Shortage of Housing Threatens City Institutions

New York City is struggling more and more to house the students, researchers, professors, and medical residents at its world-class education and health care centers, and the shortage of professional housing could threaten the quality of the institutions they serve, institutional leaders and real estate executives familiar with the industry say.“The absence of affordable student, post-doctorate, resident, and faculty housing is a major detriment to the recruitment and retention of the best academic medical faculty,” the president and chief executive officer of Mount Sinai Medical Center, Dr. Kenneth Davis, said. “This problem puts New York City at a huge competitive disadvantage.”Subsidized housing and mortgage assistance are two possible future solutions, Dr. Davis said, but the absence of meaningful operating margins for most of New York’s medical centers makes such options unrealistic. “Unless this problem is addressed, the consequences to New York will be less robust health systems, with the eventual erosion of the outstanding health care all New Yorkers deserve,” he said.Dr. Herbert Pardes, the president and chief executive officer of NewYork-Presbyterian Healthcare System, the largest private employer in the city after the city itself, said: “For New York to be a great city we need housing for incoming residents, faculty, and staff. To recruit the best-qualified professionals we must provide housing facilities that are user friendly, with luxury amenities at affordable rents.”Mr. Pardes said in the last few months the hospital had recruited chairs of departments from leading health care institutions in Dallas, Baltimore, and Philadelphia. “The recruitment aids our institution to have a large talent poll of professionals who are energetic and have provided out institution with constructive and energetic ideas,” he said.To meet the housing demands, Weill Cornell Medical Center later this spring will welcome the first residents at its new residential tower at First Avenue between 71st and 72nd streets. Three hundred seventy apartments, ranging from studios to two-bedrooms, will be available to medical residents, nurses, and physicians.“Medical resident housing is different than dormitory residence for college students,” the president and chief executive officer of St. Vincent’s Catholic Medical Centers, Henry Amoroso, said. “Residents are professionals rather than college students, and as such have different expectations related to housing. The economics of resident housing is also different. Residents are not well-paid vis-à-vis their prospects after they leave the residency program and enter practice. Housing then becomes a part of the compensation package for residents.”A “micro-market” has evolved in New York City, Mr. Amoroso said, in which medical residents are provided housing at somewhere around 60% of the market rate. “The economics of health care and the rising value of real estate have forced institutions to examine this practice,” he said. “St. Vincent’s is not alone in this struggle. Beth Israel last year sold a residential tower for condominiums that previously housed medical residents. In order for teaching hospitals to both capture the value of the real estate currently in use as housing — in the form of sale, financing, or reuse — and manage operating costs, they are seeking lower cost alternatives, such as Roosevelt Island, Brooklyn, and New Jersey. One can only expect this trend to continue as real estate values rise and financial pressures on health care providers increase.”Last month, St. Vincent’s Catholic Medical Centers signed a 15-year lease with SK Properties for 65 luxury apartments at the 30-story, 458-unit residential rental tower Grove Point, in Jersey City. The apartments will serve as housing for physicians, residents, and interns.In December, St. Vincent’s sold a Midtown property formerly known as St. Clare’s Hospital for $84.7 million to a joint venture of Tessler Development and the Chetrit Group. The joint venture plans to renovate the hospital into dormitory space, real estate sources said.In February, Arun Bhatia Development Corporation paid New York Downtown Hospital $56 million for the 129,000-square-foot residential rental tower known as Booth House at 318 E. 15th St. Industry leaders expect the developer to convert the building, near the universities surrounding Union Square and built in 1965, into a dormitory. In 2001, Arun Bhatia completed a mixed-use residential tower at 233-235 E. 55th St. One hundred twenty apartments make up the lower 31 floors of the tower and serve as the residence hall for students at Marymount Manhattan College. Fordham University is planning an expansion of its 7-acre Lincoln Center campus that would include a new student center and two new dormitories. As reported last week, Fordham has commenced construction on two new seven-story residence halls at its Rose Hill campus in the Bronx.The Hudson Companies, the Related Companies, and community leaders have been working in tandem to create housing for health care professionals on Roosevelt Island.“We discovered 10 years ago, when developing Riverwalk on Roosevelt Island with the Related Companies, that the East Side medical institutions had tremendous housing needs to recruit and retain their personnel,” a principal at the Hudson Companies, David Kramer, said. “As we stood on the island trying to determine what to build on the site, we looked across the river to Hospital Row and speculated that hospitals such as Memorial Sloan-Kettering and New York Cornell Medical Center might need residences. Later, during discussions with the hospitals, we were overwhelmed by their demand for affordable housing.”He added: “As a result, we’ve done four projects at Riverwalk with medical housing components: a 256-unit apartment building for Memorial Sloan-Kettering Cancer Center in 2003, a 136-unit apartment building for Weill Cornell Medical College in 2003, 88 additional units for Cornell in our Riverwalk Place condominium in 2005, and 96 additional units for Memorial Sloan-Kettering in our Riverwalk Landing development in 2007.”Although New York City needs student housing desperately, developers are facing significant hurdles, among them community and planning board approval.Mr. Kramer said: “One of the problems going forward is that it’s impossible to be an entrepreneurial developer of student housing without first having a deal with an accredited institution. Even though it’s true with student housing that ‘if you build it, they will come,’ the Department of Buildings is appropriately concerned about ‘student’ housing turning into standard residential housing and thus has developed strict requirements prior to the issuance of any building permits. Unless we have a long-term lease in place with a school, we’re not able to develop any private student housing. “The benefit of this policy is it should eliminate all the projects which would violate the community facility use. The downside of this policy is that the private sector cannot on its own fulfill the tremendous student housing needs that currently exist in the city,” he said.In January, New York University announced that it would pay $43 million for 58 apartments in the Riverwalk Landing building. The units range from studios to three-bedrooms, and NYU received a discounted rate because it bought in bulk and before the building was completed. When it sells the units to faculty, the university will pass along the savings to help make the apartments more affordable. NYU will not make or lose money by selling the new residences but will still be able to sell them to faculty for less than market rates, the provost of NYU, David McLaughlin, said.“When we were developing 150 E. 12th St. in Union Square, our initial plan was to develop a condo-hotel, until we realized the tremendous need for student housing at this location,” Mr. Kramer said. “We subsequently reached agreement with NYU to develop an undergraduate dormitory for them, which will be completed this year. The project is 26 stories and will accommodate more than 700 students and four faculty apartments.”In September, NYU opened a new Brooklyn graduate residence hall at 67 Livingston St., which is now home to 115 NYU graduate students. The university is making a van available at night to take students to the Brooklyn dormitory from the NYU Manhattan campus. Last month, NYU announced the purchase of Gramercy Green, a newly completed residential building at 316 Third Ave., at 23rd Street. The university also is purchasing a 21-story, 300-unit building from J.D. Carlisle Development Corporation, which originally planned a residential condominium. The building, which is slated to open in the fall, will provide housing for 900 undergraduate students, as well as faculty. The dormitory is expected to feature two- and three-person studios, four- to six-person doubles, and triples.The university also announced that it would not renew the lease on its Cliff Street residence hall, in the financial district, which expires at the end of the spring semester. Cliff Street presently houses about 350 students.At least two dormitory developments are in the planning stages in Long Island City, Queens. The City University of New York is seeking the approval of Community Board 2 for a development that includes a 13-story residential development and a six-story dormitory. The proposed development is at 5–11 47th St., across from the Queens West development, in Hunters Point.The dormitory would house about 220 CUNY Graduate School students, as well as 12 faculty townhouses and an apartment tower, with 169 units and ground floor retail. The residential tower would be owned by O’Connor Capital and the dormitory by CUNY.A few miles away, developer Edward Minskoff has announced plans for an 18-story project that would contain 650,000 square feet of class A office space, or a 1,600-room college dormitory with classrooms and administrative offices. The development is on Northern Boulevard in Queens, a few blocks from Queens Plaza North and a block from the 39th Avenue N and W subway station. Construction will commence by the end of fall 2009.Some residents of Jamaica Estate, Queens, are unhappy with a planned dormitory project for St. John’s University. The university has signed a 10-year lease for a dormitory building on Henley Road that would house about 485 students in 66 rooms. The six-story building is expected to be completed by August 2009.Last fall, New York Student Housing opened University Housing, a dormitory in a former assisted-living facility at 385 McDonald Ave., between Church Avenue and Albemarle Road, in the Kensington section of Brooklyn. The facility houses about 120 students in single and double units and was leased to students from Brooklyn College, Brooklyn Law School, the Pratt Institute, and Brooklyn Polytech. The price for one student in a two-student room, fully furnished with its own private kitchenette, is $13,110 for 12 months.The development is owned by a real estate investor, Jacob Frydman, who announced plans to raise as much as $200 million of equity for a student housing fund that would target opportunities in Manhattan, Brooklyn, and Queens.The Brooklyn Center of Long Island University recently opened a dormitory at One Hoyt Street and is now converting a few hundred dormitory rooms in a joint venture with the Chera family.The demand for student and faculty housing will continue to grow. To meet it, experienced developers must work with city and state legislators, federal and state agencies, and the public and private sectors to secure affordable housing.Mr. Stoler, a contributing editor of The New York Sun, is a television and radio broadcaster and a senior principal at a real estate investment fund. He can be reached at mstoler@newyorkrealestatetv.com.

Shortage of Housing Threatens City Institutions

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