed Advisory, we are expecting Silverstein to at some point announce a 1.9 to 2.1MSF development, with a full site, 2 story, retail base of 210kSF (as noted in the Full Story below). On top of this will be an office tower of 1.26MSF wearing a residential hat of 420kSF to 630kSF, depending on how much space Silverstein can purchase from the MTA's Eastern Railyards.
Of course, this is Silverstein and he may just rewrite the rules purely on speculation. He has done it before.
Full Story
So what educated guess can we make of what Silverstein has planned for this site?
Bounded by 11th Avenue, the Lincoln Tunnel Approach, 40th and 41st Street, 514 11th Avenue occupies the majority of the north easterly block in the recently rezoned Hudson Yards area. If any of you readers haven't dug through the zoning details of the Hudson Yards Special Purpose District, we would highly recommend it. Better yet, contact us at Cubed Advisory and we'll fill you in on the details. In broad brushstrokes it involves some hefty FAR bonuses and transferable development rights that should create a landrush similar to what was recently seen in Chelsea. It also has some tightly controlled use restrictions all with the intent of molding a bright future for approximately 100 acres of Manhattan.
For 514 11th Avenue, this translates into the following possibility:
With a lot area of 105,050SF and a base FAR of 10, it is already a large development with 1.05MSF as of right. The Hudson Yards District provides a bonus of an additional FAR of 10 (for a total of 20) if certain conditions are met.
The easy condition is that bonus FAR of 10 through 18 (840,400SF for a total of 1.89MSF) can only be obtained by contributing to the cities "District Improvement Fund". A clever, albeit naked, way to have private development shoulder some of the cities costs associated with Hudson Yards, the District Improvement Bonus is available at a cost of $100/SF in 2005 money. The code does provide a rule stating that the "contribution" is to be adjusted for inflation, which is around $118 in 2012 money. It also stipulates cash up front before any DOB or CPC approvals are received. Still, purchasing the equivalent of land in NYC for $118SF buildable is quite a steal.
The slightly more difficult- read expensive- condition to get the site from an FAR of 18 to 20 and max out the buildable area at 2.1MSF is to transfer land from the blocks between 10th and 11th Avenues, and 30th to 33rd Street- known as the "Eastern Railyards". Transfer means purchase and if a similar situation in Chelsea is any example, this could get pricey. Currently this land is owned in it's entirety by the MTA. This option is only available once the DIB capped FAR of 18 has been achieved through "contributions".
Of course there is a "but" in all this bonus area somewhere and it is where the residential hat mentioned in the title comes in. The Hudson Yard zoning also tightens up the usual zoning rules regarding residential use in commercial areas and vice versa. 514 11th Avenue is to be a commercial area per the new rules and must fufill an FAR of 14 as commercial use before any residential will be permitted on the site. Thats as-of-right FAR of 10, plus and additional FAR of 4 (420kSF for a $50M "contribution") for a total of 1.4MSF of commercial space before the first apartment can be built. NYC zoning clearly lays out that residential use goes above commercial and therein lies the hat.
At Cubed Advisory, we are expecting Silverstein to at some point announce a 1.9 to 2.1MSF development, with a full site, 2 story, retail base of 210kSF (as noted in the Full Story below). On top of this will be an office tower of 1.26MSF wearing a residential hat of 420kSF to 630kSF, depending on how much space Silverstein can purchase from the MTA's Eastern Railyards.
Of course, this is Silverstein and he may just rewrite the rules purely on speculation. He has done it before.
Full Story
Labels: 514 11th Avenue, commercial, development, Hudson Yards, residential, Robert K. Futterman, Silverstein Properties