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
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
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
22.5.12
Caveat Emptor...
...or why it pays to do a little due diligence.
Call it the Facebook IPO mindset or just some very optimistic marketing, but the development site described in the Full Story below, would appear to be over reaching what is reasonable.
Located at 79-89 Avenue D and currently occupied by a one story Rite Aid, Eastern Consolidated has put a price tag on the property of $22.5M. The site clearly has a large footprint and a (locally) impressive buildable SF of around 72k. This number swells to 96kSF buildable when 20% of the residential floor area is designated low income.
The problem is in the location. Similar to 109 Gold Street that we previously blogged about, 79-89 Avenue D is sitting across the street from a public housing project. In this case it is the Jacob Riis Houses. These buildings will limit the rent potential of units built on the site and will kill all but the most bargain priced condo development.
We have been putting our 'Cubed Advisory back-of-the-napkin-estimate' technique to this one as a multifamily rental and just aren't seeing a $/SF rent that will make the asking price make sense. With residential rents in the micro area facing the Jacob Riis houses struggling to get out of the $45/SF range, an all market rate building could expect to bring in around $2.6M annually or $2.9M with a blend of low income and market rate- an increase made less viable when the cost of construction is factored in. With that kind of income backed up against a very rough construction cost, the land barely touches a useful value of $10M. That is under $140/SF buildable, which is not coincidentally close to what Eastern Consolidated quotes as nearby comps (for properties not facing a housing project). But, it certainly is nowhere near the $234/SF buildable asking price for the bonused model or $311/SF buildable as of right.
What this site, does have going for it is it's footprint. With typical lots in the area being 2500SF, the 13kSF footprint of 79-89 Avenue D has the ability to support a very large retail space. In fact it currently is one and is probably making over $800k a year in rent from it already. It is this potential for a large retail space/spaces that can command a higher rent than residential (~$62/SF on the block) and contribute a little over 30% to the rent roll that will allow bids for this site to approach what Eastern Consolidated is asking. Again, the 'Cubed Advisory back-of-the-napkin-estimate' would figure the land could command a price of $20M as a ground floor retail development with housing above. Still 10% below the ask.
All that remains to be seen now is whether the site languishes pending a market dictated price chop. Of course if some smart developer with plans to change the micro market of Avenue D can find an underwriter willing to prop up the financial model, well- that could work too.
Full Story
Call it the Facebook IPO mindset or just some very optimistic marketing, but the development site described in the Full Story below, would appear to be over reaching what is reasonable.
Located at 79-89 Avenue D and currently occupied by a one story Rite Aid, Eastern Consolidated has put a price tag on the property of $22.5M. The site clearly has a large footprint and a (locally) impressive buildable SF of around 72k. This number swells to 96kSF buildable when 20% of the residential floor area is designated low income.
The problem is in the location. Similar to 109 Gold Street that we previously blogged about, 79-89 Avenue D is sitting across the street from a public housing project. In this case it is the Jacob Riis Houses. These buildings will limit the rent potential of units built on the site and will kill all but the most bargain priced condo development.
We have been putting our 'Cubed Advisory back-of-the-napkin-estimate' technique to this one as a multifamily rental and just aren't seeing a $/SF rent that will make the asking price make sense. With residential rents in the micro area facing the Jacob Riis houses struggling to get out of the $45/SF range, an all market rate building could expect to bring in around $2.6M annually or $2.9M with a blend of low income and market rate- an increase made less viable when the cost of construction is factored in. With that kind of income backed up against a very rough construction cost, the land barely touches a useful value of $10M. That is under $140/SF buildable, which is not coincidentally close to what Eastern Consolidated quotes as nearby comps (for properties not facing a housing project). But, it certainly is nowhere near the $234/SF buildable asking price for the bonused model or $311/SF buildable as of right.
What this site, does have going for it is it's footprint. With typical lots in the area being 2500SF, the 13kSF footprint of 79-89 Avenue D has the ability to support a very large retail space. In fact it currently is one and is probably making over $800k a year in rent from it already. It is this potential for a large retail space/spaces that can command a higher rent than residential (~$62/SF on the block) and contribute a little over 30% to the rent roll that will allow bids for this site to approach what Eastern Consolidated is asking. Again, the 'Cubed Advisory back-of-the-napkin-estimate' would figure the land could command a price of $20M as a ground floor retail development with housing above. Still 10% below the ask.
All that remains to be seen now is whether the site languishes pending a market dictated price chop. Of course if some smart developer with plans to change the micro market of Avenue D can find an underwriter willing to prop up the financial model, well- that could work too.
Full Story
Labels: affordable housing, development, East Village, Eastern Consolidated, multifamily
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
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
30.3.12
Whither Goest 25 Broad...
...45 Broad will follow.
The Full Story below brings us news that Lehman has finally cut through the red tape and it's own (strategic?) torpor to put 25 Broad on the auction block. One of the more high profile casualties of the Lehman collapse and the condo boom, 25 Broad was being developed by Kent Swig into luxury condos. Reworked with minimal effort by LCOR associates into high end rental, the property hits the block with $338M in liens on it.
What isn't mentioned in the Full Story below, is the accidental controlling interest that 25 Broad has in whatever goes on at nearby 45 Broad. Originally slated to be a 62 story Nobu branded hotel, also defaulted on by Swig, 45 Broad was auctioned in late 2011. It was repurchased by Lehman for $77M. The difficulty with transforming 45 Broad from it's current empty lot status (other than the $550/buildable SF Lehman repurchased it for), is that it is landlocked on it's block. Hemmed in on the north by the Leman Prep Academy (yes that is Leman , not Lehman) and the south by the 31 story 55 Broad Street, 45 Broad Street only has 63' of street frontage. On the back- 25 Broad, with possibly the most bizarre T shaped lot and footprint in all of NYC realestate, occupies the entire rear lotline of 45 Broad and seals it in from having any hope of a service entrance, loading dock or similar facility required of any inevitable large building development.
A future developer of 45 Broad will need to cut a deal with 25 Broad for use of one if it's old parking units to gain access to the rear of the lot by way of a common alley that runs alongside the nearby William Beaver House on South William Street. Without this access, it will be very tough to establish an A-class street presence, for whatever gets built.
At Cubed Advisory we know that not all real estate problems are about $/SF or zoning or construction methods. Sometimes it is as simple as property geometry, who your neighbors are and how much they want to charge you to be friends.
Labels: 25 Broad, 45 Broad, development, Kent Swig, LCOR, Lehman
20.3.12
Williamsburg Gains Inclusionary Housing
The Full Story below makes note of the $50M construction loan secured by LCOR to develop a large assemblage in Williamsburg at 250 North 10th Street. Being new development on empty lots, it's the kind of story that we at Cubed Advisory like to hear about. We could back out the numbers to estimated cap rates, construction cost/SF, unit cost etc., but there is another story buried in the numbers of this one.
Inclusionary housing.
Although not explicitly mentioned in the article, there is just no other way to take a 50,000+/-SF lot like 2050 North 10th, with a FAR of 2.7 and turn it into the 185,000SF development cited in the Full Story below. 185000SF is however what one gets if the site is developed to max out the inclusionary housing bonus and bring the FAR up to 3.6 (yes it doesn't work out exactly, but given rounding, mech shafts, etc. it's close enough). In the particular zone that 250 North 10th is in, developed inclusionary housing SF comes back at 125% bonus SF. For example, if one builds a 500SF inclusionary unit, one gets a 750SF floor area bonus above what the FAR would allow. This backs out to the inclusionary housing accounting for 20% of the total development.
Since inclusionary housing is mandated to rent at a less than market rate, there is clearly a trade-off here. Currently NYC caps rent for apartments in this zone at approximately $21/SF, while LCOR is looking to rent units in the mid $50s/SF- call it $55/SF. With 20% of the SF earning $21/SF and the remaining earning $55/SF, the blended price works out to $48/SF.
That's 12% less $/SF in rent (bad) over 33% more floor area (good) bringing in 16% more gross income- or roughly $1.3M annually (very good). Do we even need to mention what low income housing tax credits can do for this deal (really very very good)?
Which is the better story in the Full Story below? $50M construction loan or a $1.3M increase in revenue through smart use of zoning? Chicken and egg?
Labels: development, inclusionary housing, LCOR, multifamily, Williamsburg
15.3.12
No Land for You!
So says Gabriel Bullaro in the Full Story below as he represents the sale of a land lease for 216-222 West 30th Street. Bullaro suggests that the property would work well for a residential development or hotel.
He is half right.
Situated a couple of blocks from Madison Square Garden, in what remains of the Garment District, the neighborhood is not exactly 'move-in ready'. A luxury loft rental building on the same block is only able to eke out mid $30/sf to mid $40/sf. Rates like that work out to an approximate cap rate of 3-5% on a valuation based on estimated construction cost. This is not a bad number, but definitely one complicated by the land lease. Depending on the terms of the land lease, rent escalations could bite into the cap rate or the equity value of the building will diminish closer to the term date as refis become more difficult. Neither is appealing on an already slim margin.
Condos? Not likely. With a market soft for most product except high $/sf 'luxury' development, this location just won't cut it. Combined with NYC's ever diminishing appetite for land lease condo space- this is a non starter.
That leaves us with a hotel. Which starts to make some more sense when you look at the numbers. Bullaro's suggested annual rent of $1.2M would yield a 25 year mortgage of $17M. At 96,280SF buildable, that is an equivalent land cost of $183/SF buildable. Even factoring in rent for the expected full 50 year term, the equivalent land cost is $500/SF buildable- assuming a balance between escalations and inflation. It is cheap land and best and has an average price tag at worst. Either way, if you are basing your required return on the income rather than the equity or sell through value- it is a good deal. With current NYC hotel occupancies rates and ADR's, a gross income of $200/sf would not be unreasonable.
Hotel guests won't mind the possible land lease mandated check out time of 2062 either.
Labels: development, Gabriel Bullaro, Garment District, land lease
13.3.12
Sweet News On the Waterfront
Big news from Brooklyn... maybe. The Community Preservation Corporation and it's partner, the Katan Group, may or may not be looking to sell the Domino Sugar Factory.
Per the Full Story below, all or part of it is being shopped around.
How much of it? For how much? To Whom?
Originally purchased in 2004 for just under $56M, CPC and Katan spent several years and an unknown sum of money pushing the M3-1 zoned lots of 774600SF through a variety of levels of city and state government. As of May last year, they succeeded in having the entire parcel rezoned as R8 with a small lot on the east side of Kent Avenue made into an R6. The total buildable SF now stands at over 4.6M.
To put those numbers in
some kind of context, the ground area is equal to 3 full size midtown
blocks and the buildable SF is enough for 1.75 Empire State Buildings.
The CPC Katan partnership planned to fill this volume with 2200 housing
units and several hundred thousand SF of commercial and community
facility space.
So
what is it worth? How much can it make? At Cubed Advisory, we help
many clients figure out exactly that. In this case though, the analysis
goes much deeper than blog post math. One needs to balance the
potential earnings of the site against the cost of construction, which
in this case includes significant infrastructure and an enormous amount of demolition. Hazardous material
remediation is a factor as the existing structures are full of
asbestos. Lower returns from 220 low income housing units cemented into the rezoning deal can be balanced by possible tax incentives.
Possible city partnerships for waterfront development? Correct balance
of rental/condo mix? The number of variables grows very quickly.
As
potentially the first significant Brooklyn development after the condo
crash and coming in on the run up of a hot rental market- expect this
project to dictate the pace and price point of development in Brooklyn.
Provided of course that deep enough pockets can be matched to the
ambitious amount of SF to build. Labels: Community Preservation Corp, CPC, development, Domino Sugar, Katan, Williamsburg
2.3.12
Multifamily Unsticks the Stuck
683 Fourth Avenue in Brooklyn has been an empty lot and a typically stalled project since 2007. As land purchased by Issac Katan in 2005 with plans to build 16 units of condo and then hitting financial problems by 2006, the project followed a common trajectory of many condo jobs of the time. But, as the Full Story below tells us, good news is coming in the form of 'Greenwood on Fourth' developers.
Greenwood intends to take the existing plans, and build out the structure (currently a 421a approved basement) as a 16 unit multifamily.
Here at Cubed Advisory, we are always in favor of seeing stalled condos restarted and turned into productive and currently lucrative multifamily projects. With currently solid rents across the city, low vacancy and a general shortage of units on a per capita basis, multifamily is a no brainer. Our back of the napkin analysis estimates that the land, development and construction cost are valued around $8M. This number could be lower with savings realized for the extant basement and complete predevelopment work. Given the neighborhood comps, it seems unlikely that Greenwood will be able to realize their $45/SF rental target, with mid $30s being a more likely number for well done new development in the immediate area. This will provide a cap rate of almost 5% to just over 6%. Certainly beating the likely debt load and setting up the new development for long term success.
Multifamily construction > condo!
Labels: development, Greenwood on Fourth, Katan, lots, multifamily, Park Slope
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
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
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