Stephen G. Kliegerman
President of Development Marketing
By MAX GROSS
Graceline Court, one of the more successful Harlem buildings to hit the market, has had its swings. This three-bedroom, 1,417-square-foot condo was priced at $1.125 million when the market was at its height in 2007. It's now $895,000. Contact: Leo Munoz, Halstead Property, 212-381-2583
SHOPPING for a condo in Harlem four or five months ago was a bit like being the prettiest girl in a room full of hormone-charged teenage boys.
If you were looking to buy, you were a hot commodity. Brokers were falling over one another to be nice. The reason was obvious: The Harlem real estate market, both East and West Harlem, was in a deep freeze.
"We had a dry spell of about four months where we didn't get an offer," says Albert Marengo, chief financial officer for Gary H. Silver Architects, which is working on three new developments in East Harlem, including Observatory Place. "That was disconcerting, at best."
According to appraisal firm Miller Samuel, there were just 83 East and West Harlem apartment sales in the first two quarters of 2009, compared to 229 deals in the last two quarters of 2008.
Prices melted down, too: The average price per square foot for a one-bedroom fell from $900 in the second quarter of 2008 to $572 in the second quarter of 2009, a decline of nearly 40 percent.
Not only were few things moving and prices falling, but there was also a glut of inventory. That was because last summer, before the market collapsed, developers were eager to get projects in the ground before the 421A tax abatement expired.
Some buildings, which thought their sales were in the bag, saw buyers lose financing or walk away from their deposits at the last minute. One example: Fifth on the Park currently has 97 contracts out on 160 units -- with about half of them in some level of jeopardy, according to developer Lew Futterman. About 15 buyers there have already walked away from their deposits.
Other projects, like the splashy 119th & Third, were originally conceived as condos, but have been reinvented as luxury rentals. (According to Toby Klein, director of marketing for the building, it might switch back when the market improves.) A number of other developments are also considering the rental option.
All this conspired to make it look like the Harlem market wouldn't survive.
It still might not.
"Condos are in deep doo-doo," says broker Willie K. Suggs, who has been buying and selling real estate in Harlem since the 1980s.
And it's pretty much the same story for townhouses. "We have a couple of owners who are jumping out of windows and agents committing hara-kiri," says Suggs. "Cheaper stuff is getting cheaper. But it's a field day for buyers -- I've never seen buyers so happy. It's really half price from 2006."
And that's the one ray of light in all of this gloom: After a miserable winter market, buyers have begun showing up again.
That comes with the normal caveats.
"Buyers are certainly being cautious," says Stephen Kliegerman, executive director of Halstead Property Development Marketing, which is handling sales at a number of new Harlem condos.
"They're looking at everything before they make a decision."
But deals are being inked again.
Since June, Halstead made six sales at the Kalahari, which means that all but 15 of its 249 units are sold or in contract.
Graceline Court, another new condo Halstead is marketing, has sold more than half of its 32 units, with seven sales occurring from March to May.
"In this market, that's quite unbelievable," says Howard Loewentheil, the developer of Graceline Court.
And the prices are pretty decent for new construction.
Graceline Court's units average $689 per square foot. Kalahari is at $707 per square foot. The new 73-unit co-op building Beacon Towers averages $475 per square foot, but also has a 1,242-square-foot one-bedroom duplex for $475,000, which works out to $382 per square foot. (That's not including the unit's 380 square feet of outdoor space.)
As for retail development, a number of mega-projects on 125th Street have essentially died, like the construction of the new Major League Baseball television headquarters, which was abandoned late last year. But transactions are still taking place.
"Retailers feel it's an affordable opportunity," says commercial broker Faith Hope Consolo of Prudential Douglas Elliman.
Consolo is taking restaurateurs like Simon Oren (of Marseille and Five Napkin Burger) to look at Harlem spaces.
"We're still getting interest from usual suspects, like McDonald's," says Consolo. (McDonald's, in fact, caused a tremendous stir when The Post revealed that the golden arches might open at 111 Central Park North, Harlem's most expensive condo building.) To ensure that Harlem remains a viable neighborhood (for both commercial and residential tenants), developers and the city have started getting proactive about making sure that developments actually do cross the finish line.
Last month, Mayor Bloomberg and City Council Speaker Christine Quinn announced a $20 million program to turn unsold condos and market-rate rental buildings into affordable and middle-income housing. The city came up with a list of properties that would qualify and, presumably, many of these buildings are in Harlem. (The list is not yet available to the public.)
Affordable housing is, in fact, one of the things that might save a number of these new Harlem buildings.
Ellington on the Park, for example, has 133 units, 110 of which are affordable housing that average $229 per square foot.
"If you make $120,000 a year outside of New York, you're rich," says Charlie Lewis, a broker for Warburg Realty, which is handling Ellington. "But here, that [means you qualify for housing that's] affordable."
Of those affordable units, 105 have sold. (The active market-rate listings average $594 per square foot.) That puts the building at 79 percent sold -- well above what it needs to qualify for government-backed Federal Housing Authority loans. (A building has to be 51 percent sold to qualify.)
When Hamilton Lofts qualified for the FHA-mortgage program in June, the building announced that buyers could put as little as 5 percent down. With available units starting at $539,000, that means a down payment of less than $27,000.
And even with the market's unsteadiness, new construction marches along.
PS 90, a turn-of-the-century public school on 148th Street which had been sitting abandoned for decades, is being turned into a 75-unit luxury condo building (20 of which will be affordable). It's slated to be finished by spring 2010, and it promises a lot of the bells and whistles that you would have thought had disappeared from the Harlem real estate scene a long time ago.
And 2280 FDB, on Frederick Douglass Boulevard and 123rd Street, has 18 affordable units that start at $145,000. (The average price of the market-rate units is $795 per square foot.)
The building just celebrated its topping-off party last week and is currently 34 percent sold.
"We haven't really tweaked the project at all," says Hans Futterman, president of RGS Holdings, which is developing 2280 FDB.
Even East Harlem, which has seen harder times than its western neighbor, is forging ahead.
In addition to Observatory Place, which had a handful of recent sales, Marengo is going ahead with two other buildings, 416 E. 120th St. and 2147 Second Ave.
"We've been kind of fortunate," says Marengo. "Nothing has stopped. I'm not saying we haven't slowed down, but we're going ahead."
Thursday, August 13, 2009
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