9.3.12
Has Anyone Checked the Comps?
At Cubed Advisory Services, we are always in favor of thinking big and thinking out of the box. It is the fresh ideas that make for interesting development in NYC and brings change to the urban fabric. Even so, we are having a hard time with the numbers presented in the Full Story below.
JDS Development and Property Markets Group are teaming up to redevelop an old Verizon exchange building in Chelsea into luxury condos. The building is an existing 23 floors and will be fully gut renovated with heated floors, coffered ceiling, and french oak floors. It is to be marketed at $3000/SF to $10000/SF.
There had better be some unicorns and fairydust in the renovation schedule- the $/SF they are looking for are in the territory of 15 CPW.
The $88M oil baron's daughters crash pad came in at $13k/SF... a more humble 35th floor unit is priced at $10k/SF.
Who underwrote this project? Would someone please get them a calendar that goes past 2007.
Labels: Chelsea, comps, JDS Development, Property Markets Group, redevelopment
5.3.12
How Much for the Air?
Air rights are a big thing in NYC. Allowing a developer to build bigger (and typically higher) than permitted as-of-right, air rights purchases from adjacent buildings are the next best thing to buying empty land. Since most air rights (the exceptions and convolutions are a post of their own) are transferable only to adjacent buildings, the market for such sales are limited. If your neighbors don't want to buy any excess SF that your property may have, then there is zero market for those SF and they have zero value. It is this kind of math that has kept air rights valued at 50-70% of the equivalent land value.
As we can read in the Full Story below, this is different in Chelsea.
When NYC created the special West Chelsea Zoning District in 2005, the intent was to use the Highline as a point of focus. It was written into the zoning code that unused development rights adjacent to the Highline could be transferred to just about anywhere else in the special district. This would encourage development and preserve the light, air and focal element that the Highline has become.
What it also does, is create a market for air rights that is no longer dependent on whether or not your neighbor wants to buy. By making the air rights more fungible, it also makes them more valuable.
Which is why Sherwood equities can offer their air rights for $500/SF- basically the full cost of land in NYC. In doing so, they can expect to pocket $9.6M or $2.3M more than they paid for the unfinished 4 story shell currently on the site.
All in all, a very smart move by Sherwood that makes for an unusual NYC real estate play- making great deal of money by NOT building something.
Labels: air rights, Chelsea, highline, Sherwood Equities
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
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