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

The crown of 50 West at sunset. Photo by quallsbenson.

By:Rebecca Baird-Remba 8:00 am on February 13, 2017

The Helmut Jahn-designed, 64-story skyscraper at 50 West Street is nearly complete and ready for residents, YIMBY has some stunning new photos, shot from a helicopter, of the 784-foot-tall tower in the Financial District.

Time Equities developed the luxury building, which features a curved facade and offers panoramic, floor-to-ceiling views of the World Trade Center, New York Harbor and the Hudson and East rivers.

A northeast facing view of 50 West Street, with 40 Wall Street and the Manhattan Bridge in the background. Photo by quallsbenson.

Buyers started closing on condominium purchases last month, and the developers just unveiled two new model units. Asking prices for the development’s 191 units start at $1.76 million, and two dozen units are still up for grabs on StreetEasy, including a three-bedroom, three-and-a-half-bath penthouse for $24.54 million. Sales have evidently been stop and go, because the first units in the building hit the market two and a half years ago. The tower has been in the works since 2007, but the recession derailed construction until 2013.

The building now has a temporary certificate of occupancy, and owners are expected to start moving in over the next few months. Construction is scheduled to finish this spring.

A nighttime view of 50 West. Photo by quallsbenson.

Famed Danish designer Thomas Juul-Hansen handled the interiors, which are outfitted with marble vanities, marble floors and rain showers.

The development will also offer four floors of amenities, including a landscaped rooftop called The Observatory at 50 West, an entertainment floor with private dining room and terrace, a fitness center and The Water Club, which has a 60-foot-long pool, a Jacuzzi, steam room and sauna.

A night-time facade closeup. Photo by quallsbenson.

There will also be a small commercial component to the project: the third floor will have 15 office condominiums and a conference room.

Like many of the city’s tallest towers, this one comes with some privately owned public space. Time Equities is creating a 6,800-square-foot public plaza with an art gallery, cafe, plantings, tables, and chairs. The plaza was originally supposed to generate a zoning bonus for 50 West. But after the financial crisis, the developers scaled down the size of the tower and chose not to use the bonus, the Wall Street Journal reported in July.

50 West makes its mark on the Lower Manhattan skyline. Photo by quallsbenson.

The space will serve as a landing for the 230-foot-long West Thames Street Bridge, which will ferry thousands of commuters across six lanes of West Street every day. The bridge has been in the works for nearly a decade and will replace the Rector Street Bridge, a structure erected to temporarily replace a pedestrian bridge destroyed on September 11, 2001. The cost of the project has swelled from $20 million to $40.5 million over the years. $33 million will come from the Department of Housing and Urban Development, and Battery Park City Authority, which will be responsible for maintenance, is contributing $8.2 million. The city finally started work on the bridge in November.

50 West looks like it should dominate the skyline, but it doesn’t even crack the top ten tallest towers in the Financial District. It’s slightly shorter than the century-old Woolworth building, which reaches 792 feet above Broadway. The Robert A.M. Stern-designed Four Seasons condo-hotel at 30 Park Place was finished last year and stands 937 feet tall. Gehry’s wavy condo tower at 8 Spruce Street has a height of 870 feet, and the 71-story 40 Wall Street (pictured above), an office tower controlled by President Donald Trump, is 927 feet tall. One World Trade Center remains the loftiest in the neighborhood and the city, at 1,776 feet tall.

A northwest facing view of 50 West Street, with New Jersey in the background and One World Trade Center on the right. Photo by quallsbenson.

January 09, 2017 08:16AM

Construction at 185 Bowery and a rendering of citizenM’s hotel (credit: the Rinaldi Group)

Hotel developer and operator citizenM is planning the 20-story, 300-room project at 185 Bowery.  A Dutch company constructed the building in Poland and shipped it to New York in 210 pieces, the Wall Street Journal reported.

CitizenM, which has nine hotels operating and 14 in development, has used modular construction to build the majority of its properties in Europe, where the technique is widespread.

While the method isn’t always less expensive than traditional construction, it does allow for quicker assembly. CitizenM’s hotel, co-owned by Brack Capital Real Estate, is expected to take three to four months to finish, compared to six to nine months using traditional methods.

 

It will also cut down about 1,200 truck deliveries to the site.

“That is the beauty of modular construction,” said Anthony Rinaldi, of  construction manager the Rinaldi Group. “It really minimizes disruption to the neighborhood, to the community, to the traffic flow.”

New York’s fledgling modular industry is hoping the project will be a boon, illustrating the time-saving benefits.

“So much centers on how quickly you get the hotel full,” said Roger Krulak, chief executive of Brooklyn-based Full Stack Modular.

In October, Full Stack bought Forest City Ratner’s modular-building business, ending the developer’s brief and largely unsuccessful foray into the world or prefabricated construction. [WSJ] – Rich Bockmann

• Fortis Editors Note: we publish the following article with guarded optimism for the success of the new administration. But more importantly, we hope that he succeeds in all burdens that weigh so heavily on the Presidency.  As a measure of reality soon encompasses and removes the campaign bluster, we sincerely hope that the President elect carefully chooses the correct path for our people. The Real Estate sector would certainly want to see prosperity and gains in our dealings, but not at the expense of  people and institution’s less fortunate or simply in the wrong place and time.   The shoes of the Presidency are quite a burden to fill, and we wish the soon to be new “President” Trump success and triumph, for our sake and the worlds. God Bless America and Happy New Year!   DJM, MD  Fortis Investment Group  

December 01, 2016
By Kenneth R. Harney

Could the election of Donald Trump have unanticipated impacts on the federal tax code’s benefits, which favor  homeownership over renting?

To the extent that the House, Senate and White House soon will be under one party’s control, the answer may well be yes. Though housing issues got scant attention during the campaign, Trump’s tax reform plans, linked up with versions already proposed on Capitol Hill, could contain some jolts for many people.

Late in the campaign, Trump revised his earlier tax plans in ways that make it more compatible with House Republicans’ tax “blueprint” issued this past June. Trump would collapse the current seven tax brackets for individuals to just three: For married joint filers with incomes less than $75,000, the federal marginal tax rate would be 12 percent. For those with incomes of $75,000 but less than $225,000, the rate would be 25 percent. From $225,000 up, the rate for married joint filers would be 33 percent. Single-filer rates would have the same brackets but be based on incomes half the amounts for married joint filers. The capital gains rate would remain capped at 20 percent, and the controversial 3.8 percent “Obamacare” surtax on certain investment income would disappear.

Now it gets more intriguing: To simplify the tax system and wean more taxpayers from itemizing deductions on Schedule A of their returns, the Trump plan would boost the standard deduction for joint filers to $30,000 (up from the current $12,600) and raise it to $15,000 for single filers, instead of $6,300 at present. For very high income earners, there would be a limit on all itemized deductions of $200,000 for married joint filers and $100,000 for singles.

There’s no mention here of limits on mortgage interest deductions, so from strictly a homeowner or buyer perspective, nothing jumps out as objectionable. Simplicity is good. In fact, the original Trump tax plan exempted the mortgage interest and charitable deductions from the sorts of modest limitations contained in Hillary Clinton’s proposal.

But here’s a key question: With a substantially increased standard deduction of $15,000 to $30,000, how many homeowners will want to file for mortgage interest or property tax write-offs, as many do today. The chief economist of the National Association of Home Builders, Robert Dietz, estimated that the number of itemizers might drop from the current 25 percent of taxpayers to anywhere from just 5 percent to 10 percent.

Is that a problem? It depends on how one views the longtime tax code preferences for encouraging ownership of homes over renting. One analysis, provided by Evan M. Liddiard, senior federal tax policy representative for the National Association of Realtors, maintains that if the standard deduction is raised dramatically, “itemized deductions become less relevant,” and previously valuable and distinctive “tax incentives [for] homeownership evaporate even while taxes are not necessarily being reduced.” There’s less incentive to own rather than rent.

Dietz put it this way: When you decrease the attractiveness of a longtime subsidy devoted to encouraging purchases by lowering financing costs, “the economics would reduce the tax benefit for homeownership.” Such a change could “increase the after-tax cost of paying the mortgage,” he said.

Tax reformers see the issue starkly differently. Most comprehensive proposals that have been made in recent years, notably the landmark, bipartisan Simpson-Bowles National Commission on Fiscal Responsibility and Reform, call for wholesale elimination or sharp reductions of special interest carve-outs in the tax code.

But could limiting or ending homeownership tax preferences have the side effect of lowering home values and selling prices? Academic researchers suggest the answer is yes. A new paper from an economist at the Federal Reserve estimates that eliminating the mortgage interest deduction alone would cause the average household to lose
“10.9 percent of the value of the house, with homeowners losing 11.5 percent and homebuyers 8.5 percent.”

The Fed study did not address the type of tax plan contemplated by Trump or Capitol Hill reformers but appears to agree with the broad conclusion of earlier researchers: When you diminish the value of a subsidy benefit from a favored asset category, the value of that asset to potential buyers or owners is likely to drop.

None of this is happening yet. Months of committee hearings and debate — and lobbying — are guaranteed before any tax plan gets to the president’s desk. But it’s an indication of what’s on the line for real estate.

Kenneth R. Harney is a syndicated columnist.