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Category ArchiveDesign + Construction

The Plan: For a Furniture Dealer, a ‘Showhouse’ Is the Best of Both Worlds

A “showhouse” is how designer and furniture dealer Meadows Office Interiors describes its second New York City location on the fifth floor of 625 West 55th Street between 11th and 12th Avenues.

Showhouse, yes, in that it’s been decorated and made to look like an exhibition—but being that it’s near the West Side Highway, with easy access to ship its goods and has 18-foot ceilings, it’s also a 17,000-square-foot warehouse.

The remaining 3,000-square-foot section is an office-showroom furnished with products from 53 of the 300 manufacturers with whom Meadows works. This setup allows for the actual office to be a display for clients who visit.

“We made sure that a client can come in here and see a whole range of products,” Sheri David, the chief executive officer of Meadows, told Commercial Observer on a recent tour of the new digs.

Take the 65-inch tabletop screen near the middle of the office for example. It has architecture software installed so that clients can work on office designs while on site. At the same time, Meadows is a distributor for Ideum, the manufacturer of the screen, so it showcases a product as well.

Most of the office is set up on a platform, which pushes the flooring higher to allow electrical wiring to run directly underneath the floors. As with tenants that purchase the flooring Meadows can easily move outlets in case it needs to relocate or expand workstations quickly.

“If [tenants] want to move at a moment’s notice, this helps,” said Marissa Allen, the chief operating officer of Meadows. “You need to show clients the ability to be flexible.”

Currently, 12 employees work at the showroom—under a multicolored painting of diamond shapes—in sales and client advisory roles. There are also four in the warehouse division. Construction of the project wrapped up in December 2017. The 91-person company’s main showroom and offices are at the Lipstick Building at 885 Third Avenue. (It also has additional locations in New Jersey.)

The showroom has three “mockup rooms,” which allow clients to set up products—like desks and chairs—to test the design and feel. And there is stadium seating in front the model rooms that allow people to watch the action. Meadows designed the walls between the showroom and warehouse in glass so light fills the storage area.

A flexible room, called “the den,” features a Ping-Pong table and comfortable colorful chairs. It can be used to relax or for team meetings. And there is a conference room, equipped with a 14-seat table and 95-inch television, guarded by plant-covered barn doors.

In the furniture business, every purveyor has dealt with clients missing small parts (screws, nuts, bolts). To combat this, Meadows prepared a parts room in its new space with thousands of small replacement pieces.

“So when those boxes of casters for chairs disappear,” Allen said, “we can help, so people can sit.”


Source: commercial

REBNY Celebrates Tax Break Renewal and Rezonings as Its 2017 Victories

The Real Estate Board of New York’s track record of promoting affordable housing and high construction wages may be up for debate among activists, but the 121-year-old organization touts both as major policy victories in the introduction to its annual report released first to Commercial Observer today. Affordable New York (the replacement for 421a), fair construction pay and safety, and affordable housing production all landed at the top of the group’s list of issues it promoted in the report.

Replacing 421a

The resurrection of the lucrative 421a property tax break was unquestionably the biggest achievement for REBNY in 2017. The issue had seemed hopeless for more than a year, as the old 421a law sunsetted in January 2016 with one weird caveat engineered by Gov. Andrew Cuomo: the labor unions and REBNY had to hammer out a compromise on the policy that would satisfy developers’ desire for cost control and the construction trades’ mission to ensure workers get paid prevailing wages..

When the two parties finally worked out a deal in November 2016 for what they called Affordable New York, it mandated that developers of projects with 300 units or more pay construction workers an average hourly wage of $60 in Manhattan and $45 in Brooklyn and Queens.  

Developers that hope to score the lucrative tax break must rent 25 to 30 percent of their units in a new building at below-market rates. Projects in the 300-unit-plus category in Manhattan south of 96th Street or along the Brooklyn and Queens waterfront will be eligible for a 35-year tax exemption. Meanwhile, smaller developments that meet the affordable housing requirements qualify for a tax break that lasts 25 years and do not have to fulfill the wage rules.  

Despite all these new details, the state legislature spent another six months wrangling over a few nitty-gritty details in the bill. Much of the debate revolved around whether condominiums should get the exemption and if so, how large it should be. Ultimately, the version that passed capped the exemption at projects of 35 units or less with an assessed average tax value of $65,000.

The proposal was a triumph for the real estate lobby, but not necessarily for the public. Affordable New York is unlikely to produce much housing for low-income New Yorkers, and it will cost $1.2 billion more than the old 421a program over the next decade, according to a report issued by the city’s Independent Budget Office last year.

Midtown East

The rezoning of New York City’s densest office neighborhood was another achievement for the real estate board, which counts among its members many of the city’s biggest commercial landlords and developers. In November 2015, REBNY, then-City Councilmember Dan Garodnick and then-Manhattan Borough President Gale Brewer resurrected a Bloomberg-era plan to upzone Midtown East. The group, known as the Midtown East Steering Committee, issued a new set of recommendations that required developers to pay for transit upgrades or pay a premium in order to tap into unused air rights attached to landmark buildings in the neighborhood.

The rezoning entered public review at the beginning of 2017 and hewed closely to the steering committee’s recommendations. Under the Midtown East plan, developers can only use landmark air rights if they pay 20 percent of the value of the sale of the air rights to the city. The one major sticking point in the plan was the proposed price of landmark air rights, which the city initially pegged at a minimum of $78 a square foot. After REBNY and landmark property owners charged that the proposed amount was far too high and would stymie both air rights deals and development, the city agreed to lower the cost of air rights to $61.49 a square foot.

The City Council ultimately approved the rezoning in August 2017, along with $50 million in capital funding for fixing up public spaces and streets in Midtown East.

Construction Safety

Few issues generated more controversy in the construction community last year than Intro. 1447, a piece of construction safety legislation commonly known as “the apprenticeship bill.” It was introduced in January 2017 as part of a package of 21 bills that covered worker training, prevailing wages, site safety, civil penalties and reporting requirements. When it first hit the floor of the council, Intro. 1447 heavily favored the construction trade unions by requiring workers on buildings of 10 stories or taller to enroll in apprenticeship programs. Since construction unions are the only groups that run apprenticeship programs, nonunion or open-shop contractors (firms that can employ union and nonunion workers) felt that they and their workers would be unfairly penalized or kicked off construction sites.

REBNY and open-shop groups testified vigorously against the bill at a City Council hearing last January. Small, minority-owned contracting companies and their workers would be the hardest hit by the new requirements, they argued, because they wouldn’t be able to afford to build new apprenticeship programs.

Several months of back and forth ensued. Union and open-shop construction groups held dueling rallies that ended in knock-down, drag-out fights. The apprenticeship language was eliminated from the bill. But the final version—which REBNY opposed—required 40 hours of construction safety training for workers on building sites of four stories or higher by September 2020. The City Council passed it in September 2017 with a unanimous vote of 42-0.

Toxic Effects of Green Initiatives?

REBNY has advocated for green energy initiatives in construction and building management for the past couple of years. But, it turns out, the real estate lobby took issue with the city’s carbon footprint when the new rules created negative financial impacts for its members.

In September, Mayor Bill de Blasio unveiled plans to cut the city’s greenhouse gas emissions 80 percent by 2050. The proposal called for new, strict limits on fossil fuel usage in commercial or residential buildings of more than 25,000 square feet that will go into effect in 2030. Landlords who cannot meet the requirements will face steep financial penalties. Older, multi-family residential buildings that rely on natural gas and heating oil are most likely to suffer under the new regulations, according to REBNY’s report.

“In the coming year, REBNY will continue to forcefully advocate for the industry on these issues,” the report notes. “We will meet with relevant stakeholders to express our concerns over the unintended consequences of this legislation and the need to identify appropriate metrics to measure energy efficiency.”

Tax Worries and Investment Sales

Even after a year marked by struggling investment sales and declining retail rents, REBNY members still saw signs the market was doing well. The luxury residential condo market took a hit, but the volume of residential home sales still increased year-over-year throughout the five boroughs for the first three quarters of 2017, the report notes.

And as it looks down the barrel of 2018, the organization will have to contend with unfavorable tax laws passed by a Republican Congress that could negatively affect the market in New York. Under the new rules, the state and local tax deduction will be capped at $10,000 for property, income and sales taxes. Since New York is a high-tax state, residents and developer alike are concerned by the spectre of rising property taxes and whether that will ultimately drive New York’s wealthiest to low-tax states like Florida.

However, REBNY members can also look forward to the organization’s 122nd annual banquet on Jan. 18. Hosted at the Hilton in Midtown, the party will include a cocktail hour from 5:30 to 6:30 p.m. and the banquet and awards from 7 to 10 p.m.


Source: commercial

Five City-Shifting Projects Credited to the Late John Portman

John Portman, Jr., who died on Dec. 29, 2017 in his hometown of Atlanta at age 93, was more than just a famous architect and developer—his large-scale complexes changed the faces of cities. They planted a flag for a city. They were the sudden skyline changer. They were the kinds of projects that spurred urban renewal around the United States and the world.

Choosing his top project is nearly an impossible task as his work spans nearly seven decades. He started his Atlanta-based eponymous architecture firm John Portman & Associates in 1953, after working at another firm for a few years, and he worked to the bitter end, according to The New York Times. (He was also a savvy businessman: Besides his architecture firm, he established development company Portman Holdings and the AmericasMart marketplace, a wholesaler of home, gift, area rug and apparel merchandise.)

His projects have inspired legions of followers, as his “city-within-a-city” mega-projects helped rejuvenate urban areas. We take a look at five of his most city-defining projects.


Source: commercial

The Plan: Inside AlphaSights’ Linear Designed Offices in Midtown East

To London-based AlphaSights, which helps top executives address challenges by connecting them to industry experts around the globe, the line is an important concept.

The company likes to highlight its mission showing a world map with ample crisscrossing lines, reflecting business connections it helped facilitate.

So when it came to the design of its new offices at RFR Realty’s 350 Madison Avenue between East 44th and East 45th Streets, the architecture firm Ted Moudis Associates focused on blending lines throughout the 47,000-square-foot offices.

The architects made a series of curved lines on the ceiling by using dark and white exposed and dropped ceilings and on the floors via the contrast between wood and polished floors. The curved theme can be seen in the sleek reception desk.

“We wanted to evoke connections that were being made,” Jeff Knoll, a design director at Ted Moudis, told Commercial Observer. “We thought that that was an appropriate image. So a lot of the design has these curving, fluid lines.”

AlphaSights relocated to the new offices in August last year, expanding from 22,000 square feet at 229 West 43rd Street between Seventh and Eighth Avenues. The company has the entire 12th and 14th floors and half of the 15th floor at 350 Madison Avenue. (There is no 13th floor in the building.)

Bright red is accentuated throughout the new digs in chairs, walls and table legs because it’s AlphaSight’s branding color. The hue stands out because it is the only non-neutral color (black, white or gray) that is being used in the space, excluding the wood.

Since the U.K.-based company wanted its New York offices to feel like the Big Apple, the Ted Moudis team designed the offices to look like industrial New York properties. That’s why the ceilings are exposed and the floors are polished concrete. The conference rooms are encased in glass resembling factory windows, and the columns have been stripped.

The architecture team recognized that this industrial look tends to be a bit dark. So to warm the space up, they added a hint of nature: wood floors and walls in some areas. They even decked out some of the columns in wood and embedded planters in the columns.

There is a green wall in the café, an unenclosed area at the center of the office. It doubles as a town hall space, which can hold up to about 75 people, and has a variety of seating schemes.

“A lot of [AlphaSight’s] employees are millennials, and this is a kind of environment where they are providing a lot of amenities for the staff,” Knoll said. “There is beer, wine and snacks. The café becomes a space that is used all day long.”


Source: commercial

Construction Starts in the Bronx Projected to Top $2B—Again

The Bronx is still burning.

Led by strong housing development, the value of construction starts in the Bronx is expected to be more than $2 billion for the third consecutive year, according to a just-released New York Building Congress Bronx study of Dodge Data & Analytics data covering the first nine months of 2017.

The Building Congress forecasts that about $2.3 billion worth in projects will have commenced construction this year in the Boogie Down, roughly the same amount as in 2016, and slightly outperforming 2015’s $2.2 billion.

Projects that started this year in the borough by September were collectively worth $1.7 billion, according to the analysis. (New York City overall saw around $31.2 billion of construction project starts through the first three quarters of 2017.)

The Bronx has seen increasing interest from developers over the last 10 years in response to the demand for more affordable housing citywide as well as the availability and affordability of the land in the borough.

“The Bronx is experiencing positive momentum and benefitting from continued strong investment from both the public and private sectors,” Building Congress President and Chief Executive Officer Carlo Scissura said in a prepared statement. “With the value of annual construction starts more than doubling since the beginning of this decade, it’s obvious that the development community now views the Bronx in a whole new light.  And I would be surprised if that percentage doesn’t continue to rise in the coming years.”

As of September, the top costliest developments in the Bronx this year are a $232 million project to replace Unionport Bridge and a $133 million 12-story, 305-unit apartment building at 443 East 162nd Street in Melrose, which is being developed by New York City’s Department of Housing Preservation and Development, the Women’s Housing and Economic Development Corp. and BFC Partners

Housing account for the largest asset class—53 percent—for which new projects began construction through the first three quarters of 2017 in the Bronx, according to the report. That was followed by public works at 20 percent, institutions (schools and health care facilities etc.) at 15 percent and commercial properties with 11 percent.

“The Bronx possesses the most opportunities for new residential development, and the ability to produce new housing for residents at all income levels,” Scissura said. “As the de Blasio administration further ramps up its affordable housing program and as private developers increasingly look to the north, the future looks bright for the Bronx.”

Excluding the final quarter, the Bronx saw 3,190 residential units begin construction in 2017. The report indicates that the total is on track to outperform last year’s 3,918 units and 2015’s 4,240 units, which was the most in the last decade.

“The Bronx has land, which the other boroughs don’t,” Louis Coletti, the president and CEO of the contractor association umbrella Building Trades Employers’ Association told Commercial Observer. “And the land is obviously less costly than in Manhattan or Brooklyn.”

Regarding the future of development projects in the Bronx, Coletti added: “The only thing that could impede the growth of the Bronx is the natural economics of real estate—if interest rates start to get too high and people decide they aren’t going to borrow money or if [the economy] starts to slow down. Then you will see things slow down in the Bronx.”


Source: commercial

The Construction Industry Should Brace Itself for a Rollercoaster 2018: Experts

Coming off a few booming years, New York City’s real estate industry—including the construction sector—has been suffering a bit of a setback this year.

The New York Building Congress forecasts at year end, $45.3 billion will have been spent on construction in 2017, the second-highest-ever total dollar amount committed to construction in the city’s history, according to the organization.

But it would mark a 13 percent decline from last year’s record $52.2 billion. At the same time, the number of jobs in the industry increased to 149,800 in 2017 from 146,200 in 2016. And the organization expects it to rise to 151,200 jobs next year.

Construction permits, which indicate the level of future work in the city, meanwhile are up slightly this year, although the pace is slowing. The New York City Department of Buildings issued 109,724 permits in fiscal year 2017, ending in July, a 0.4 percent increase from 109,277 in 2016, according to the city’s annual Mayor’s Management Report released in September.

What does all of this mean for the construction business in 2018?

Commercial Observer spoke with five experts about what to watch for. Overall, they forecast a decline in housing construction, but an increase in work in the public sector and the office market. The jury is out on construction costs. And then there is the elephant in the room: tax reform, which has been passed by the Senate but not the House of Representatives. Republicans cheer it as a win for jobs (and big Wall Street businesses are chomping at the bit as it would cut the corporate tax rate by nearly a half). Democrats are against it, claiming it serves wealthy individuals and corporations. As for New York City construction experts, they are split on the impact to their segment of the industry.

Housing

Over the past few years, there has been a surge in housing development, which many experts say has led to an oversupply. And in turn, construction of new homes slowed down this year by 41.2 percent and that is expected to continue for the foreseeable future. There were 37,700 new housing units added in 2016, just 26,700 this year, and the Building Congress expects 24,000 new housing units in 2018.

In terms of dollars and cents, $11 billion will be spent on residential construction this year, the Building Congress forecasts, a 31.3 percent drop from $16 billion last year. In 2018, the figure will rise to $11.6 billion.

“I think on the residential end—apartment complexes and condominiums—I think that it’s is a little overheated,” said Richard Lambeck, the chair of the construction management program at New York University’s Schack Institute of Real Estate. “There will be a slow down. The products that have been produced have surpassed the absorption rate. The amount of apartments that are going to be purchased is going to be slowed and it will have an impact on the industry.”

In addition to the oversupply problem, there are a lot of people crying “Not in my backyard,” a.k.a. NIMBY. Community organizations are rallying against large skyscrapers such as SJP Properties’ 200 Amsterdam Avenue on the Upper West Side, Gamma Real Estate’s planned 67-story building at East 58th Street between First Avenue and Sutton Place, and Extell Development Company’s 69-story tower at 50 West 66th Street.

The fear is that these projects could be forced to scale back or canceled altogether due to community opposition, which will lead to less work for construction companies and subcontractors.

“I worry about community to reaction to projects,” Louis Coletti, the president and chief executive officer of contractor association umbrella Building Trades Employers’ Association. “We are going to go back into the 1990s where NIMBYism just takes over and stops the city. You see this opposition to as-of-right projects, that’s crazy. You see the general direction of the city becoming progressive. You just wonder if it is the natural course of things as people become more politically active.”

Public works

Government spending for public infrastructure projects climbed this year for projects of note around the five boroughs, such as the redevelopment of LaGuardia Airport and the expansion of the Jacob K. Javits Convention Center and the new Kosciuszko Bridge.

Spending on similar projects is expected to reach about $16.9 billion in 2017, according to the Building Congress report—a 16 percent increase from 2016’s $14.6 billion. And the organization expects a further increase to $18.8 billion next year.

“Our infrastructure and transportation systems are the key,” Coletti said. “They are the real foundation to continued growth in the city. Those systems have lacked appropriate level of investment for many, many years. That’s the reason why the governor has to move billions of dollars for the [John F. Kennedy International Airport] and LaGuardia [Airport] [redevelopment projects].”

He added: “There is going to be a real focus on how to finance and really build our infrastructure to allow New York City to have continued growth.”

On the horizon, major infrastructure projects such as the redevelopment of JFK, the next phase of the Second Avenue subway and the Gateway Tunnel project—which would build another tunnel to New Jersey—lay in wait.

And some are questioning the viability of the next phase of Second Avenue subway project in the short term, as the calls to repair and fix the existing subways grow louder, meaning dollars would go to maintenance. While that could be great for commuters, maintenance produces less construction work than new projects.

“I don’t know if the [Metropolitan Transportation Authority] has sufficient funds to start that early,” Lambeck said. “At least from the MTA psperspective, they have been getting a lot of pressure, primarily in maintenance.”

Office   

All across the city there has been an abundance of construction on office projects in 2017. Just along the Far West Side alone there is Related Companies and Oxford Property Group’s Hudson Yards, Brookfield Property Partner’s Manhattan West and Moinian Group’s 3 Hudson Boulevard.  

In Brooklyn, Two Trees Management Company is building an 380,000-square-foot office tower at 292 Kent Avenue in Williamsburg; Rubenstein Partners and Heritage Equity Partners is working on the 500,000-square-foot 25 Kent Avenue in Williamsburg; Tishman Speyer and HNA Group is converting the upper floors of the Macy’s at 422 Fulton Street into 620,000 square feet of office space in Downtown Brooklyn; JEMB Realty and Forest City New York are building a 500,000-square-foot building at 1 Willoughby Square; and Thor Equities is working on Red Hoek Point in Red Hook, a nearly 800,000-square-foot office development. And in Queens, Tishman Speyer is building a 1.2-million-square-foot two-building office and retail project called The Jacx in Long Island City.

Construction work on all of these projects, as well as others, will continue into next year, keeping contractors busy.

“You have a lot happening with Midtown West products. You have a lot of activity in Lower Manhattan and upgrades to office buildings [across Manhattan],” said Carlo Scissura, the president and CEO of the Building Congress. “Office is a strong part of the market. And you are seeing [large office developments] happen in Brooklyn and in Queens.”  

Looking forward, the demand for office space in Manhattan is high (as CO recently reported), and there is a need to renovate a crumbling older stock of buildings. Redevelopments of towers and expansions are an area that could see growth next year. Midtown East—thanks to its new rezoning—will allow for larger projects and developers could look to redevelopment projects in the area, which would create more work for construction companies.

“Hudson Yards has proven that there is a tremendous need for new space and much of the city’s current product needs to be replaced,” said Kenneth Colao, the founder and CEO of CNY Group. “If you had another large sector of town that was wide open for development, I think it would be in play. The [Midtown East] rezoning I think will support more redevelopment.”

Construction costs

In May, Turner & Townsend released its annual construction market survey that pegged New York City as the world’s most expensive city for construction. The average cost of a building was at $354 per square foot, surpassing Zurich, Switzerland which came in at $328 per square foot.

Rising costs has become a problem in the industry due to a variety of factors, including the cost of labor. Construction companies have blamed union’s high hourly wages and an abundance of regulations.

On the latter point, unions have been making compromises in contract negotiations and lowering hourly wages as more developers demand general contractors take bids from nonunion companies in order to increase profit margins. Some construction leaders expect this trend to continue as the competition between organized labor and other subcontractors heats up further.

“I think the unions have to recognize that in order to be viable they need to work with their development clients and figure out ways to reduce costs,” said Richard Wood, the CEO of Plaza Construction.

Another reason for inflated construction costs is high insurance rates. New York is the only state with a law that allows a worker injured on a construction site to sue everyone—construction companies and individual superiors. This increased liability raises insurance premiums.

But regulations for the industry have increased towards the end of the year, as the City Council tried to improve safety on construction sites. The council passed a number of bills this year targeting construction safety, including one polarizing one: Intro-1447-C. The legislation will require workers to have at least 40 hours of safety training. Opponents to the bill claimed that it will force contractors to fund courses for their workers, increasing the bottom line. And the council also passed yesterday Intro-1399, which gives most industry employees, including construction workers, the right to “flextime” or two days off from their regular schedules.  

One construction watchdog said losing workers could disrupt work flow on projects.

“This isn’t a store or a restaurant—this is a construction site,” Coletti said. “We have schedules and budgets we have to make.”

Tax reform

As of publication, Congress’ tax reform bill had not been signed into law. But it looks extremely likely that it will as Republicans in the Senate passed a final version of the bill early today and their counterparts in the House of Representatives will re-vote on the legislation today after approving it yesterday with some errors.

The legislation will cut the corporate tax rate to 21 percent next year from 35 percent, which could mean a boon for companies. With extra money on their balance sheets, companies could reinvest in their offices. And real estate developers may use those funds to upgrade facilities in their assets. This will lead to more construction projects.

“I think indications are that it will be good for the construction industry,” Colao said. “If in fact the tax reform results in corporate tax reductions, corporations may start sprucing up facilities, then there would be an uptick in activity. Corporations—and entities that are tenants in office buildings—if they are looking at an improved bottom line at the same revenue—they might look to increase their capital expenditures.”   

However, as a part of the regulation, individuals will be limited in deducting state and local income taxes, sales taxes and property taxes to $10,000. Homeowners will be able to deduct mortgage interest on debt up to $750,000, down from $1 million. These segments of the bill don’t bode well for real estate interests in New York City, which has an average home sales price at $987,000 as of the third quarter, according to the Real Estate Board of New York. If people can’t reduce their taxes it will add to Gotham’s living expenses and could mean less people wanting to relocate to the city—lowering demand for more housing and impacting construction.  

“New York and especially the New York City area is one of the highest areas for state and local taxes,” Wood said. “I think there is going to be a tendency for people to want to move to states that don’t have high state taxes, and with that, many corporations may think in order to get a good labor pool they’ll want to move their offices to those low-tax states.”

He added: “I personally think that people are going to have to stay focused on solutions to that problem, because it could have long-term adverse effects on the real estate industry and the construction industry in New York.”


Source: commercial

Loft Landing: Inside the Mayor-Backed Fight to Protect the City’s Artists Lofts

Just shy of two weeks before Election Day and with victory a foregone conclusion, Mayor Bill de Blasio turned his attention to the future of the artists of New York City.

The mayor hunched his body into a creaky freight elevator inside 475 Kent Avenue—a South Williamsburg former factory home to scores of painters, sculptors and photographers—rode up to a ninth-floor studio and announced the city would change how it regulates loft spaces.

De Blasio has never lived in a loft himself, but his wife is a poet and both speak frequently about the vital contributions that the city’s artists have made in shaping New York’s identity.

“This is about making sure the people who make New York City great can afford to live here. We don’t want to lose one of the most essential parts of New York City,” de Blasio said at an Oct. 25 press conference, standing in front of a sign that read “Keeping Lofts Affordable” inside a studio at 475 Kent Avenue.

At the press conference, de Blasio revealed three ways he wants the city to modify how it follows the Loft Law, a state law that gives rental protections to prevent landlords from raising rents willy-nilly on about 10,000 tenants living in formerly industrial loft units. Per the mayor’s proposal, the city would make tenants prove their loft space is their primary residence; allow all occupants of a loft, including family members, to apply for legal protection; and keep units under rent-regulation even if a tenant takes a buyout.

The mayor blamed the Bloomberg administration for inadvertently reducing the number of rent-regulated lofts by 30 percent in the last 15 years.

“The sad reality is we lost those protections not by accident,” he said. “It was a series of choices made at the state level and made by the previous mayoral administration that really favored the private sector over the needs of tenants.” 

And he declared that artists deserved to live in the warehouse spaces they inhabit while lambasting landlords for pricing them out of their neighborhoods.

“We have to make it harder for landlords to take buildings market rate,” de Blasio continued. “Once a loft is out of rent-regulation forget it; it’s never going to be affordable again. We’re fighting for every single loft.”

The next day, a couple who runs Williamsburg dance studio Cave 12 at 58 Grand Street—about half a mile north of where the mayor stood at 475 Kent Avenue—saw their legalization application rejected by the state legislature-enacted New York City Loft Board, which regulates conversions of industrial spaces to residential ones. Board members argued that the basement-level arts space lacked external windows because it had a retractable steel gate that rolled down in front of a wall with windows.

Ximena Garnica, a choreographer and one of the Cave tenants for more than two decades, called the reasoning “absurd.” She removed the gate and is currently appealing the decision.

“How is it possible that this hyper-technicality could undermine the original intention of the law? Our space has windows,” Garnica told Commercial Observer. “Everybody who sees a picture of the building says, ‘What? I don’t understand.’ Just because of the windows, we’re ineligible for coverage?”

The challenges that artists face to live and work in an affordable part of the city have become almost insurmountable.

Owners continue to scour rapidly gentrifying neighborhoods for workaday warehouses they can gut and redevelop for wealthier tenants. And the pressures of New York’s rising cost of living has caused many artists to move upstate, out west or abroad in search of an affordable community.

New Yorkers who live in large commercial warehouses have since 1982 been able to petition the city to legalize their apartments, bring them up to code and become rent-regulated tenants (although the original law was mostly limited to buildings around Soho). A 2010 revision brought thousands of outerborough tenants under the law’s auspices, though the law limited protections to those in three of the city’s 16 industrial zones—in the Brooklyn neighborhoods of Greenpoint and Williamsburg and in Long Island City, Queens—and added a number of exemptions including a requirement for windows to face the street or a yard.

But the political tide steadily rising against artists may be turning.

City Hall has engaged with artist activists over regulations after activists asked the mayor in mid-November, after the election, to revise his proposed Loft Board recommendations. 

Forcing tenants to prove that their loft has been their primary residence in order to receive coverage is an onerous burden, advocates have argued since 2009. Instead, they want the city to clarify what constitutes an incompatible use for residential living, such as having a working factory in the building, and consider a new building code just for live-work spaces.

“Our buildings are live-work buildings, not apartment spaces, and you cannot apply the same type of building code to a brand new apartment building,” said 475 Kent Avenue tenant activist Eve Sussman, who hosted the mayor for his October press conference at her studio. “All of these code issues cause snarl ups and cause [New York City Department of Buildings] plan examiners to reject plans to codify and legalize live-work space.”

Others want the Loft Board to stop ruling on new cases until the city revises its regulations.

“It’s like trying to change a tire while driving a car,” Garnica said. 

Tenant leaders and advocates met with City Hall officials two weeks ago to discuss what regulatory changes they would like the Loft Board to make, and sources told CO that the Loft Board has tabled discussions on the recommendations until the mayor submits new ones. A de Blasio spokeswoman said conversations with tenant advocates are “ongoing.”

As city bureaucrats and tenants haggle over enforcement, state lawmakers will try to make an even wider swath of loft buildings legal.

The Democratic-controlled Assembly passed a bill in June removing some of the limitations in the 2010 law, but it never got out of the Republican-controlled Senate Rules Committee. Democratic lawmakers had tried to make a deal linking the Loft Law revision to a Republican-friendly bill, but nothing materialized.

“The Senate doesn’t pass any tenant legislation unless they get something for landlords. They weren’t interested in a bill giving tenants more protections than they already had,” said Assemblyman Joe Lentol, who is pushing for a Loft Law revision. “If anyone thinks anything will get enacted on the merits, they should know better when it comes to tenant protections. That’s sad but it’s true.”

But the Senate may not be in Republican hands three months from now.

Gov. Andrew Cuomo and Democratic leaders have been working to reunify a group of eight breakaway Democratic senators, who caucus with Republicans, with the mainline conference. With another rogue senator, Brooklyn’s Simcha Felder, they could effectively wrest control of the upper chamber from the GOP and determine what legislation reaches the floor.

In the meantime, Senate Republicans say that the Loft Law remains “under consideration” as they await de Blasio’s 2018 legislative agenda.

“We’re willing to look at what he gives us,” said Senate Housing Committee Director Lorrie Pizzola. “We’re glad to work with him and all the sides in the process to see what we can do on the Loft Law or other housing initiatives.”

Tenants are cautiously hopeful that the law will be revised in a way that protects new artists and keeps others in their current spaces.

“We have an equal shot at both and it’s just about tenants staying vigilant in Albany and with the mayor’s office,” Sussman said. “But we can’t take a year to decide these things. We need to figure it out in the next couple months. Otherwise people could lose their homes.”


Source: commercial

Los Angeles Passes Linkage Fee on Real Estate Development

The Los Angeles City Council unanimously passed a measure on Wednesday that will assess a “linkage fee” requiring developers to pay a surcharge for new residential and commercial projects to generate revenue for an affordable housing fund. The fee is an effort to address a housing and homeless crisis—the city has the highest number of homeless people in the nation with an estimated population of 58,000 in 2017, according to statistics from the Los Angeles Homeless Services Authority.

Mayor Eric Garcetti signed the ordinance into law following the council vote.

The Affordable Housing Linkage Fee Ordinance (AHLF) will earmark what will amount to $100 million a year for the city’s affordable housing trust, thus generating an estimated 1,500 new units of affordable housing a year once it fully goes into effect in mid-2019, according to a spokesman for City Councilman Jose Huizar, the chair of the Planning and Land Use Management Committee.

The fee will range from $1 to $15 a square foot, depending on the type of project and its location. Planners will utilize the city’s 35 community plans, which designate boundaries to help guide development, to calculate the charge, according to the Los Angeles Times. For instance, home builders on the Westside—considered a high market—would pay higher fees, while developers in lower-range markets, like San Pedro and South Los Angeles, would have lower fees.

Several building categories will be exempt from the fee, including schools, hospitals and public museums, as well as residential additions smaller than 1,500 square feet. Residential property developments, which include a set percentage of affordable, low- or moderate-income housing in their buildings, would also be exempt.

The measure is part of a statewide trend toward assessing fees for real estate transactions to help raise money for low-income housing. In September, the LA Times indicated, Gov. Jerry Brown approved Senate Bill 2, which includes a $75 fee on mortgage refinances and other real estate transactions, is expected to raise $250 million a year to help finance low-income developments, as well as a $4 billion bond slated for the 2018 ballot, that together could raise close to $1 billion for low-income housing annually.

Expectedly, some members of the business community are concerned that the ordinance will discourage the commercial development, namely of middle-class housing, in the city.

“No one can deny the need for more affordable housing in the region,” Gary Toebben, the president and CEO of the Los Angeles Area Chamber of Commerce, told Commercial Observer. “It makes no sense to add another fee to the construction of middle-class housing, which is what so many of our residents desperately need.”

A motion proposed by City Councilman Gil Cedillo, would exempt housing developments that contain ownership units affordable to middle-income households, defined as those making between 120 percent (ranging from $72,101 to $108,100 for a family of four) and 150 percent (ranging from $108,101 to $135,150 for a family of four) of the Area Median Income (AMI).

Toebben said if that motion was incorporated in how the measure is instituted, his organization would withdraw its objections. (In addition to approving the linkage fee, the council agreed Wednesday to study raising the residential development fee in high-market areas to $18 per square foot and also consider Cedillo’s motion.)

“We’re the only big city in the state of California that does not have a consistent funding source for affordable housing. And with the diminishing assistance from the federal government and more in the federally proposed tax plan where they are going to take away tax credits that developers could use as well as the disbandment of the state’s redevelopment agencies, our options for affordable housing is decreasing exponentially every year,” Rick Coca, the communications director for Huizar said, referring to the formal disbanding of hundreds of state redevelopment agencies by the Supreme Court of California in 2011.

When asked if he is concerned the measure might slow down commercial development in the city, he said the city council took that into consideration when coming up with the rate structure.

“The ordinance that we are adopting today comes in at a lower rate than a Nexus study said the market could bear,” Coca said before the council vote on Wednesday. “A big part of the reason why we are being conservative is obviously we do not want to slow down development or block it in any way. We think given the housing needs, housing development, and just the amount of cranes that seem to go up in Downtown Los Angeles daily, that this linkage fee will be able to be incorporated into any future development without too many problems.”

Mayor Garcetti first proposed a linkage fee in 2015 as part of his comprehensive housing strategy, which includes tripling the production of permanent supportive housing for the homeless, strengthening the City’s Rent Stabilization Ordinance, doubling the production and preservation of affordable housing, and permitting 100,000 units by 2021.


Source: commercial

ACORE Provides $132M Construction Loan for Cali Student Housing Property

ACORE Capital has closed a $131.7 first mortgage for the ground-up construction of The Graduate—a 19-story student housing building in San Jose, Calif., Commercial Observer can first report.

The loan, which has a 60-month term and closed on Dec. 8, was made to AMCAL Swenson, a joint venture of San Jose-based development firm Swenson and Los Angeles-based residential developer AMCAL Equities. The financing was arranged by Alison Company.

The Class-A, L-shaped property at 90 East San Carlos Street will sit on a 1.45-acre site located one block from the main entrance to San Jose State University. In addition to housing 1,039 students across 260 furnished apartments in its top 17 floors, the building will include 14,750 square feet of retail space, a four-level parking garage, an amenity deck and a pool.

The Graduate is located between the San Jose State University campus and San Jose’s SoFA District—the principal arts and entertainment area, stretching along South First Street between San Carlos and Reed Streets.

“The Graduate will serve as a significant bridge between campus and the SoFA District as well as the surrounding urban amenities of downtown,” Case Swenson, the president of Swenson, said in an announcement at the time of the project’s groundbreaking in October. Its construction is expected to be completed in 2020.

It’s been a busy year for ACORE Capital with the nonbank lender closing deals from coast to coast. In September, it closed a $63 million loan to Dr. Kiran Patel for the acquisition and renovation of Cheyenne Mountain Resort in Colorado Springs, Colo., as well as a $73.4 million financing for the redevelopment of 163 Varick Street in New York City. A month earlier, it provided a $121 million loan—which included a senior loan and a mezzanine portion—to developer Sterling Bay for its purchase of a vacant building in Chicago’s West Loop area.

AMCAL and ACORE officials weren’t available for comment by press time.


Source: commercial

The Plan: Emerge212 Brings High-End Hospitality to 1185 Avenue of the Americas

While the stratospheric rise of WeWork has raised the profile of coworking to an unprecedented level in recent years—with more firms than ever seeking to cater to the market for short-term, highly amenitized shared working spaces—“not all spaces are created equal,” according to James Kleeman, a director at boutique shared office provider Emerge212.

“There’s a wide landscape of coworking spaces out there,” Kleeman said during a recent visit to Emerge212’s newest location at 1185 Avenue of the Americas in Midtown. “The trajectory of officing is only going more nimble, more flexible, more [able] to suit each individual company and entrepreneur’s needs.”

Emerge212 was formed in 1999 as a wholly owned subsidiary of SL Green Realty Corp., which makes the firm “old-timers in this industry,” as Kleeman put it. But despite its relatively senior status, the office provider is going for an altogether different vibe than its competitors—one bringing “the best of hospitality and design into officing,” Kleeman said. “Our value proposition is the three S’s: style, service and sophistication.”

The two-level, 56,000-square-foot space at the SL Green-owned 1185 Avenue of Americas opened this past summer as Emerge212’s third New York City location, and like its other two (at 3 Columbus Circle and 125 Park Avenue, also SL Green properties) offers a sleekly designed, aesthetically minded office environment featuring high-end finishes and amenities. There are conference rooms named after famous artists (Warhol, Picasso, Pollack) that pay homage in their choice of carpeting and wallpaper (think splattered patterns on the walls of the Pollack room), while common area flourishes including a blue wooden staircase, a wall decked out in green, moss-like material and a glass table featuring gold-leaf decor that responds to static from the touch (designed by Kleeman himself) add a vibrant, modern feel to the place.

Café areas include diner-style seating and top-of-the-line coffee machines plus sparkling water and wine on tap—a WeWork-esque touch that lifts the coworking giant’s infamous tap beer amenity but “underscores the sophistication and the differentiation” of Emerge212’s product, Kleeman said. There is a “bistro” area housing a kitchen and movable furniture that can be reorganized to accommodate events; a building code-compliant fireplace; a glossy bicycle storage room; and a lounge area featuring soundproof “serenity” chairs equipped with speakers that can play audio of the user’s choice. Meanwhile, common area users can pipe in music through the rooms’ speaker systems with a tap of a smartphone.

And then there are the offices themselves, which line hotel-style corridors equipped with chic lighting fixtures but—with their three-foot-thick obfuscated glass panels and keyless entry—go for a more traditional and “private” office experience than many shared office spaces. Emerge212 clients, who Kleeman said mostly come from the financing, technology, legal and consulting industries, can take anywhere from a single cubicle up to several suites banded together to accommodate dozens of employees.

“We don’t have these big team rooms that are split desk by desk by desk,” Kleeman said, noting that the space’s more corporate aesthetic is going for a more “Midtown” feel than more creatively minded coworking environments.

While Kleeman had significant input in the design, Emerge212 enlisted the help of architecture and interior design firm LB Architects, which also designed the locations at 3 Columbus Circle and 125 Park Avenue. Rachel Talavera, a senior designer at LB Architects, said Kleeman’s vision was inspired by European boutique hotels and a desire to equip the space with furnishings and finishes “that were new to the marketplace.”

“They’re very particular in that someone walks into their space and doesn’t say, ‘Oh, that’s a Restoration Hardware table,’ ” Talavera said.

For Kleeman, it’s not only about designing the most beautiful space possible—one capable of “satiating the five senses”—but also building an environment that tenants will want to stay in “year over year over year.”

“When you build and design something that’s not as traditional, you’re taking a leap that the clientele you’re building it for is going to love it, want it, sign for it and pay for it,” he said. “We’ve gotten great feedback.”


Source: commercial