27.4.12
Thor Making Room for a Flagship?
There has never been a shortage of flagship stores on 5th Avenue and at Cubed Advisory, we expect that Joe Sitt is going to be adding space for one more.
As the Full Story below notes, Sitt's Thor Equities recently purchased 516-520 5th Avenue from Aby Rosen's RFR Holding. Currently a group of 3 tired and surprisingly short buildings, Thor paid $132M for the trio, which works out to an eye watering $838/SF buildable. But when bundled with the 139kSF of air rights that RFR added to the property in 2007, that comes down to a much more reasonable $444/SF buildable.
With a combined as-of-right and air rights buildable SF of almost 300kSF, it is likely that Thor will put up a tower of around 30 floors. Perhaps a few more depending on how the tower conforms to it's zoning envelope. Bonus FAR is available for public amenities. However, given the small footprint (10500SF), it seem unlikely that any sort of urban plaza is going to appear and bolster the buildings FAR. Offices above will be able to command solid rents with their views of Bryant Park, but it will be the ground floors that will be worth watching. After Uniqlo opened late last year further up 5th Avenue in a $300M, 15 year deal it seems all but certain that Thor will be marketing the first few floors of his new development to a large retail interest.
Full Story
As the Full Story below notes, Sitt's Thor Equities recently purchased 516-520 5th Avenue from Aby Rosen's RFR Holding. Currently a group of 3 tired and surprisingly short buildings, Thor paid $132M for the trio, which works out to an eye watering $838/SF buildable. But when bundled with the 139kSF of air rights that RFR added to the property in 2007, that comes down to a much more reasonable $444/SF buildable.
With a combined as-of-right and air rights buildable SF of almost 300kSF, it is likely that Thor will put up a tower of around 30 floors. Perhaps a few more depending on how the tower conforms to it's zoning envelope. Bonus FAR is available for public amenities. However, given the small footprint (10500SF), it seem unlikely that any sort of urban plaza is going to appear and bolster the buildings FAR. Offices above will be able to command solid rents with their views of Bryant Park, but it will be the ground floors that will be worth watching. After Uniqlo opened late last year further up 5th Avenue in a $300M, 15 year deal it seems all but certain that Thor will be marketing the first few floors of his new development to a large retail interest.
Full Story
Labels: Aby Rosen, commercial, development, Joe Sitt, Midtown, retail, RFR Holding, Thor Equities
24.4.12
Condo Zombie- Soon Taking Reservations
Here at Cubed Advisory, we have seen several stalled condo projects go rental, what we don't see quite as often is a stalled condo going hotel. After multifamily being driven by record rents, hotel is the next most active real estate asset class in the city, with several under construction or renovation (opens PDF).
So it shouldn't be all that surprising to learn from the Full Story below that Turkish chain Marmara Hotels and Residences have picked up the stalled Jasper condo at 114 East 32nd, from Petra Capital Management for $55M. Originally planned as 80 condos, previous reports had mentioned reworking the 122kSF building into 200 hotel units. The $450/SF purchase price is on the higher end of average Manhattan hotel land purchases, but Marmara should be able to achieve savings by the fact that the building is extant. Gut reno is cheaper than ground up- especially when the previous owner has already completed the gutting. Marmara is still going to have to keep a close eye on the bottom line as any construction over $250/SF is going to push them over the current average NYC hotel development figure of $488k/room. We are predicting that Marmara is much more likely to be saddled with a full development cost of $550-575k/room.
Full Story
So it shouldn't be all that surprising to learn from the Full Story below that Turkish chain Marmara Hotels and Residences have picked up the stalled Jasper condo at 114 East 32nd, from Petra Capital Management for $55M. Originally planned as 80 condos, previous reports had mentioned reworking the 122kSF building into 200 hotel units. The $450/SF purchase price is on the higher end of average Manhattan hotel land purchases, but Marmara should be able to achieve savings by the fact that the building is extant. Gut reno is cheaper than ground up- especially when the previous owner has already completed the gutting. Marmara is still going to have to keep a close eye on the bottom line as any construction over $250/SF is going to push them over the current average NYC hotel development figure of $488k/room. We are predicting that Marmara is much more likely to be saddled with a full development cost of $550-575k/room.
Full Story
Labels: condo to hotel, hotels, Jasper, Marmara Hotels and Residences, Murray Hill, Petra Capital Management, redevelopment
20.4.12
An Unusual Arbitrage in B'Burg
The Full Story below tells of a not uncommon event. Purchase of land by a developer with the plan to redevelop the site and consequently profit. What makes the story of 237-241 Bedford Ave in Brooklyn different, is that the value is being generated by the retail component of the site. Avid followers of the current state of NYC real estate or readers of the Cubed Advisory blog would know that it is almost always residential rental and not retail that drives the current market.
So what makes this one different?
The joint venture of RedSky Capital and Waterbridge has just picked up the site for $66M (33% in equity). With a low FAR of 2.0 on a site of 52,500SF, this works out to a rather shocking $628/SF buildable. Although eligible for FAR bonus from inclusionary housing, a quirk in the zoning for this particular site means that the required 20% of affordable housing can only glean a 10% SF bonus- obviously a non-starter. The project is therefore a straightforward $/SF vs. basic zoning and some simple math.
Waterbridge is planning a 50kSF ground floor retail development and 39 residential units. Given the sites FAR and a typical loss factor, the 39 units are likely to account for 46,500SF of revenue generating space. At a range of $45/SF to $55/SF for residential rental in the area, Waterbridge/RedSky should be easily able to pick up $2.1M to $2.5M. Our 'Cubed Advisory back-of-the-napkin-estimate' puts the cost of carrying the full project in it's entirety at around $5.75M a year. This leaves $3.25-3.65M to be covered by the retail rents to break even- or $65-73/SF.
With Waterbridge/RedSky getting $54/SF in place and an expectation to double or treble that, there should be no problem in having a successful development. But with the residential portion only accounting for around 40% of the required income and a 20% range of value, the income it provides can only move the projects bottom line by 8% up or down. At 60% of the project income and with a conservative range of value of 100% (up to 400% being seen as possible by Waterbridge's acquisition director), the retail portion of the project can move the bottom line by 60%.
It is that range of effect that makes the retail value the real arbitrage in this project and what makes it very different from most development currently taking place.
Full Story
So what makes this one different?
The joint venture of RedSky Capital and Waterbridge has just picked up the site for $66M (33% in equity). With a low FAR of 2.0 on a site of 52,500SF, this works out to a rather shocking $628/SF buildable. Although eligible for FAR bonus from inclusionary housing, a quirk in the zoning for this particular site means that the required 20% of affordable housing can only glean a 10% SF bonus- obviously a non-starter. The project is therefore a straightforward $/SF vs. basic zoning and some simple math.
Waterbridge is planning a 50kSF ground floor retail development and 39 residential units. Given the sites FAR and a typical loss factor, the 39 units are likely to account for 46,500SF of revenue generating space. At a range of $45/SF to $55/SF for residential rental in the area, Waterbridge/RedSky should be easily able to pick up $2.1M to $2.5M. Our 'Cubed Advisory back-of-the-napkin-estimate' puts the cost of carrying the full project in it's entirety at around $5.75M a year. This leaves $3.25-3.65M to be covered by the retail rents to break even- or $65-73/SF.
With Waterbridge/RedSky getting $54/SF in place and an expectation to double or treble that, there should be no problem in having a successful development. But with the residential portion only accounting for around 40% of the required income and a 20% range of value, the income it provides can only move the projects bottom line by 8% up or down. At 60% of the project income and with a conservative range of value of 100% (up to 400% being seen as possible by Waterbridge's acquisition director), the retail portion of the project can move the bottom line by 60%.
It is that range of effect that makes the retail value the real arbitrage in this project and what makes it very different from most development currently taking place.
Full Story
Labels: redevelopment, RedSky Capital, residential, retail, Waterbridge Capital, Williamsburg
9.4.12
5 Beekman- Nice Building, Better Air Rights
Late last week, news came out that the well known sale of 5 Beekman Street had closed. The Full Story below tells us that the Chetrit Group and Bonjour Capital finally stopped suing each other (last item) and got around to selling the building. Purchased by GB Lodging for $64M, the plan is to turn the property into a 297 room/90 residence hotel. Judging from the existing atrium, possibly one of the best looking hotels in NYC.
It is unclear at this point if the redevelopment plans include any expansion. The 297/90 plan of the existing 128k+SF building, only yields a tight 331SF per room. There is plenty of space to expand into if needed, as the existing landmarked building only makes use of 57% of it's as-of-right FAR. With that amount of free SF available, 5 Beekman has to be looking at selling some of that unused development space to it's neighbors.
Landmarked buildings with available air rights have a bit more latitude in terms of how far those rights can be transferred. Down the block, or across the street are precedented possibilities.
This would likely have been an easy sale to the 30 story residential tower going up at 113 Nassau, had they not already built footings. 132 Nassau Street is another possibility. Perennially underutilized since it's purchase in the late 60's by the JW Realty Company, 132 Nassau seems ripe for development.
However it is played, GB Lodging has the possibility of developing one of most dramatic hotels in NYC and offsetting some of it's investment with the value of the untapped development rights.
Labels: 5 Beekman, Bonjour Capital, Chetrit Group, GB Lodging
4.4.12
What is Sitt Sitting On?
The short answer is an ever growing assemblage in Coney Island.
As the Full Story below describes, Joe Sitt and his firm Thor Equities, have just picked up another two lots in Coney Island. Thor currently owns all but 6 lots on the block bordered by Stillwell, West 12th, Surf Ave and, well... the ocean. With ownership of significant chunks of the two westerly blocks, Sitt is building a fine collection primed for something big.
Coney Island is historic and some elements of it can and should be preserved. But to call a ramshackle collection of amusements sitting on an ocean beach, with a boardwalk, next to an aquarium with a giant subway station across the street, an asset that is not currently at it's best and highest use- would be a gross understatement. Joe Sitt knows this too. Having just paid over $400/buildable SF, Thor Equities isn't planning to recreate 'shoot the freak' . Thor is looking very long term with an eye on the special Coney Island zoning district. The newish (2009) zoning doubles the available FAR to 4 for large sections of Sitt's holdings. It paradoxically also provides height limits and tower allowances that vastly outstrip what an FAR of 4 can typically do. However, when you own the whole block and leave half of it empty for 'amusements' that basically have zero FAR, then towers you shall have. The city has written the zoning to encourage the development of large projects with large open areas.
Hotels on the beach. Revitalized Coney Island amusements. Would someone please permit gambling on this strip too and really let the jobs flood into a part of town that could desperately use them?
Back in 2005 Sitt said he wanted to evoke the feeling of Vegas. Vegas doesn't have a beach- which is why Coney Island can be even better.
Thor is clearly biding it's time to capture the last remaining parcels. At Cubed Advisory, we can't wait to watch the development that will lead to a significant new NYC travel destination.
Full StoryLabels: Coney Island, development, Joe Sitt, Thor Equities