Crains

CRAIN'S: Manhattan landlords race to fill apartments in declining market

Apartment rents are dropping in Manhattan. So is the patience of landlords.

Units that found tenants in February spent an average of just 34 days on the market—the shortest stretch since October 2011—as owners cut rents, offered incentives and did whatever else they could to fill vacancies, according to a report Thursday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate.

“Landlords, they’re not playing around,” Jonathan Miller, president of Miller Samuel, said in an interview. “They’re being more aggressive in terms of time. They just want to get them in.”

Rents fell from a year earlier for the third consecutive month in February as landlords competed for tenants in a market that’s overflowing with choices. Owners cut an average of 2.4% off their asking prices, then sweetened deals with incentives, such as rent-free months, on 48% of new leases, Miller Samuel and Elliman said. The median rent, with concessions subtracted, dropped 2.8% from a year earlier, to $3,168.

Concessions are getting more creative. Publicly traded landlord Equity Residential is reducing security deposits to $1,000, instead of the usual full month’s rent, for tenants who sign leases at most of its Manhattan towers by the end of March. Signers at Stuyvesant Town–Peter Cooper Village, the borough’s biggest apartment complex, will get a year of free Wi-Fi and cable.

At one Upper East Side property, a letter from owner Hakim Organization was slipped under residents’ doors, offering half a month of free rent if they help find occupants for vacant units by April 1.

“If you have a friend or relative looking for an apartment, we are willing to rent to them through you,” read the letter, signed by Ely Samuels. He didn’t return calls for comment.

Landlords seeking the advice of brokerage Citi Habitats have been calling regularly to ask, “What else can I do?” said Gary Malin, the firm’s president, who tells them that ingenuity helps. That’s translated into some owners lifting restrictions on pets and others offering to pay a portion of a new tenant’s moving costs, he said.

“A lot of owners take the wait-and-see approach, but unfortunately, the market has changed and the sentiment of tenants has changed,” Malin said. “Landlords realized that what they were doing wasn’t getting the right results.”

About 5,630 newly built apartments will be listed for rent in Manhattan this year, according to data compiled by Citi Habitats. That’s on top of the 4,270 units that reached the market in 2017.

Book a Room At The Waldorf Astoria Soon, Final Checkout Will Be March 1

Want to book a room at the Waldorf Astoria New York next year? Plan that trip early in the year, the hotel's owner will not accept reservations beyond Feb. 28 and final checkout will be March 1—suggesting its owner will begin converting about 1,000 rooms to luxury condos shortly thereafter.

The blackout dates were shown on a booking website run by Hilton Worldwide Holdings, which operates numerous Waldorf Astoria hotels around the world. A spokesman for the property confirmed the reservation cutoff and that the landmarked building would close next spring, but would not elaborate on the residential conversion nor disclose plans to upgrade whatever hotel operation is left intact.

"We have not finalized any plans in terms of the scope, nature and details of the renovation project or the exact timing and duration of the hotel's closure," the spokesman said. "We are currently developing conceptual plans and will share additional details once those plans are finalized."

China-based Anbang purchased the Waldorf Astoria, located at 301 Park Ave., for $1.95 billion in late 2014 with vague plans to renovate it. Two months ago, Crain's reported that the insurer's strategy entailed converting roughly 1,000 of the hotel's 1,413 rooms to luxury condos.

Miami Takes The Reigns From New York As America's Rudest City

New Yorkers aren't the angriest urbanites in America anymore.

Miami has taken over as the rudest city in America in a survey conducted by Travel + Leisure, Time Inc.’ s travel magazine.

New York fell to the No. 3 spot. It may have shed its frosty image due to a mild winter that kept locals more cheerful toward tourists, Travel + Leisure reasoned.  

Miami-based travel blogger, Christine Austin, said Miami may have reached its breaking point this winter when tourists crowded beaches and streets. “It feels like you're being stretched to the seams," said Austin. "It’s a lot to handle in a short period of time, and for people who live here, just going to the grocery store is frustrating [because of the traffic].” 

New York City has experienced a steady increase in tourism for more than a decade, with a record 58.3 million visitors last year. While New Yorkers often curse at the crowds concentrated in Times Square, most neighborhoods are not overburdened by outsiders. 

According to Austin, the other factor working against Miami could be how tourists perceive the city.

“People may feel that the locals are always happy, laid-back and relaxed, because they perceive Miami as a fun, beachy, relaxing place to vacation," Austin said. "They are disappointed, [when they realize] we're out there trying to buy groceries and go to work like any regular Joe.”

Inside The Underground Economy Propping Up New York City's Food Carts

When Sharif leaves his home in Flushing, Queens, it’s too early to say goodbye to his wife and three kids. Long before sunrise, he drives 15 minutes to a cold, brightly lit garage in Long Island City that smells of spent fuel, cleaning fluid and food that’s about to turn.

There, Sharif, an Afghan native in his mid-40s, stocks the front window of his food cart with muffins and bagels from a wholesale bakery in Queens, sold to him at a markup by the garage’s owners. Like the five dozen food-cart vendors busy alongside him, Sharif has brought his own perishables; for most, it’s the seasoned chicken, rice and vegetables that will become halal dishes by lunchtime. Western Beef and two Costco stores— favorites for bulk provisioning—are a short drive away.

Sharif double-checks the propane tanks and grill, hangs his food-seller’s permit around his neck, hitches the rig to his car and heads for the Queens-Midtown Tunnel. (To protect cart owners and vendors from being prosecuted for illegally renting out or selling permits, Crain’shas declined to identify them by their full names or exact locations.)

An hour later, on a corner in midtown, Sharif has already sold the first of the day’s 125 coffees. At 6 a.m., he’s joined by Zamir, a younger Afghan immigrant. For the next few hours, with Zamir standing over the hot griddle, they sell egg-and-cheese sandwiches to a steady stream of regulars and early rising out-of-towners.

Though Sharif owns his food cart, a portion of his earnings is sent to “a guy in New Jersey”—likely "Mr. Q"

Sharif has been working on the same corner for 17 years. “It’s hard work, six, seven days a week,” he said, “but I have bills to pay. I have a family.”

Working nine hours a day, food-cart vendors like Zamir take home as little as $400 to $500 for a six-day week. Many are new immigrants hoping to start new lives. During a brief lull in lunch service, Zamir, 22, told me he served as a translator for U.S. troops in Afghanistan before he was wounded and then awarded a visa to settle here. A generation ago, after a few years of hard work and saving, Zamir could have become his own boss. Sidewalk vending was long an option for immigrants eager to improve their lives.

That’s no longer the case. Today’s mobile food vending business is one of day laborers and shift workers who, despite hustling all week long, may not earn minimum wage.

Even for bosses like Sharif, financial autonomy is not guaranteed. Though Sharif owns the actual food cart—“I built it three years ago,” he said—a portion of his earnings is sent to “a guy in New Jersey.”

According to records obtained by Crain’s through a Freedom of Information Law request, that guy is in all likelihood “Mr. Q.” While Sharif owns the food cart and his own vendor’s license, it’s Mr. Q who controls the mobile food vending permit—a tiny piece of adhesive plastic that makes this cart more than just a griddle on wheels. Without it, Sharif has no business.

On a nearby block, it’s a similar story. In a smaller cart equipped to sell just coffee and baked goods, another Afghan, a 54-year-old man who asked to be identified only as Steve, has been fighting for market share with Starbucks, Dunkin’ Donuts and their predecessors for 27 years. He supports a wife and five children on the $600 to $700 he earns every week—about $35,000 a year.

At least, like Sharif, Steve is the boss—almost.

“I own 35% of the cart,” Steve said proudly. “When I started 20 years ago, they paid me a salary.” It was unclear if Steve bought or earned a share in the cart; it was also unclear who “they” are. Like most of the vendors interviewed for this article, Steve wasn’t keen to elaborate on his business.

One thing is certain: The name on the permit is not his. Either like Sharif, Steve leases his permit from the legitimate owner—for upward of $10,000 a year—or that’s why he’s ceded nearly two-thirds of his business to silent partners.

The city’s administrative code is clear that permits can’t be sold or transferred. Section 17-314.1 (b) of the code reads: “No vehicle or pushcart used to vend food in a public place shall be assignable or transferable with a license, permit or plate that has been issued under this subchapter attached thereto.”

Sharif and Steve are just two of the thousands of unwitting lawbreakers in a black market for cart permits that operates in plain sight of the city’s enforcement agencies. That black market is worth an estimated $15 million to $20 milliona year, costing the city millions of dollars in potential fees while making it harder for immigrant entrepreneurs to build equity and take the first step up the economic ladder.

Historian Mark Kurlansky writes that in the 19th century, food carts peddled fresh oysters for 6 cents apiece. When the oyster beds died off and new waves of immigrants arrived, offerings diversified; it wasn’t uncommon to find corn, pickles and sausages for sale on city sidewalks. In 1890, Jacob Riis wrote, “There is scarcely anything else that can be hawked from a wagon that is not to be found, and at ridiculously low prices.”

It was these “ridiculously low prices” that drove the first wedge between mobile food-sellers and restaurateurs. The latter, burdened by rent, insurance, payroll, equipment and other overhead, struggled to compete with 6-cent oysters and their successors.

The relationship between vendors and retailers hardly improved over the next century. Embarrassed by the lower-class food carts, Mayor Fiorello La Guardia decreed that sellers had to stand behind their carts, and eventually formed a network of covered markets to get the peddlers off the sidewalks.

Four decades and six mayors later, Ed Koch inherited this mess. The irascible Koch had little sympathy for the vendors. Of midtown’s crowded sidewalks, the mayor told The New York Times, “This is not supposed to look like a souk.”

Under pressure from brick-and-mortar retailers, in 1981 Koch set a limit of 3,000 citywide permits for mobile food carts and trucks. The mayor’s move turned pushcarts into the new taxis, whose medallions—not the cars themselves—are the valuable asset.

For $50, just about anyone can get a license to sell food on a city sidewalk. The application process is cumbersome, but as bureaucratic chores go, it sits somewhere between the drudgery of renewing a driver’s license and the complexity of filling out a tax return.

The problems come with registering the food carts themselves, and with the plastic inspection sticker known as the mobile food vending permit, or MFVP, for which the Department of Health and Mental Hygiene charges $200, and which is usually valid for two years. But many permit holders, having put in their time slinging souvlakis and moved on to more lucrative businesses, such as driving a cab, keep renewing their permits and renting them out, often with the cart attached, on a lucrative black market.

Illicitly renting a two-year permit from its legitimate holder can cost as much as $20,000 for a cart that serves hot food and can bring in far more revenue than a simple coffee-and-doughnut cart, or as much as $30,000 for a food truck—a fully mobile kitchen. Because they’re so valuable but not legally transferable, these permits never officially change hands. Instead, brokers help permit seekers find permit holders who no longer want to man a cart. The vendor who needs a permit—and a cart—might pay a flat fee every two years, upon renewal, or work out a profit-sharing arrangement.

LIST PRICE: The city charges $200 for a two-year city-wide mobile-vendor’s permit
PAY TO PLAY: Expect to pay $20,000—or more—to rent a permit from a licensed holder
LOTTA DOGS: 3,000 mobile food vendor permits have been issued by the health department 

In this manner, an estimated 70% to 80% of permits are illegally in use by someone other than the permit holder. Some have been legally owned by the same person for two decades, even if he or she hasn’t touched a shawarma since the administration of Mayor Rudolph Giuliani. (The health department, which distributes the permits, couldn’t produce back records of permit ownership.)

At the center of this underground economy sits a loose network of garages known as licensed commissaries where, by law, every food cart must be cleaned and stored each night. While these garages serve as a meeting point for the food cart world, there is a decentralized network of owners, brokers and would-be vendors that has evaded the haphazard efforts of law enforcement.

On a cold, rainy morning earlier this year, I visited nearly a dozen of these garages to figure out how, exactly, this illicit system operates.

In Manhattan, the commissaries are clustered in Hell’s Kitchen. Most are no wider than a single-car garage, deep as a typical railroad apartment, and hidden in plain sight behind hanging strips of thick clear plastic. Often, a broken food cart sits along a back wall, awaiting repairs.

The licensed commissaries are largely modest operations, garages that store and service just 10 to 15 carts whose operators pay upward of $600 per month. The commissary owners often require vendors to buy their provisions from the garage. Commissary owners make most of their money from a 5% to 10% markup on supplies.

Manhattan’s largest commissary doesn’t even store or clean food carts. From their headquarters on West 37th Street, Tom and George Makkos have run M&T Pretzel for more than three decades. Born in Athens, the Makkos brothers immigrated to New York in their teens with their parents; like many Greek immigrants of the time, their father supported his family with a food cart.

After college, Tom and George returned to the family business. Seeing opportunity in Koch’s permit cap, they amassed a fleet of food carts—and, crucially, the permits that made them legal. It’s not known exactly how many permits the Makkoses held at their peak, but a current employee (who insisted on anonymity) told Crain’s it was “thousands.”

By 1995, the brothers, dubbed the Hot Dog Kings by The New York Times, were in a position to pay the city a $288,200 franchise fee for the right to vend for one year from a single hot dog cart in front of the Metropolitan Museum of Art. That same year, they paid $480,400 for the rights to Central Park’s 60 concessions, making them the Parks Department’s second-largest revenue driver, after Tavern on the Green.

Soon enough, the high-flying Makkos brothers—and at least one other mini-empire of hot dog carts—attracted the unwanted attention of Mayor Giuliani. In February 1995, the City Council passed a law limiting mobile food vending permits to one per person or company, effective Jan. 1, 1996. The idea was to once again make the food-cart business a path for aspiring entrepreneurs. With the end nigh, the Makkoses diversified (Tom is a longtime co-owner of the upscale Italian restaurant Nello), relinquishing the pushcarts as their permits expired and becoming suppliers instead.

Twenty years later, by all appearances, M&T Pretzel is nothing but a wholesaling business, and has nothing to do with amassing—or renting—food cart permits. Along the back wall of the large, well-lit space, a row of humming commercial refrigerators holds enough hot dogs to feed a stadium. Stacks of soft drinks fill more of the remaining floor space.

The Makkoses still appreciate the power of a monopoly. Said one older man at a nearby garage, “If you buy a bottle of Poland Spring in the city, you go through them. Period.”

That’s barely exaggeration: The lot next to M&T is filled with shrink-wrapped pallets of beverages—many with the familiar Poland Spring logo, stacked two-high and packed Tetris-tight by two busy men on forklifts.

Tom Makkos—charming, funny, recreationally vulgar and good with a handshake—declined to speak on the record with Crain’s when I met him that morning. Reached by phone several weeks later, he told me he’s no longer involved in the retail end of the business.

“I do not own any permits,” he said. “I don’t own any carts. I have nothing to do with that.”

Just one block away, I met Hell’s Kitchen’s other commissary king, Zizo—“No last name, please”—who came to the U.S. from Egypt in the early ’80s. He’s been in food carts ever since, clawing his way up from vendor to garage owner. Today he has the second-largest commissary in Manhattan.

Like M&T Pretzel, Zizo’s garage (whose trade name was never made clear, and defied research efforts) is also enormous by industry standards. I found Zizo sitting at a cluttered desk in the back. He looks to be in his 50s, fit and solid in that manner of men who don’t actually sit for a living, and he was eager to talk about how the business has changed over the years.

Not that food vending was ever easy, he made clear, but it’s harder than ever. When he arrived, “everybody got a permit,” he said. “Everybody could work.” The barrier to entry was low enough to encourage entrepreneurship. In the 1980s, Zizo said, a classic hot dog pushcart cost $3,000 to $4,000 to buy; today’s carts, equipped to prepare halal lunches with griddles and coolers, can easily run $35,000.

When asked about permits, Zizo sighed, stood up and pointed to my notebook. “The price of permit going up, up, up,” he said, jabbing his finger to make sure I got his point. Today, he said, a permit costs $20,000 for a two-year black-market rental. He expects that number to rise to $22,000 next year.

New rules by the city have only made it more expensive to rent a permit illicitly. In 2015, the health department began requiring permit holders to show up in person to contest tickets for violating the myriad rules of where and when carts can operate. (Previously, the licensed food seller was held responsible.) To account for this greater risk, owners are pricing permits higher still. Some even require a security deposit in addition to the biennial fee.

“Where are these permits changing hands?” I asked.

“Go to Astoria,” Zizo said. “That’s where the brokers are.”

When Giuliani instituted the one-person, one-permit rule in 1996, the food cart business was dominated by Greeks. “Then,” Zizo said, “the Egyptians took over. Now it’s Bangladeshis and Iranians and Turks.” Astoria has been home to all these groups, and that’s why Zizo sent me to Queens to find the permit brokers.

On a late Saturday afternoon in March, working with just a few cross streets and first names, I went looking for “Dmitri” and “Effie,” both said to handle certain tasks on behalf of food vendors.

 

Photo: Buck Ennis

THE FIXER: Effie Tsatsaronis fixes tickets, legally, for vendors from this Astoria storefront. She was once arrested for selling permits.

I wasn’t optimistic—one can’t swing a souvlaki in Astoria without hitting a Dmitri—but an hour of cold-calling in local storefronts turned up a different lead. In the window of a tiny, unkempt real estate office under the elevated N and Q subway line, I found a flier. “FOOD VENDOR CART with 2 Year Citywide Permit + Spot [in] Very Busy Area in Queens,” it said. The photo showed a typical halal cart, ready for business.

According to an older man inside the storefront, “some Indian guy” had asked him to put up the sign; he himself was not involved, he said. He did, however, know a Dmitri (or “Jimmy,” in its Anglicized form) who was involved with food carts. Like Zizo, he offered me cross streets and a polite dismissal.

On the way to find Dmitri, I called the number on the flier. A man who gave his name as Mr. Singh picked up and, in a very thick Indian accent, explained that he was selling his truck. It’s in Jamaica, near the subway, and it “includes everything,” he said.

“The permit is included?” I asked.

“Yes, all five boroughs,” Mr. Singh said. “I have a new job. I am selling everything.”

“How much do you want?”

“No, no, please, come out, see the truck. We’ll talk price.” Street vendors often refer to the larger carts as trucks.

Eventually, I got an asking price of between $20,000 and $30,000, and I would be buying the truck and the permit from him directly. Mr. Singh refused to say more unless I met him.

“Buying” Mr. Singh’s permit would be illegal—and, as a practical matter, impossible—as permits are not transferable on the city’s ledger. I doubt that’s what Mr. Singh actually meant. More likely, Mr. Singh would sell me his cart with the permit attached; together, we would go to the inspection center in Maspeth, and he would sign the renewal papers. I wouldn’t see Mr. Singh again for two years, in time to renew the permit that would again bear his name.

On a nearby corner, I bought a $3 souvlaki from a man in his late 30s named Ioannis. I tipped him a few bucks and asked about Dmitri and Effie, about food carts, about getting a permit. He shot me the suspicious side-eye I had come to know.

“Effie, I don’t work with her. Dmitri? This is Dmitri,” he said, pointing to a young Greek guy sitting on a folding chair. It was not the right Dmitri. I thanked him and turned away, but Ioannis grabbed my arm lightly and asked, “You want a cart? I have a cart.”

He whipped out his iPhone and pulled up photos of a classic pushcart, perfect for selling $2 hot dogs.

“How much?” I asked.

“No, I don’t sell it,” he said. “We work together. You pay me every month.”

“How much? A thousand dollars a month?”

“No, no,” he said, “we talk price later. You come see the cart. It has the sticker.”

I pressed—$800? Finally, he relented. “The permit costs $18,000,” he said.

While the real Dmitri proved elusive, Effie revealed herself without much effort. She runs a clearly marked business called Effie’s Food Vendors out of a modest storefront on a quiet residential street in Astoria.

Every weekday from 6 p.m. to 9 p.m. and Saturdays from 10 a.m. to 1 p.m., Ifigenia “Effie” Tsatsaronis serves as an expediter, helping food vendors navigate the tangle of bureaucracy that defines their business.“We renew people’s licenses,” she told me from behind the single desk that dominates her modest office.

“We get them a license for the first time, we renew their permits, we adjudicate their violations, we do their sales taxes.”

Tsatsaronis charges $15 to contest a ticket, $50 to help get a new operator’s license and, curiously, $90 to renew that license. For vendors earning subsistence wages, it’s more cost-effective to hire Effie than to waste days hauling paperwork around town.

Years ago, Tsatsaronis was also known to broker deals between permit holders and buyers. In 2009, along with five others, she was arrested in a sting by the city’s Department of Investigation and charged with criminal possession of a forged instrument in the second degree and falsifying business records in the second degree. The charges were dismissed and the records sealed.

Tsatsaronis is refreshingly frank about her arrest. “There is an industry, and there are things happening everywhere. We happened to be the subject of the raid, so we paid for everybody’s sins at the time. We were the only ones who had to pay the consequences.”

Tsatsaronis said the system is not broken—perhaps because she’s built a cottage industry on its inefficiencies. “The city has a point in saying, Okay, you have a permit that is your property for as long as you use it.” But if a vendor no longer wants to stand all day in a cart, she said, the permit should revert to the city. “Then more people get a chance for the $200 fee every two years, like it should be,” she added.

 

Photo: Buck Ennis

EVERYONE COMES TO ZIZO'S: Each night, food carts park and restock at this Hell’s Kitchen garage.

In my months reporting on this story, I got no sense of there being a criminal mastermind or an evil overlord running this black market. By and large, this trade is done face-to-face, through texts, and on Craigslist. Rightly or wrongly, most permit sellers are just taking advantage of a system that happens to be broken in their favor.

Sean Basinski, founder and director of the Urban Justice Center’s Street Vendor Project, agreed. “It doesn’t make it any better,” he said of the permit owners, “but it’s former vendors who are not rich people—because why would they have been vending in the first place? Now they’re doing a little bit better. Maybe they’re driving a taxi.”

Indeed, Mr. Singh said he has a new job, which he wouldn’t name; Ioannis has graduated to a larger truck. But they’re holding on to their permits. “It’s $20,000 every two years,” Basinski said. “It’s almost like a retirement fund, like a pension.”

Why doesn’t the city lift the cap on permits? Or, at least, relax the limit and charge more than just $200, putting money in the city’s coffers?

For one, the city’s business improvement districts, or BIDS, staunchly oppose any legislation that would increase the ranks of mobile vendors. They see sidewalks clogged with cheap meals. They see carpetbaggers occupying valuable real estate. They see ugliness, visual clutter, noise and fumes from diesel generators, unfair competition, litter and lines of customers blocking access to their own storefronts.

Basinski says vendors do not compete with local businesses. “The removal of vendors has led to a loss of foot traffic that harms brick-and-mortar small businesses,” he has written.

Andrew Rigie, executive director of the New York City Hospitality Alliance, which advocates for the city’s restaurants, bars and hotels, agrees. “Most brick-and-mortar business owners aren’t anti-vending,” he said. Rigie’s organization wants a new permit program, though he can’t say how it would work. “There are a lot of honest people who want to comply with the law who might be eligible for a permit under a different system,” he said. “But until the various stakeholders come to the table, it’s difficult to say what a new system would look like.”

The City Council has spent more than a year looking for a compromise everyone can support, or at least can tolerate, and is no closer to a solution.

Finally, there’s the issue of bureaucratic appetite. Officially, city agencies are concerned. “The health department has taken significant steps to increase enforcement and reduce the illegal transfer of mobile food vending permits,” said a spokes-person for the Department of Health and Mental Hygiene. “This has increased compliance and reduced permits being illegally transferred or sold.”

In fact, fewer than 70 permits have been removed, suspended or placed on probation since 2014, and the health department failed to provide any proof of “increased compliance.” On the street, there doesn’t seem to be any slowdown in permits changing hands.

The Department of Investigation has been running occasional stings to tamp down the black market, but appears to have little interest in making arrests. In 2014, for instance, the department confirmed that permits were being sold on Craigslist and referred those findings to the health department. The police are tasked with ticketing vendors.

The black market preys upon working-class immigrants, discourages entrepreneurship and has done nothing to foster financial security. The vendors who started under Giuliani are now well into middle age, and most have little to show for their decades of hard work.

“What else am I going to do,” asked Steve, the 54-year old who has sold coffee and pastries in midtown for 27 years. “Who’s going to hire me? I’m not an electrician.”

With a resigned grin loaded with gallows humor, he noted, “Who knows what will happen? A few weeks ago, I know one guy who dropped dead in his cart.”

With that, he shrugged, snapped a plastic lid on my coffee and turned back to his line of customers, $1.50 richer by my hand—but still a long way from being able to retire.

Sony Building Sold to Saudi Group, Will Remain an Office Tower

A subsidiary of Saudi investment conglomerate Olayan Group has acquired the Sony Building for $1.4 billion to $1.5 billion. The Real Deal first reported the transaction Monday. Olayan American, along with Chelsfield Group, a London-based property investment company, bought the 850,000-square-foot office tower at 550 Madison Ave. from Chetrit Group and Clipper Equity. Chelsfield will have a minority stake in the property.

Chetrit and Clipper, which bought the Sony Building for $1.1 billion in 2013, planned to convert the officer tower into luxury condos and a hotel. They expected to sell units for $4,000 a square foot. That plan has been abandoned by the new owners, who will maintain the Sony Building as a commercial space.

The electronics giant has closed its retail store at the base of the midtown building and will reopen it at its new headquarters farther south at 11 Madison Ave.

Another sign the luxury condo market is cooling

The median price reached $1.1 million, up 17% from the same time a year earlier, but that figure is inflated

The median price reached $1.1 million, up 17% from the same time a year earlier, but that figure is inflated

The overall market for Manhattan homes remained strong during the first quarter of this year despite the luxury segment cooling off, according to a number of reports released Friday.

However, the $1.1 million median price reported by Douglas Elliman Real Estate—up 17% from the same time a year earlier and the second-highest on record—was artificially inflated by a slew of new development contracts closing during the first three months of the year. Those deals, which also pushed the average price to new heights, were likely inked more than 12 months earlier.

"I think of the market as three broad areas all performing in different ways," said Jonathan Miller, whose appraisal firm, Miller Samuel, prepared the report for Douglas Elliman. "And the further down in price you go, the more intense the demand is."

The luxury portion of the market, which Miller considers the top 10% of all sales based on price, has slowed by many accounts. Despite a number of new projects coming online in the past year, the number of sales increased by a mere 8%, while the number of units on the market fell as developers of new buildings opted to keep homes off the market.

The trend was even starker for apartments in newly constructed buildings, many of which also fall into the luxury category. Even though developers built an estimated 5,500 units in 2015, there were fewer units being marketed in the first quarter of 2016 compared to a year ago. That decline in active listings, which fell by 44%, was largely due to sellers keeping new units off of the market in response to the sluggish pace of contract signings in recent quarters, according to Miller.

The median price for new developments jumped by more than 60% compared to a year earlier, but this was more of a reflection of the market at the time the contracts were signed during headier days in late 2014 and early 2015. Now it's a different story. 

"I think on the higher end, buyers are balking a bit on the pricing and looking for deals," said Pamela Liebman, chief executive of the Corcoran Group, which also released a report Friday. "Prices have been going up for so many quarters in a row it is not unusual for them to take a breath."

But the opposite was true in the resale market, which makes up more than three-quarters of all transactions in New York City. There, buyers quickly snapped up lower priced units. In fact, the largest share of sales during the first quarter were for homes priced between $500,000 and $1 million, according to Corcoran.

And inventory increased by double digits as more owners opted to cash in on what the Douglas Elliman report showed was steady price growth: The median price for resales reached $950,000 at the end of the first quarter, a 7.3% increase compared to a year before.  

Going forward, real estate experts believe the lower-end and resale markets will remain strong. But developers at the high end of the market need to be willing to price their apartments appropriately in order to move units. 

"The real sellers have made adjustments to what was unrealistic pricing," said Andrew Heiberger, chief executive at brokerage firm Town Residential, who said that more developers will likely begin following suit for homes that have sat on the market.

Industry heavyweights gearing up for $3B Penn Station redevelopment

A $3 billion plan to renovate Penn Station has attracted some of the city's biggest developers.

Several large real estate landlords and builders—including Boston Properties, Brookfield, Related Cos., Silverstein Properties, Tishman Speyer and Vornado Realty Trust, attended a tour of the transit hub on Feb. 25—according to a document provided by the Empire State Development Corp.

The state agency is overseeing a request for proposals to solicit a developer to improve the station with new retail, upgraded interior spaces and better entrances, including a plan to potentially relocate the Theater at Madison Square Garden and create a large glass opening to the station along Eighth Avenue.

Developers were also invited to bid on transforming the Farley Post Office Building, west of the Moynihan Station, would also accommodate retail stores and potentially also office and hotel space.

Other notable developers, including Madison Capital and JDS Development, the builder of what will be the tallest residential tower in Brooklyn, also participated in the site tour. It's not clear which firms will submit bids, but sources said that most are likely to participate.

Potential lenders who may help finance the megaproject were also present. Among them were Bank of China, Barclays and Macquarie Capital. Architecture and construction firms, including Tishman Construction, Skanska, FX Fowle, Gensler, SOM, Tutor Perini and Thornton Tomasetti, were also present.

Bids for the project, which would be paid for by private developers in return for revenue from the new retail and commercial space, are due April 22.

Gov. Andrew Cuomo unveiled the plan to remake Penn Station at the beginning of the year as part of a bold slate of infrastructure projects. Under the latest plan, a redeveloped Penn Station and Farley Buidling would be known as the Empire Station Complex. A decade ago, the state selected developers Vornado and Related to jointly convert the Farley Building into Moynihan Station. The developers eventually expanded that plan to include relocating Madison Square Garden from atop Penn Station to the western annex of the Farley Building and gut-renovating the station. That plan fell apart during the recession. In recent years, a more modest $300 million plan was undertaken to install entrances in the Farley Building connecting to Penn Station's tracks.

Plaza Hotel foreclosure auction canceled after lenders grant extension

Next month’s auction for the Plaza Hotel in Manhattan was canceled after the holders of the mortgage reached a deal to give the borrowers more time to sell the property and pay back the loan, said a person with knowledge of the matter.

The hotel’s ownership has been in limbo for two years. Billionaire brothers David and Simon Reuben hold the mortgage on the five-star hotel and had scheduled a foreclosure auction for April 26, according to the person, who asked not to be named because the deal is private. The Reubens bought the loan from Bank of China Ltd. after a default by the property’s current majority owner, Sahara India Pariwar, last year. Sahara is controlled by Subrata Roy, who was imprisoned in India in early 2014 for defrauding investors.

A spokesman for the Reuben brothers didn’t immediately respond to an e-mailed request for comment.

The chateau-like Plaza, located at the corner of Fifth Avenue and Central Park South, has changed owners many times over its 109-year history. Presidential candidate Donald Trump bought the Plaza in 1988 and married his second wife, Marla Maples, there. Trump sold it to a group including Prince Alwaleed bin-Talal of Saudi Arabia, who then sold it to Israel’s Elad Group, which converted some of the hotel rooms to condominiums. Bin-Talal retains a minority stake in the Plaza, as does an entity tied to hotelier Sant Singh Chatwal.

For sale were the Plaza’s hotel rooms, its restaurants and retail space, according to the person with knowledge of the matter. It was to be sold in a package with the Dream Downtown hotel, a trendy property in Manhattan’s Chelsea neighborhood that is located one block from the elevated High Line park, the person said.

The two hotels serve as collateral for the Bank of China loan and are cross-collateralized with the Grosvenor House hotel in London. The Dream hotel is owned by Sahara’s Roy and Chatwal. The combined mortgages for the New York properties total about $500 million, the person with knowledge of the matter said.

First Look at Rafael Viñoly's Boxy Chelsea Office Building - Development Update-o-Rama - Curbed NY

A recent Crain's article about the trend of "boutique office properties" offers one particularly interesting tidbit for the architecture-obsessed: the first rendering of Rafael Viñoly's latest NYC commission, an office building at 61 Ninth Avenue.

Viñoly's building will replace the nearly century-old Prince Lumber, a holdover from the Meatpacking District and Chelsea's industrial days. The new structure will stand nine stories, with 115,000 square feet of office space and 37,000 square feet devoted to retail. Though it's shorter and squatter than the Uruguayan architect's best-known NYC project, 432 Park Avenue, it has some of the same boxiness that defines that supertall building. (But is this one inspired by a trash can, or some other quirky quotidian object?)

Construction is set to start by the middle of this year, with an anticipated completion date of 2018—and the whole thing will cost $100 million. But according to Crain's, rents in the building will likely start at $150 per square foot, which is double the average for Class A spaces in Midtown, so the developers shouldn't be in the red for long.

 

Source: First Look at Rafael Viñoly's Boxy Chelsea Office Building - Development Update-o-Rama - Curbed NY

As Desire for Pricey Apartments Wane, Developers Split Full-Floor Condos at 432 Park Ave. Into Two - Crain's

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The developers of 432 Park Ave. have split full-floor apartments at the 1,396-foot tall tower in half in a move that may signal a slowdown in sales for $50 million-plus apartments. With several other high-profile condo projects underway, sales at 432 Park Ave. have been closely watched as a bellwether for the super high-end segment of the city’s residential real estate market. There is some concern that there aren't enough buyers who can afford apartments priced in the tens of millions of dollars—an increasingly common figure for the latest crop of ultra-luxury condos.

In what could be a concerning sign for upcoming projects, 432 Park Ave.'s developers, CIM and Harry Macklowe, have cut five full-floor apartments on floors 91-95 of the tower into two: sized 4,400 square feet and 3,600 square feet. The smaller units have asking prices of $40.25 million and $39.75 million, respectively. The move comes as the sale of the palatial pads have slowed.

That's far bit less than the asking price for full-floor units. One full-floor apartment remains available at the property—an 8,000 square-foot unit on the 88th floor. The developers are asking $76.5 million for that apartment.

Richard Wallgren, an executive vice president at Macklowe Properties who is leading sales and marketing at 432 Park Ave., said the decision was made on a bet there will be more buyers willing to bite at that price point.

So far, more than 70% of 432 Park’s 106 units are in contract to be sold, with prices ranging from $7 million for a handful of one-bedrooms all the way up to $95 million for the spire’s 8,000-square-foot penthouse, which sits on the 96th floor. Closings for the apartments will begin either by the end of the month or in December depending on when the developers receive a temporary certificate of occupancy from the city.

Both the penthouse and the building’s one-bedrooms are among the collection of apartments of varying sizes in the tower that are in contract and scheduled to begin closing. The closings for the existing units in contract will likely run though the end of January. The building, which has been under construction since 2011, is set to be completed in mid-2016. The sales figures have made the $1 billion project a success, Wallgren said.

In a recent interview on the tower’s 38th floor, in an unsold 4,000-square-foot model apartment built to showcase the finishes that buyers can opt to request  the developers install, Wallgren shared with Crain's more information on the type of buyers the project has attracted. Wallgren estimated the average age of buyers to be about 55 and said several will use their apartment as their primary address and will even raise families there.

About 65% are American and within that group about half are New Yorkers, he said. The other half are from California and there is one buyer from Chicago. The remaining 35% of buyers are foreigners from a host of countries, including Turkey, Saudi Arabia, China, Russia, Greece and Brazil.

“We have local New Yorkers that will raise toddlers here and young children who go to private schools on the Upper East Side,” Wallgren said.

Even though a completed apartment sale will trigger deed filings cataloged by the city, it will still be difficult for the general public to determine the actual identity of buyers because most tend to purchase their units using limited liability companies.

“Because our prices start at $17 million, nearly everyone is well known,” Wallgren said, referencing the cheapest still-available unit at 432 Park. “They own banks and telephone companies and conglomerates that control trillions of dollars of assets.”

Several of the buyers are also purchasing units for their hired help. In fact, staff suites at 432 Park Ave. have sold so briskly that CIM and Macklowe converted an additional floor, the 34th, into  studio-sized apartments. That floor will join 28 and 29, which have already been reserved for the suites.

“We have had people buy multiple staff suites because they travel with a cook, or a driver, or an assistant,” Wallgren said.