Archive for June, 2011
Thursday, June 30th, 2011
Posted by Leonard Steinberg on June 30th, 2011
The Witkoff Group won in the bidding for the Toy Building, the Madison Square Park landmark once slated to be condominiums by developer Yitzhak Tessler.
Supposedly the bidding was fierce with competitive bidders S.L. Green and Macklowe losing out on the purchase of this magnificent structure that boasts spectacular frontage onto Madison Park, not to mention Eataly as its next door neighbor. (The Mathematics Museum is coming too!) Architecturally it stands in sharp contrast to its neighbor across the way, One Madison Park, the all glass tower still suffering from the pains of the recent economic meltdown that left both buildings in trouble. If the Toy Building was a ‘troubled asset’, the market has certainly recovered very nicely considering its selling price rumored to be just under $ 200 million.
This building located at 1107 Broadway is exactly what the market is calling for now: elegant, well scaled apartments in a prime, convenient location, fronting a park, in an architecturally grounded, regal pre-war structure with large windows and strong ceiling heights.
Wednesday, June 29th, 2011
Posted by Leonard Steinberg on June 29th, 2011
Some banks are being like governments right now: stupid. When banks do not want to lend to highly qualified, super-reliable, well educated, credit worthy clients, we should conclude that we have a MAJOR problem. When these same banks make everything in the application process so difficult, cumbersome, illogical and painful, they cease being real banks in my opinion.
When banks willfully hire inept appraisors that appraise property stupidly (without a detailed understanding of the market, often citing comparable sales that have little or no bearing on the property at hand) we all lose. The economy loses. The taxpayer loses. Governments lose. Job growth stalls. The process grinds. Transfer tax revenue slows. Income tax revenue slows. Home improvement and renovation stalls. The list goes on.
Another bank stupidity: Why would banks wait endlessly (in the hopes of a default that would lead to foreclosure?)and not renegotiate the rate of a loan to make the monthly payment manageable for a property owner experiencing difficulty?
When you hear about some banks reliance on excessive punitive fees to create the bulk of their profits, one cannot be surprised at their inability to create smart profits through real banking practices.
Obviously this stupidity does not apply to all banks: there are exceptions. One has to hope that banks that are acting prudently now destroy those banks that are not and rid our society of this dirty, stupid element of society.
Tuesday, June 21st, 2011
Posted by Leonard Steinberg on June 21, 2011
NY1 reported yesterday on the new automated parking garages opening up in New York, a system where a mechanized system takes your car and parks it in a compartment without the need of a parking attendant. The cars are stacked on top of one another in ‘contained areas’. The process takes under 3 minutes from drop off to your car being fully positioned and parked.
This system is not very new at all: Automated Parking Solutions installed this system very effectively at 1 York Street a few years ago, the infamous Enrique Norten designed condominium at the edge of Canal Street that recently broke a record for the sale of its penthouse for over $ 22million. The system stems from a company based on the Swiss/Italian border and is used extensively throughout Europe and the Far East. It is an extremely efficient system and cost effective too: you can park almost double the number of cars this way as opposed to the traditional way. It also minimizes the scratches and dings associated with the traditional parking garage.
This is the perfect example of how technology brings efficiencies to our world, but the human cost is obvious: with this machine the need for parking attendants is sharply reduced, again eliminating jobs just like self check out machines have done so throughout the world. These machines boost efficiencies and profits, and while they eliminate low paying jobs, they do create higher paying jobs as they require tech support. The message is clear: simple jobs requiring minimal education are being swallowed up by technologies and to truly address the jobs crisis we currently face, intense education is essential. The word is that tech-savvy staffing is the toughest to find right now. An investment in education and re-education is critical to a jobs recovery.
Another trend this system highlights is how space is being more and more efficiently utilized: Every square inch counts now, and the days of excessive, wasted space are over, especially in large cities where the cost of space is at a premium.
Monday, June 20th, 2011
Posted by Leonard Steinberg on June 20, 2011
The other day I did a showing of a rather wonderful Chelsea apartment that boasts the most extraordinary view…..the kind of view that leaves you breathless even after seeing many truly incredible views. This view located from the top of the Chelsea Stratus building at 101 West 24th Street, has to be the ultimate panorama of Manhattan, Queens, Brooklyn, New Jersey and beyond. It’s truly that good.
The prospective buyer gazed through the window and made an interesting observation. While he loved art, he said the view was like a magnificent work of art to him, constantly changing, inspiring, telling a story, invoking emotion….and he went on. I stared back out of the window and I really, really believed him. So like great art, gorgeous views often command pricing that defies basic logic or rational evaluation (certainly not the scrutiny of an appraiser). Especially if it achieves collector status. And even more so if its protected.
And rightfully so.
Saturday, June 11th, 2011
Posted by Leonard Steinberg on June 11th, 2011
New York Managing agents perform the unenviable task managing all aspects of a building’s operations and financials including staffing, repairs, maintenance, etc. The managing agent reports to the board of the building, a group of people elected by unit owners to oversee the physical and financial well-being of the building. Often these boards are to blame for the inefficiencies and quirks buildings display, yet many times I find its the managing agents who are to blame. Here are some very important roles they perform towards where I see dramatic room for improvement:
1) The processing of applications to purchase or rent. Managing agents charge large fees for this, often up to $ 1,000 per application. Assuming an application takes 3 hours to process (most take less than an hour!) that would equate to an annual salary of $ 700,000.00…… Applications should be processed within 5 days and passed onto a board for review, along with notes if any explanation is required. 5 days is more than adequate to run background and credit checks and review the documentation. In turn, boards should review these packages within one week: claiming to be ‘too busy’ is fair, but then I strongly suggest you should not run for the position of a board member.
2) The processing of applications to renovate: Again, someone in the agency should be assigned to this and fully understand the process. Again there are large application fees associated with these applications….work for these fees! If the renovation requires building architect scrutiny, pass them on immediately. Waiting for 3 weeks is simply inexcusable. Making buyers wait weeks and months for these applications to be reviewed is a thorough disgrace. Mostly the scrutiny involves a few hours work. Highly complex renovations are much easier to review by arranging a simple architects meeting: 1 hour. Not 6 weeks. ALSO: managing agents should have very clearly defined alteration agreements that clearly specify what the building’s expectations/restrictions are. No one can follow laws if they have not been written. Not everything should be so gray. And no, it should not require a 6 week process to be able to paint an apartment!
3) Financials: If you and I don’t hand in our tax returns on time, we get fined: managing agents should be fined if they do not have financials in place by a reasonable date. And the financials should be clear and organized. They should advise their Boards accordingly, preparing them to be organized. Boards should keep up with changing laws to advise boards accordingly for financial adjustments to keep buildings marketable in the eyes of banks.
4) Responsiveness: not responding to e-mails and calls is un-acceptable. Taking 5 days is pretty lousy too. 24-48 hours is really the max. Cannot do it? Take on fewer buildings or hire more staff! If a lawyer needs an appointment to scrutinize building info, respond promptly. You are there to help the process not hurt it. If something is missing in an application, notify all parties promptly…..not 3 weeks later!
5) USE TECHNOLOGY: Charging for every little item is pushing it, although it may be necessary considering the costs in operating a business in New York. So if a lawyer needs financials or an offering plan, make them available on line, and if they have to be purchased, make the process simple + easy. Technology has password protection and log-ins. Most application forms should be available on line and that way they are automatically updated. Create a ‘building questionaire’ for banks online answering all the questions all banks would ask (any weird bank requiring additional info. could always e-mail that one missing item) and update this info regularly. Charging $ 100 each time to fill out this info is somewhat absurd…..if it takes 10 minutes to do this work, that equates to a salary of $ 1,2million/year…..And maybe this time would be better spent doing the critical things buildings require.
6) COMMUNICATE! If you have changed a board application’s requirements, let owner’s know this. Help the process. It will make your life easier too. Let unit owners know where exactly their building stands at the annual meting….inform them, educate them, communicate to them the need for efficiencies.
7) VISIT YOUR BUILDINGS: Go and see for yourself what is going on at least once every two weeks. Speak to the staff. LOOK. Anticipate.
If you are under-staffed, hire more people. If you have bad staff, replace them. If your staff is angry, pay them more. Line up the best professionals for advice and guidance in specialized areas. Get rid of any resources that have proven to be difficult or inefficient.
I lived in a Fifth Avenue building recently where an elevator shaft existed behind my bedroom wall creating horrible noise: after many failed attempts to get the managing agent to address this properly, I contacted the building Board president directly. That infuriated the managing agent who then turned on me. Instead of focusing on the problem that caused me to call the president, they focused on protecting their ‘image’….did they have a ‘special arrangement’ with the elevator company and the developer of the building to protect them from being identified as incompetent or worse, corrupt? I never found out. I moved out and the apartment was sold for a lot less than its real value had the problem been properly resolved. I have seen apartments de-value when a building is known to be ‘difficult’…..often this is the Board’s fault (yes, including condominium boards!) but often it filters back to an ineffective managing agent.
Managing agents should not slow down or hamper the sale/rent/renovation process: they are paid entities and by doing so can actually de-value the properties they are supposed to be helping. So while this entire ranting post may be viewed by some as an angry broker looking out for his own needs, being a broker who also sits on 2 boards, I fully understand the value of a professional managing agent, and the damaging effects of a bad agent on the valuations of real estate.
Friday, June 10th, 2011
Posted by Leonard Steinberg on June 10, 2011
What may be good news for New York, could be bad news for Stamford Connecticut: It appears UBS will be moving a sizeable chunk of its workforce from Stamford back to Manhattan, possibly to 3 World Trade Center.
UBS says the company is considering moving its trading floor, and thousands of employees, back to Manhattan in part because it has found it more difficult to recruit talented people in their 20s to work in the suburbs. Stamford is about 35 miles out of Manhattan. For many Manhattanites who work there, an end to the 45 minute plus commute will come as a huge relief, adding about 200 hours back to their lives per year if their commute time is cut by 50% (assuming they still will have to commute from somewhere)…..that’s the equivalent of a 8 day vacation! Much more if they choose to live in Tribeca, Wall Street or Battery Park within walking distance….
UBS would maintain offices in Stamford, although they would be smaller. The number of Stamford employees had already dropped to 3,000, from 4,000 two years ago.
This move would re-emphasize trends we identified starting some time ago: people want shorter commutes as they rob them of precious time they can spend with friends, family or simply rest. Another trend we continue to see is younger people want to live in big cities: they are drawn to them, not only for employment opportunities and ‘career climbers’ but also because its easier to meet other people in a large city, and a city like New York certainly draws a diversified crowd not only from around the country, but the entire world. This trend is not exclusively confined to the young, as a vast number of empty nesters return annually to Manhattan for its excitement and cultural variety.
With Conde Nast and now UBS heading to the Wall Street area, we should expect the real estate market in the area to continue its path of gentrification. Prime beneficiaries should be larger apartments that house families used to Connecticut-sized homes and small, slick rental apartments.
Thursday, June 9th, 2011
Posted by Leonard Steinberg on June 9th, 2011
YOSI MILO GALLERY is opening a new gallery at 245 Tenth Avenue, the iconic stainless steel building hovering over the newly opened extention of the Highline Park.
I am shamelessly sharing this information as we are marketing the building, but it is always exciting when another gallery is added to what is already a prized gallery district for contemporary art….and Yossi Milo represents some of the very best artists of our time. And also lets celebrate the fact this retail space will not become another boring bank or Duane Reade! (even though it can be convenient to have one on every corner in Manhattan!) Now all retail is sold at 245 Tenth Avenue, and the condominium plan is about to be declared effective. www.yossimilo.com
Saturday, June 4th, 2011
Posted by Leonard Steinberg on June 4th, 2011
A dislocation between a few “super cities” is emerging, where international money moves markets, and national counterparts that are still closely linked to economic inertia. In to-day’s Financial Times it is reported that a separation has become marked over the past two years, with strong price growth in some major capitals belying modest gains or stagnation elsewhere within their countries. SUPER CITIES now merit comparison with each other rather than to their countries. This is particularly true when analyzing the upper ends of the property market, with buyers as happy to live in any one, and often in more than one, of the narrow sub-market of functioning city states. Manhattan is a prime example, defying the trends of the rest of the USA where this week sensationalist headlines spoke of a potential ‘double dip’ in the housing market. A school such as AVENUES, the world school is catering to this exact trend.
We are seeing a virtual global continent where billionaires move markets. The next property cycle has already started, and is seeing the emergence of a top tier of global city markets where the top addresses will become ever more fought over by wealthy buyers as stores of value and secure investments. We are seeing this in buildings such as 15 Central Park West, 40 Mercer Street, 200 Eleventh Avenue and 400 West 12th Street. Sluggish economic growth, along with the expiry of the stimulus packages designed to save western economies from recession, has slowed many housing markets in the past year – while some never really recovered from the crash in 2008. Crucially, the difference between the best and the worst markets generally comes down to a simple case of over-supply during the property boom. In Florida too great a percentage of the newly built inventory was built for pure speculation or vacation homes. A third of Spain’s housing market are vacation homes. Las Vegas’ huge speculative inventory is another example.
Tight supply constraints have met surprisingly resilient demand in international financial capitals such as Manhattan and an expanding wealthy population, which has helped accelerate this decoupling effect from national markets. All the factors sapping national housing markets – a malfunctioning mortgage market, the end of the quantitative easing programme that helped pump equity into economies, rising interest rates and unemployment – have less of an impact on prime cities where equity-rich overseas investors and domestic professional services are key. Lets face it, when HOME DEPOT fires 4 check-out employees per store during a recession and replaces them with self check-out machines, those jobs never return (2,200+ stores x 4employees = almost 9,000 jobs lost forever)….but those profits go to the bottom line that fuels the wealth of the company’s shareholders, the buyers of high end real estate. Those who lose their jobs cannot replace them and suffer, and so too does the real estate market that caters to them.
In the first quarter of 2010, according to Knight Frank, average annual price growth across these four cities stood at 54.6 per cent, but had fallen to 11.5 per cent by the first quarter of 2011. Knight Frank’s overall prime city index saw a decline in the past year because of cooling Asian prices, with the average annual price growth of 6.6 per cent across all cities in the first quarter about half what it was in the same period of the previous year. While most major cities saw growth over the year, some such as New York, Moscow and Singapore have been weaker in recent months. Transactions in Asia have slowed as speculators retreat following the Japanese crisis and rising local mortgage rates. In China, the volume of primary residential sales in most of the 10 major mainland cities fell between January and February 2011 owing to new government regulatory policies. In an effort to
curb speculation in Hong Kong, the government has launched a mortgage database that may mean that banks refuse more applications from investors. There has also been some slowdown in other, more mature, prime locations, with the risk of future tax changes in Switzerland slowing growth, for example.
The strength of Hong Kong’s market has been driven by Chinese mainland investors looking for a safe haven for their emerging wealth. Prices were higher by some 80 per cent from the low point of 2008 by the end of last year. There is also a link between Chinese wealth and London or Paris, as Asian residents look for a base in Europe, and investors look for a safe haven to invest in mature and high-performing markets. There is an “insatiable demand” from investors in Asia and the Middle East for prime property to act as a store of wealth, with London top of the list followed by Paris and New York….Manhattan is also seeing a strong demand from South America. All of this is very understandable considering the profiles of the governments of these countries.
Foreign nationals accounted for 60 per cent of all buyers in the prime central London market, according to Savills, and 70 per cent of houses valued at more than £10m in 2010. Moreover, prime housing in London has a correlation with the price of gold and equities as much as any underlying national economic outlook, as house price growth is stoked by the growth in the wealth of the world’s richest people.
It is already possible to spot the correlation between the oil prices and the value of real estate in Moscow. An increase in the price of oil by $1 per barrel triggers an increase in the price of a square metre of prime Moscow real estate by $200, according to Savills. When global demand for energy resources dropped off in 2008 and 2009, the value of properties fell by around 40 per cent from the 2007 peak. The average price of real estate in Moscow was $5,700 per sq m in the first quarter of this year – more than three times the Russian average – even if the end of the rebound has meant some price declines over the past year.
Moscow is to Russia and Manhattan is to the USA what London is to the rest of the world, given the significant influx of buyers from the rest of the country seeking real estate as an investment. However, as wealthy Russians feel even wealthier with the increase of both their business and housing interests, they are also turning to the south of France and luxe resort locations in Italy. Home owners in Monaco could do as well looking at the price of gold or oil as at the economic growth of the principality. Bicycle-riding locals in Forte Dei Marmi decry the invasion of chauffer driven Maybach’s shuttling Russian trophy wives to the local Prada store.
Compared with provincial cities, the bigger, more international cities have seen bigger rises in housing prices, especially over a five-year period. London prices rose 26 per cent, against a national average of 6 per cent; Hong Kong by 95 per cent, against a Chinese market growth of 59 per cent, and a flat market in New York against a 26 per cent decline around the rest of the US. Some buildings in Manhattan have seen distinct pricing escalations in the past 2 years, and even in the past month some pricing records have been broken.
There is a widening divergence between key cities and their domestic markets based on this supply and demand imbalance. This is particularly true of prime property in Paris, London, Manhattan, Zurich, Geneva, Hong Kong and Helsinki. The top end of these markets appeal to global buyers as much as to domestic wealth, which means that their prices are capped not by national factors but by global trends. Those markets do not necessarily move as one but are aligned on a similar curve.
Nationality does play a part when it comes to currency, particularly where people are buying properties more as investments than as places to live. Pricing in London has been boosted by an additional currency advantage, given the value of sterling – something that has held back the Manhattan and wider US prime market. Overseas buyers account for only 15 per cent of the prime market in Manhattan, for example, and this is in part why it has not seen the same sort of growth as in the UK, yet the influx of the international super-wealthy seems to be growing.
Wealthy cities are not immune to the global economy and there are risks from any economic shock and fall in stock markets or commodities. There have been some falls already as houses have come off their rebound highs and reacted to localised events such as the earthquake in Japan. The financial troubles in Greece, Portugal and Spain weigh heavily on European centers.
The decoupling effect appears to be true as long as the upper levels of the international wealthy remain so. Even cash-rich investors like to use debt where possible, and the mortgage constraints and interest rate rises remain a broad impediment to housing growth. There are specific dangers in the sovereign debt in the west as well as the potential for deflation following a housing bubble in the east.
All these factors have subdued growth, rather than reversed it, and fundamentally strong demand will continue to lift prices. It is predicted that the $15,000 per sq ft barrier will be breached at some point this decade, having reached $9,000 per sq ft last year in London and Hong Kong. Manhattan’s record is closer to $ 7,000/sf, although that is an unusual number, the average being much lower. This bodes well for Manhattan where the highest end of real estate could be viewed globally as a ‘good buy’. The “virtual continent” of the wealthy is unlikely to falter too much: The creation of wealth in emerging markets over the next decade will ensure that they grow – regardless of domestic market conditions.
Manhattan is getting ready to launch some super-luxe buildings over the next few months catering specifically to this market including The Drake building on Park Avenue, One 57, the Extell building on West 57th Street, and 150 Charles in Greenwich Village. The performance of these buildings will be the next test for a market that has a short supply of full service ultra-luxe exclusive buildings.
Thursday, June 2nd, 2011
Posted by Leonard Steinberg on June 2nd, 2011
The penthouse at 2 Horatio just went to contract for over $ 4,000/sf: Granted it was gut renovated, has spectacular views and significant outdoor space, but 2 Horatio is not exactly considered a trophy building. It is a co-op with lovely apartments, although most are rather ordinary. Across the park (Jackson Square) the penthouse at One Jackson Square sold for significantly less at just under $ 3,000/sf, even though its a brand new condominium with a swimming pool. Around the corner, Jennifer Anniston just bought three apartments including a penthouse on West 12th Street for just under $ 9 million total…they are to be combined and require a complex renovation so at the end of the day, the price will probably be around $ 4,000/sf too. These three apartment sales clearly indicate the strength of West Village pricing in New York…..an area becoming known as RECESSION PROOF.
Its also the area where the young (or young-at-heart) wealthy want to live now. The fact that prices of this caliber are being achieved in OK buildings certainly screams for a new building that delivers more than just great apartments, but also services and amenities to rival uptown buildings such as 15 Central park West.
With the down-zoning of the entire area, views will always sell for a premium in this part of town known for its amazing year-round light and charming tree-lined streets, not to mention its proximity to the Hudson River Park, the Highline Park, Meatpacking District boutiques and nightlife, the new Whitney Museum coming to 12th Street…..and the list goes on. West Greenwich Village rules! (Yes, anything West is pretty good these days, and only getting better.)
Thursday, June 2nd, 2011
Things have certainly heated up in more ways than one: As we finalized this month’s LUXURYLETTER, we were struck at how our editorial coincided with all the dreadful housing news that hit the media. It’s important to remind ourselves that the data collected is a reflection of closed transactions, most of which were negotiated many weeks or possibly months ago. That is not necessarily a reflection of what is happening right now, although it is not to be ignored.
Our major message in this month’s letter is to some Sellers unrealistic, artificially elevated pricing expectations. We are in a very fortunate market in Manhattan, that has largely avoided the worst of the housing crisis. Being too greedy now at a rare moment with very low inventory AND low interest rates may prove to be unwise. Yes, the selling brokers role is always to maximize pricing, but attempting to maximize beyond reality is quite simply….unrealistic. It’s also especially important to understand how localized each market truly is: the biggest dis-service these sweeping headlines deliver is in their generality: Averaging the entire country is simply bad economics AND bad reporting….but it sells newspapers and boosts ratings. Not once during the depths of the recession was any mention made of the few areas that were barely affected by the market’s trauma. No-one should expect boom-times when gas prices, commodity and food prices are soaring: then again, lets remind ourselves that there are always people who know how to make lots of money out of these (or any) times…..and these are the buyers of A-grade real estate.
Find below this month’s letter links: