Sunday Summary: The Rent is Too Damn Low!

Back in 2010, Jimmy McMillan ran for governor of New York on a pretty straightforward platform: The rent was too damn high.

McMillan said it again and again, and named his political party The Rent is Too Damn High Party. (McMillan’s presence on the debate stage garnered national attention and Matthew Yglesias even titled a slim book with the same name.)

Sixteen years later, McMillan is still not wrong, in that the average monthly rent just hit $6,655 in Manhattan according to research from Corcoran Sunshine — which is 10 percent higher than it was a year ago.

There are a number of solutions that the Mamdani administration have proffered, but one that has perhaps attracted the most attention has been freezing rents on rent-stabilized apartments. In June, the Rent Guidelines Board issued a freeze on one- and two-year leases, which will certainly be popular with rent-stabilized voters.

But one has to wonder if it will actually address the larger issue of affordability — especially if landlords begin to lose more money than they make on stabilized units. Some landlords are keeping units off the market rather than getting them in rentable shape.

“Some of [the rent-stabilized units] require more work than others, but for the ones that need significant work — and I mean baseline, just to get them up to livable standards — we’re talking $30,000 minimum,” said Jose Tur, who owns two stabilized buildings in Washington Heights and testified before the RGB before their vote.

In addition to the baseline, Tur told Commercial Observer that he would probably have to include another $30,000 per unit for the cosmetic fixes. And that’s on the lower end of the renovation spectrum.

Matthew Engel, president of Langsam Property Services, says he has units that require $80,000 to $100,000 worth of work, and rent as low as $600 per month.

“There’s no way for me to finance that work,” said Engel. “No bank would lend me $100,000 if I’m only going to be able to collect $6,000 a year in rent.”

Score one for the Mamdani administration

The RGB freeze might not sit well with the real estate industry, but another thing that had driven up the collective blood pressure had been the promised pied-à-terre tax on apartments in excess of $5 million.

The tax was temporarily blocked and subsequently unblocked last week. And many industry mandarins fumed that the rollout — which included a video in which Mayor Mamdani personally named Citadel’s Ken Griffin as the public face of the rich interloper — would cause buyers to flee to more hospitable locations.

Turns out, not so much.

Preliminary data from Corcoran Sunshine shows a modest rise in pied-à-terre sales over the last 16 weeks, when the tax was passed.

In the last four months there were 302 sales over $5 million, compared to 268 sales from Jan. 31 to April 17.

That being said, there was a dip at the very highest edge of the market; homes above $25 million are down 20 percent year-over-year.

But in the end, the thing that would probably most help affordability in New York is not a pied-à-terre tax and not rent freezes — but more housing.

So it was good to see that Rachel Foster’s Brooklyn-based Heights Advisors filed plans for a 606-unit affordable housing development in Soundview in the Bronx.

We also learned that the Domain Companies secured $175 million in construction financing for the 429-unit mixed-income Elara that they’re building in Astoria.

And while we wouldn’t want to swear to it, we would be surprised if the two ecclesiastic sales we saw last week in Brooklyn — Tankhouse and Lonicera Partners’ acquisition of 360 Schemerhorn Street in Boerum Hill for $28.3 million and the Sisters of the Visitation’s sale of its 7.5-acre campus at 8902 Ridge Boulevard to Integritas Capital and Heights Advisors (again!) for $42.25 million — didn’t involve housing.

Beyond multifamily….

All that housing stuff aside, it was a pretty good week for office and retail.

SL Green Realty notched a renewal to the office furniture manufacturer Haworth at 125 Park Avenue (30,365 square feet for office and showroom) and a 10,000-square-foot expansion to private equity group OceanSound Partners at 450 Park Avenue, raising their total footprint to 32,032 square feet.

The investment management firm Capital Group took 70,400 square feet at Rudin’s 345 Park Avenue.

And GFP Real Estate and BDT & MSD Partners scored a major coup with Comcast Advertising, (the advertising sales and technology wing of Comcast) taking a whopping 140,000 square feet at 1540 Broadway. (Although some office still has problems — at least 85 10th Avenue does.)

Retail also seemed to be trucking. (If you don’t believe us, look at Simon Property Group’s recent earnings call.)

Madewell signed a lease for a new store at Tishman Speyer’s 1 Rockefeller Plaza; Yalla Motek, an off-shoot of Happy Corner Hospitality’s Israeli restaurant Motek, signed a 2,500-square-foot lease at David and Jack Israel’s 1147 Broadway.

And it’s not just in New York where retail has become desirable — in Palm Beach the aforementioned Ken Griffin bagged a nice $3 million profit from three years ago for the $86 million sale he made of 125 Worth Avenue to Blackstone Real Estate.

Sunday reads

Bread-and-butter deals aside (and we didn’t even mention Vantage Communities’ recent $103 million in bridge loans for a 864-unit multifamily portfolio in Texas, or Pinnacle Group’s $128 million residential and retail condominium portfolio sale) if you’d like a deep dive into a residential story this Sunday check out CO’s look at the merger between AvalonBay Communities and Equity Residential.

Another good deep dive for our L.A. readers is what will happen with the Lineage Cold Storage warehouse, which burned down earlier this summer and has since become a source of controversy among Angelenos who don’t want the site rebuilt.

And if you’re looking for something a little more personal, there’s our Sit-Down with Sulie Arias and Trevor Adler of Hogan Lovells Cadwalader, or our profile of Jesse Sharf and Eric Feuerstein of Gibson Dunn.

See you next week!