When President Donald Trump announced in June that the United States would pull out of the Paris climate accord, New York developer Jonathan Rose sensed that something more than an environmental safety net was at stake. He saw retreating dollar signs.

“Bottom line is, these are major economic opportunities,” he said, referring to technologies that promote energy efficiency, such as electric cars and solar energy. “We just ceded them to China.”

Nearly 200 nations, including the U.S., signed the Paris agreement in December 2015, pledging to dramatically reduce greenhouse gas emissions and limit global temperature increases to 2 degrees Celsius or less by 2100. In some ways, supporting the accord is a symbolic gesture — even if every participating country meets its reduction goals, the world is still on track to exceed that amount of warming by 2030. But inaction or silence on the issue accomplishes even less, and in the case of New York City’s real estate industry, rising temperatures could have grave consequences — from regular flooding to major storms like Superstorm Sandy that occur every few years.

Maya Camou, director of sustainability at the Manhattan-based development firm Time Equities, said “it was a no-brainer” for her company to formally sign a letter supporting the Paris climate accord. “Climate change is real, and you see it everywhere,” she said. “Our own properties all over the U.S., as well as internationally, will start being affected by these changes [over the next few years].”

New York real estate developers would seem inclined to support measures that would curb rising temperatures and extreme weather events — threats that could directly impact their assets. While a handful of companies are incorporating climate-conscious designs in new development projects, the industry at large hasn’t stepped up to make climate change a public priority.

“It’s very hard for people to grasp what things are going to look like in 100 years,” said Sweta Chakraborty, a risk management expert and assistant director of the Institute for Global Policy. “Whose job is it to look beyond their lifetime? Builders definitely don’t.”

Of 165 real estate firms The Real Deal surveyed on Trump’s decision to remove the U.S. from the Paris agreement, 146 declined to participate. Some later said that they didn’t have an opinion on the matter, but most declined to participate without explanation.

When asked separately, the Real Estate Board of New York’s spokesperson Jamie McShane said that the lobbying group doesn’t have an official position on the agreement.

“To the extent that many in the real estate industry are political conservatives, it isn’t all that surprising that climate change hasn’t been high on their agenda,” said Michael Mann, a professor of atmospheric science at Pennsylvania State University. “It is unfortunate and rather ironic since the real estate industry may be among the hardest hit by climate change.”

New York real estate owners are not only among the most exposed when it comes to rising sea levels and storm damage, but they are also responsible for a majority of the city’s greenhouse gas emissions.

Buildings produce 75 percent of NYC’s annual emissions, which weighed in at an annual 52 million metric tons in 2015, according to the most recent data released by the city. Without dramatic reductions in fossil fuel use, sea levels could rise as much as six feet by 2100, and major storms that were previously expected every 100 years or so could instead occur every two to three years.

Jeff Moelis, director at L+M Development Partners, who was disappointed by the president’s choice to abandon the climate accord, said it’s not as easy for real estate as it is for other industries to collectively make its position known.

“The real estate industry is so fragmented. It’s not like oil or gas, where you have one company that’s the mouthpiece for the industry,” he said. “It’s a lot of small family businesses, so there isn’t one general thought leader.”

Playing the long game

After Superstorm Sandy pummeled New York City in October 2012 — resulting in $8.6 billion of private property damage — some developers and real estate owners took steps to guard their buildings. They moved mechanical equipment from basements onto higher floors, invested in detachable flood shields and added landscaping designed to intercept rainfall. Rudin Management, for example, elevated the second floor of Dock72, a waterfront office development in Brooklyn, 40 feet above the ground. And Brookfield Properties decided to add floodgates to One New York Plaza after more than 20 million gallons of water rushed into the building’s subterranean shopping mall.

But while these measures acknowledge the need to be proactive in the face of climate change, they only address immediate threats.

Sea levels in New York City are expected to rise 30 inches by 2050 — and by that point, roughly 90 percent of the city’s 1 million buildings will still exist, according to a study released by the city last year. Most of those buildings — 98 percent — span less than 50,000 square feet, according to the report. Because those small and mid-sized properties are rarely vacant and tend to change hands often, their owners are less likely to incorporate technology like solar and wind power or passive-house standards. In addition, some owners are not financially equipped or willing to wait a decade for the benefits of energy efficiency to pay off. Their investment horizons are limited to however long they plan to own the asset, and the added upfront cost and potential loss is enough to dissuade them from trying out new technologies that could cut down on energy use and carbon emissions.

“It’s a challenge to [retrofit] existing buildings when they are fully occupied,” said Justin Palmer, CEO of the sustainable property developer Synapse Development Group.

Synapse has had luck building from the ground up, and the company constructed Manhattan’s first passive-house rental apartment building, at 542 West 153rd Street. On average, passive houses use anywhere from 70 to 90 percent less energy than standard buildings, according to the independent research organization the Passive House Institute. The structures require airtight construction and an energy-recovering ventilation system in place of traditional heating and cooling equipment.

While similar projects have sprung up in the city over the past few years — including Cornell Tech’s 26-story residential tower on Roosevelt Island, which will be the world’s tallest passive house — the standard is hardly the go-to due to high costs and limited labor. Building to passive-house standards can cost 3 to 5 percent more than a building with a traditional heating and cooling system, and there are only a handful of contractors equipped to install passive-house facades and ventilation systems, Palmer and others explained.

L+M and Jonathan Rose Companies are teaming up on a 751,000-square-foot passive- house project in Harlem dubbed Sendero Verde, which means “green path” in Spanish. The affordable housing project is expected to use 60 to 70 percent less energy than a standard building of its size.

But building sustainably requires patience. For instance, incorporating solar and wind power — which requires upfront costs of hundreds of thousands of dollars — can take seven to 10 years to pay off, said David Brause of real estate investment firm Brause Realty. His firm, which owns and manages more than 3 million square feet of property, is developing a 38-story, 266,000-square-foot rental building in Long Island City that uses both.

Brause said that not all property owners are thinking long-term, and many plan to sell before the energy savings pencil out. But family-owned companies tend to take the long view, he noted, since they typically build with future generations in mind.

“It’s my duty as a father and the owner of a business to do what I can to make the world a better place,” Brause explained. “It’s not just about making a dollar in the real estate business.”

Another family firm, the Durst Organization, which owns 13 million square feet of office and retail space and another 3 million square feet of residential rental properties in New York, has made efforts to build responsibly. The developer had planned to take its massive Hallets Point residential project off-grid, which means the buildings would operate using their own power plants.

But that plan was foiled when the 421a tax break lapsed for 15 months starting in 2016, Phil Skalaski, vice president of engineering and energy services at Durst, told TRD. Without the exemption, it wasn’t clear if all five buildings would be constructed, and the off-grid concept hinged on the entire project moving forward. Instead, Durst incorporated an alternative air-conditioning system, where cold water is circulated through a building’s pipes and tenants are able to control exactly how much energy they are using.

While the chilled water apparatus increases the initial cost of each building’s mechanical system by about 8 percent, the projection is that the energy-savings costs will more than make up for that, Skalaski said.

He said that the complexity of alternative air-conditioning and other forward-thinking technologies can be a deterrent for property owners, noting that many aren’t willing to front the extra money and are often wary that the new systems won’t work properly.

“I don’t know if that’s going to change,” Skalaski said. “A lot of developers have one way of doing things.”

Pat Sapinsley, managing director of cleantech initiatives at Urban Future Lab, NYU Tandon School of Engineering’s incubator for smart-grid energy solutions, echoed that sentiment, calling the real estate industry acutely “liability conscious.” But she noted that there are some climate-conscious players in the industry and named Rudin Management’s John Gilbert, who last year helped pioneer a cloud-based building operations system. The new technology allows the company to monitor and adjust energy use in its buildings based on occupancy and other factors.

But many developers and property owners remain wary of that and other energy-saving technology. “They don’t trust the energy-savings calculations,” Sapinsley said.

David Schwartz, principal of the multifamily developer Slate Property Group, said that while he supports the Paris climate accord, there isn’t enough “compelling data available” to convince landlords that energy-saving technology, like passive house or cogeneration, is a glitch-free way to cut costs.

“You never want to be the first guy to do it if it doesn’t work,” he said.

Inefficient efforts

Other initiatives such as Energy Star and Green Globes exist, but over the last 20 years, many developers have built to the requirements of the Leadership in Energy and Environmental Design (LEED) certification program, which the United States Green Building Council launched in the late 1990s to evaluate the environmental performance of a building.

However, architects and engineers alike have spoken out against the international certification program, claiming that it detracts from more effective initiatives. Critics argue that LEED is prohibitively expensive and hinges on a point system that doesn’t always add up to an energy-efficient building.

Geoffrey Lynch, director of architecture at the New York office of engineering giant AECOM, said that he still views LEED as a powerful tool but has seen some developers move away from the system. They either feel that they can make their buildings energy efficient without it or seek a more advanced certification program.

“When it first came out, it was new and different and it was something to show off,” he said. “It’s not exotic anymore.”

In April 2010, architect Frank Gehry caused a stir when he told Bloomberg News that developers were given LEED awards for “bogus stuff” and that the program served as more of a marketing tool than a meaningful way to promote energy efficiency.

“[LEED has] become fetishized in my profession. It’s like if you wear the American flag on your lapel, you’re an American,” he told Bloomberg at the time.

A few months later, the Brooklyn-based development firm Forest City Ratner announced it would not pursue LEED certification at its Gehry-designed rental tower at 8 Spruce Street in Manhattan.

“As much as we can, we designed the building to be sustainable. And as we look at the ongoing operations, we look to make it as sustainable as possible,” Susi Yu, an executive vice president at Forest City Ratner, told TRD last month.

Most recently, some of the building’s residents began participating in a composting program as part of a pilot run by the city. Eventually, Forest City plans to make the program available to all residents in the roughly 900-unit building to significantly cut down on trash input.

But on the whole, Yu said she feels that developers are increasingly making climate-conscious decisions as a selling point for younger tenants.

Regulatory pressure

Demand is not only coming from everyday New Yorkers. Local officials are also putting increased pressure on property owners to start retrofitting their buildings, especially in the wake of the country’s withdrawal from the Paris agreement and President Trump’s move to dismantle the Environmental Protection Agency. State and city leaders have pledged to adhere to the climate accord despite the president’s decision.

In late June, seven City Council members introduced a bill that would essentially require certain buildings to meet passive-house standards beginning in 2025. And just a few weeks earlier, Council members Jumaane Williams and Brad Lander called on Mayor Bill de Blasio to require retrofits across the city, which was met with fierce opposition from the real estate industry. Williams, who serves as chair of the Council’s committee on housing and buildings, said the city needs to target buildings under 25,000 square feet and require energy-saving upgrades to electrical systems.

Last month, John Banks, president of the Real Estate Board of New York (REBNY), told Politico that although the group shares the city’s goal to reduce emissions, a call of mandatory retrofits does not reflect “economic reality or credible methods of implementation.”

Carl Hum, REBNY senior vice president for management services and government affairs, later told TRD that “tenants will ultimately feel the impact in their monthly rent bills.”

It’s not the city’s first attempt to seek mandatory retrofits, however. In December 2009, then-mayor Michael Bloomberg tried and failed. He backed off amid objections from building owners that the plan would prove too costly. Instead, the city left it up to property owners to make changes on their own.

Sapinsley of Urban Future Lab said mandatory retrofits would be an important next step to actually get owners to take energy-saving action. “I have no patience for [the real estate industry’s] whining,” she said.

However, some developers have run into regulations that make going green a lot harder — and far more costly. The Durst Organization is jumping through various regulatory hoops at One Bryant Park, where it has its own 4.6-megawatt cogeneration plant that provides both heat and electricity to the 2.3 million-square-foot office tower. Though the developer boasts that the system is twice as efficient as a conventional plant, Durst is still required to pay Consolidated Edison some $1 million each year in standby rates, fees paid for the utility’s backup energy systems — energy that the building isn’t actually using.

Skalaski said Durst has been working with REBNY and public officials to get Con Ed to reform its rates and incentivize the use of combined heat and power units.

“There’s got to be some level of payback for that. It can’t be a loss every time, or no one will do it,” he said.

Financial shortfalls

Rose of Jonathan Rose Companies said the country’s withdrawal from the climate accord is in some ways a positive development in that it’s shifted the onus of combating climate change on local government and private businesses.

And indeed, at a meeting in late June, the United States Conference of Mayors, a nonpartisan organization comprised of more than 1,400 mayors, stated that it would not only urge the federal government to rejoin the accord, but also find ways to combat climate change in individual cities, the New York Times reported.

Republican and Democratic mayors alike committed to a slew of green initiatives, including enforcing more building codes and creating more incentives for property owners to reduce energy use.

Although environmentalists, city officials and a handful of developers push for more green-building requirements, the bottom line is something any real estate owner can understand: cost. Even when it comes to the city’s efforts to safeguard itself from another Sandy, funding for some New York City-run projects has dried up.

In June, city officials announced that a plan to protect Red Hook from the next “100-year flood” would need to be significantly scaled back. A feasibility study showed that the $100 million project to raise streets in the neighborhood would actually only protect it against a 10-year event. A larger project, the Wall Street Journal reported, would cost $300 to $500 million.

The city’s “Build It Back” program, which is overseeing the rebuilding of thousands of homes in the hardest hit areas such as Staten Island and Red Hook, is $500 million over budget.

And it doesn’t look as though the city will be able to bank on additional federal funding. The president’s proposed budget cuts $667 million from the Federal Emergency Management Agency (FEMA) and local grant programs. He also gutted all $3 billion in funding provided by the Department of Housing and Urban Development after a disaster.

Alan Blumberg, a professor at Stevens Institute of Technology who studies coastal waters and how they interact with urban areas, noted that cities are increasingly planning according to more specific scientific data, not just the broad-brush predictions provided by FEMA. Last year, at the request of the city, the agency agreed to redraw its flood maps to better reflect both current and future flood risks.

For New York, it’s a delicate balance between allowing people to enjoy the waterfront, while they still can, and preparing for a future when they can’t, sources inside and outside of the real estate industry say.

“Pay attention to 2050. Sea level will be at maybe a foot or two more in New York City,” Blumberg said, noting beyond that it’s unclear what things will look like. “People ask me, when is the next 100-year storm coming?” he added. “I say maybe never. Or maybe next year.”

Rents up less than 1% in Brooklyn and Manhattan in June

According to this week’s market reports, rent prices are up in Brooklyn, Manhattan and Queens, but barely. New York is behind Mexico City as the least affordable city on a list of 30 global metros.

Manhattan, Brooklyn and Queens rentals | MNS
Rental prices inched upwards in all three markets in May relative to the previous month, with 0.5 percent in Manhattan, 0.3 percent in Brooklyn, and 1 percent in Queens. In Queens, Long Island city was the priciest on average for studios, one- and two-bedrooms. Read the full reports for Manhattan, Brooklyn, and Queens.

Luxury Sales | Olshan Realty
Twenty-one contracts were signed last week at $4 million and above, with an average 13 percent discount from asking price. The total asking dollar volume was $178 million. Read the full report here.

NY state housing | NYSAR
In New York state, 10,704 home sales, up by 4.6 percent from May 2016. Median sales price continued its upward climb, increasing by 7.1 percent compared to last May. Read the full report here.

Post-rent growth | ApartmentList
In New York City, post-rent income growth, or the income that remains after paying for rent, increased by 7.7 percent for knowledge workers, but decreased for blue-collar and service workers by 4.9 and 9.4 percent. Read the full report here.

Least affordable cities in the city | RentCafe
New York City came second only to Mexico City, where median rent requires 60 percent of median income. In New York, it’s 59 percent.

500 Kent Avenue in Williamsburg

Rabsky Group is in contract to buy a 2.65-acre development site along the Williamsburg waterfront from Consolidated Edison for $50 million, or $217 per buildable square foot, representatives for the developer and the utility giant confirmed to The Real Deal.

The prolific Brooklyn developer is planning a commercial building on the vacant site at 500 Kent Avenue, which offers 230,000 buildable square feet as-of-right, a spokesperson for Rabsky said. The current zoning allows for manufacturing, offices and some retail uses, given its inclusion in the Brooklyn Navy Yard’s Industrial Business Zone (IBZ).

In October, Con Edison hired Cushman & Wakefield to market the 115,000-square-foot lot and implied to potential buyers that a rezoning to residential was in the works. The city, however, responded by saying it would not allow for a rezoning.

Mike Clendenin, a spokesperson for Con Ed, said the deal remains subject to approval by the New York State Public Service Commission, prior to closing.

The site sits just south of Eliot Spitzer’s 857-unit rental project at 420 Kent Avenue and the Williamsburg Bridge. There is about 648 feet of frontage on Kent and Division avenues.

A Cushman team led by Stephen Palmese and Brendan Maddigan marketed the land for sale.

Rabsky, which made its name developing luxury rentals and condominiums in North Brooklyn, has increasingly branched out into commercial development. The firm filed plans last month for its first hotel, along Bedford Avenue in Williamsburg, and paid $68 million for a site that allows its Downtown Brooklyn project to amass as much as 770,000 buildable square feet.  Rabsky is considering office or residential for the latter site.

May 01, 2017
By Rich Bockmann

From its post-World War II heyday as a department store hub that Abraham & Straus, Namm & Sons and Martin’s called home to its mix of low- and high-end stores today, the Fulton Mall is changing on a scale not seen in decades. The street’s once-drab eastern end is seeing a flurry of new residents due to several major developments in the surrounding area.

One of the biggest new additions is the 1.8 million-square-foot City Point complex, which will soon house a Trader Joe’s, among other stores and food hubs. Those retailers will add to the contrast of shops that already exist. Shake Shack, Brooklyn Industries and Swarovski stand side by side with Fulton’s old guard: Jimmy Jazz, Dr. Jay’s and the Rainbow Shops, among other discount retailers and an array of pawnshops and beauty supply stores.

Average asking rents have climbed to $326 per square foot, surpassing Williamsburg’s trendy Bedford Avenue as the priciest corridor in the borough, according to a recent retail report from the Real Estate Board of New York. Higher rents and changes in co-tenancy raise the question: Will new retailers alter the character of Fulton Street, leaving the area’s traditional discount stores in the dust?

“There’s a whole wave of new tenants, which reflects the broadening of the Fulton Street market,” said Paul Travis of Washington Square Partners, which developed City Point with Acadia Realty Trust. “It’s beginning to catch up with the changes that have been occurring in the neighborhood and around the street.”

Indeed, the recent influx of national chain stores to the Fulton Mall is tied to the booming office and residential activity from new towers rising on the Downtown Brooklyn skyline.

“I think the cycle’s not going to happen overnight, but [traditional retailers] may or may not want to stay based on increasing rents and the expanding customer base,” said Lansco Corp.’s Robin Abrams, who sits on REBNY’s Brooklyn retail-report advisory group.

And that transformation will only continue. JDS Development Group and the Chetrit Group are building a 1,066-foot-tall rental building at 9 DeKalb Avenue, next to the iconic Junior’s Restaurant. And Tishman Speyer is bringing 620,000 square feet of office space above Macy’s at 422 Fulton Street.

Those developments are changing Downtown Brooklyn into more of a “24/7 neighborhood” — a stark difference from the largely office population that the area used to house, according to RKF Vice Chairman Barry Fishbach. “Office workers would go shopping during lunch and then typically at the end of the day would get in their cars and go home,” he said.

And while the old stores on Fulton Mall usually start to roll up their gates by 7 p.m., the newer shops at City Point stay open later, and Target doesn’t close its doors until midnight.

“If you take a walk on Fulton Street today, the difference from two to three years ago is exponential,” said Cushman & Wakefield’s Diana Boutross. “The customer base is changing. It’s no longer a 99-cent-store customer. It’s Gap. It’s Banana Republic. The rents have changed so much. Some of the discount tenants will eventually have to move out as the new retailers start filling in on the block.”

Xios, a young men’s discount fashion shop with about two dozen locations in New York and New Jersey, for example, closed down at the northwest corner of Duffield Street and Fulton more than three years ago before Thor Equities bought the building, at 519 Fulton, in 2014 for $12.7 million.

(Click to enlarge)

“It’s harder for a local tenant to pay the premium rents that a corner typically gets,” said Fishbach, who is not involved in the property. Thor is currently marketing the space, which has about 2,200 square feet on the ground floor.

A short walk west — on a block home to Ann Taylor Loft, Duane Reade and the Gap Factory Store — a pawnshop and jewelry store has operated out of a 20-foot-wide storefront at 453 Fulton for about 20 years, but it looks like its days may be numbered.

The owner, local landlord Fasiha Sheikh, is looking to attract a national tenant to the space, which has 1,400 square feet on the ground floor.

“We had some interest from nationals, mostly food chains,” said Samuel Mizrahi of Century 21 Mizrahi Realty, who is marketing the space. “The taxes are just so high on the street. It’s a tough nut for a local tenant.”

But other market insiders said that the changing face of retail on Fulton doesn’t necessarily spell the end of the area’s traditional stores. The strip still serves shoppers from the immediate area — including the public-housing complexes Gowanus, Ingersoll and Walt Whitman. And new entrants including the Banana Republic Factory Store and Nordstrom Rack fit the street’s traditional profile of discount retailers.

“Of course, for every new tenant that came in, an old one left,” said Ryan Condren, managing director of CPEX Real Estate’s Brooklyn retail group. “But I think if a store has the right business model, it will be fine.”

Stores on Fulton Mall average around $1,200 per square foot in sales, and stalwarts like the discount department store Cookie’s do business at a good clip, reaching up to $1,400 per square foot, according to SCG Retail broker Geoff Bailey.

“That’s on par with some of the top-grossing shopping centers in the country,” he said.

Even at City Point, retailers are trying to figure out the Fulton Mall’s formula. Armani Exchange, which was the project’s first tenant in 2012, closed its 6,500-foot store in 2015.

“They entered the market very early and did not reopen, which seemed to indicate that it was not ready for them,” Boutross said.

While the face of Fulton continues to transform, some say the core demographic that made it such a longtime success remains.

“I was concerned that as the character of the Fulton Mall changed, we might be essentially just swapping one demographic for another,” said Robert Perris, district manager of Downtown Brooklyn’s Community Board 2.

“However, it seems to me that the traditional, hip urban black shopper who kept the Fulton Mall alive for decades, I see them in stores like Aeropostale,” he added. “It doesn’t seem like we have pushed one demographic out for another.”

A look at the slew of developments popping up along Fulton Street

1. City Point
Various developers

City Point — the first large-scale development Fulton Mall has seen in decades, and the biggest, kicks off the transformation of Albee Square Plaza at the eastern end of Fulton Street.

The $1 billion, 1.8-million-square-foot mixed-use development includes 675,000 square feet of retail, 1,148 apartments and 30,000 square feet of office space.

Century 21, Target, the Alamo Drafthouse movie theater and Danish retailer Flying Tiger Copenhagen are now open, with Trader Joe’s and DeKalb Market Hall among those coming later this year. Brodsky Organization’s 440-unit City Tower at 10 City Point opened  in 2015 and the 250-unit 7 DeKalb Avenue rental tower, co-developed by BFC Partners, opened early last year. As part of the megadevelopment, Gary Barnett’s Extell Development is also constructing a 59-story tower at 138 Willoughby Street. The building, which will house either condominiums or co-ops, is slated for completion in 2020.

Plans for City Point emerged after Downtown Brooklyn’s 2004 rezoning, when Washington Square Partners and Acadia signed a long-term ground lease with the city for the site. BFC and Brodsky were named partners in the project in 2012, and Barnett acquired the last site at the project for $120 million in 2015.

2. 9 Dekalb Avenue
Chetrit Group and JDS Development Group

Set to rise 1,066 square feet over Albee Square, JDS Development Group and the Chetrit Group’s 73-story rental tower is primed to be the tallest in Brooklyn.

JDS and Chetrit purchased the Dime Savings Bank at 9 DeKalb Avenue as well as the property’s air rights for $90 million in late 2015. The developers plan on repositioning the landmarked bank into a 30,000-square-foot store. The 500-unit residential tower will have 110,000 square feet of additional retail and will be connected to the old bank with a glassy atrium designed by SHoP Architects.

The developers have yet to sign any retail tenants. Those familiar with the space said its unique design —  a landmarked interior and lack of a glassy storefront — won’t appeal to everyone, but will to a certain type of retailer looking to make a statement.

“There are only so many tenants out in the market that are looking for that type of product,” said Ryan Condren, managing director of the retail group at CPEX Real Estate, who added that the bank’s idiosyncratic design will mean that the developers will be marketing it to a smaller pool of potential tenants.

3. Fulton assemblage
RedSky Capital

One of Fulton Street’s most buzzed-about projects is also one of its most secretive.

Williamsburg-based RedSky Capital has spent more than $104 million over the last four years assembling a nearly full-block site between DeKalb Avenue, Fulton Street and Flatbush Avenue Extension facing the eastern end of Albee Square.

While RedSky has been tight-lipped about its intentions for the site and has yet to file plans with the Department of Buildings, it refinanced the property with a $127 million loan from Apollo Commercial Real Estate in April.

The area — which currently houses a collection of low-slung retail buildings — is zoned for more than 500,000 square feet of residential and commercial development. SCG Retail broker Geoff Bailey said it’s likely that the developers will follow their peers and build something that mirrors the other projects on Albee Square.

“I’m sure it’s going to be a big, tall building with a nice retail podium,” he said. “It could very much be a flagship location.”

4. The Wheeler
Tishman Speyer

Macy’s is getting an upstairs neighbor, thanks to Tishman Speyer.

The department store chain sold the top five floors of its nine-story Fulton Street store to the developer for $270 million in December 2015. Last month, Tishman Speyer unveiled its plans for the Wheeler — named after architect Andrew Wheeler, who in the 1870s designed the four-story cast-iron structure that currently makes up part of Macy’s store. 

Tishman Speyer is constructing 10 floors of office space spanning 620,000 square feet above and alongside the four floors that Macy’s is retaining (the retailer is using $100 million of the proceeds from the sale to renovate the lower portion of the building). The Wheeler is slated for occupancy in mid-2019; each floor will have 16-foot ceilings and open spaces in hopes of attracting Brooklyn’s creative-office tenants.

“That’s the first office space on Fulton Street ever,” said Washington Square Partners founder Paul Travis, who noted that the addition of creative-office types directly on Fulton Street will be a game changer for retailers and property owners. “We haven’t seen anything like that.”

May 01, 2017 08:00AM

Rendering of Est4te Four’s project in Red Hook, Brooklyn. The buyer, Sitex, will keep the properties for industrial use.

UPDATED, May 1, 8:55 a.m.: Red Hook’s most ambitious mixed-use project will not see the light of day.

Italian developer Est4te Four has abandoned plans for a $400 million, 1.2 million-square-foot megadevelopment along the Brooklyn waterfront, and will instead sell its six-building site for $110 million to Sitex, a firm that specializes in industrial properties.

Sitex will not go through with Est4te Four’s ambitious redevelopment plans, and will instead keep the buildings industrial, the Commercial Observer reported.

“We intend to reposition what’s there and modernize the buildings and rent them out,” Brian Milberg, a principal at the firm, told the publication.

Est4te Four paid $66 million for the properties – at 219 Sullivan Street, 68 and 100 Ferris Street, and 202 and 242 Coffey Street – and hoped to build a project dubbed the Red Hook Innovation district, with offices, shops and a promenade. But the Milan-based developer struggled to secure financing and had been on the lookout for a capital partner.

Industrial real estate has “become the investment darling for institutional investors,” CBRE’s Kevin Welsh recently told The Real Deal, particularly in the field of logistics, which is seeing a boom driven in part by more e-commerce stores offering same-day delivery. [CO] — Hiten Samtani

By Kathryn Brenzel | April 13, 2017 04:18PM

Gail Brewer and Midtown East

It’s rare that the Manhattan Borough President and the Real Estate Board of New York see eye-to-eye. But the two seem to share at least some common ground when it comes to the proposed price of landmarked air rights in Midtown East. Both agree that the minimum prices should be lower (if they exist at all).

Gail Brewer recommended on Thursday — based on estimations by Cushman & Wakefield — that the city lower the minimum price set for air rights to $250 per square foot, rather than the current $393.

“It is essential that we err, if at all, on the side that will not choke off the transactions upon which a significant pillar of this proposal is based and if the City cannot come up with a re-evaluation that inspires more confidence it may have to search for another mechanism to address the transparency and predictability concerns of the Public Realm Improvement Fund,” Brewer wrote.

The recommendation was included in her official comments on the proposal to rezone Midtown East, which is expected to add 6.5 million square feet of new office space to the district in the next two decades. REBNY and owners of the 3.6 million square feet of air rights have been very vocal in their concern that setting a floor price might discourage deals. The city has proposed taking $78.60 per square foot from any of these air rights transfer and putting the funds into public improvement projects.

Brewer also requested the Department of City Planning to up its requirements when it comes to above-grade public space. DCP has dedicated upfront funding for four projects and is studying whether sites benefiting from the rezoning of 40,000 square feet or more should automatically be required to provide outdoor public space.

The borough president also notes that the Pfizer Headquarters site should automatically be required to contribute to the public realm improvement fund if its density is increased. The Pfizer site is unique in that it currently has an allowed floor area ratio (FAR) of 10 rather than a FAR of 15. As the rezoning proposal currently stands, the site wouldn’t necessarily be required to contribute to the public improvement fund.

Brewer also advocates removing residential buildings on the East Side of Third Avenue from the district, citing the expansion of the Second Avenue subway and the pressure it will put on the area to maintain its residential character.

The Manhattan borough board approved the rezoning proposal in March.

March 29, 2017 08:13AM

Anbang Insurance Group abandoned plans to invest in Kushner Companies’ redevelopment of 666 Fifth Avenue.

“Kushner Companies is no longer in discussions with Anbang about 666 Fifth Ave.’s potential redevelopment, and our firms have mutually agreed to end talks regarding the property,” a Kushner spokesperson told the New York Post.

The Chinese insurance conglomerate was reportedly in advanced talks to buy a stake in the Midtown office tower and help Kushner redevelop it into a retail and condo building. The partners were seeking a $4 billion construction loan But some observers immediately expressed doubts about the strength of Anbang’s commitment and the wild numbers that circulated.

Investor documents obtained by Bloomberg projected that the completed redevelopment would be $7.2 billion, and another estimated cited by the Wall Street Journal valued a redeveloped 666 Fifth at $12 billion, which would easily be a record in America for a single building. That plan included tearing out the building’s steel frame and adding an additional 40 floors. The residential portion of the building would total 464,000 square feet, with condos projected to sell for $6,000 a square foot. If the Kushner’s went for the $12 billion plan, it would leave them with a 20 percent stake in the finished project. Kushner would also have to buy out its partner Vornado Realty Trust as well as the office tenants.

With Anbang out of the picture, Kushner will have to find a different equity partner. To complicate matters, the Post reports Kushner will not work with foreign sovereign wealth funds or companies with business before the U.S. government to avoid potential conflicts of interest. Jared Kushner recently left the family company to work as a senior adviser in Donald Trump’s White House.

Time is not on Kushner’s side. According to a recent Bloomberg report, the property is loosing money because of its high vacancy rate and debt cost. [NYP] — Konrad Putzier

(editors note: this is a reprint of a January 6, 2017 article which we had not reported but, in the interest of fairness and disclosure, wanted to share with our real estate & fund  partners)

All 900’+ buildings currently rising in New York City

By: Nikolai Fedak 4:00 pm on January 6, 2017

New building applications for single and multi-family residential developments in New York City saw a major slowdown in 2016, as the fading boom following the changes that occurred at the Department of Buildings in 2014 began to slack further. Numbers have plunged by over half since 2014, and by 38 percent since 2015.

Activity varied across the board, though every borough saw a substantial decrease in new building filings. Manhattan fared the best, with units filed dropping from 5,593 to 4,193. Queens’ small year-over-year increase in 2015 was completely reversed in 2016, with numbers dropping from 9,591 to 5,981. Brooklyn was impacted even worse, with numbers dropping from 11,554 to 6,449. The Bronx was also hit hard, falling from 6,317 units filed in 2015 to 3,919 in 2016, and Staten Island rounded out the five boroughs’ misery with a fall from 1,214 to 831.

The trend this year would seem to indicate that the market downturn that became pronounced in Manhattan during last year’s report is now leveling out, while the tsunami of negativity is now reaching the outer boroughs. Brooklyn’s pipeline submissions have fallen by almost 70 percent since the height of 2014, while activity in Queens, the Bronx, and Staten Island is returning closer to typically anemic levels.

In terms of the largest projects, Queens easily led the pack. A massive filing for a 921-unit project in Long Island City this past May was the largest of all, at 23-03 44th Road, under development by the Stawski Group and being designed by Goldstein Hill & West. The 774-unit 23-15 44th Drive, being developed by Chris Xu, comes in second place. It will also be designed by Goldstein Hill & West, and will rise in the same neighborhood, becoming the tallest building in Queens at an anticipated height of 984 feet.

The next two largest projects are set to rise in Manhattan. The 389-unit 430 East 58th Street was filed just before the New Year, and will be designed by the Stephen B. Jacobs Group and developed by Gamma Realty. 515 West 42nd Street comes next, which is being designed by Handel Architects and developed by BD Hotels, with 350 units in all.

Brooklyn rounds out the top five multi-family filings for 2016 with the 311-unit 3514 Surf Avenue, which was also filed just before the New Year. That building is being developed by John Catsimatidis and designed by Goldstein Hill & West.

While large multi-family construction waned in 2016, the city saw a surprising surge in hotel development, which would ordinarily be a positive sign. The number of rooms filed at the DOB rose from 4,286 to 5,653, increasing by 31 percent. Unfortunately, many of these filings came in periphery neighborhoods that do not ordinarily see anything of the sort, offering an ominous sign of the worsening homeless crisis, as one such project in Maspeth created a community uproar when it transitioned from hotel to homeless shelter last year.

On the plus side, Queens will soon gain the city’s largest hotel outside of Times Square. 24-09 Jackson Avenue will have 1,260 rooms in all, rising 50 floors. The Toyoko Hotel Chain is behind the project, which promises to help cement Court Square as a burgeoning 24/7 neighborhood.

As YIMBY correctly predicted in last year’s pipeline report,

“The Mayor’s policy on housing seems to be a series of ad-libbed responses rather than any type of cohesive plan to promote affordability, and consequently, all types of development are likely to be affected by continued uncertainty regarding what is actually happening, since no-one in local government seems to have any idea what is going on.”

With regards to 2017, more of the same is likely, if not worse. As new development applications have continued to plunge, both the governor and mayor have focused on fanciful vanity projects like creating unrealistic renderings for expansions and renovations at LaGuardia and John F. Kennedy airports, as well as Penn Station. With the Second Avenue Subway’s costs beyond those of any other line on Earth, government continues to spend the city into oblivion, and plans for the latest round of supposed improvements seem unlikely to leave Cuomo’s imagination.

On the ground, the unfolding chaos between dumbfounded community groups and an increasingly kleptocratic local and state bureaucracy is likely a minor taste of what’s to come later in 2017, as the Maspeth controversy will soon be echoed in similar cases across the rest of the outer boroughs. Whether all of these hotels end up being used to house homeless people remains to be seen, but it is becoming increasingly clear that a solution to the city’s worst-ever homeless numbers is eluding a mayor whose mantra has been “affordable housing.”

In any event, if there are any bright spots, the boom that began in 2014 continues to echo in the city’s skyline. While new building applications may be down substantially, many of the projects that were filed for during the frenzy are now rising out of the ground. Since last year’s report, 175 Greenwich Street (3 World Trade Center) has topped-out, One Vanderbilt has begun construction, and the official design for 220 Central Park South has been revealed, as depicted in the below image created by New York YIMBY’s Jose Hernandez.

All 900’+ buildings currently rising in New York City, click for hi-res