Sunday, October 10, 2010

In article on Beekman Tower (now 8 Spruce Street), Times papers over construction stoppage and renegotiation; rental price now was sought all along

From a New York Times Real Estate section article today headlined New Gehry Tower Prepares for Renters:
Now the developer Bruce Ratner of Forest City Ratner is about to determine whether a big-name architect can do the same [increase prices] for rental apartments. His new tower at 8 Spruce Street, just south of the Brooklyn Bridge, was designed by Frank Gehry, who gave it an undulating skin that ripples like the Statue of Liberty’s gown, but in stainless steel rather than copper.

At 867 feet, 8 Spruce Street (which for a time was known as Beekman Tower) is the tallest residential building in the city, surpassing the Trump World Tower. That would make it notable even without Mr. Gehry’s distinctive facade.
Controversy noted and missed

The article acknowledges some controversy:
If the apartments do command high rents, it will mean a big payday for Forest City Ratner. One reason is that the company received tax abatements under a program originally meant to stimulate construction of affordable housing. (In 2006, Community Board 1 passed a resolution criticizing the city’s Department of Housing Preservation and Development for giving the 20-year abatement to a building with no affordable-housing component.)
Yet it also contains this reference:
Construction on the building was halted twice, as Forest City Ratner worked out financing and labor. (Forest City was a development partner in the Midtown headquarters of The New York Times Company.)
Worked out financing and labor?

The Times reported more precisely 5/28/09:
Two months ago, work stopped abruptly at the 37th floor of the 76-story Beekman Tower as the developer Bruce C. Ratner desperately sought to cut costs on the project, a glass and stainless steel apartment building in Lower Manhattan.

...The developer, who had threatened to cap the building at 40 stories, said he was able to retain Mr. Gehry’s distinctive wavy-wall design and the tower’s full height, while paring labor expenses and taking advantage of falling prices for construction materials and appliances for the tower’s 900 apartments.

Mr. Ratner, chief executive of Forest City Ratner Companies, is one of a dozen developers who have approved a long-awaited and unusual project-labor agreement in which the city’s construction unions backed a series of concessions on work rules that proponents said would save builders as much as 20 percent on labor costs.
Making the originally sought rent?

The renegotiation was supposed to make the building financially viable. As the Times reported last year:
But the market continued to sour as apartment rents fell amid a glut of expensive units, especially downtown. Bankers and government officials say that annual rents downtown are about one-third less today than the $80 per square foot that Mr. Ratner and other developers had expected.

As a result, Mr. Ratner stopped work again in late March.
But the Times reports today:
[Forest City Ratner Executive VP MaryaAnne]. Gilmartin said that after looking at other high-end rental buildings, including Silver Towers on West 42nd Street, she thought rents would be at least $80 per square foot per year.

That would put the rent for the smallest unit at 8 Spruce Street — a 450-square-foot-studio — at $3,000 a month.

But Ms. Gilmartin said that if demand was strong enough, there would be no qualms about raising the prices, “even over the course of a single day.”
So they may get the originally sought rent, after lowering costs based on an expected lower rent.

Gotta like" Beekman

As I wrote 4/7/08, covering a conference call with investment analysts, analyst Sheila McGrath brought up the Beekman Tower.

Forest City Enterprises CEO Chuck Ratner asked executives Bob O'Brien and Joanne Minieri to “give Sheila a little color” regarding the “tremendous demand on the part of the banks” for the tax-free Liberty Bonds.

JM: Like a billion-two demand for the 204 [million] that we put out there.

SM: And are all the units in that building, they’re all market-rate units?

JM: That’s correct, Sheila.

BO: That’s the beauty of the Liberty Bonds, tax-exempt rates and all market-rate units.

CR: Thank you, Bob.

SM: Gotta like that.

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