Sunday Summary: Is Anybody Happy With the Rent Board?

When New York City’s Rent Guidelines Board met last week, landlords wanted a 4.5 percent increase in rents to cover rising costs.

Tenants wanted a rent freeze, citing the city’s ridiculously low 1.4 percent vacancy rate.

You could say that the board split the difference — an increase of 2.75 percent was allowed for one-year leases on rent-stabilized apartments (5.25 percent for two-year leases). Which was a smaller increase than the board approved last year (3 percent).

We’re not sure if this made anybody happy.

There was loud booing from the meeting hall, and tenant advocates were quick to issue condemnations of the move.

“The board seems interested only in continuing to line the pockets of landlords while tenants are left to suffer the consequences,” said Legal Aid Society’s Adriene Holder. “We condemn tonight’s vote in the strongest possible terms.”

“The only way to ultimately lower rents is to build more housing,” Mayor Eric Adams, who appoints the board’s members, said in an attempt to be conciliatory, “and we are using every tool in our toolkit to build that housing more quickly.”

Perhaps that’s true. But, if we learned anything from Commercial Observer’s multifamily housing conference last week, it was not to anticipate a huge surge of new housing.

While the mood at the forum at 51 West 52nd Street was hardly gloomy or dour, it wasn’t as though there weren’t real roadblocks to development discussed.

“There’s a scaffold law in New York which places strict liability for any type of injury on the construction site,” said Gotham Organization’s David Picket at the conference. “Doesn’t matter what the laborer was doing, you know, if they didn’t tie themselves off, which is a requirement, and they fell and hurt themselves, there is strict liability to the contractor.”

This likely has an enormous effect on insurance rates, which raises the price of development.

“Insurance is up across the country, but in New York, our insurance makes up about 10 percent of our construction costs,” said Picket. “I mean, that is just outrageous, right? If we could just cut that in half, we could create a lot more housing.”

Also, seeming silver bullets, like adaptive reuse, are likewise thornier problems than might seem at first.

“We are eager to try to figure this out,” said Alchemy’s Ken Horn. Horn cited a 400,000-square-foot office building his firm was considering for conversion. But the layout of the building’s pillars made it impossible to adapt; without windows and light, each floor would have to dedicate 8,000 square feet to amenity space. “It would have been great for tenants but in terms of making the economics work, it was very, very hard.”

Jobs, jobs, jobs

We don’t know if you saw the May employment numbers that came out at the beginning of June, but the long and short of it was: Companies are still hiring. (The country saw about 92,000 more jobs than expected.)

And despite the fact that swanky hotels like the William Vale in Brooklyn are being sold at auction; or that centrally located office addresses like Shorenstein’s 1407 Broadway are apparently losing almost three-quarters of their pre-COVID value; or that Ares Management and Monument Realty’s Liberty Building in Washington, D.C., is on the brink of foreclosure; or that some lenders’ patience has finally been exhausted, as in the case of Macerich’s Santa Monica Place mall — despite all of this, there are hirings also happening in real estate.

Tishman Speyer, for one, hired Nikita Rao away from Nuveen to head its U.S. residential platform.

Blue Light Credit  — the debt investment arm of Mike Tepedino’s new firm Blue Light Capital — tapped Jeremy Burton and Tristine Lim from Needham Point Capital to join the firm and also announced that Greg Manocherian, founder of the investment and development company RoeHoldings LLC, was brought in as a Blue Light Capital partner. 

And, while it’s not a hiring, exactly, Sammy Greenwall, the brainiac who co-founded Lev back in 2019, and Adam Pratt are launching an AI business that prepares business decks for real estate deals. They’re calling the new business Henry.

The big auction

Speaking of troubled assets, the big one we have our eye on is Oceanwide Plaza in Downtown Los Angeles, which its Beijing-based developer, China Oceanwide Holdings Group, has spent in excess of $1 billion on and would need another $1.2 billion to complete.

We learned this week that the project — a set of buildings that rises 49 stories into the sky and that has been dubbed “graffiti towers” owing to the, er, street art that has taken over the buildings’ exteriors — is going on the auction block this September.

“The ownership has clearly not been responsive to the needs of this project downtown, so it’s a good thing that it’s in the process of moving forward,” said Cozen O’Connor’s Paul Rutter. “I still see a vibrant residential portfolio downtown … but there needs to be a flushing out of certain projects at the end of market cycles, which is what we’re seeing now in Los Angeles with a number of other bankruptcies and foreclosures. That’s a good thing … from there people can start [reshuffling] their thoughts on development in those areas.”

North Village Bay: Here comes Bruce Eichner!

Last year, Ian Bruce Eichner’s Continuum Company ponied up $35 million for a 1.4-acre surface parking lot in South Florida’s North Village Bay, which Eichner is planning to replace with a 31-story, 200-unit condo tower.

Well, Eichner’s not finished.

Last week, Continuum plunked down another $75 million for an adjoining, 4.4-acre parcel of land. Plans include a condominium, a club, a restaurant and a marina.

“The vision for North Bay Village is exactly the same as the Continuum on South Beach 20 years ago,” Eichner said in a statement to CO. “We saw a substantially undervalued oceanfront development opportunity and then transformed the neighborhood into one of the most coveted places to live.”

Top Tenn. list

Summer is officially here (we didn’t need the reminder, but, thanks, heat dome) and that means traveling.

If you’re looking for destinations, may we suggest a business/pleasure trip to Nashville, Tenn.?

On the real estate side, the multifamily market seems to be rebounding after oversupply concerns.

“Nashville has really turned into a top city for people to move to from around the country,” said Rajen Shastri, founder and CEO of developer Akara Partners. “There’s a tremendous migration pattern from larger cities, or other cities in the Southeast, to Nashville. We see it in our building in people from the East Coast, from New York, and from the West Coast, with a lot of folks from L.A. and San Francisco.”

In fact, one of Nashville’s greatest assets — its country music cred — might be a victim of its own real estate success. Some of the classic venues that were platforms for eventual superstars are being priced out of the market.

But that doesn’t mean the town isn’t a thriving and growing metropolis.

“Simply put, it punches above its weight class,” said Kyle Matthews, the head of Matthews Real Estate Investment Services, in our Sit-Down last week about his adopted town. “Nashville is not a big city, at least not yet. Certainly, we’re adding population each day, but for being somewhere around 30th biggest city in the U.S, you feel like you hear the name of Nashville in the top 10 of cities. The uniqueness of Broadway and the county music, the culture of the city, the ‘Nash Vegas’ elements, where it’s a great time for young people, it’s the bachelor and bachelorette capital of the country — here’s a lot of that down here. There’s so much tourism in Nashville and it just dumps money into our economy, so, even if you’re not in real estate, it’s almost like everyone is talking about Nashville and visiting Nashville, and it creates a buzz.”

See you next week, y’all!