Thursday, May 22, 2008

Excess amenities fade from new developments

The New York Sun
Developers Move Away From Outlandish Residential Amenities
By CANDACE TAYLOR, Staff Reporter of the Sun
May 22, 2008
http://www.nysun.com/real-estate/developers-move-away-from-outlandish-residential/76875/

Manhattan's halcyon days of over-the-top residential amenities — from pet spas to putting greens to bowling alleys — appear to be coming to a close.

Development projects beginning to hit the market and in the pipeline show a paradigm shift to scaled-back amenities, with builders scrapping costly features to appease value-hungry buyers who are balking at shelling out higher prices in exchange for elaborate items they don't consider necessities.

While high construction costs, an economic slowdown, and the scarcity of lucrative tax abatements for new condominiums have been hurting developers for some time, builders are now changing tack in earnest as lower rents are taking hold, and first-quarter numbers clearly show a marked drop in real estate sales volumes.

According to Citi Habitats, Manhattan rents increased just a hair in April compared with the same period last year, but certain pockets have shown a steep drop-off. In SoHo, for example, rents for studio apartments fell 24% in April compared with last year, to an average of $1,855, while on the Lower East Side, the average rent for a two-bedroom plummeted nearly 18%, to $3,403.

Meanwhile, the number of sales in Manhattan declined 34.3% in the first quarter compared with the previous year's first quarter, to 2,282, according to appraisal firm Miller Samuel.

The Georgica, a 58-unit condo on the Upper East Side that went on the market two weeks ago, will have only a gym, a children's playroom, and a roof garden.

"Instead of having bloated common charges and having to charge more for the units, we wanted to come up with something that was a really good value," the managing director of the Prudential Douglas Elliman Development Marketing Group, Andrew Gerringer, said. Two- to four-bedroom residences in the Cetra/Ruddy-designed glass tower, with white oak herringbone floors and floor-to-ceiling windows, average $1,500 a square foot, according to the Web site StreetEasy.com.

The Georgica is in stark contrast to many projects of the past few years, where features such as a robotic car-retrieval system at 123 Baxter St. and a pet salon at the Ariel East were the norm. At Philippe Starck's 15 Broad St., residents were treated to a ballet studio, reflecting pool, and bowling alley, while 75 Wall St. boasts a sandy rooftop beach with cabanas.

"In the last seven years, buildings have gone amenity-crazy," the executive director of development marketing at Halstead Property, Stephen Kliegerman, said. Now, certain items such as gyms, washer-dryers, and roof decks are standard in new buildings, but anything more dramatic is falling out of vogue.

In a recent discussion regarding a high-end condominium coming to market in SoHo next year, the project's developer asked a group of marketers whether to expand the building's gym or put in a wine cellar. "Everyone in the room said, 'Give them a bigger gym,'" Mr. Kliegerman said. "You can definitely over-amenitize a building."

Unlike a gym, which is widely considered a necessity, creating common spaces such as movie screening rooms, playrooms, or spas is harder to justify. "With construction costs climbing, they're looking to maximize sellable square footage," Mr. Kliegerman said. "You don't hear as much about frivolous amenities."

Moreover, some features, such as pools and spas, add to common charges because they require staff — an increasingly unpopular feature in a softening housing market.

Another factor limiting amenities is the sunsetting this spring of the 421-a tax abatements, which had allowed developers in areas of downtown Manhattan and Brooklyn to offer tax abatements for buyers at new condominiums. This had enabled those projects to have much lower monthly common charges. Now, buildings that will be constructed without this abatement will have to compete with competitors that are as much as 40% cheaper, Mr. Gerringer said.

Some larger buildings and those in boroughs other than Manhattan, where there's more space, likely will continue to offer a wide range of amenities, Mr. Kliegerman said. For example, a building he's developing in Flushing will have a golf simulator, "but it's 1,200 units," he said. "You can do that in a building of 1,200 units."

At focus groups for 133 W. 22nd St., a new project by the Ascend Group, which developed the Georgica, potential buyers said they didn't want a virtual game room, movie screening room, or dog-walking facilities. "Most people didn't care about those oddball amenities," the president of the Ascend Group, Robert Kaliner, said. "They thought it was a waste."

The focus groups did want an outdoor pool, as many of the new Chelsea buildings don't have one. The 99-unit building, slated for completion in 2009, has been on the market about seven months, Mr. Kaliner said, and five or so units are left.

Another developer, the Athena Group, is also focusing on pared-down buildings. Construction will soon finish the developer's 250-unit A Condominiums in Jersey City, and 111 Central Park North, a 19-story Central Harlem tower on the edge of the park. Both buildings have fitness centers and party rooms, but few other amenities.

"My amenities are my value, my location, and my proximity to transit," the director of sales and marketing at Athena, Harry Dubin, said. "Everything has to do with giving someone the most for their money."

Developers tailor their projects to the market, and unlike a year ago, buyers today are "looking for value," Mr. Dubin said. "With the fundamentals out there today, there's no urgency. No one's right behind you to write that check if you don't."


A Condimniums

A Condominiums at Jersey City.

Sunday, May 18, 2008

Bargains come at a price when a great apartment is inside a bad building

Do your shareholders a favor, and don't become a board indifferent to aesthetics and don't let your staff become entrenched-but-indifferent. Part of your duty to your shareholders is to keep their property values high, and you can help by not letting the common areas deteriorate, as this article discusses...


New York Magazine
Inner Beauty Goes Only So Far
When a great apartment’s in a foul-looking building, be careful of the bargain.
By S.Jhoanna Robledo
Published May 18, 2008
http://www.nymag.com/realestate/realestatecolumn/47013

The junior four in the East Eighties was pretty, with a smartly renovated kitchen. But the outside hallway “looked like a Days Inn,” says Jason Isbell, who was apartment-hunting with his wife. The carpet was frayed, and three sconces barely lit the corridor, making it feel even dingier than it was. And the wallpaper: “You could tell where the heat from the vent came down because it was all sooty … It made the apartment feel a little cheesy. It was such a stark contrast.”

They passed—and they were probably right for doing so. Unless a buyer intends to stay in a place for a “very long run,” says Prudential Douglas Elliman broker Leonard Steinberg, “I tell people that if they’re going to buy the most beautiful apartment in the worst building, it’ll be a mistake.” Longtime board members may be indifferent to cosmetics; entrenched-but-inefficient building staff too hard to replace. And before you know it, you’re the seller persuading someone else to overlook the same problems.

A hot market forgives most ills, but “when you have more competition, like now, seemingly small things like lighting or dingy hallways or smells are magnified,” says appraiser Jonathan Miller. “Whenever there’s a weakness in the market, people are looking for reasons not to buy.” Elliman’s Stefani Pace had clients nearly walk away from a dream Harlem duplex because it shared a fence with a junk-filled backyard. “It almost destroyed the sale,” she says. One Corcoran broker’s Christopher Street listing sat on the market for months because the building stank of urine and common areas were lit harshly. “People would walk [into the apartment] and say, Oh my God!” she says. “It took two people to market a one-bedroom during open houses, because we had to have someone Febreze outside every 30 minutes.”

That said, one person’s deal-breaker could be another one’s bargain. Miller says ghastly common areas can affect values “as much as 5 percent.” Steinberg recently handled the sale of a “beautifully scaled” downtown condo that saw one buyer renege largely owing to a tacky red-and-gray-Formica-burdened lobby. “At the end of the day, the owner had to settle for less,” he says.


(Photo: Steven Ainsworth/Alamy)

Residents are connecting online

The New York Times
May 18, 2008
They’re All Connected
By LISA KEYS
http://www.nytimes.com/2008/05/18/realestate/18cov.html

WHEN James Keating moved into the Beacon, a 10-tower residential conversion in Jersey City, in August, he found a cascade of e-mail messages circulating among the new residents. Some had questions about amenities, some wondered when construction projects would be completed and others just wanted to get to know their neighbors.

Mr. Keating, the vice president for marketing of ShopWiki.com, an online shopping search engine, found the seemingly endless forwarding of those messages inefficient and time consuming.

To streamline things, he founded an online message board, BeaconOwners.com, where residents can post messages about everything from poker games to elevator noise.

“For $9, I bought the domain name,” said Mr. Keating, who is 38. “For free, I downloaded the software. Two hours later, we had a message board. It was amazingly easy to do.”

Electronic communication in residential buildings has gotten a lift in the New York region in recent years with so many new condominiums hardwired for the Internet.

But the means to connect residents in buildings of any age can be as simple as creating a Google or Yahoo group, building a group on social networking sites like MeetUp or Facebook, or joining a site like LifeAt.com, which allows members to post profiles and pictures. Another Web site, MeetTheNeighbors.org, is free to join and largely functions as a message board for people who live in the same building or the same neighborhood.

The buildingwide systems have allowed residents to get to know one another, to communicate with building management, to request and track repairs that must be made and to settle disputes.

LifeAt is used in 149 buildings in Manhattan, according to the company. Buildings pay a one-time fee of $6,000 for access to the site. Residents can post personal profiles and classified ads that can be seen by others in the same building, as well as rate local businesses and receive coupons from national retailers like Kohl’s and Sears. The building’s staff members can also contact residents through LifeAt.

In January, Ryan James, 29, moved into Eleven80 — a 317-unit luxury rental at 1180 Raymond Boulevard in Newark that opened in August 2006 — and signed up for LifeAt.

“I was surprised with the level of participation,” said Mr. James, who is vice president for financial services at Unity Financial, on Wall Street. “It goes to show that people are willing to extend, if not friendship, some level of acquaintance and familiarity. In all the buildings I lived in, particularly in New York City, people kept to themselves.”

On his profile, Mr. James describes himself as a “single, fly-by-night kind of guy” whose hobbies are politics and sports. “I did go on there to see what kind of ‘companionship’ the site offered,” he said. “There are some cuties in my building, yeah.”

And while he said he was still working up the nerve to contact them, he attended a football playoffs party, held in the building’s media room, that he had discovered through the site.

LifeAt also offers a message board for resident-to-resident chats. “In the beginning, a lot of developers said, ‘We don’t want them to communicate with each other,’ ” said Matthew Goldstein, the chief executive at LifeAt. “Our response was that they’re doing it anyway — they’re going to Yahoo and Google and creating groups. Here’s a way to be able to monitor it, maintain it and react to problems and issues instead of hiding behind them.”

Some groups are set up before buildings are even finished.

At the Gantry, a 47-unit condominium in Long Island City, Queens, Yvan Chu, who owns a unit there, started a Google Group in early 2006, before the building opened later that year.

“With new construction, there’s such a long lead time between contract and closing; I thought it would be a good place to sort of get together,” said Mr. Chu, 35, a real estate lawyer. “We all wanted to know about each other, what expertise we could lend each other.”

Susan Burns, a Gantry owner and president of its board, said that in the building’s preclosing days, the Google Group was an excellent source for real estate advice. “It was a great way of sharing resources and sharing information.” At the time, said Ms. Burns, 44, a vice president at Sard Verbinnen & Company, a financial public relations company, future residents exchanged messages about painters, real estate lawyers and home insurance.

Mr. Chu, who serves as the assistant treasurer of the Gantry board of managers, said that activity on the message board had died down somewhat, now that residents can easily knock on one another’s doors. Nonetheless, it remains a tool for communication.

Recently, messages from a few residents regarding custom window screens developed into a conversation about aesthetics of the building’s exterior and, eventually, a group order of screens.

“We were able to get everything done collectively, in one day,” Mr. Chu said. “Everyone was happy, everyone was getting a lower price.”

As technology becomes more prevalent, some buildings use multiple systems simultaneously.

Last Wednesday, for instance, the Beacon in Jersey City added something beyond BeaconOwners.com: Vertalink, an Internet-based system that allows residents to book spa treatments or order food via computer or touch-screen hardwired into the building.

Also, the Gantry has gone beyond the Google Group to add BuildingLink.com, which allows paperless communication among building residents, staff members and managers.

“The Google Group is more informal — let it all hang out and share,” Ms. Burns said. "BuildingLink is the official channel."

BuildingLink is used in some 375 residential buildings in the New York City area, according to the company. With the system, which charges $13 per unit per year, everything from work orders to package deliveries is recorded online. (Residents receive e-mail messages when packages are received; signatures are recorded electronically.)

“Our biggest fans are doormen,” said Fran Besdin, BuildingLink’s marketing manager. “We have streamlined their operations tremendously.”

One of BuildingLink’s clients is the Albanese Organization, which uses the system in all its residential developments, including the Visionaire, a new Battery Park City condominium scheduled to open this summer. “It adds tremendous value, as it helps us efficiently manage a property,” Mr. Albanese said.

The Visionaire will also be testing a service that will allow residents to order hotel-like amenities, like wake-up calls from the front desk.

Internet-based systems can bring even older buildings into the digital age.

At Peter Cooper Village and Stuyvesant Town, two adjoining developments along the East River, built in 1947, with 110 buildings and more than 11,000 units a new residents-only Intranet will start in August.

Among its many applications, the site will allow residents to make and track maintenance requests and to keep abreast of events around the complex. This is an upgrade of an existing resident portal, CommunityNET, which alerts residents of news and events.

The new system — which will be more user-friendly than the current system, according to its developers — is separate from the online message board that is independently run by the Stuyvesant Town-Peter Cooper Village Tenants Association.

“With the emphasis on online interaction these days, it was a natural fit for us,” said George Hatzmann, a managing director at Tishman Speyer, which bought the complexes two years ago.

Another, perhaps unintended, effect of buildingwide communication is that it’s easier to grouse as a group, too.

“There’s a lot of collective complaining that happens on the Web site,” said Mr. Keating of the Beacon. “But, interestingly enough, it’s been constructive as well.”

Cathy Chin, the Beacon’s property manager, said that when residents have a problem, they are more likely to go online than pick up the phone. “As long as we have a place where we can access complaints and react to them, it certainly makes our job easier,” she said. “We’re able to know sooner if there are any problems arising and we can correct them before they become an issue.”

As a result of complaints on the message board, residents were able to persuade Metrovest, the Beacon’s developer, to increase the size of the shuttle bus to the PATH train and increase frequency of service.

Like a lot of Internet chatter, conversations on individual building sites can become less than civilized. “People say things online that they would never say face to face,” Mr. Keating said.

He said a fellow resident began calling him names after an online discussion about enforcing the cellphone ban in the building’s gym. Many residents rushed to his defense, Mr. Keating said. Nonetheless, it has made for awkward encounters in the mailroom.

"Anonymous or not anonymous, it doesn’t seem to make a difference as far as I can tell,” Mr. Keating said. “People just seem to forget that what we say online gets carried into the hallways."

Still, he said, sometimes the simplest applications are most rewarding.

Thanks to the owners’ Web site, “I get instant feedback: This is what the community wants,” said Mr. Keating, who also serves on the Beacon’s board. “It’s great for me to send a question out there and get responses right away. Normally, with a condo association, you could only do that when you have a meeting. In this way, I could hold virtual meetings online.”

Mr. Keating added, “It was the best $9 investment I ever made.”


Robert Wright for The New York Times

GETTING STARTED Yvan Chu, top right, started a Google Group at the Gantry in Long Island City, Queens, while it was still under construction. Mr. Chu is on the five-member board, along with, counterclockwise, Josh Lamberg, Susan Burns and Eric Greenberg.


Evan Sung for The New York Times

Ryan James, left, joined LifeAt.com at Eleven80 in Newark. He met a neighbor, Dr. Stephen Wang, on the site.


Annie Tritt for The New York Times

ONLINE James Keating (left, with pool-playing neighbor) created a message board for the Beacon, in Jersey City.

Thursday, May 15, 2008

Collateral Foreclosure Damage for Condo Owners

The New York Times
May 15, 2008
By CHRISTINE HAUGHNEY
http://www.nytimes.com/2008/05/15/business/15condo.html

Barbara Sanz has never missed a mortgage payment, but the plunge in real estate is punishing condominium owners like her anyway.

Four years ago, she bought her first condo in a glassy new Miami tower when the building was filling up. Now nearly one in six residents in the 43-story building is battling foreclosure and their contributions to the building association are shrinking. Each of the remaining owners has had to chip in an extra $1,000 assessment and $50 more a month for cable and Internet. That is on top of Ms. Sanz’s $450 monthly maintenance fee.

Even though she pays more, her building has broken washers and dryers and unusable exercise equipment, and her hallway is spotted with mold.

“It’s not fair,” said Ms. Sanz, a 32-year-old event planner. “The first two years, I enjoyed all of the benefits of living in a condo. I’m disappointed now. I hate the way the building looks.”

When people buy condos, they expect their monthly fees will cover many of the responsibilities that they would otherwise have as owners of single-family homes, like cutting the grass and paying the water bills. Now many find themselves nagging each other in the hallways to pay their assessments and adding special fees while haggling over chores. In Miami, Chicago and San Diego, condo owners are adjusting to the economic woes, sometimes by mowing themselves and working shifts for building security — all while lamenting their lost community.

“What motivated people to go into the condo market in a way that led to overbuilding was the expectation that it would be easier than owning a home on a maintenance basis,” said Sam Chandan, chief economist at the real estate research firm Reis. “The downside is that your fate is tied to 50 or 100 other people who may stop making their condo payments.”

Many of the numbers compiled on home sales specifically exclude condos, which account for one out of eight homes in the nation, and that missing data may be masking just how weak the housing market really is. Sales of existing condo units were down 26 percent in March from a year earlier, compared with an 18 percent decline for single-family homes, according to the National Association of Realtors.

The pain in the condo market, mostly in urban areas, may not only be deeper than in the rest of the housing market during this downturn but more prolonged. Bargain hunters say they are reluctant to buy into a building even when the upfront cost seems low because they might have to pay unexpected fees as distressed neighbors default on their mortgages or just stop paying the association fees that cover everything from taxes to pool maintenance to air-conditioning repair.

Marcus & Millichap Real Estate Investment Services, which is based in Encino, Calif., estimates that nearly 202,000 condo units will be added this year to the pool of 574,000 added nationally in the last five years. Next year will bring 94,166 more units onto the market.

“We have not even approached the bottom and will not approach the bottom until 2009,” said Hessam Nadji, managing director of research services at Marcus & Millichap.

The shabby condition of some condos means potential buyers insist on especially steep discounts on foreclosed units. Alessandro Comoglio, a 34-year-old investor from Italy, recently visited six apartments in Ms. Sanz’s Miami building with a real estate broker. Mr. Comoglio was surprised to find worn-out hallway carpeting and orange foreclosure stickers partly scratched off the doors in such a new building.

His willingness to spend stopped short of $200,000 for the condo units, which once sold as high as $700,000, according to the broker, Peter Zalewski. Mr. Comoglio also wants a written guarantee that he would not have to pay more fees.

“Nobody knows if the worst is yet to come,” he said. “Nobody knows how much prices will continue to drop.”

Rosa Rodriguez, a resident and property manager at Parkview Point Condos in Miami Beach, says her former neighbors have left her with so many problems that she would never buy a condo again. The 38 foreclosures in her 244-unit building and the unpaid dues nearly cost the residents running water because the building could not pay its bills. The building abruptly stopped repairing its ceiling lobby and left its wiring and ducts exposed when the board ran out of money. She avoids answering questions from visitors about ceiling repairs.

“We’re not going to tell them we don’t have any money,” she said. “That’s embarrassing.”

Buildings with few units can suffer even if it just one owner falls into trouble. Doris Wilson, who owns a one-bedroom apartment in a building in the Bronzeville neighborhood of Chicago, struggled to get a lender to pay $2,500 in association fees after it foreclosed on one of the seven units in her building. The bank eventually paid the money, and the association has since been able to paint its wrought-iron fence and clean the sewer system.

Still, Ms. Wilson worries that the expected sale of the foreclosed unit at about $94,000 will hurt neighbors who paid or refinanced their units for three times that price. In the short term, she dislikes asking her neighbors to pay an extra assessment of nearly $220. She dreads going to monthly condo board meetings, and she avoids some neighbors who are struggling to pay the additional fees.

“It’s personal,” she said. “Here they are going through a hard time and you have to ask them to pay.”

Marki Lemons, a Chicago real estate broker, says that investors are hesitant to buy properties with many foreclosures because of the possible problems. Some buildings with four to eight units have had so many foreclosures that their condo associations have disbanded and windows have been boarded up. In these cases, she does not even want to represent sellers, because buyers cannot get financing and will have to pay all cash. Sellers will be disappointed by those buyers’ offers. “They’ll probably give 20 cents on the dollar,” she said.

So far, the Manhattan market has been largely spared, in part because of foreign owners who never sought a quick profit. By the end of the year, about 15,000 units will have been added during the five-year condo boom in Manhattan, according to Miller Samuel, a real estate research firm.

Jonathan Miller, the company’s chief executive, said that foreigners, who have bought up to a third of these new condos, typically put in more cash and plan to hold for some time.

“They’re in it for the long-term equity play,” he said. “They’re looking for a 10-year hold.”

Those who fear a downturn remember that Manhattan co-op prices suffered so much during the housing downturn of 1989 to 1993 that buildings had a hard time luring buyers. This financial instability hurt New Yorkers at all economic levels. Some recall neighbors handing over their Fifth Avenue apartments for $1 because they could not afford the maintenance fees.

Condo owners across the country are trying to ride out the slowdown. Since 2004, when Mark Mills bought his two-bedroom apartment for $622,000 in the 210-unit GasLamp City Square condo in downtown San Diego, 10 of his neighbors have succumbed to foreclosure. The building now has a $115,000 shortfall in its budget because residents failed to pay their condo dues.

He resents neighbors who have rented units they cannot sell to 20-somethings, who leave beer bottles in the lobby and hold late-night parties. He is tired of the constant beeping of a smoke alarm in a vacant unit, indicating a battery needs to be replaced. Still, Mr. Mills is staying because he expects he could get only about $550,000 for his home.

“We couldn’t sell it for what we bought it for,” he said. “I’m in it for the long haul.”


John Loomis for The New York Times

Peter Zalewski, a broker for Condo Vultures Realty in Miami, led an Italian investor, Alessandro Comoglio, through a dimly lit hallway to an apartment for sale recently. The lights are turned down to save on electricity costs, as owners forced out by foreclosure have left fewer tenants to pay fees.


John Loomis for The New York Times

Evidence of hard times in a condo in Miami: top, multiple brokers’ lock boxes for vacant apartments; and foreclosure notices on apartment doors.


John Loomis for The New York Times

Peter Zalewski, a Miami broker, led an Italian investor, Alessandro Comoglio, through a condo building with foreclosure trouble.