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Owners, developers "bullish" on real estate, present and future

Kayte Steinert-Threlkeld 09.16.2015 | Berdon Press Release

NEW YORK - The New York real estate marketing is enjoying "five golden years," with 300,000 new apartments on-line and rents beyond comprehension.

That's the bottom line according to Peter Hauspurg, chairman and CEO, Eastern Consolidated, at the 7th annual New York Multifamily Summit held September 9. More than 600 owners, developers, brokers and others associated with the industry spent the day at a variety of break-out sessions addressing various aspects of the state of the New York multifamily market, including growth in the boroughs, management strategy, the use of technology, new condo development, and more. Berdon LLP was a sponsor event, with real estate partner Seth Molod moderating a panel on new condo development.

Bill Rudin, Vice Chairman and CEO of Rudin Management, provided the keynote speech. He noted that the key to the Rudin family success for more than 100 years was a mantra of collaborate, innovate, disrupt, or perish.  He also noted that his grandfather was one of the first to promote the concept of live/work/play, often noting that "If I can't get there by subway, I don't want to own it."

Following are some highlights from other speakers throughout the day-long event, which was held at New World Stages.

Richard Anderson, President, NY Building Congress

  • The City is experiencing its stronger construction market since 1965, with activity "clicking on all cylinders," including the governmental, residential and non-residential sectors. 
  • Office construction is at its highest level since 1990 due to several factors, including low interest rates, low unemployment, new development sites such as Hudson Yards, and the renovation of existing sites so they they can remain competitive.
  • Challenges to the New York marketing include:
    • Too few units being produced annually; production too heavily targeted at the ultra-rich.
    • Inadequate funding for public infrastructure.
    • Ethical lapses in the industry.
    • Construction costs in New York that remain the highest in the country.
    • Designs that must be more resilient, as evidenced by the destruction of Hurricane Sandy.
  • "The time to innovate is when things are going well."

Julie Miller and Brannan Zahler, TOWN Residential

  • It is 89% more expensive to buy a condominium than a co-op apartment in New York. 
  • Average rent in New York is up 14% from last year.
  • Developers are meeting the quality, design and marketing standards demanded by "micro-neighborhood markets."

Amy Rose, Co-President, Rose Associates

  • New York remains an uber-luxury marketing for the foreign owner "flight market."
  • The upper luxury market continues to rent at extraordinary numbers, even $25,000 to $30,000 per month.
  • "All product will be absorbed. There is an explosion of families and schools. There will always be that need for rentals.´

Kirk Goodrich, Director of Development, Monadnock Development

  • Airbnb is a flaw in the hospitality market that can date back to 1954, when Single Room Occupancy buildings (SRO) were outlawed in the City.
  • The need for small, reasonable living alternatives is more acute today, giving rise to the WeLive model.

Seth Molod, CPA, Real Estate Partner, Berdon LLP

  • 6,500 condo units are coming on line in 2015, a very promising year for the condo market in New York.
  • High tax rates on condos (up toward 50%) make larger returns essential. No 1031 exchange options are available.
  • Many owners of high end condos have factored in the repeal of 421a for their projects.
  • Most investors are demanding returns in excess of 20% for condo projects.

Wendy Maitland, TOWN Residential

  • Buyers no longer define value as the home that is least expensive. They look for quality and the content of the project: "Buyers are more savvy than they have ever been."
  • Newer developers may lack the ability to execute large scale projects and attain financing for larger projects; their notes may be purchased by more experienced developers.

Winston Fisher, Partner, Fisher Brothers

  • "When the world hiccups, New York City real estate does very well."
  • Lower Manhattan is at the precipice of full development with the opening of the new transit center.
  • The city's infrastructure is not keeping pace with residential and business demands, which is a huge risk for the City.
  • Lenders to large-scale projects do not typically require pre-sales, based upon their knowledge of the market demand in the City and the reputation of each owner/ developer.

Sunder Jambunathan, Principal, Certes Partners

  • Certes seeks out micro niche neighborhoods, which often mean redevelopment projects vs. new build projects and finding ways to "work the property." For example, existing curb cuts are an asset on a 95th Street project, eliminating what could be a 12-month approval process to insert curb cuts.
  • It is important to look for greater efficiencies in new-build projects, including the reduction of hallways and direct elevator access to units. These efficiencies reduce the gross to net for the developer.

Charles Bendit, Co-CEO, Taconic Investment Partners

  • Residential demand in New York and other areas increasing for walkable urban areas with no dependence on cars.
  • Landowners remain hopeful that land costs will remain high (at $1,000/square foot), but developers are skeptical that buyers will buy at $3,000/ square foot for finished product.

Next big markets cited by panelists throughout the day:

  • Brooklyn ("where the jobs are")
  • Long Island City (with its mix of commercial and residential as well as its proximity to mid-town Manhattan)
  • East Village
  • Coney Island (accessible, affordable beach front property)
  • Williamsburg
  • Greenpoint
  • Long Island City
  • Crown Heights
  • Flatbush
  • Washington Heights
  • Bronx waterfront
  • Any neighborhood with a high concentration of subway lines








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