Midtown’s Building Boom

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

Two weeks ago, Jeffrey Levine’s Douglaston Development Company hosted a topping-off celebration at its latest planned residential tower at 555 West 23rd Street between 10th and 11th avenues in Chelsea. The project is a 320,000-square-foot, two tower luxury rental apartment building.


Jeff Levine told The New York Sun that last month, his company joined with New Jersey-based Continental Properties, owned by Steven and Mark Fisch, in the purchase of several four-story mixed-use buildings on the east side of the block between 32nd and 33rd streets along Fifth Avenue. The purchase also included the adjacent parking lots.


The site is one block from the Empire State Building. This fall, the joint venture will begin the demolition of the buildings to make way for a 40-story, 390,000-square-foot, 250-unit luxury residential condominium tower to be located at 325 Fifth Ave. HSBC Bank provided a $37.4 million bridge loan for the acquisition of the property. The joint venture has obtained a commitment for construction financing of $130 million from HSBC Bank USA and a $42 million mezzanine loan from the Massachusetts Mutual Life Insurance Company. The balance of the projected $190 million total cost will consist of the partners’ equity.


“We are going to be building a luxury high-rise taking advantage of the absence of height restrictions, enabling the units to have 10-foot clear floor-to-ceiling with explosive window walls to highlight the incredible views of Midtown.” Marketing is planned to begin in the first quarter of 2005 with anticipated delivery in early 2006. “We expect to build a superior luxury condominium development with prices beginning at approximately $850 a foot,” said Jeff Levine.


Less than two blocks from this site, on West 31st Street between Fifth Avenue and Broadway, construction is nearing completion for a Con Edison substation, on the former site of a two-story parking garage and a tennis court. Directly across the street, demolition has been completed of two small buildings and a parking lot. The Sun has learned that the developer has entered into a long-term land lease of the existing parking lot and plans to build a residential market rate apartment building.


Another residential development is planned for West 31st Street between Sixth Avenue and Broadway. Douglas Durst, co-president of the Durst Organization, told this reporter that the firm plans to begin demolition within three weeks for a market-rent residential tower, which his organization will be developing with Sidney Fetner & Associates. The tower will be 60 stories high, comprised of 14 stories to house operations and a residence for the St. Francis of Assisi parish and another major charitable organization. The remaining 46 floors will be the home of the new residential tower. The building is being developed on land owned and occupied by the St. Francis of Assisi parish. The development will be financed by the New York State Housing Finance Agency under the 80/20 program. Under the program, 80% of the units in a project financed with tax-exempt bonds may have market-rate rents while the other 20% must be rented to low-income households. According to Mr. Durst, when completed in 2006, rents are projected to be in the range of $48 a square foot, resulting in a monthly rent of $3,000 for a 750-square-foot one-bedroom.


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The official opening of the Hampton Inn Manhattan Herald Square is scheduled for December 13. The 19-story, 136-room hotel, which will be owned and operated by Hersha Hospitality Trust, will rise at 116 West 31st St. between Sixth and Seventh avenues. Hersha Hospitality Trust is a publicly traded real estate investment trust.


Just two blocks downtown from the new Hampton Inn Manhattan Herald Square, a developer is in the process of completing the demolition of a few four-story mixed-use buildings to make way for a 16-story, 51-unit residential tower. The new building will be located at 101 West 28th St. on the corner of 28th Street and the Avenue of the Americas.


Construction is under way at 400 Third Avenue, between East 29th and East 30th streets, of a 16-story, 30-unit affordable housing rental building. The Sun has learned that the developer will be offering all of the units to low-income families whose annual income ranges from $26,400 for a single person to $30,120 for two or more people; representing no more than 60% of the area median annual income. Rents in the building will range from $621 to $663 for the studio and one-bedroom units.


The building is being constructed to allow the developer to gain inclusionary zoning benefits. The zoning benefits will then be sold to other developers who are developing luxury rental and condominium units. These benefits allow a developer to increase the number of residential units in a proposed location.


Adjacent to the corner of 404 Fifth Ave. between East 37th and 38th streets is the site of two four-floor mixed-use buildings. The buildings are in the process of being demolished to make way for another luxury residential condominium development. Trevor Davis and the Chetrit Group are planning to develop the site. The new building is located across the street from Davis & Partners’ 67-story mixed-use condominium at 425 Fifth Ave., which opened earlier this year.


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Construction is booming in Midtown Manhattan for residential rental and condominium apartments. Nearly every former parking lot or mixed-use tenement building is under review for conversion to a residential tower. Based upon preliminary estimates, the minimum sale price for each square foot for a new residential unit will range from $850 to $1,200. All of these developers are continuing to take advantage of relatively low interest rates and a desire of lenders to provide financing.


As many lenders have told this reporter, “We have plenty of money available and very few good deals.” Unfortunately, what may be a good deal today may not be a great financial investment in the near future. It was only a few years ago when these same developers were building apartment buildings during the height of the dot-com bubble and before the attacks of September 11, 2001.


The largest obstacles facing these developers are the uncertainty of interest rates when the buildings are completed in 2006 as well as the state of the economy and the state of nation. One should remember that these are the highest prices we have ever seen and the real estate market always undergoes cycles of up and down.


Will the market for luxury condominium units be strong enough when these units are ready for occupancy, and will be individuals be willing to pay more than $1 million dollars for a residential apartment in Midtown Manhattan? To quote the president of W & M Investments, Anthony Malkin, “When we began construction of our residential tower on West 72nd Street and Broadway in 1989, the economy was booming. Unfortunately when we finally completed the development, we had great difficulties in the sale of the condominium units.”


One should be very cautious in the days ahead.



Mr. Stoler is a television broadcaster and vice president with First American Title Insurance Company of New York. He can be reached at mstoler@nysun.com.


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