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Tag: Long Island City

  • Long Island City rezoning would add to neighborhood swing

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    Long Island City could be on the receiving end of another 15,000 apartments if the City Council approves a rezoning proposal slated for a vote later this month. 

    If the neighborhood’s prior evolution is any indication, a fresh slate of sites is likely an attractive prospect for developers, who have delivered thousands of housing units since a major rezoning in 2001. 

    Long Island City has transformed in recent years from an aging industrial scape to a desirable residential hub. The area’s development boom began largely with rental projects before luxury condo towers sprouted up, benefiting from an influx of demand during the pandemic. 

    Price growth in Long Island City is undeniable, even if long-term comparisons can be murky considering there were few homes to sell before rezoning efforts. Between 2014 and 2024, median sale prices in the neighborhood more than doubled, up from $287,000 to $667,000, according to a report from Property Shark. 

    In September, the median sale price was $805,000, up 11 percent from the same month last year, according to data from Redfin. During the same period, the median price per square foot rose more than 5 percent to over $1,000. 

    One of the neighborhood’s most notable projects is Chris Jiashu Xu’s Skyline Tower, which has pushed the boundaries of price expectations since launching sales in 2019. At the time, Xu anticipated the 800 units to sell out for more than $1 billion. 

    A penthouse at the building set a new price per square foot record in 2023 when it closed for $2.3 million, or $2,300 per square foot. The tower is also home to the priciest rental in Queens, a 67th-floor penthouse that snagged a new tenant earlier this year with a last asking price of $11,500 per month, the New York Post reported. 

    However, the building at 3 Court Square isn’t without its challenges. Several of its penthouses, priced between $2 million and $3.4 million still haven’t traded. Plus, 90 condo owners at the tower sued the developers in 2022 over allegations that early victories heralded by the team behind the project were actually misrepresentations of actual sales numbers, which were later revealed to be much lower than the numbers shared at the time many buyers signed contracts. 

    Despite the slowdown at Skyline, developers don’t appear to be backing down from building condos in the neighborhood. Montperia Group and JLS Construction Group are planning a 40-story tower, including more than 200 condos, at 24-02 Queens Plaza South, backed by a $115 million construction loan from Maxim Credit Group. 

    Earlier this week, Hang Dong Zhang’s BZ Development Group finally filed plans to demolish a three-story building at 23-08 Jackson Avenue six years after buying it. The developer is planning to replace the 18,000-square-foot structure with luxury condos, called the Moon Court Square. 

    Not so fast… 

    The New York City mayoral election is finally upon us, but the jury’s still out on whether a potential Zohran Mamdani victory will send wealthy residents packing. 

    Since the Assemblyman won the Democratic primary earlier this summer, brokerage executives and agents have forecasted doom and gloom for the real estate market if Mamdani prevails. Chief among their cautions is a refrain that New York’s richest residents will flee the city over fears of rising taxes and crime. 

    However, others in the industry have pushed back on that narrative. Some are projecting that sidelined buyers will re-enter the market if prices drop, according to a Curbed article published earlier this week. Others, including Serhant’s Peter Zaitzeff, characterized most of the chatter as conjecture.

    “Obviously, there’s a lot of talk, but it’s just talk,” Zaitzeff told the outlet. “New Yorkers like to talk, they like sensationalism, but New York is New York.” 

    Still, many brokers are on edge, especially as agents in the suburbs are reporting an uptick in activity ahead of the election. The New York Post billed the rising prices and competition in Greenwich, Connecticut and Westchester as a reaction to the looming change in leadership. 

    “We’ve been seeing bidding wars, and we’ve been seeing people come out of New York City,” Houlihan Lawrence’s Joy Metalios told the outlet. 

    Compass’ Heather Harrison, who works alongside her husband, Zach, told the Post that Westchester is “even busier than it was during Covid.” 

    But the duo was quoted in Curbed as saying most of the folks moving out to the suburbs were already planning to regardless of the election. They added that perhaps the only true consequence of the pending election is those suburban buyers pulling the trigger more quickly over fears that even more competitors will enter the ring, given all the press coverage. 

    Even if the Mamdani-related woes are far-fetched, the industry still isn’t taking any changes. After Mayor Eric Adams dropped out of the race in September, real estate professionals backing the incumbent official instead steered their donations to former Gov. Andrew Cuomo

    Early voting ends on Sunday, Nov. 2 at 5 p.m. Election Day voting begins on Tuesday, Nov. 4 at 6 a.m. and closes the same day at 9 p.m. 

    NYC Deal of the Week

    The most expensive deal to land in city records this week was a condo at Extell Development’s 50 West 66th Street, which closed for roughly $47 million, or $6,700 per square foot. Unit 47E in the Upper West Side tower sold to an anonymous LLC known as Darcy5066. 

    Corcoran’s Beth Benalloul and Hilary Landis are heading sales at the 127-unit building. 

    Read more

    The Daily Dirt: Big zoning day in Queens


    How Queens ascended the resi throne


    Jiashu Zu’s Skyline Tower Condo Sets Price Record for Queens

    Penthouse at Skyline Tower sets price record in Queens


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    Sheridan Wall, Matthew Elo

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  • New rezoning plan for Long Island City envisions “future growth”

    New rezoning plan for Long Island City envisions “future growth”

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    Long Island City is the latest neighborhood primed for rezoning, the city announced Tuesday, kickstarting the early stages of a process that’s expected to result in new housing and infrastructure upgrades for a swath of Western Queens.

    The proposal, dubbed “One Long Island City,” includes LIC’s Industrial Business Zone and an area extending from the East River to Court Square and 23rd Street; and from Gantry Plaza State Park in the southwest to include Queensbridge Houses in the north.

    While the proposal it still in its infancy, the rezoning shares the same goals of as other plans across the city, including the creation of new affordable housing and greenspace, enhanced transit, improved infrastructure, and greater economic development. The city also seeks to make these areas more climate resilient.

    Handout

    A map of the Long Island City Neighborhood Study area.

    The rezoning effort seeks to create a more unified vision for an area that has been rapidly developing — and gentrifying — in recent years. Local Councilmember Julie Won described it as a more “holistic” approach than the individual site rezonings “that have been hurtful and divisive for so long in our community.”

    The proliferation of such neighborhood-wide rezonings under Mayor Adams reflects the larger shift away from a “project by project” approach in favor of bigger-picture planning.

    Tuesday’s announcement by Won and members of the Adams administration jumpstarts the preliminary community planning process. The months-long study period will include proposed land use changes to guide new development across Long Island City and solicit public input on issues such as transit, infrastructure, capital investments and open spaces.

    “This comprehensive community plan invites the whole community to participate in identifying, defining and protecting important existing resources, while also developing a blueprint for future growth that ensures equity and resilience for all,” Won said at a press conference in Queensbridge Park. “Under our current developer-led process, we’ve seen-record high rents and have said goodbye to too many of our longtime neighbors who could no longer afford to live here. If we continue this route, we will continue to be exhausted, remain on the defense and battle this affordability crisis one luxury tower at a time.”

    Councilmember Julie Won speaks at a a press conference in Queensbridge Park to announce a new rezoning of Long Island City.

    Téa Kvetenadze

    Councilmember Julie Won speaks at a a press conference in Queensbridge Park to announce a new rezoning of Long Island City. (Téa Kvetenadze)

    The process is being spearheaded by the Department of City Planning and will culminate in a final neighborhood plan, including zoning changes, to be voted on by the City Council by the end of 2025.

    It’s the fifth neighborhood-wide rezoning under Mayor Adams and the second in Queens, after one was announced for Jamaica in May. The Bronx, Brooklyn and Manhattan each have their own local rezoning plans at various stages of the public review process.

    A separate neighborhood study was also announced Tuesday that will encompass parts of Astoria, Sunnyside and Woodside. The “Heart of District 26” plan stretches from Queens Boulevard and Roosevelt Avenue, respectively, to the Brooklyn-Queens Expressway.

    A map of the Northern Boulevard and Roosevelt Avenue Study encompasses multiple neighborhoods of Astoria, Sunnyside, and Woodside.

    Handout

    A map of the Northern Boulevard and Roosevelt Avenue Study encompasses multiple neighborhoods of Astoria, Sunnyside, and Woodside.

    Unlike the “One Long Island City” plan, the Astoria plan will not lead directly to a rezoning. Instead, its findings “can be considered at a later time” and will serve as guidance for future development, Won said. It will be funded by City Council Speaker Adrienne Adams and led by the urban planning nonprofit Hester Street, which is expected to complete its plan by next June.

    Long Island City’s population has grown by 78% in the past 30 years, per Won, and rents have soared with it: last year, one-bedroom apartments in the neighborhood went for an average of $4,114 a month, according to Zumper.

    At one time it was poised to become home to a new Amazon headquarters, though that plan famously imploded following community pushback.

    The 2001 rezoning of 34 blocks of the neighborhood kicked off the ongoing development boom that has transformed its skyline. But more recent attempts to rezone Long Island City have fallen through, including a proposal by the de Blasio administration.

    The city admitted at the time that the 2001 plan had fallen short.

    Won said the plan announced Tuesday included areas such as Queensbridge that were left out of the initial rezoning 22 years ago.

    Corinne Hayes, president of the Resident Association for Queensbridge Houses, told the Daily News she was optimistic about the plan.

    “To be a part of the planning [process] is not the tradition,” she said. “Usually, we’re given what was planned and we live with it.”

    Public town halls for both proposals and planned for next month.

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    Téa Kvetenadze

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  • Three Trends Impacting New York City Commercial Real Estate

    Three Trends Impacting New York City Commercial Real Estate

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    Tenant behavior in the office market, regulation in multifamily and a much higher cost of capital contributed to a 43% drop in New York City investment sales to $12.8 billion in 1H 2023 from 1H 2022, according to research compiled by Ariel Property Advisors.

    However, that drop was expected as we began to see a slow down at the end of 2022 due to rapidly rising interest rates. As a result, while the first quarter was lackluster, the market improved during the second quarter as savvy investors seized the opportunity to invest in repriced assets.

    Office: Letting Go, Holding On, Recapitalizing and Repositioning

    With New York City’s office occupancy rates hovering around 50% of pre-Covid levels, the dollar volume of office transactions fell 48% year-over-year to $2.4 billion in 1H 2023, one of the lowest levels in the past 10 years.

    Mortgage Maturities Force Decisions

    While mortgage maturities are presenting a major challenge in the office market, they are providing insight as to how office landlords and investors view the office world. Owners are essentially choosing which assets to save and which ones to let go. Therefore, when the underlying fundamentals are weak and there’s no immediate hope for the asset, keys are handed back to lenders.

    However, investors with a long-term outlook and the ability to withstand the storm are well-positioned, especially once they’ve shed their lowest performing assets. These owners have managed to successfully refinance, attract new capital, leverage the repriced values of their buildings and should be able to greatly benefit from this strategy in the long run.

    Letting Go

    Examples of major landlords letting go of their assets in the first six months of 2023 include RXR’s 61 Broadway; L&L Holding Company’s Metropolitan Tower at 142 West 57th; Related’s 2100 49th Avenue and 2109 Borden Avenue in Long Island City, Queens; and Blackstone’s 1740 Broadway.

    Holding On

    Some of these same owners, however, are holding onto office properties with strong underlying fundamentals by extending their loans and bringing in new capital. These include newer, well-located, occupied buildings with high rents such as SL Green’s 245 Park Avenue; Tishman Speyer’s 300 Park Avenue; RFR’s 375 Park Avenue; RXR’s 601 West 26th Street; Blackstone’s Willis Tower in Chicago.

    Recapitalizing

    The office tower at 245 Park Avenue is a great example of not only holding on, but also bringing in a new investment at a slight discount to the original 2017 purchase price, which is a great testament to the interest in investing in quality assets.

    Repositioning

    Office assets with weak underlying fundamentals but a strong future, traded nicely at a discount over the past six months either to investors or to user groups who believe in New York City’s office market long-term. These include the acquisitions of 40 Fulton Street, 126 East 56th Street and 529 5th Avenue by David Werner Real Estate Investments, Sovereign Properties and Namdar, respectively. Owner-users stepped up with Hyundai acquiring 15 Laight Street; NYU acquiring 400 Lafayette Street; and Enchanté acquiring 149 Madison Avenue.

    Multifamily: One Asset Class, Three Different Outcomes

    Multifamily dollar volume dipped to $1.1 billion in 1Q 2023 but soared 242% quarter-over-quarter to $3.9 billion in 2Q 2023, according to Ariel Property Advisors’ Q2 2023 Multifamily Quarter in Review New York City. However, each asset behaved differently depending on whether it was free market, rent stabilized or affordable housing.

    Free Market

    Free market multifamily accounted for 51% of the multifamily dollar volume in the first half of the year. Significant transactions included GO Partners purchase of 265 East 66th Street for $402 million; Slate’s acquisition of 600 Columbus Avenue for $120 million; Namdar’s $100 million acquisition of 552 West 54th Street; and Stonehenge and Carlyle’s $114 million investment in 408 East 92nd Street.

    There continues to be a deep bench of institutional, private and international capital available to invest in free market properties. These apartment buildings benefit from New York City’s favorable fundamentals such as job growth and government policies that discourage new development and, therefore, have created a housing shortage that is driving up rents by 10% year-over-year. The City has an estimated deficit of 376,000 units of housing today, a figure that will rise to 560,000 by 2030.

    Rent-Stabilized

    Prices for rent stabilized buildings in 1H 2023 dropped to their lowest level since 1H 2015 because of higher interest rates combined with the significant structural changes created by the Housing Stability and Tenant Protection Act of 2019 (HSTPA), a regulation that eliminated incentives to renovate buildings and vacant units. As a result, we saw buildings originally purchased in 2014, 2015 and 2016 sell in the first six months of 2023 for a discount of close to 30%.

    Lower prices for rent stabilized assets, however, are attracting smart, private money and high net worth individuals and families who understand the product, believe the regulations will be changed because they are unsustainable and are willing to stick it out for the long-term.

    Affordable Housing

    Affordable housing enjoyed 34% of the total multifamily pie in the first six months of the year. Investors in this asset class are mission-driven with a double bottom line; seeking to integrate financial success with social accountability. The opportunity drivers include lower property taxes, value-add opportunities that allow for rent increases over time, specifically for vouchered tenants, and agency financing.

    Several prominent affordable transactions took place in the first half of the year including Nuveen’s purchase of the Omni portfolio for close to $1 billion, and the $150 million sale of Sea Park, an 818-unit former Mitchell Lama building with a land opportunity, which was arranged by Ariel Property Advisors. Additionally, Ariel is currently marketing nearly 5,000 affordable units that will be sold this year or the first quarter of 2024.

    Land of Opportunity

    New York City land sales dropped 30% year-over-year to $2.5 billion in the first half of 2023 compared to the first half of 2022, which can be attributed to a number of factors including the failure of state lawmakers to approve a successor to the 421a tax abatement program, which expired over a year ago; the dramatic rise in construction costs, both hard costs and labor; and slower condominium sales due to higher interest rates.

    However, lower prices presented opportunities for developers such as Rockrose, which acquired the St. Francis College campus in Downtown Brooklyn for $160 million, and other investors that bought sites with the intention of land banking.

    Land that is 421a vested and qualified for the tax abatement before it expired last year also traded at a premium as did affordable housing developments supported by the city and state. Additionally, rezoned locations in the Jamaica, Astoria and Willets Point areas of Queens contributed to that borough enjoying an 80% increase in land transactions year-over-year.

    What to Watch For

    Looking forward, we expect to see:

    • Private lenders step up to fill the void left by the regional banks that are facing greater scrutiny from regulators following the bank failures in the first half of the year.
    • Mortgage maturities contribute to additional repricing for office and rent stabilized multifamily assets, opening the door for investors to acquire properties with strong fundamentals at a discount. The FDIC’s sale of the Signature Bank portfolio later this year also will present an interesting investment opportunity.
    • Although state lawmakers failed to approve a comprehensive housing policy in the last legislative session, the governor announced a new program that will provide some tax relief to developers in the Gowanus section of Brooklyn, which is encouraging because it could be expanded to other parts of the City.

    While there are challenges, economic indicators in New York City are strong. Therefore, we believe smart capital, which is abundant, will return in a big way in the next six to 18 months.

    Content for this article was taken from Ariel Property Advisors’ 2023 Mid-Year Research Reports, which I presented at our firm’s Coffee & Cap Rates event on July 20, 2023. To access Ariel’s research reports and videos from the event, please click here.

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    Shimon Shkury, Contributor

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  • New York City Free Market Multifamily: Pocket Of Strength Amid Regulations, Lack Of Housing

    New York City Free Market Multifamily: Pocket Of Strength Amid Regulations, Lack Of Housing

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    Over-regulation and the systemic lack of new housing in New York City have created an opportunity for investors in free-market multifamily assets. In this article, we review emerging investment trends, underlying fundamentals and drivers. We also have some recommendations for smaller investors.

    Investor’s Shift: Regulation Effect #1

    Market rate apartments, which make up 45% of the City’s 2.27 million rental units, consistently account for the majority of sales in the multifamily market. Our research shows that of the $2.11 billion multifamily sales recorded in Q1 2023 in New York City, 78% of the dollar volume was for buildings with predominantly market rate units, signaling continued investor confidence in free market multifamily. In contrast, regulated rent stabilized assets, which make up 44% of NYC’s rental units, accounted for only 14% of the dollar volume in the first quarter.

    The Drivers: Regulation Effect #2

    There are multiple factors driving investment in New York City’s free market apartment buildings.

    Demand for housing is stronger than ever but unlike many other parts of the country, supply isn’t keeping up. New residents flock here as students to attend one of the City’s colleges and universities or to work in industries such as FIRE (finance, insurance and real estate), technology or the arts. Higher interest rates have discouraged many renters from buying, which is also putting additional pressure on the rental supply. Therefore, the City’s housing crunch is expected to persist as economic indicators continue to improve, including the following:

    • The fastest population growth since the 1930’s. New York City’s population increased by 6.8 percent between 2010 and 2020 or by 562,000 people totaling 8,804,000. After losing residents during the pandemic, economists forecast that net migration will increase again this year.
    • Jobs grew by 163,200 in the past 12 months. The total jobs number is 4,683,100 pushing NYC above the 4,668,000 level last seen in February 2020.
    • NYC is a college town. Over 550,000 students have resumed in-person learning at the City’s 110 universities and colleges.

    Tourism is on the rebound. The City is expecting 61 million visitors in 2023, up from 56 million in 2022 and on track to reach the record level of 66.6 million visitors set in 2019.

    Subway ridership has risen. There were 4,002,961 riders on April 20 (73% of pre-pandemic levels), the first time ridership surpassed 4 million since March 12, 2020.

    Rental growth. In May, increased demand pushed up median Manhattan rents to $4,360, up 10.6% from the previous year; Brooklyn rents rose 9.7% year-over-year to $3,517; and rents in Northwest Queens rose 16.2% to $3,368 over the same period, according to the Elliman Report.

    Inflation hedge. Rents can be raised to offset rising expenses such as utilities, salaries, repairs and maintenance, property taxes and the rising cost of debt resulting from interest rate hikes.

    Public policies are choking new construction, a topic I examined in a recent Forbes article.

    • The Housing Stability and Tenant Protection Act (HSTPA) of 2019 removed incentives to rehabilitate rent stabilized units when they are vacated by long-term tenants because the law doesn’t allow for adequate rent increases to cover the cost of renovations. The result is, tens of thousands of units are kept vacant.
    • There has been minimal rental construction. The expiration of the 421a tax program in June 2022 eliminated incentives to build middle income and affordable rental housing versus condominiums. Lawmakers argued that the 421a program, which produced 68% of the City’s multifamily apartments (117,042 rental units) between 2010 and 2020, was a “giveaway” to developers. However, 421a is a win-win because it generates housing and eventually tax revenue for the City while motivating developers to invest. Since New York City’s construction costs and taxes are higher than other cities, we are now seeing that if projects don’t make economic sense, developers will simply leave and build housing in more hospitable states.

    Although the City will need 560,000 additional housing units by 2030, we can expect that the elimination of the 421a tax incentive will contribute to the continued housing shortage. New construction starts in NYC fell to only 12,005 housing units in the second half of 2022 and only 2,639 units in the first four months of 2023, compared to filings for 31,750 units in the first half last year when 421a was still in effect, according to a Real Estate Board of New York (REBNY) analysis.

    Strong Fundamentals: Regulation Effect #3

    Pre-2019, institutional investors looked favorably on rent stabilized housing as any vacancy presented a rehabilitation opportunity and, as a result, an increase in rent and value. This business plan brought a tremendous amount of capital to the City, benefited older buildings and enabled existing rent-stabilized tenants to enjoy great housing with low rents because those apartments were subsidized by the higher rent units. However, HSTPA changed that. Since then, institutional investors have shied away from regulated multifamily and invested heavily in free market buildings and affordable housing with a Capital A (as noted in my previous Forbes article).

    For institutional investors in New York City, free market housing has presented a great opportunity, especially in the current inflationary environment. Some of the significant transactions in the last 18 months include:

    • Blackstone Group purchased 8 Spruce Street from Brookfield Properties for $930 million.
    • GO Partners acquired three Upper East Side multifamily properties for $825 million, and the American Copper Buildings, a pair of Murray Hill luxury apartment towers at 626 First Avenue, for $850 million.
    • Ponte Gadea Group purchased 114 Fulton Street in the Financial District for $487.5 million.
    • A&E Real Estate acquired 160 Riverside Boulevard on the Upper West Side for $415 million.
    • Avanath Capital Management acquired 38 6th Avenue & 535 Carlton Avenue in Brooklyn for $314.5 million, which was the California-based investment firm’s first purchase in New York City.
    • KKR has invested over $792 million in four New York City multifamily properties since 2020 including the $190 million acquisition of 80 Dekalb Avenue in Fort Greene, Brooklyn.
    • Stonehenge partnered with the Carlyle Group to acquire a 32-story, 196-apartment rental tower on the Upper East Side of Manhattan for $114 million. Last year, the firm teamed up with San Francisco-based investor Stockbridge Capital Group to buy a 22-story, 163-unit market rate building at 354 East 91st for $128 million, and, in a separate transaction, closed on a six-story, 70,000 square foot apartment building at 780 Greenwich Street in the West Village for $80.4 million.
    • The Carlyle Group has acquired 56 multifamily properties valued at $483 million since 2020, of which 44 valued at $190 million were for buildings with less than 10 units. In addition to joining Stonehenge in its acquisition of the 196-unit Upper East Side rental, Carlyle invested over $140 million in three rental developments with 421a tax abatements–two in Gowanus and one in Long Island City.

    Smaller Buildings, Free Market, Tax Protected, Boosted by Over-Regulation

    Smaller investors should follow Blackstone, KKR and especially Carlyle, which has invested heavily in small, class A and class B predominantly free market rental buildings that are, in many cases, tax sheltered. The waves of young adults and newcomers will continue unabated while the supply of housing in the current political environment will continue to diminish, thereby guaranteeing that the fundamentals will stay strong even during a recession or a down market.

    Public Policies Fuel the Perpetual Growth of Free Market Rents

    Rent growth could be mitigated by encouraging developers to build. New York Gov. Kathy Hochul tried to jumpstart the development market this year by introducing an expansive affordable housing program that included a successor to the 421a property tax abatement program and extending the deadline required to complete existing 421a projects from 2026 to 2030, among other initiatives.

    However, the State Legislature didn’t approve the governor’s proposals to increase housing inventory, but passed more restrictive regulations for her to sign. One bill would disallow a rent increase as a result of the combination of rent-stabilized units, discouraging the rehabilitation of vacant units and reducing supply further. Another bill encourages tenants to sue their landlords for fraud, making it an administrative nightmare to run and own and rent-stabilized buildings.

    In closing, the multifamily fundamentals in New York City are strong, pushed by too much regulation, lack of new housing and the misalignment of interests between the regulators and the overall real estate market. However, this has created an opportunity for investors who understand that any asset allowing for considerable rent growth will benefit.

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    Shimon Shkury, Contributor

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