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
9.3.12
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
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
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