Real estate investment funds and trusts are helping to fuel the fire for investment in dense urban neighborhoods across New York City. These funds and trusts, which have access to enormous pools of liquid capital, are steering more money into the city’s hot real estate market, and helping to preserve and build much-needed residential housing, office, and retail space, especially in the boroughs of Manhattan, Brooklyn, and the Bronx.

A residential boom is sparking commercial development in downtown Brooklyn, the head of zoning and land use at Herrick Feinstein LLP, Mark Levine, said. “The city helped set the stage for the redevelopment by a major upzoning passed by the City Council in 2004,” he said.

One of the most active investors in the urban redevelopment of downtown Brooklyn, the Bronx, and Manhattan is Acadia Realty Trust. On February 23, the real estate investment trust announced that it has entered into an agreement for the purchase of the leasehold interest in the Gallery at Fulton Street and the adjacent parking garage in downtown Brooklyn for $120 million through its Fund II New York Urban-Infill Redevelopment initiative with P/A Associates and Paul Travis of Washington Square Partners. The fee position in the property is owned by the city of New York and the agreement includes an option to purchase this fee position at a later date. Acadia P/A-Travis is partnering with MacFarlane Partners, the leading national minority-owned real estate management firm.

Plans for the property include the demolition of the existing building and the development of a 1.6 million-square-foot mixed-use complex to be called the Center at Albee Square. The residential portion will include both moderateincome and market-rate rentals under the city’s 80/20 affordable housing incentive program.

Acadia P/A-Travis, a majority partner, together with MacFarlane, will develop and operate the retail component, which is anticipated to total 535,000 square feet of prime shopping space. Acadia P/A-Travis will also participate in the development of the office component with MacFarlane, which is expected to include about 125,000 square feet of Class A office space. Together, they plan to develop 900,000 square feet in a new residential tower and operate about 1,000 residential units with underground parking.

In April, the city’s Industrial Development Agency voted unanimously to approve about $1.8 million in city subsidies for the new owners, which are intended to primarily lure office developments.

With 535,000 square feet of retail space across a four-level structure, Albee Square will provide opportunities for larger-scale national retailers as well as smaller local entrepreneurs. The new center will be the only space in downtown Brooklyn with storefronts on four major streets, Flatbush Avenue at the foot of the Manhattan Bridge, Fulton Street at Albee Square, Gold Street at Willoughby Square Park, and Willoughby Street across from MetroTech Center.

The Center at Albee Square is the seventh property under development by Acadia and P/A through the New York Urban Infill Redevelopment initiative. As reported in the Acadia Realty Trust 2006 Annual Report: “As retailers continue to recognize that many of the nation’s urban markets are underserved from a retail standpoint, the fund’s intent is to capitalize on this trend by investing in redevelopment projects in dense urban areas where retail tenant demand has effectively surpassed the supply of available sites. It has already started construction on four New York City redevelopments: Fordham Road in the Bronx, Pelham Manor in Westchester, 216th Street in Manhattan, and Liberty Avenue in Queens.

Joseph Sitt, president of Thor Equities, the company that sold the Gallery at Fulton Street to the Acadia joint venture, said: “As an investor in downtown Brooklyn and former chairman of the Fulton Street business improvement district, I have seen a total transformation of this area with its new positioning and stature.”

Mr. Sitt said he expects that the downtown Brooklyn market will shortly “leap forward into the best of class 24/7 major metropolitan markets here in the United States.”

The majority of real estate leaders agree that New York City has a dire need for additional retail, especially in urban sections of the boroughs. Some of the highest retail sales per foot have been recognized in urban areas such as Harlem and in the Bronx for national and local retailers. For example, one of Target’s highest revenue stores in the nation is located in Atlantic Yards in downtown Brooklyn. The highest grossing Pathmark in the chain is located on 125th Street and Lexington Avenue and the second is at 146th Street and Bradhurst Avenue.

In the Bronx, Acadia and P/A through the New York Urban Infill Redevelopment initiative are developing the Offices at Fordham Place, one of the first mixed-use projects to be developed in the borough in more than a decade. The joint venture is restructuring the historic Sears building at 400 East Fordham Road, directly across the street from Fordham University. The development consists of about 285,000 square feet within 14 stories, including 159,000 rentable square feet of office space and 126,000 square feet of retail would provide an addition to the thriving Fordham Road business district. The project is expected to be completed in about 18 months. Sears will be relocated to the basement level and Walgreen’s will be among the other national and local tenants.

In the borough of Manhattan, Acadia and P/A are redeveloping the historic George Washington Bridge Bus Station into Broadway Marketplace at GWB. The redevelopment expands and enhances the building’s retailing potential with a total of six new levels of merchandising space, which would include 206,000 square feet across four levels. The complex is located in Washington Heights, occupying a full block on West 178th and West 179th streets between Broadway and Fort Washington Avenue, as well as a second site across the street on Broadway and Wadsworth Avenue.

As noted above, Acadia P/ATravis is partnering with MacFarlane Partners in the Albee Square development. Urban properties in which MacFarlane Partners invests include neighborhood-serving retail and affordable housing in inner cities, luxury residential apartments, mixed-use high rises in upscale infill locations, transitoriented developments along commuter corridors, and masterplanned communities that promote “smart growth” development in the suburbs.

In February 2003, MacFarlane Partners agreed to purchase 49% of the 338,000 square feet office space not occupied by Time Warner and the 504-spot parking garage at the Time Warner Center at Columbus Circle. MacFarlane invested in the Time Warner Center as part of its joint venture with the nation’s largest public pension fund, the California Public Employees’ Retirement System, to invest in urban infill properties in major metropolitan areas nationwide.

MacFarlane has invested with the Related Companies in a 24-story, 274-unit, 357,000-squarefoot residential rental apartment building, Tribeca Green, at 325 North End Avenue in Battery Park City. It is also an investor with the Moinian Group in the Atelier, a 42-story condominium residence at 627 W. 42nd St. The company is also an investor at 15 Central Park West, the luxury condominium near Columbus Circle that will provide for 263 condominiums and 77,300 square feet of retail space, to house a Best Buy.

Later this year, a joint venture of Vornado Realty Trust, MacFarlane Partners, representing CalPERS and Integrated Holdings, will break ground for the construction of a 21-story, 640,000-square-foot mixed-use office and retail complex called Harlem Park at Park Avenue between 124th and 125th streets.

In March 2005, a joint venture of the Dermot Company and Canyon-Johnson Urban Funds LP purchased the Williamsburg Savings Bank building, the 34-story landmark near downtown Brooklyn. The joint venture is in the process of converting the tower into a mixed-use property with retail, lower-floor offices, and topfloor residential condominiums in a complex named One Hanson Place. Canyon Urban-Johnson Fund is an equity investment fund that is devoted to revitalizing apartment buildings and mixeduse projects in urban areas.

With nearly $1 billion in committed capital, the Canyon-Johnson Urban Fund is the country ‘s largest private equity fund focused solely on the revitalization of America’s densely populated, ethnically diverse communities. Canyon-Johnson Urban Fund was formed in 1998 when Earvin “Magic” Johnson’s Johnson Development Corp. teamed up with Canyon Capital Realty Advisors.

The Web site of Canyon-Johnson, states that it is bullish on Urban America for several reasons: (a) there is a significant mismatch between supply and demand of housing and quality retail options; (b) the population of urban areas is growing significantly faster than suburban markets; (c) government leaders in urban areas tend to be more supportive of growth and attracting investment, and (d) there is still a lack of capital in urban markets.

One Hanson Place represents Canyon-Johnson’s second investment in Brooklyn. Along with a local developer, Anderson & Associates, it constructed Park Place Condominium, an eight-story, 90,000 square foot mixed-use project on the site of the former Brooklyn Tabernacle auditorium, at 145 Park Place, in the heart of Park Slope. The project consists of 47 market rate residential condominiums, 4,500 square feet of ground level retail, and 25 underground parking spaces.

In March, Canyon-Johnson provided $12.4 million in mezzanine financing to Green Street Development LLC, which is constructing a six-story, 130-unit condominium in the Greenpoint section of Brooklyn.

Lubert Adler Real Estate Funds also has been active in the residential development in Manhattan. The company has been an investor with World Wide Development in the conversion of 71 Broadway into 238 residential units and 88 Greenwich St. into 458 units. The company has provided capital for development for a 119-unit condominium tower, the Milan, at 300 E. 55th St., and a 14-story, 22-unit condominium development, Vesta 24, at 231 Tenth Ave. between 23rd and 24th streets.

One thing is certain: Just about everyone is bullish on the greatest city for urban development, New York City.

Mr. Stoler, a contributing editor to The New York Sun, is a television broadcaster and a senior principal at a real estate investment fund. He can be reached at mstoler@newyorkrealestatetv.com.