Brooklyn Loses 'Stepchild' Status

By YAFFI SPODEK

Buying Brooklyn's tallest office building wasn't a well-timed move by SL Green Realty Corp.
The company, Manhattan's largest office building owner, bought 16 Court St. in 2007 at the peak of the market paying a pricey $107 million for the mostly vacant tower. Since then the landlord has had to deal with the global financial downturn and a plunge in the building's value.

 

16 Court St. in downtown Brooklyn. 

But lately the 38-story building's fortunes have been improving. Its occupancy has increased to 85% from 19.4% in 2007 with a mix of new tenants in businesses, some not ordinarily attracted to downtown Brooklyn.

In its most recent deal, 16 Court achieved the ultimate in success for Brooklyn office buildings: attracting a tenant from Manhattan. After more than a century in lower Manhattan, BlumbergExcelsior Inc., a nationwide supplier of specialized legal software, signed a lease for 12,420 square feet. It plans to move its 50 or so employees to 16 Court by the spring.

"Brooklyn no longer has the stepchild status to Manhattan," says Robert Hebron, of Ingram & Hebron Realty, the exclusive leasing agent for 16 Court. "It's become a different place."

A view of the street level.

The downtown Brooklyn office market, an accumulation of stodgy second-class buildings near Brooklyn Borough Hall, is beginning to see the benefit of the borough's renaissance as a place to live, visit and find world-class entertainment. In recent years thousands of new apartments have been developed, and national retailers and hotel companies have added locations in the surrounding neighborhoods.

The Barclays Center made headlines recently when it opened nearby with a Jay-Z concert. The 18,000-seat arena is the new home of the Brooklyn Nets basketball team.

Owners and brokers say that, thanks to these improvements, many Manhattan-based companies no longer see Brooklyn as a second-class address. Meanwhile, rents in Brooklyn remain a lot lower than those in Manhattan, a powerful incentive during tough economic times.

"We would have stayed in TriBeCa for under $30 a foot, but it was impossible to find a space for that price," says Bob Blumberg, chief executive of BlumbergExcelsior.

According to Cushman & Wakefield, average Brooklyn rents were $28.83 in the third quarter, compared with $39.83 in downtown Manhattan and $66.42 in Midtown. Meanwhile, the Brooklyn vacancy rate declined to 8% as of the end of September, down from 11% at the end of 2011. The Brooklyn statistics includes Dumbo and the MetroTech Center, as well as the downtown markets, which total about 15 million square feet.

To be sure, the real-estate industry has heralded the turnaround of the downtown Brooklyn office market in the past, only to see it fizzle. The area is still being hurt by the overall weak economy that has slowed leasing citywide, as well as the decrepit condition of some of its buildings.

But brokers and owners say there are reasons to be bullish about Brooklyn other than the new arena, hotels, stores and condos. The Dumbo market has become so hip among start-ups and technology companies that there is practically no vacant space there.

Some of that demand is beginning to spill over into downtown Brooklyn, brokers and landlords say. "We're seeing some signs of different businesses and tech businesses looking at space," says Steven Durels, SL Green's director of leasing.

Also, a game-changing deal in downtown Brooklyn was sealed earlier this year when New York University agreed to rent 370 Jay St. for a school of applied science. The 61-year-old building was the former headquarters of the Metropolitan Transportation Authority and is mostly vacant.

The deal will result in a major upgrade to the unused property in the heart of downtown Brooklyn. It will also bring students and faculty and possibly spinoff businesses to the area. "That creates a buzz," says Glenn Markman, executive vice president at Cushman & Wakefield.

Downtown Brooklyn has benefited by a wave of economic development initiatives that stretch back to the development of MetroTech starting in the 1980s. The city also has made zoning changes and offered tax breaks and other incentives to encourage development.

"Brooklyn is going to have people looking at it as a first choice, rather than as an alternative, less expensive choice," says Steven Spinola, president of the Real Estate Board of New York. "If the Nets can do well in the season, that will also help speed along the process."

 http://online.wsj.com/article_email/SB10000872396390443615804578042702351881838-lMyQjAxMTAyMDIwNzAyODc3Wj.html?mod=wsj_valettop_email

City Takes Up Zoning Changes to Erase Downtown Brooklyn’s Glut of Parking Spots

 By: Thomas Kaplan

300 Livingston Street


In traffic-clogged New York City, where parking spaces are coveted like the rarest of treasures, an excess of parking spaces might seem like an urban planner’s dream.

Yet city officials, developers and transit advocates say that in Downtown Brooklyn, there is this most unusual of parking problems: There is simply too much of it.

The issue, officials say, lies with the large garages that the developers of new residential buildings have been required by zoning rules to construct. But with 13 subway lines and 15 bus routes in the area, many new residents choose to leave their cars behind, meaning the garages sit half-empty and take up precious space.

“People are choosing to live in Downtown Brooklyn because of the great access to the public transit network that they find there,” said Tucker Reed, the president of the Downtown Brooklyn Partnership. “The last thing we need to be doing is developing more parking.”

The city is now seeking to rein in what it sees as a glut of parking. On Monday, a City Council panel is scheduled to consider new zoning regulations that would reduce how many parking spaces must be built with new residential developments in Downtown Brooklyn, and allow developers who already have excess parking to reclaim the unneeded space for other uses. (Because there are so many subway tunnels and other infrastructure in that part of Brooklyn, many of the garages are above ground, making it easier to use the space for something else.)

Residents in Downtown Brooklyn are likelier than those in many other neighborhoods to go car-free: 22 percent of households in the neighborhood own cars, according to the Census Bureau, compared with 45 percent for the city over all.

In making the case for reducing the parking requirements, the city’s Planning Department cited the Avalon Fort Greene, a high-rise on Gold Street with more than 600 units. Under the current rules, the building was required to have more than 250 parking spaces, but the city said barely one-third of them were being used.

Paul Steely White, the executive director of Transportation Alternatives, said residents moving into the area, particularly younger ones, wanted nothing of the “car-oriented suburban lifestyle of their parents.” He called the proposed changes a step in the right direction by city officials.

“We hope they go even further to tip the balance even more in favor of transit, walking and, increasingly, bicycling,” Mr. White said.

Under current rules, developers of new residential buildings in Downtown Brooklyn must provide parking spaces for at least 40 percent of households. The minimum parking requirement would drop to 20 percent under the new rules, and there would be no requirement to build parking with subsidized housing units, a move that supporters said would reduce the cost of building such units.

The proposed rules were approved by the City Planning Commission last month, and they will go before the Council’s Subcommittee on Zoning and Franchises on Monday.

Councilwoman Letitia James of Brooklyn said there was no question that Downtown Brooklyn was a “transit-oriented community.” But she said she was concerned that parking could become more difficult to find because of the opening of the Barclays Center, and she added that she was not convinced it was a good idea to allow developers to get rid of excess parking they had already built.

“They would turn it into more luxury housing,” Ms. James said, suggesting that it was naïve to think developers would volunteer to turn their extra parking into subsidized housing or a community space.

In his review of the city’s proposal, the Brooklyn borough president, Marty Markowitz, called for the zoning rules to be adjusted not only to reduce the requirement for automobile parking, but also to increase the requirements for providing bicycle parking by 50 percent.

Mr. Markowitz said his proposal demonstrated the wrongheadedness of “erroneous claims from critics that my office doesn’t advocate enough for the bicycle community.” But the Planning Commission concluded that requiring additional bicycle parking was beyond the scope of the zoning changes that were being considered. 

 http://www.nytimes.com/2012/11/26/nyregion/seeking-to-rein-in-excess-parking-in-downtown-brooklyn.html?partner=rss&emc=rss&_r=1&

Luxury Brooklyn Condos, Some Cloaked in Tradition

 

BROOKLYN HEIGHTS, that enclave of impeccably restored brownstones lining narrow, leafy streets, has long been immune to the buzzy changes washing over communities beyond its borders. The local tone is set by entrenched institutions like the 102-year-old Brooklyn Heights Association and the even more august Brooklyn Heights Casino, whose tennis courts can be used as a ballroom and whose squash courts have spawned generations of talented young players.

Condo conversions are going on at an old police station at 72 Poplar Street.

 At 20 Henry Street, an old candy factory has a modern annex.

 

 

The 1885 Peaks Mason Mints factory will have 38 condos starting at $450,000.

 

 

The 1885 Peaks Mason Mints factory will have 38 condos starting at $450,000.

But thanks in part to a more buoyant economy, changes are nibbling at the neighborhood’s edges, particularly in the area residents call the north Heights. Although most of Brooklyn Heights falls within a historic district, the city’s first, half a dozen projects that will bring pockets of luxury accommodations are moving through the pipeline. Prospective residents are being drawn by good schools and easy access to downtown Manhattan. Also in the works are new and refurbished hotel rooms, notably in the century-old Bossert Hotel, one of Brooklyn’s most storied buildings.

Four of the projects are on or just off Henry Street, the commercial strip that has traditionally played second fiddle to Montague Street, the neighborhood’s main drag. The first to open its doors will be 20 Henry Street, at Middagh Street, where Canyon-Johnson Urban Fund is developing 38 luxury condominiums ranging from studios ($450,000 apiece) to four-bedrooms ($2.7 million) in the Peaks Mason Mints candy factory.

The project actually consists of two structures. One is the 1885 factory, which retains its original red-brick facade, exposed buttresses, oversized arched windows and chunky white “Peaks Mason Mints” lettering. The other, on the former courtyard, is a new building that will have floor-to-ceiling windows and garden penthouses.

“It’s more like a Dumbo project, except it’s in Brooklyn Heights,” said Steven Rutter, the managing director of Stribling Marketing and Associates, who is handling the sales. The apartments will be relentlessly modern, with accents like teak vanities and free-standing soaking tubs. But the main lobby will resonate with echoes of the past.

“You’ll be able to see some of the Southern white pine that was used when they built the place,” Mr. Rutter said. “And it’s backlighted, so you can see the original sap.” He keeps a chunk of the wood on his desk, “because it makes a good paperweight.”

Among the residents who will start arriving later this year are Navin Chawla, who lives in Dumbo with his wife, Allison, and their 8-month-old daughter. “I used to stroll by the site and then started doing research online,” said Mr. Chawla, who is preparing to enter medical school. “I liked that it was near the subway and near P.S. 8. And I liked that the building was modern but still had an old Brooklyn Heights feel.”

Echoes of the 19th century will also be felt next door at 30 Henry Street, where construction has begun on a ruddy brick building, accented with black wrought-iron Juliet balconies, that will contain five floor-through condominiums. A feature being touted in this parking-challenged neighborhood is a robotlike facility in the basement known as an A.G.V. (automated guided vehicles) garage, which stores and retrieves cars without human intervention. According to Harry Kendall, a partner of BKSK Architects, the building’s designers, “cars will be automatically whisked away, like a piece of dry cleaning.”

At 72 Poplar Street, a long-unused 100-year-old police station is being converted to a condominium containing 14 family-size apartments, with occupancy scheduled for 2014. David T. Ennis, the principal of the Daten Group, the developer, sees the target audience as “urban hipsters starting families” who seek a middle ground between the tradition-bound Heights and cutting-edge Dumbo to the north.

Here, too, the goal is to marry new and old in graceful fashion. “The block has the feeling of turn-of-the-last-century Brooklyn,” Mr. Ennis said, noting especially the faux-gaslight street lamps. “We wanted to respect that.”

A few blocks away at 70 Henry Street, long the home of the Brooklyn Heights Cinema, plans are proceeding for a five-story building that will contain 15 to 17 rental apartments, mostly one-bedrooms, and will incorporate the movie theater in its ground and basement floors. Construction could begin in the spring, according to the designer, Randolph Gerner of Gerner Kronick and Valcarcel Architects.

As for the facade, “of course it will be brick,” Mr. Gerner said, in this case reddish-brown brick, along with large steel casement windows intended to impart a loftlike feel. “We want a building that’s appropriate and respectful,” he added. “We really want to do the right thing in this neighborhood, and that wouldn’t be a 50-story glass tower.”

At Montague and Hicks Streets, work could begin by year’s end on the planned conversion of the Bossert Hotel, which for decades stood at the heart of the borough’s social life. A 14-story Renaissance Revival building, it is becoming available because the Jehovah’s Witnesses, who have owned and operated it since 1983, are selling many of their Brooklyn holdings. The buyer is David Bistricer of Clipper Equity and the Chetrit Group, which plans to transform the Bossert into a boutique hotel with about 300 rooms.

The lobby, with its coffered ceiling and oversized columns topped by elaborate capitals, will be restored to the way it looked when the hotel opened, according to Gene Kaufman, the architect. “We inherited a fantastic structure,” Mr. Kaufman said. “It’s a reminder of a time when people made ornate buildings. We want to recall that grandeur.”

A very different sort of grandeur will be on display at 60 Furman Street in Brooklyn Bridge Park. Just south of the bridge, Toll Brothers City Living and the Starwood Capital Group plan two mostly glass structures that will house 125 one- to five-bedroom condominium apartments (price tag: $800,000 to $5 million) and 200 hotel rooms. Amenities will include a screening room and, of course, spectacular views. Construction is expected to begin in the spring.

These new projects are arriving with predictable concerns from the community. Will the transformation of the Bossert bring parking problems? Will there be too much construction in the park? And perhaps most important, will these projects alter the neighborhood’s character?

The answer to the last question, at least in some minds, is “not necessarily.”

“It’s true that Brooklyn Heights is very much of a community in which people belong to the same institutions, like the casino and the Brooklyn Heights Association,” said Robert Perris, the district manager of Community Board 2. “On the other hand, these new projects don’t necessarily destroy that. In a way, they simply expand the size of the pie.”

By CONSTANCE ROSENBLUM

http://www.nytimes.com/2012/10/21/realestate/in-brooklyn-heights-brownstone-area-welcomes-luxury-projects.html

421a For Dummies: When It Comes to Benefits, Politicos Don’t Have a Clue

By: Robert Knakal

If I read one more comment from an elected official condemning the 421a tax abatement program, my head is going to explode.

The reason their comments have been so frustrating is that their positions show very clearly that they have no idea how the program they are condemning actually works. Nor do they understand the benefits this incentive provides to the market and to New York.

Robert Knakal.

The 421a program was initiated in 1971 as an incentive for the private sector to build new residential apartments in the city. To date, the program has been responsible for the construction of more than 110,000 units. The program was significantly hamstrung in 2006, as many elected officials felt that an incentive was no longer needed to induce new residential construction, given the strength of the New York City development market at that time.

As a result, effective Dec. 28, 2007, several fundamental changes to the way the program was implemented went into effect (the reforms curtailed the certificate program, under which affordable developments in qualifying areas created certificates that could be sold to developers in other areas). The 421a benefits vary depending on factors such as location, method of construction and review of compliance with requirements for affordable housing. The Department of Housing Preservation and Development determines eligibility and approves the application, and the Department of Finance administers the benefits.

The program provides a declining property tax exemption based on the new value created on tax lots upon which new construction is focused (the key phrase here is “new value created,” but we will come back to this shortly). The benefits generally apply to new construction of multiple dwellings on lots that were vacant or under-improved prior to construction of the new building.

Market-rate projects that are not eligible for 421a because they are located in the exclusion areas, but that otherwise meet the requirements of 421a, can qualify for a 10- or 20-year partial tax exemption by participating in the 421a Affordable Housing Program. The developer of a project that receives benefits must construct or rehabilitate on-site or off-site affordable units. Generally, one affordable unit must be constructed for every five units in the project receiving benefits.

Recently on CNBC, City Councilman Brad Lander called the program “an outrageous giveaway.”
“We can’t afford to be giving away millions of dollars in tax breaks for nothing,” he added while discussing some of the high-profile luxury properties that may qualify for the program. I don’t mean to single out Mr. Lander, because we have all heard the very same comments from dozens of legislators who are attempting to build their voter bases.

Rather than advocating for the elimination of the program, they should be advocating to bring back the pre-2006 421a program.

Let’s take a look at the phrase, “tax breaks for nothing.” Really? Nothing? Give me a break.
The benefits make many projects feasible when they wouldn’t otherwise be feasible. In other words, these projects may not have been built if the benefits were not available.

Recent development trends support this thesis. Moreover, and more importantly, the benefits only impact the new value created by the new development (I told you we would get back to this). This means that if a site is presently under-improved with smaller properties, the city may be collecting real estate taxes of, say, $100,000 per annum. After the new building is constructed, if it participates in the program, taxes on it remain $100,000. It is only the increase in taxes that is capped, and it is not capped in perpetuity. The benefit burns off according to a schedule. Within as little as 10 years, that tax parcel of land may be producing millions more in real estate taxes for the city.

So while the “millionaires and billionaires” who purchase units in these luxury buildings pay lower taxes initially, just one of them may, in the short-term, pay more in real estate taxes on one single apartment than the entire tax lot was generating for the city prior to the construction of the new building. Multiply this benefit by the dozens, or hundreds, of apartments in a development, and the financial benefits to the city are obvious.

Add to this increase in revenue the number of affordable housing units brought to the market and the thousands of additional construction jobs that are created by the new developments, and the program is a win-win for all stakeholders. If elected officials want to truly benefit the city, they should advocate taking the 421a program back to its pre-2006 form. Greater tax revenue, more jobs and even more desperately needed affordable housing would be the result.

http://commercialobserver.com/2012/10/421a-for-dummies-when-it-comes-to-benefits-many-politicians-dont-have-a-clue/

Planned New York Media Center Gets a Developer, and an Address in Brooklyn

The planned “Made in NY” media center, a project favored by Mayor Michael R. Bloomberg, took a big step forward on Thursday as New York City officials designated the Independent Filmmaker Project, a nonprofit, as its developer and operator. They also named a building at 20 Jay Street in Brooklyn’s Dumbo district as the center’s location. The building, designed in 1909 for the Arbuckle Brothers coffee roasting company, is currently a New York City landmark.

Earlier this year, New York officials called for proposals to design and operate the center, which is supposed to serve as an incubator for media projects by offering low-cost work space and other support. In choosing to go with I.F.P., the city also named General Assembly, an education company, as a partner with responsibility for developing courses that will be part of the center’s program.

Through its boards of directors and advisers, the I.F.P. brings connections to some important players in New York’s entertainment industry, including Sheila Nevins, an HBO executive who has fostered that company’s documentaries business, and Michael Barker, the co-president of Sony Pictures Classics. The center is expected to open in the spring of next year, the I.F.P. said in a statement.

By MICHAEL CIEPLY

http://mediadecoder.blogs.nytimes.com/2012/10/11/planned-new-york-media-center-gets-a-developer-and-an-address-in-brooklyn/

Domino Suit Thrown Out, Paving The Way For Factory’s $180 Million Sale

By Daniel Geiger
 
 The State Appellate Court has thrown out a lawsuit seeking to block the sale of the Domino Sugar factory, paving the way for the real estate firm Two Trees to close on a $180 million acquisition of the property later this month.

The Katan Group, which owns the site in a joint venture with the Community Preservation Corporation Resources, launched the suit during the summer, alleging CPCR had ignored higher bids for the 11-acre parcel and therefore had not acted in the best interest of the partnership to try to maximize profits in a sale.

The Domino plant and the Katan Group’s chief executive Isaac Katan

CPCR reached a deal in June to sell the sugar factory, long a landmark of Williamsburg’s waterfront, initially for $160 million. Two Trees raised its bid to $180 million after the Katan Group balked at the price, claiming it had better offers from a host of other prospective buyers, including Joe Chetrit, lawyers for the Katan Group told The Commercial Observer.

The Katan Group’s suit, which began in August, was struck down in September, but on September 28, the appeals court granted a temporary injunction in order to review the case, giving the plaintiff temporary hope that it might be able to break up the sale or force Two Trees to again up its bid.

With the Appellate Court’s decision today however, the sale can now close. Two Trees is scheduled to complete its acquisition of the Domino site on October 15. CPCR had imagined building up to $2 billion of market rate and affordable housing on the site, which has sweeping views of Manhattan, while preserving the old refinery building that has become an icon of Williamsburg’s industrial past. Two Trees has not yet revealed whether its plans for the site will follow CPCR’s vision.

http://commercialobserver.com/2012/10/domino-suit-thrown-out-paving-the-way-for-factorys-180-million-sale/ 

4Q12 Investment Sales Will Be Epic

Thanks to capital gains tax increases, expect sellers to scramble in fourth.

BY: Robert Knakal

Put your space helmet on, strap yourself in and get ready for what is sure to be one of the wildest rides in the history of New York City’s commercial real estate investment sales markets.

Yes, the fourth quarter of 2012 is likely to go down as one of the most active periods in the last quarter-century for property sales in the Big Apple.

Changes in tax law often spark activity as market participants rush to beat the deadline, as we saw most notably in 1986.

Robert Knakal.

The looming threat of substantial capital gains tax increases next year has the market poised to see a huge spike in transaction volume. We began alerting clients at Massey Knakal to this possibility back in January, as it was clear at that time that the capital gains rate, which is an integral variable in determining the after-tax proceeds of most commercial real estate sales, was vulnerable to change. Record deficits, lower-than-expected tax revenue and an economic recovery that is moving at a snail’s pace have members of Congress scratching their heads for solutions.

With government spending as a percentage of GDP extraordinarily high and revenue as a percentage of GDP unusually low, a balanced Simpson-Bowles type approach would seem to be appropriate, but the inertia exhibited in Washington leaves little consensus thus far. On the revenue side, the capital gains rate is most vulnerable, given that it is broadly considered to be a “rich person’s tax” by those who favor raising revenue.

We observed the same political rhetoric in 2010 as we approached the midterm elections. It created a dynamic in which property owners, who were considering a sale of their property in the short-term, elected to sell prior to the year’s end, fearing that a capital gains tax increase in 2011 would erode their after-tax proceeds. In October 2010, I wrote that the investment sales brokers in the city should “clear their calendars” and suggested they “don’t plan on taking much vacation time in December,” as it was clear that 4Q10 would see a whirlwind of activity. And it happened. As a result, of the approximately $14.5 billion of Gotham’s 2010 total sales volume, about $5.4 billion occurred in 4Q10 alone. This was, at the time, the highest quarterly total in 10 quarters.

This year’s threat is even more likely to become reality, as Congress would have to take action—not to make the rate rise, as it would have had to in 2011, but to keep the rate down. As we have seen recently, getting Congress to do anything would be surprising. To the extent it doesn’t take action, the Bush tax cuts will sunset on December 31, automatically raising the capital gains rate from 15 percent to 20 percent. On January 1, the component of Obamacare that implements a covert 3.8 percent increase in the capital gains rate kicks in, meaning that, without government action, the rate will rise to 23.8 percent beginning in the new year, a nearly 60 percent increase. And this assumes that, if the president is re-elected, he does not fulfill his quest to initiate a minimum 30 percent tax rate, which is likely not to include the health care surcharge. That would bring the rate to 33.8 percent.

The impact on after-tax proceeds from sales would be tangible. At Massey Knakal, we have already closed on the sale of dozens of properties whose sellers were specifically prompted to sell in 2012 because of the potential increase in the capital gains rate. Additionally, we have an even greater number of properties presently under contract for sale that are due to close in 4Q12, which will save our clients tens of millions of dollars if the increase does come to pass.

Participants in New York City’s investment sales market can look forward to extremely robust activity this fall. It would not be surprising to see more than 1,000 buildings sold and more than $10 billion in sales in the fourth quarter. Both of these totals would be seen for the first time since 2007.

Three, Two, One …

Source: Commercial Observer