Tuesday, July 30, 2013

Brooklyn real estate: a hot market has to be good news for Forest City Ratner (but why 25 years for AY?)

I recently watched the videos from Terra CRG's Brooklyn Real Estate Summit held at the Brooklyn Academy of Music in May, summarized by the 5/10/13 Brooklyn Daily Eagle as Brooklyn Real Estate Summit: Brooklyn is hot, getting hotter, with a quote from a participant: "Demographics is destiny; the borough is changing."

All of this has to be good news for the developers of Atlantic Yards, aiming to market luxury rentals and later condos.

It also could be fuel for critics who, in the pending Supplementary Environmental Impact Statement, argue that the 25-year permit for Forest City Ratner's buildout should be reduced, and that the sites in Phase 2 be bid out to other developers.

Keynote: Deputy Mayor

In the opening keynote (video), Deputy Mayor for Economic Development Robert Steel cited record population, jobs, housing units, and tourists, including a 16% growth in employment in Brooklyn during Bloomberg's three terms, though he acknowledged that certain areas, such as the South Bronx or East New York, face a jobs deficit.

The four-point economic development strategy includes: quality of life, a pro-business environment, investment in the future, and innovation in economic transformation.

Regarding quality of life, he cited increased public safety--murders going from 2200 in 1990 to 419 last year, better parks, and cultural institutions.

Steel noted that young workers can find a good job and lifestyle in "other, newer, more interesting cities" like Austin or Seattle.

"I'm really comfortable selling the idea to people," he said, that "you can live in Brooklyn and work in DUMBO and enjoy Brooklyn Bridge Park and enjoy all of BAM [Brooklyn Academy of Music], and that's a life on your mountain bike with your dog that's not dissimilar to the outdoor life you can get in some of these other places."

Steel noted that residential real estate is hot, but without a "thumb on the scale," there won't be as much commercial office space and retail

"Brooklyn, we believe, will be one of the lasting legacies of this administration," he said, calling the BAM cultural district "kind of our next Lincoln Center." The city's $100 million investment--which surely doesn't include indirect discounts--has "really changed the nature of how people perceive Brooklyn," he said.

Steel praised Two Trees' New Domino plan, saying "the chance to reformulate the skyline is pretty exciting," acknowledging of the SHoP rendering, "I'm sure this will change a bit."

He mentioned Steeplechase Plaza at Coney Island, and the planned Seaside Amphitheater, and said he could talk about Greenpoint Landing, BAM South, and plans for East New York.

Panel: arts and entertainment

In a panel (video), BAM president Karen Brooks Hopkins, said, “This is Downtown Brooklyn’s moment. This is our moment, and and we've waited for it a long time.” With venues ranging in size from 200 to 19,000 seats, she said, "you really don't see anything like this on the planet."

"Within the next five years, you'll also see 10,000 more people residing in this district," she said. "It's an amazing opportunity for real estate industry as well as culture."

She presented a slight challenge to the developers: "We would like all of you to be partners, not adversaries... We challenge you to build great buildings... we want you do something distinctive... also hope you will partner with cultural institutions."

Broker Chris Havens declared, "This is Lincoln Center, with better food within walking distance."

Panelists talked about growth in Gowanus and Williamsburg and Coney Island, all of which are looking up, though Coney could still use hotels, movie theater.

Panel: retail

Geoff Bailey, VP of Retail Sales at TerraCRG, at a panel on retail (video), described a 180-degree turn when visiting the International Council of Shopping Centers conference.

"People want to be here, they want their brands here," Bailey said. "The retail market in Brooklyn has historically been one of the most underserved retail market... what we've seen in the past year has been tremendous... Armani Xchange... everything is happening on Fulton mall, the first SoulCycle in Williamsburg."

Related is building 600,000 square feet behind its Gateway project in East New York.

Christina Warner of L&M Development, described how Williamsburg had changed. After seeing people with Trader Joe's bags, her firm and partner Goldman Sachs made sure to put a high-end grocery in 11 Broadway.

Sabrina Glazer of Equinox said SoulCycle sold out classes (at $34) in an hour. They're looking to expand, perhaps in Brooklyn Heights, Cobble Hill, Boerum Hill, and DUMBO.

At the same time, the firm's high-style, low-cost ($15/month) Blink Fitness has 13 locations, with four in the pipeline, in Prospect Park South, Brooklyn College, and Utica Avenue, and future locations in Bushwick, Sunset Park, Bed-Stuy, and Brownsville.

"I would buy anything that I can on Fulton Street," said Ike Chera, Crown Acquisitions, noting that a street where rents were once $150/sf is now approaching $300/sf.

"City Point we think is going to be a transformative project," said Paul Travis, one of the partners in the joint venture that includes retail and housing, noting that in five years Downtown Brooklyn will have 32,000 residents. "We believe that is the best residential site in the entire borough," he said, citing an 1.8 million square foot buildout. "When City Point opens in 2015, it's a new era for Brooklyn retail world."

A Starbucks rep noted that the chain first opened 20 years ago on Montague Street in Brooklyn Heights and had just opened its 20th store, on Flatbush Avenue and Park Place in Park Slope, and is looking to double its Brooklyn presence in the next four to five years. Starbucks would like to be in Williamsburg, but "it is such a sophisticated market, you gotta do it right."

"Demographics is destiny," Travis said, noting that in some brownstone neighborhoods, "income has doubled in the last ten years."

Panel: hotels

In a panel (video) on hotels, Jason Muss of Muss Development, which built the pioneering Marriott in Downtown Brooklyn, observed, "Everyone thought we were crazy to build a hotel. Now they say you're crazy not to build a hotel."

Marc Freud of Troutbrook Development recently opened a Fairfield Inn and Suites recalled that, more than a decade ago, when his firm closed on the deal to renovate 636 Pacific Street in Prospect Heights--the condo building where Atlantic Yards foe Daniel Goldstein lived--"my car got broken into." (That block improved once renovations emerged.)

The Third Avenue site for Fairfield Inn and Suites was purchased in early 2007 with a "belief that the area might change." Franchiser Marriott was cautious, Freud observed, so his firm had to hire a helicopter to take photos to explain how close the location was to transportation hubs.

Toby Moskovits, founder and CEO of Heritage Equity Partners, is building a 150-room hotel in Williamsburg next to the Wythe Hotel. She cited a “tremendous disconnect" demand and supply for hotel rooms in Williamsburg. "They’re coming for the Williamsburg experience.”

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