28.2.12
Solow Buys HIgh
Sheldon Solow, owner of the very desirable 9 West 57th has just dropped $120M in what seems to be a move not entirely based on the underlying fundamentals. As the Full Story below notes, the $120M pricetag for an 11 story 81kSF building at 12 West 57th works out to $1400/SF. This is no less alarming when translated into the more useful metric of buildable SF... $1106/SFbld.
One would like to think that his current ownership of the adjacent space has factored into the math here. Last mortgaged for an even $1M back in the late 80s, it can be assumed that the empty 6 West 57th is somehow on the books as free land.
Even considering this, without picking up some air rights from adjacent buildings (and further increasing the overall land cost), the best buildable SF that could be hoped for as of right is 15 or so stories... 30 with a well styled envelope. It isn't a great residential street, the land cost and small size all but precludes a profitable commercial tower and a 250+ room luxury hotel would have some stiff competition with Extel's announced plans for the same 2 doors down the street.
The Full Story below cites a source who states that Solow wants to make the block a bit more upscale. But, from the outside this looks like a competition play. By outbidding Extel for the property, Solow prevents them from building a very large luxury hotel in his backyard and limits them to something of a more 'boutique' scale.
Someone please tell us that this isn't about losing a view of the Empire State Building from 9 West 57th.
Sheldon Solow may have flirted with record $/SF pricing in his purchase of 12 West 57th or he may have just spent the most money to preserve a view since the Rockefellar's bought the Pallisades. Time will tell, but at Cubed Advisory, we will not hold our breath to see the results.
24.2.12
Easy Money Reno
The redevelopment of 247 East 28th is everywhere today. It's in the Full Story below, it's here and here and probably a few other places too. Rightfully so! It's a simple story of an underperforming asset that is about to be repositioned for solid returns. As the Full Story below notes, 247 East 28th has been picked up by Silverstone Property Group and RWN Real Estate Partners for $53M, with plans to sink another $12M in upgrades. Over 128 units and 109kSF, our back of the napkin math tells us that is $507k/unit and $596/sf, which isn't cheap at a first look.
But, the current average rent of $40/sf provides a gross rent multiple of somewhere around 17. If Silverstone successfully repositions the building into their target 'luxury' market (and let's take the broker speak with a grain of salt), there is no reason they can't realize $45/sf like Kips Bay Court Across the street, or $55/sf like Parc East, one block down.
$55/sf would give Silverstone and RWN a GRM in the neighborhood of 12, beating current rates by 2 points.
Nice investment + nice reposition = easy money.
Labels: Kips Bay, multifamily, redevelopment, RWN Real Estate Partners, Silverstone Property Group
23.2.12
Sovereign Assemblage
At Cubed Advisory, we are sitting back and wondering what Sovereign Partners is planning for 28th Street. As the Full Story below states, they just picked up 140-144 West 28th for $20.5M. Currently an empty parking lot, there is nearly 76kSF available as of right. That makes for a land price of $270/sf and a world of exciting development possibilities.
What the story doesn't mention is that Sovereign picked up the adjacent property at 146 West 28th back in September for $13.5M. Sovereign swept the note on that building out from it's then owner Ben Shaoul at a significant discount to the $28M P&I in default at the time. Shaoul went on to sue Sovereign with apparently no success.
This previous acquisition adds 46kSF buildable, bringing the assemblage total to 122kSF at a land price of $278/sf. However, as they say on TV 'but wait, there's more...'. Massey Knakal had previously been listing 140-144 and 146 West 28th as one package with mention of additional air rights available from 141-143 and 145-147 West 28th. That's a possibly 48kSF of air rights. Anyone curious enough to read the loan docs and look for that air?
At the low end Sovereign has large as of right space on a big lot. At the high end, they have even more and guaranteed views over air rights to the north and east. Given the zoning and the market, a fast hotel play would be the obvious choice. However, it is more space than the current trend of boutique or discount hotel typically wants in one place.
We will be watching this site with interest.
Labels: Ben Shaoul, Chelsea, development, lots, Massey Knakal, sales, Sovereign Partners
21.2.12
Credit Where Credit is Due...
Tax credit that is.
The Full Story below relates the story of two solid organizations doing some development work for a good cause. A hundred+ year old and currently vacant school building in East Harlem is scheduled to be turned into 10kSF of community arts space as well as 90-100 affordable housing units by Artspace and El Barrio’s Operation Fightback.
Reuse of abandoned buildings... redevelopment through repurposing space... supporting the arts within a community- three things that we are fully in support of at Cubed Advisory.
As with all real estate stories, the real magic is in the math.
Based on the stated $50M budget, the project is likely coming in at a weighted $/unit of $440k and very reasonable $500-550/SF built. All good numbers, but tough to make work with the affordable housing rents of $500-$1100/mo. It becomes much more workable by the fact that the project is going to get $24M in low income tax credits as well as historic structure tax credits and arts credits. There is no word on what the city will be transferring the building to the organizations for, but one can be sure it would count as a credit.
So- who is now thinking they want to open a non-profit?
Labels: affordable housing, Artspace, East Harlem, El Barrio's Operation Fightback, redevelopment, tax credits
15.2.12
Stonehenge Going Long
Stonehenge are smart investors in NYC multifamily. They have a talent for buying undervalued or underdeveloped property and putting the work into it. One only has to look at their plans for 555 6th Avenue to see that Stonehenge creates value through transformative investment in clever acquisitions. They are one of the few firms that we at Cubed Advisory have heard talk up the merits of rent stabilized tenants as a future arbitrage.
So what are they doing with their seemingly expensive purchase of 364 West 18th? There are few facts in the Full Story below (5th item down) outside of $35M sale price for 65 residential units. So let's pad some out some more facts:
-65 residential units with 7 commercial units = $486k/ unit ($376k adjusted for weighted commercial)
-57706SF with no available FAR = $606/SF
It all adds up to some pretty thin margins, especially with average residential rents of $2800/mo, but therein lies Stonehenge's basis. Minor renovations could easily push average rents up 30%, more if some of the retail was reclaimed for amenity space. Speaking of retail, it is safe to assume that with a barber shop, check cashing store, deli and candy store- retail is also sub market rate.
Stonehenge clearly didn't buy low, especially with the amount of work to be done, but their history of long term holding of assets means that there will always be a future opportunity to sell high.
Full StoryLabels: Chelsea, multifamily, repositioning, Stonehenge
Going Big AND Going Home- In Brooklyn
At Cubed Advisory, we tend to make a lot of noise about the low hanging fruit that currently is the multifamily market. Steiner NYC seems to agree and aren't fooling around about it picking it. As the Full Story below notes, the Steiner family is taking four oversize lots on the border of Fort Greene and Boerum Hill and building 'The Hub'- 720 units on 52 floors.
Can anyone think of a similarly elephantine project out there right now? And no, failed condos converted to rental don't count.
The Steiner's picked up the properties for $30M which works out to a jaw dropping $63 per buildable foot. Combined with the preferential financing available for building 20% of the units as inclusionary housing, it would seem that the project is starting off on a very sound financial foundation.
Not having a full zoning analysis on tap for this particular assemblage, we are wondering just how they are going to get 720 units from 419kSF (LA*FAR10-50kSF retail) without zoning bonuses. But if the Steiner's can buy land at $63/SF buildable, we'll trust that they have the other aspects of the project stitched up.
Labels: affordable housing, Boerum Hill, development, Fort Greene, lots, Steiner NYC, The Hub
13.2.12
One of These Things is Not Like the Others
It is a well known fact right now, that in New York real estate the easy money is in multifamily rental. As the Full Story below points out though, there may be even easier money in the affordable housing subclass. Between federal and city tax credit assistance programs, federal low income housing tax credits and the Community Reinvestment Act, there is a great deal of incentives available to help improve the bottom line of such developments. But how are the numbers quoted in the Full Story related to a baseline such as $/built unit?
It looks like this:
L+M Development:
Affordable Housing Preservation Fund- $100M over 1300 units = $77k/unit
Phipps Houses Group:
Units developed since 2007- $650M over 2000 units = $325k/unit
Hobbs Court- $125M over 134 units = $932k/unit
Fordham Bedford Housing Corp
Serviam Gardens- $46M over 243 units = $189k/unit
Clearly L+M's fund numbers are low being strictly reno. Fordham seems a little light at $189k/unit. But what happened at Hobbs Court? $932k/unit development cost? Someone needs to check the published unit count or stop finishing units in gold leaf.
Labels: affordable housing, Fordham Bedford Housing, L+M Development, multifamily, Phipps Houses Group
7.2.12
Less Parking, More Hotel
From the Full Story below, one could always make a joke about NYC parking spaces being slightly smaller than the average hotel room and only slightly more expensive. As the article notes, OTO Development is looking to cast aside the jokes and get to work on their second site in the city. After purchasing a low slung parking garage, the OTO team is planning to redevelop the site into a hotel. Known for budget brands like Hampton Inn and Hilton Garden Suite, OTO is likely to try to squeeze every last inch of development rights from the site.
At Cubed Advisory, we have done some back of the napkin math and figure that OTO is going to have to squeeze hard after paying a not unreasonable $361/sf buildable for the land.
With a buildable area around 99540sf and a likely development cost of around $850/sf, the overall project cost is around $120.5M. With budget hotels averaging 350sf/per room across the building, that is a per room development cost of $422k.
Ouch!
If OTO were to bring the per room development cost down to a more reasonable $375k-380k per room, they would be looking at room sizes of 319sf. This would require a hotel with very small rooms and/or no real amenities.
It is also happens to be twice the size of an average parking space.
Labels: development, hotels, OTO Development
2.2.12
14 Wall- Tip of the Iceberg?
Much noise has been made in the press of late regarding the amount of CRE notes that are coming due in 2012. It would seem that 14 Wall Street represents the first note of note.
Bought at the height of the market in 2007 for $325M ($387/SF!), Capstone Equities is having no luck finding equity partners to be able to help make payments on the debt. Shorenstein Properties is poised to flex it's mezz muscles and take control of the property- leaving it with a great building and a messy debt structure to rework.
There is a silver lining in this otherwise grim tale (other than what must surely be some excitement at the Shorenstein offices). The Full Story below notes that Capstone's partner in the building- the Carlyle Group has written off it's investment. If more organizations admit their mistakes and take their lumps like the Carlyle Group has, then the unwinding of the remaining $5.6B in NYC CRE notes this year may be the much storied correction that the industry has been waiting for. Two years of 'extend and pretend' has not improved the debt fundamentals underlying the market.
Full Story
Bought at the height of the market in 2007 for $325M ($387/SF!), Capstone Equities is having no luck finding equity partners to be able to help make payments on the debt. Shorenstein Properties is poised to flex it's mezz muscles and take control of the property- leaving it with a great building and a messy debt structure to rework.
There is a silver lining in this otherwise grim tale (other than what must surely be some excitement at the Shorenstein offices). The Full Story below notes that Capstone's partner in the building- the Carlyle Group has written off it's investment. If more organizations admit their mistakes and take their lumps like the Carlyle Group has, then the unwinding of the remaining $5.6B in NYC CRE notes this year may be the much storied correction that the industry has been waiting for. Two years of 'extend and pretend' has not improved the debt fundamentals underlying the market.
Full Story
Labels: Capstone, Carlyle, CRE, FiDi, Shorenstein