Rezoning Done Right Putting Downtown Brooklyn on Map

The first phase of City Point is completed

The rezoning of Downtown Brooklyn has dramatically revitalized the area over the last several years and made it more desirable for people to work and live there.

This rezoning plan has brought, since 2006, more than $3.9 billion in private investment, and 8.7 million square feet of development, including 607,000 square feet of retail space; 297,000 square feet of office space; 5,900 residential units; and 1,000 hotel rooms.  Along with the redevelopment of Atlantic Yards and the soon-to-open Forest City Ratner project of the Barclays Center, Downtown Brooklyn will be one of the City’s great success stories for the first half of the twenty-first century.

Downtown Brooklyn is the city’s third-largest central business district and was rezoned in 2004 to accommodate greater density consistent with the Department of City Planning’s goal of fostering transit-oriented growth and channeling new development to transit-rich areas. The Real Estate Board of New York supports this type of rezoning which allows both commercial and residential development that positively impacts the city’s economy.

The Special Downtown Brooklyn District (SDBD) where this rezoning occurred borders the neighborhoods of Brooklyn Heights, Cobble Hill, Boerum Hill, Bridge Plaza and Fort Greene. It encompasses an area generally bounded by Tillary Street, Flatbush Avenue and Atlantic Center, Atlantic Avenue; and Clinton and Court Streets.

Retail space has boomed with new shopping and amenities transforming Fulton Street with the opening of Shake Shack, Aéropostale, GAP factory store and ALDO Shoes to name a few and has new leases for T.J. Maxx, Raymour & Flanigan, H&M and Century 21, among others. Office space has transitioned from back office use to front office with more media, advertising and technology companies moving to Downtown Brooklyn.

New residential developments offering thousands of new units in Downtown Brooklyn include; Avalon Fort Greene, residential/retail by Avalon Bay; BKLYN Gold by Lalezarian Development; The Brooklyner, residential/retail by Clarett/Equity Residential; DKLB, 80/20 residential/retail by Forest City Ratner Companies; Toren, residential/retail by BFC Partners; 14 Townhomes (Phase 1) by Time Equities/Hamlin Ventures; Schermerhorn House/Common Ground, mixed income/mixed use by Common Ground + Actors Fund/Hamlin; as well as  Two Trees Development’s mixed-use project 194 Atlantic Avenue and the residential project 110 Livingston Street, which redeveloped the city’s former Department of Education headquarters.

The rezoning plan also brought 1,000 more hotel rooms with an expansion at the Marriott, a Muss Development project, and new additions of the aLoft Hotel, Hotel Indigo and the NU Hotel/The Smith.

Last year, a $15 million Fulton Mall streetscape project was completed which implemented new sidewalks, bus shelters, lights and a new plaza called Albee Square, located at the base of the historic Dime Savings Bank of New York and City Point, a sustainable mixed-use development. Other streetscape project improvements were added along Adams Street and Boerum Place as well as along Flatbush Avenue, which softened the Downtown Brooklyn boundary with Fort Greene.

There are several new projects in the pipeline.  The first phase of City Point is completed and the project includes over 1.5 million square feet of local and national retail as well as affordable and market-rate housing. Mixed-use projects include Steiner Development building 324 Schermerhorn Street; 388 Bridge Street by Stahl Real Estate Company; Avalon Bay Willoughby by Avalon/UAL; and 210 Livingston by Benenson Capital Partners. Others are Muss Development‘s project of 2 Floors in 345 Adams; Oro 2, a soft site by Lalezarian; 75 Schermerhorn, a soft site by Edison Properties and 9 Townhomes (Phase III) by Time Equities/Hamlin Ventures.

Changes to parking may also be coming to the SDBD. The city recently proposed to modify the parking requirements to reflect the reduced demand for accessory parking. This proposal would reduce by half the amount of parking that new residential developments are required to provide to better reflect the actual parking demand in Downtown Brooklyn, which features some of the best transit access in the city.

It would also encourage affordable and mixed-income housing by eliminating parking requirements for affordable housing units as well as simplify the parking regulations in the SDBD, which would provide more opportunities for additional public parking for residents, employees and visitors, according to the city. A public hearing on this proposal will be held by The City Planning Commission on September 19, 2012.

This proposal demonstrates that the City continues to make changes in zoning to reflect actual conditions and help reduce the cost of development.

Source: Real Estate Weekly

Getting Dirty

 
208 East 14th Street

Industry analysts continue to debate whether the New York City real estate market has recovered, but there’s no question that land prices here have. In some cases, development sites are trading for close to — and even exceeding — the levels they hit just before the 2008 financial crisis.

Eager developers, encouraged by lenders with a newfound willingness to write loans for construction projects, are acquiring development sites across the city, pushing up land prices. According to data compiled for The Real Deal by real estate research firm PropertyShark and the commercial brokerage Massey Knakal, the gains in price and volume are being driven by a flurry of activity in Manhattan and Brooklyn.

In fact, the surge in appetite for land has some developers worried that a bubble is imminent.

“I’m starting to feel that it is going out of control,” said Miki Naftali, CEO of the Naftali Group, which last month closed on a deal to buy an interest in a development site at 33 Beekman Street in the Financial District.

The asking prices for some properties are twice what they were just 12 months ago, noted Naftali, though he declined to reveal what he paid at 33 Beekman.

Closed sales data doesn’t show increases quite that steep, but prices are clearly on the rise.

For Manhattan development deals so far in 2012, the price per buildable square foot is $323.43, up from $308.32 last year, according to data from Massey Knakal Realty; in Brooklyn, it’s grown to $117.71 from $113.24 in 2011.

Activity, too, is on the rise. In the first six months of 2012, there were 275 sales of vacant properties (including parking lots) in New York City, according to PropertyShark. If that energetic sales pace continues as analysts expect, the year will conclude with some 550 land buys, the most since 2008, when the city saw 620.

“The level of activity indicates that people are buying land again, and there’s no question there’s been improvement in pricing,” said Teresa Nygard, a land appraiser for Manhattan-based KTR Real Estate Advisors.

 

Manhattan deals
 The uptick in land sales, experts said, is partly due to the greater availability of construction financing.
“Without a construction loan, land is worth nothing,” said Abraham Hidary, president of Hidrock Realty, which paid $27.9 million, or around $200 per buildable square foot, in March for a vacant lot at 133 Greenwich Street. Along with partner Robert Finvarb Cos., Hidary said his team plans to build a $100 million, 320-room hotel on the site, which is slated to open in 2015.

That deal was one of 27 vacant Manhattan land buys in the first half of this year, according to PropertyShark. If that activity keeps up, 2012 will see more activity than last year, when the borough had a total of 46 deals for vacant land; 2010, when there were 41; 2009, when there were 23; and even 2008, when there were 37.

And that doesn’t include sites with existing structures that will likely be converted to new uses, or razed for new buildings. According to Massey Knakal, which does track those sites, Manhattan has already seen 44 deals for development sites in the first half of the year, worth $809.4 million. That puts the borough on track to far exceed last year’s 54 total transactions. The strong residential market is one of the main forces driving more investors to buy land. The average monthly rent for a Manhattan apartment, for example, hit a record high of around $3,400 this spring, according to data from the brokerage Citi Habitats. Prices for new condos in some areas, meanwhile, are now hovering around $2,000 per square foot, brokers said.

That may explain why the priciest land deals of the year are those that are slated for use as new condominiums. The priciest Manhattan development deal per square foot so far in 2012, according to Massey Knakal, was the sale of a parking lot at 24 Varick Street, also known as 11 North Moore. That deal closed in June for $47.7 million, or $707 per buildable square foot. As The Real Deal has reported, VE Equities, headed by Zach Vella and Justin Ehrlich, is developing a 20-unit condominium there.

And at 105 West 57th Street, JDS Development Group purchased the controlling interest in a lot owned by Starwood Capital Group for $40 million. The price for the site, which can accommodate a skyscraper, comes to $617 per buildable square foot, according to Massey Knakal.

JDS — the developer of the Chelsea condo conversion Walker Tower — plans to build a 100,000-square-foot, 50-story condo on the site, which is already zoned for residential.

Sites like these, which are “shovel-ready,” tend to fetch top-dollar from developers, explained Ofer Cohen, president of the commercial brokerage TerraCRG.

Other development deals that fetch top-dollar are often those with existing structures that are ripe for conversion to residential uses.

In April, for example, a 10,446-square-foot factory and garage building at 37 Great Jones Street sold for $7.5 million. According to Massey Knakal, the seller, Great Jones Street Property LLC, paid around $633 per buildable square foot for the site. The landmarked building is being converted to five residential lofts and the project, developed by DIB Management, is currently seeking approval for its plan from the city’s Landmarks Preservation Commission.

Another high-profile Manhattan land deal, which closed in 2011 but also seems to reflect the land-rush trend, is a weedy vacant lot at 208 East 14th Street, which has sat vacant for years with no apparent interest among developers to build on it. It was nicknamed the “mystery lot” by Curbed.

A partnership of New Jersey-based Ironstate Development Company, Abe and Scott Shnay, and CB Developers bought it last year for $33.2 million and is now beginning to build an eight-story, 82-unit condo that is scheduled for completion in 2013.

Brooklyn boom

Brooklyn has seen an even more dramatic spike in activity.

Last year — Brooklyn’s most active since the financial crisis — some 206 vacant properties traded hands in the borough, according to PropertyShark. That’s more than the 195 that traded in 2008.

Naftali is currently constructing a 104-unit apartment building on an empty lot in Park Slope, which he bought seven months ago for around $100 per buildable square foot. Today, with demand rising, he said he believes he could sell the property for $200 per buildable foot.

“The market is moving so fast,” he said.

The borough’s high level of activity can be traced to a sudden uptick in supply: Many development sites that were stalled during the recession and then tied up in litigation are now coming to market.

“A huge vacuum opened,” Cohen said.

Simultaneously, Brooklyn’s popularity has grown throughout the downturn. Cohen estimated that residential rents in Brooklyn have been growing by about 10 percent per year.

Illustrating the new thirst for Brooklyn land is one of the borough’s priciest land deals this year: the sale of a stalled site at 242 Bedford Avenue in Williamsburg, where a Whole Foods will soon be opening, the New York Post reported. Michael Cayre’s Midtown Equities, along with Aurora Capital and developer Alex Adjmi, closed on the purchase from landlord Yahuda Backer in March. According to Massey Knakal, the site traded for $21 million, or around $222 per buildable square foot.

The partners’ 150,000-square-foot development will also include luxury rental apartments, the Post reported.

In another deal with a high price per square foot, an 8,150-square-foot Brooklyn Heights building at 174 Montague Street, formerly the home of Eamonn’s Irish pub, traded hands in May for $12 million, or $240 per buildable square foot, according to Massey Knakal. The Brooklyn Eagle reported that the new owners are Eli Stoll and Charles Dayan, and that the existing two-story structure will be replaced by condos.

Also in May, 313 Gold Street in Downtown Brooklyn traded for $19 million. Since the site can accommodate a skyscraper of up to 40 stories, that works out to only around $81 per buildable square foot, according to TerraCRG.

The vacant lot, at Johnson Street — located next to the now sold-out Oro condominium — was supposed to be the site of Oro’s sister building, but developers appeared to have scrapped those plans when they put the land on the market this year. A group called Brooklyn Princess LLC was the purchaser, according to city records.

And in June, at 61 Park Place in Park Slope, a 5,000-square-foot building owned by the Catholic Church was purchased for $5.75 million, or $357.50 per buildable square foot, the priciest per-square-foot deal this year in Brooklyn. According to filings with the city’s Department of Buildings, a demolition permit for the site has already been issued.

Other boroughs

Outside Manhattan and Brooklyn, however, land sales are still far below their boom-time levels.
In the Bronx and Staten Island, activity tumbled after the financial crisis and has stayed roughly the same since, according to PropertyShark.

In Queens, the number of land trades has decreased every year since 2008. There have been 49 sales of vacant properties this year, on track to finish the year at about 100, less than last year’s total of 126, according to PropertyShark.

PropertyShark’s Calen Onet attributed the sluggishness to lenders’ view that Queens is “the NYC borough with the most foreclosures.”

The one exception was the massive deal in February by Victor Elmaleh’s World-Wide Group, for a 25,000-square-foot lot on 24th Street in Long Island City.

World-Wide bought the lot for $28.9 million from the Criterion Group, according to city property records. Elmaleh’s plans for the site are unclear, though. He did not return a call for comment, nor did Criterion.

 

By C. J. Hughes

http://therealdeal.com/issues_articles/getting-dirty/

Uncle Sam I Am: America’s Favorite Allegory Flexes Its Muscles in the Latest Issue of The Economist, But is Economic Prosperity Really So Close?

( Commercial Observer) - The cover of last Friday’s The Economist bears an image of Uncle Sam.

That is not unusual in itself, since he is one of the magazine’s most consistent allegories. In his most current incarnation, however, he departs significantly from Uncle Sam Wilson of Troy and from the Uncle Sam imagined by J.M. Flagg for his 1917 war recruitment poster. In keeping with a more contemporary sartorial standard, the updated version has lost his familiar coat. He is now shirtless and buffer than any economist you are likely to encounter. As wide as his guns, the title above him reads “comeback kid,” implying a rebounding recovery.

Is the Economy on the Rebound? Or is it Reinvention?



The suggestion that we may be on the cusp of a new growth spurt seems ill timed. June’s employment report seemed confirmation enough that something is wrong. As it turns out, a contrarian assessment is not what the venerable journalists of St. James’s Street intend to convey. They agree that the economy is “in a tender state,” but also posit that things are better than they appear. The private sector is positioned for growth. Pointing to politics and the public sector as curbs on our potential, their advice to the next president beckons to the Hippocratic Oath: do no harm.

Rather than rebounding, the economy may be reinventing itself. We should expect no less. After all, decline and reemergence from recession are necessary processes of creative destruction. In the current cycle, the destructive forces have razed the unsustainable positions of the housing market and financial system. It is plain to see that these forces are still at work. What requires substantiation is the notion that a new, stronger order is emerging quickly or to a degree that negates the increasingly profound structural impediments to long-term prosperity in the United States.

Minutes from the June Federal Reserve Board and Federal Open Market Committee meeting, released last week, show a constrained assessment of the economy’s health. In its necessarily tempered language, the Fed observed that economic and labor market activity has slowed since the first quarter. That is rather euphemistic when considering that January’s private sector net job gain was the strongest in almost six years.

Commenting on the current policy juncture, Dennis Lockhart on Friday offered that “with each apparent change of the pace of activity, policymakers as well as business planners, government planners and forward-looking consumers had to ask whether the new trend is likely to be transitory or persistent.”

Our inability to establish a sustained trend has had a dampening effect on behavior, even during those brief periods when the data have improved. At the year’s halfway point, we remain constrained. Absent momentum in the labor market, income growth and spending by households have softened and consumer confidence has retreated from earlier highs. Small business optimism has seen a full reversal of the year’s earlier gains.

Apart from the immediate European threat, U.S. fiscal policy is expected to weigh more heavily on the outlook in the approach to the election. No matter who wins the election, budget politics will maintain a high profile in 2013, even if the reality of our spending imbalance does not come to roost. Reflecting the possibility that domestic indecision or external shocks will reverberate through the global economy, Fed officials have restated their commitment to accommodative policies. The unfortunate reality is that monetary policy has largely exhausted its known potential; it might even be argued that recent moves by the Fed have been ineffectual if not counterproductive inasmuch as they distort incentives for risk-taking.

Opting to forgo a clear and regular message regarding monetary policy’s limits, the Fed risks feeding volatility as it is thrust into the political arena and as markets grow ever more dependent on central bankers’ attempts to offset failures in the fiscal realm. For the time being, that means the interest rate environment will remain exceptionally accommodative. Impairments to the transmission mechanisms of monetary policy mean that commercial real estate investors must remain on alert. The flow of capital is supporting property prices; it is not fomenting a commensurate improvement in the economic underpinnings of value.

Sam Chandan, PhD, is president and chief economist of Chandan Economics and an adjunct professor at the Wharton School.

http://commercialobserver.com/2012/07/uncle-sam-i-am-americas-favorite-allegory-flexes-its-muscles-in-the-latest-issue-of-the-economist-but-is-economic-prosperity-really-so-close/?utm_source=Sailthru&utm_medium=email&utm_term=The%20Commercial%20Observer%20NOW&utm_campaign=CO%20NOW%207%2F18

Featured: Massey Knakal’s Stephen Palmese Closed 8% Of All Brooklyn Sales Deals

(Commercial Observer) - The sale of 204 Huntington Street, a 62,404-square-foot asset in south Brooklyn, was 10 years coming.

The investment sales firm Massey Knakal Realty Services had first noticed the property, a warehouse-turned-multifamily development, in 2003-2004. Later, Area Property Partners owned and managed it between 2009 and 2010, before its principals decided to place the asset on the market.

To market such a property, Massey Knakal tapped a Bay Ridge-born broker whose tenacity in the investment sales sector had already earned him a reputation as one of the borough’s most active up-and-coming agents.

Stephen Palmese. (Photo courtesy Will O'Hare)

“We were prepping for this in late 2011, and there naturally had not been many, if [any], multifamily transactions,” said Stephen Palmese, a 30-year-old director of sales at Massey Knakal.
This multifamily offering, however, had an “added value play.”

“This was something that, on a price per square foot [basis], was being offered for almost $400 a foot on a net number,” said Mr. Palmese.

Located near Carroll Gardens, the area had seen an influx of new restaurants and developments, while condominium prices and rental prices swelled to favorable highs.

“It was a perfect opportunity where somebody was going to sit on it, and then convert it and sell the balance of the units for who knows what number in the future,” he said.

The property was formerly a collection of industrial properties that had been converted into apartments in 2003, Mr. Palmese explained. At the time, there had been a J-51 tax benefit program put on the property, which kept the rents in place at a 20 percent discount from normal market rates. With rents at $36 per square foot, a developer could swoop in, convert the property and raise the rents to levels similar to 360 Smith Street, a neighboring new development that was renting out at $49 per square foot.

His selling point was simple: “Take this property, turn it into a Class A property by way of a rental or by way of a condo,” said Mr. Palmese.

Aided by low interest rates and flush with cash, developer Doug Steiner of Steiner Studios closed on the 60-unit property for $24.5 million in May.

“This was a very rare property in that everyone is looking for a conversion or a vacant building,” said Mr. Palmese.

His intimate knowledge of the market has helped position him as one of the most prolific brokers in Brooklyn. Of the $1.5 billion in building sales in Brooklyn recorded in the first half of 2012, Mr. Palmese and his team of three full-time salesmen have accounted for approximately 8 percent.

He sold 313 Gold Street for $19 million, 109 Gold Street for $14.5 million and 131-137 Emerson Place for $13 million, among several of his most notable deals so far in 2012.

What’s attracting buyers to Brooklyn is the potential for transforming these buildings into market-rate rentals or condos.

“To a degree, Manhattan is an island, and a lot of pension money and a lot of hedge fund money is now looking at Brooklyn,” he said. “In Manhattan, 1 million [square] feet is big. In Brooklyn, it’s 100,000 [square] feet. So you have a lot of developers competing for sites that are 100,000 to 200,000 square feet, and there aren’t that many of them.”

The youngest of four siblings, the Bay Ridge native was educated in Staten Island and followed his two brothers to Georgetown University. When he graduated in 2004, he reached out to Jonathan Hageman, a friend of his sister’s who was a longtime employee at Massey Knakal.

“I applied for a bunch of finance jobs, [but] I knew I wanted to be in real estate. It was what my friends were doing, and they went on to do banking, private equity or hedge fund work,” said Mr. Palmese.

He was told that if he wanted to learn real estate, he should join Massey Knakal, where he would receive his “real estate 101” education before eventually moving on to work for a REIT or a major developer.

That landed him back in Bay Ridge, the Brooklyn neighborhood of his youth, to sell 447 86th Street for a Greek family.

“I’ve focused in that market for a period of time, and then in 2008 I shifted to this downtown Brooklyn market,” he said.

In making that shift, he essentially started his own business. He now has three full-time people under his charge during a period that he believes has become one of the most active in the Brooklyn marketplace in recent memory.

“I am calling 2012 ‘The Great Sell-Off of 2012’ because the volume in the market is 1½ percent,” he said. “In an average year [like] ’04, ’05 and ’06, it was 2½ percent. So it’s not even a function that there’s more deals, but what’s got me taken and why I’m calling it ‘The Sell-Off of 2012’ is the ferocity of people buying and selling.”

The draw for Brooklyn is the borough itself, he says, and not the so-called residual value that will be created by the impending debut of Ohio-based developer Forest City Ratner’s Atlantic Yards Development, which other brokers and developers have been boasting about ever since the Barclays Center broke ground in 2010.

“I think that’s hogwash,” he said of the shared benefits of the Atlantic Yards development on residential real estate. “I don’t think it’s going to affect residential rates at all. You can argue that it could decrease rents.”
“It has sort of insulated and propped up the retail in the surrounding corridors that were trying to find their identity,” Mr. Palmese said. “So yes, it has had a positive effect for retail, but I think it has a negative effect on residential.”

Despite being an Italian who was raised Catholic, he has been an active board member of the Jewish Children’s Museum and the Museum of Jewish Heritage. Meanwhile, his distinctly Mediterranean appearance helps him pass as either a Greek or Israeli national to his clients.

“In the Greek community, and largely, I was ‘Stavros Palmesolopis,’” he said with a laugh. “With the Jewish community, I am ‘Stefan Palmis.’”

Whatever the ethnic background, Mr. Palmese’s work has made an impression on his company’s co-founder.

“Stephen is certainly the next generation of superstar sales brokers in the city,” said Robert Knakal, chairman of Massey Knakal. “He is tenacious, he has tremendous integrity and he understands the business.”

http://commercialobserver.com/2012/08/the-eight-percenter-in-1h12-massey-knakals-stephen-palmese-closed-8-of-all-brooklyn-sales-deals-how/

NYC Loft Law

What is a “loft” building? Not to be confused with new luxury loft-style housing peppering the neighborhood, Williamsburg/Greenpoint is filled with numerous buildings that have been used for manufacturing, warehousing, and/or commercial purposes in the past. When artists started moving to this part of Brooklyn more than thirty years ago, a lot of these building were no longer in use and artists began to occupy them as live/work spaces. Over the years, countless residents have moved into lofts in many different types of buildings, some of which still had some kind of manufacturing, warehousing, or commercial use going on in them, while others had been converted solely to residential use. The big problem is that most of these buildings are not zoned for residential occupancy, technically making residential use illegal. In recognition of the fact that so many residents of North Brooklyn & NYC are living safely and happily in lofts that they legally shouldn’t be, the New York State Assemblyman Vito Lopez continually lobbied for and finally passed an expansion of the Loft Law in 2010.  This means that loft residents living in Williamsburg & Greenpoint now have a mechanism whereby their building can gain legal residential status and all of the protections that come with it (rent stabilization; the right to basic services; the ability to go to landlord tenant court in the event of a dispute with your landlord, etc).

 

What is the Loft Law? Initially passed by the New York State Assembly in 1982, it was a way of offering legal residential status to loft residents located mostly in SOHO, Tribeca, & Hells Kitchen. Generally speaking, a building that met the following criteria was covered by the original Loft Law: the building possessed no residential certificate of occupancy pursuant to §301 of the Multiple Dwelling Law, the building was used in the past for manufacturing, commercial, or warehousing purposes, and there were 3 or more residential tenants living in seperate apartments in the building in the 20 month period between April 1, 1980 and December 1, 1981 (the “statutory window period”)

 

What is the Loft Board? The NYC Loft Board was established in 1982 to regulate and coordinate the legal conversion of certain lofts in the city from commercial/manufacturing use to safe residential use.  The Loft Board consists of 9 (voting) members who meet monthly to hear cases and oversee rulemaking. In 2009, the Mayor reorganized the Loft Board to be housed as the Department of Buildings (as opposed to the Mayor’s office). The DOB commissioner and Commissioner of the Fire Department serve on the Board, as well as one member representing manufacturing interests, one member representing the real estate industry, and one member representing loft residential tenants, and four members representing the public. The  public members of the Board are appointed by the Mayor and serve for a term of three years.
The current make-up of the Loft Board is:

• Robert D. LiMandri, DOB Commissioner
• Manufacturers’ Representative – Mark Foggin
• Owners’ Representative – Matthew Mayer, Esq.
• Tenants’ Representative – Chuck DeLaney
• Fire Department’s Representative – Chief Ronald Spadafora
• Public Member – Gina Bolden-Rivera
• Public Member – Elliott Barowitz
• Public Member – LeAnn Shelton, AIA, Esq.
• Public Member – Daniel Schachter

In addition, the Loft Board has a staff of 12 divided into 3 units which oversee the work of the agency; the Legalization, Hearings, & Enforcement Units.

 

What is included in the Loft Law “extension” of 2010? Last year the Loft Law was amended to include lofts that didn’t qualify under the original law. This bill has been introduced every year for over twenty years and almost passed in September 2001. From 2003-2009, a loft law extension has passed only the Assembly; the State Senate had always killed the bill until 2010 when it finally passed. The bill refreshes the Loft Law, which offered no protection for tenants who moved in after 1987. The legislation also made permanent the Loft Law, which until now had to be extended periodically by the Legislature. (The deal also makes the lottery game Quick Draw permanent; the game and the Loft Law have always been linked by Albany lawmakers.) While the original 1982 Loft Law was explicitly limited in geographic scope, the new law seems to default coverage unless specifically excluded. 13 of the city’s 16 Industrial Business Zones were excluded from coverage of the law; however, loft buildings in the Greenpoint-Williamsburg, North Brooklyn and certain areas of the Long Island City IBZ’s can apply for coverage. The rules of the extension are still being promulgated by the Loft Board, meaning that they are still determining how to govern this extension. Once the rules have been promulgated, there will be a six-month period for buildings to apply for coverage. After that time has ended, no building covered by the extension will be able to apply for coverage.

 

How do I know if I can qualify for Loft Law Coverage?
In order to qualify for coverage the following must be true with regards to your building and your particular unit:

• Three or more units in your building must have been put to residential use during any consecutive 12 month period from January 1, 2008 through December 31, 2009.
• Some portion of your building must have previously been occupied for either manufacturing, warehousing, or commercial purposes.
• Your building must currently lack a residential certificate of occupancy.
• Your unit must have at least one window opening to the street, a yard, or court.
• Your unit must be at least 550 square feet.
• Your unit cannot be located in a basement or cellar.
• Your unit cannot be in a building that, as of June 21, 2010, contained certain uses determined by the Loft Board to be incompatible with residential use.

Please note that these are just the basic bare bones facts; the loft law and the rules  are actually rather nuanced and can mean different things to different buildings.  We encourage tenants of loft buildings to get informed, learn the law, and to participate in the process by attending Loft Board meetings and NAG Loft Organizing meetings.

 

How does a building get covered?
There are two ways to begin the process of gaining Loft Law coverage for your building: Your landlord can register the building with the Loft Board or as a tenant, you can apply for coverage with the Loft Board.

http://www.nag-brooklyn.org/loft-law/

3.8% Medicare Tax - The Impact To Real Estate Owners

Many people are wondering if the federal capital gain tax rate will be raised.  The truth is it already has been under certain circumstances.  The new 3.8% Medicare tax on unearned income will take effect January 1, 2013.

The revenues generated from this tax will be utilized to help fund the Medicare Trust Fund.  The income subject to this tax will include net rental income, as well as the capital gains upon the sale of real property.

This additional tax will apply to those taxpayers with an Adjusted Gross Income (AGI) exceeding $200,000 (single)/ $250,000 (married).  Net losses from rents and net capital losses will reduce AGI. However, if, after losses, AGI still exceeds the AGI thresholds, the 3.8% tax would still apply to any net unearned income.

Unearned income is the income that a taxpayer derives from investing their capital, including capital gains, net rental income (net of allowable expenses including depreciation, cost of repairs, property taxes and interest expense associated with debt service), dividends and interest income. It also comes from some investments in active businesses if the investor is not an active participant in the business. The portion of unearned income that is subject both to income tax and the new Medicare tax is the amount of income derived from these sources, reduced by any expenses associated with earning that income.

The actual tax is not imposed on the AGI or solely on the investment income, but rather calculated based on a formula. The taxpayer will determine the lesser of (1) net investment income or (2) the excess of AGI over the $200,000/$250,000 AGI thresholds. Thus, if net investment income is the smaller amount, then the 3.8% tax is applied only to the net investment income amount. If the excess over the thresholds is the smaller amount, then the 3.8% tax would apply only to the excess amount.

For example. if AGI for a single individual is $275,000, then the excess over $200,000 would be $75,000 ($275,000 minus $200,000). Assume that this individual's net investment income is $60,000. The new 3.8% tax applies to the smaller amount. In this example, $60,000 of net investment income is less than the $75,000 excess over the threshold. Thus, in this example, the 3.8% tax is applied to the $60,000.

If this single individual had AGI of $275,000 and net investment income of $90,000, then the new tax would be imposed on the smaller amount: the $75,000 of excess over $200,000.

The Medicare tax will apply to a primary residence, however, only to the extent the gain realized is in excess of the $250,000/ $500,000 primary residence exclusion (and to the extent their AGI exceeds the referenced thresholds. Furthermore, net rental income from a vacation home, to the extent it has been rented out for more than 14 days, would be considered net investment income and could be subject to the new tax.

The new Medicare tax, coupled with the possible expiration of the Bush-era tax cuts (which would increase the Federal capital gain tax rate to 20%) will significantly increase the tax burden placed upon taxpayers selling real property. The opportunities to defer the capital gain tax through a 1031 tax deferred exchange or a Deferred Sales Trust will become that much more important.

www.legal1031.com

Economic Growth in NY's Brooklyn Holds Lessons For Cities

(Reuters) - Wall Street may be the financial capital of the United States, but downtown Brooklyn, just across the East River, punches above its economic weight, a report showed Thursday.

Growth in private sector employment and wages in downtown Brooklyn outpaced the rest of New York City between 2003 and 2010, according to data analyzed by the New York State Comptroller's office. Wages in downtown Brooklyn grew 48 percent during that time, while wages in New York City's five boroughs grew by 38 percent.

The health care and social assistance sector employed the largest number of people, providing around one-third of the 77,260 jobs in the area. Education jobs grew by nearly 25 percent, and account for 11 percent of jobs in the area.

In the leisure and hospitality sector, thanks to a crop of new hotels, restaurants and cultural organizations, jobs grew by 54 percent.

Median household income in downtown Brooklyn rose by 40 percent between 2005 and 2010 to $71,790, nearly $30,000 higher than the rest of Brooklyn.

In recent years, tech companies and startups have flocked to areas like DUMBO and Vinegar Hill, drawn by rents per square foot that are less than half those in midtown Manhattan, according to real estate advisory firm Newmark Knight Frank.

Downtown Brooklyn hosts the back-end operations of some of the largest financial service providers, including Goldman Sachs and Morgan Stanley. While those sectors experienced job loss during the crisis, New York State Comptroller Thomas DiNapoli said that the loss of jobs was offset by gains in other parts of the economy, particularly the cultural sector. During the recession, downtown Brooklyn was spared the job losses that hit the rest of New York City.

"Don't view investments in arts and culture as simply aesthetic, or for quality of life," he said. "It is also an economic investment."

Comptroller DiNapoli said that collaboration between the public and private sectors bolstered the area's natural advantages, which include its historic neighborhoods, riverside land, and nearly a dozen higher educational institutions.

He cited the Brooklyn Academy of Music, or BAM, and its efforts to support smaller arts organizations in their orbit.

"BAM is a dominant arts and culture institution, but they don't elbow out other organizations," he said. "They work very hard to create more venues in the BAM network of buildings so other organizations can participate in a low-cost way."

With 2.53 million inhabitants, Brooklyn is New York's most populous borough.

http://www.reuters.com/article/2012/07/26/us-growth-brooklyn-idUSBRE86P1UB20120726
Photo credit: AP