“Price is what you pay. Value is what you get.” Warren Buffet’s wise words handily sum up a dominant theme in New York’s residential market these days — which is to say, despite all the talk of glitzy new condos and penthouses with astronomical prices, developers, buyers and brokers are increasingly chasing value.
The phenomenon is playing out across all price points, and it applies to first-time homebuyers on the lowest end of the price spectrum to foreign investors seeking a “safe haven” for their money at the high end.
This month, The Real Deal dissected the market under $10 million, zeroing in on three key price brackets: $1 million to $3 million, $3 million to $5 million and $5 million to $10 million. What we found was that each of those markets is behaving very differently in this transitioning market.
Not surprisingly, properties between $1 million and $3 million are flying off the shelves. As prices rise across the board, this category is absorbing a growing number of buyers who are finding themselves priced out of more expensive apartments. And the majority of buyers in this range know that they need to act fast because there is a line of competing buyers who will grab the property if they don’t.
However, higher up on the ladder — in both the $3-million-to-$5-million range and the $5-million-to-$10-million market — sales have slowed as buyers wade through more choices than they’ve had in years and sellers overreach with asking prices.
“It’s just a tale of two markets,” said Noah Rosenblatt, founder of real estate analytics firm Urban Digs.
Compass agent James Cox put it this way: “We have more listings and more buyers than we did this time last year, but they’re looking for bargains and sellers are holding out for something better.”
No one is immune from price sensitivity, either.
“Even at $10 million, people are very aware of value and they will not overpay,” said Jeffrey Stockwell of Stribling & Associates. “Look, we live in uncertain times and people want to make smart decisions.”
Bronx Getting Hotter With Recent Related Cos Transaction – Victor Jung
Related Cos., in partnership with New York City pension funds, is ramping up its multifamily moves, with the $112.5 million purchase of a 20-building Bronx portfolio – the largest package to change hands in the borough this year, sources told The Real Deal.
The portfolio contains 737 apartments spread throughout the North, West and South Bronx. In a statement, a spokesperson for Related confirmed the portfolio buy and said the firm’s Related Fund Management arm and the pension funds plan to preserve the units in a long-term hold as workforce housing.
The buildings are largely low-rise walkups with rent-stabilized units. They are in a mix of working-class and middle-class neighborhoods such as Soundview, Wakefield, High Bridge and Fordham.
A group of private Brooklyn Heights-based investors known as Eastern Capital Partners acquired the properties in several transactions over the past five years, records show.
Addresses include 4002-4004 Carpenter Avenue, 1085-1095 Colgate Avenue, 2608 Creston Avenue and 1065 Jerome Avenue, among others.
Rosewood Realty Group’s Aaron Jungreis and Besen & Associates’ Amit Doshi and Ron Cohen each brokered portions of the deal. Jungreis, Doshi and Cohen declined to comment.
Last year, Related and the city pension funds to acquire 35 rental buildings from Stanley Wasserman’s SW Management for $270 million. Over the summer, the development giant behind the Hudson Yards megaproject scooped up a 10-building, Brooklyn-and-Queens package from Silvershore Properties and three formerly distressed buildings in Marine Park.
The Bronx is undergoing something of a residential renaissance, with more than 11.5 million square feet of residential real estate under development borough-wide, according to a TRD analysis in September.
Two of the other large Bronx portfolios of the year include A&E Real Estate’s purchase of a 441-unit complex in Riverdale for $89 million and an Asden Properties-led group’s acquisition of 612 apartments for $90 million.
– See more at: http://therealdeal.com/blog/2015/12/24/related-makes-biggest-bronx-portfolio-deal-of-the-year/#sthash.conMXSoD.dpuf
The Year of the Chinese Investor
Inside the growing wave of investors buying and building in the five boroughs
March 01, 2015
By E.B. Solomont
For more than two decades, China’s most populated city, Shanghai, has experienced a building frenzy unlike any other: Developers have built office buildings in the city of 24 million as far as the eye can see, including skyscrapers like the under-construction Shanghai Tower, one of the tallest in the world.
But increasingly, Chinese developers and investors are looking elsewhere to build. And a fast-growing number are setting their eyes on New York.
Chinese investors pumped more than $3 billion into the New York real estate market last year. That was nearly 43 percent more than they invested in 2013. And it appears to just be the tip of the iceberg.
With China’s economy cooling, investors are throwing their money into deals in New York. And it’s not just individual Chinese buyers snapping up condo units these days. Institutional players, investors and developers, who’ve made a splash buying trophy buildings over the past two years, are not only continuing to ramp up purchases, but also are accelerating their involvement in condo development and looking for developable New York land.
“There’s a whole lot of capital in Asia that wants to be invested [here],” said Kevin Swill, chief operating officer of the New York-based Carlton Group, a real estate investment banking firm. “They look to the U.S., even with ups and downs, and it’s still the most stable real estate market in the world.”
It’s been hard to ignore Chinese investors in New York in the last few years.
The Beijing-based Anbang Insurance rocked the industry here with its record-setting, $1.95 billion acquisition of the Waldorf Astoria, a deal that closed last month.
Also last month, Chinese insurer Sunshine Insurance Group struck a deal to buy the 114-room Baccarat Hotel from Barry Sternlicht’s Starwood Hotels & Resorts Worldwide for $230 million, or an unprecedented $2 million per room. In December, Bank of China agreed to buy 7 Bryant Park for $600 million.
And those trades came on the heels of Fosun International shelling out $725 million in December 2013 for One Chase Manhattan Plaza, now known as 28 Liberty, and Greenland Holdings paying $547 million in October 2013 for a 70 percent stake in Forest City Ratner’s Atlantic Yards development in Brooklyn, which was promptly renamed Pacific Park.
In addition, over the past two years, Soho China spent $1.9 billion, including $700 million for a stake in the GM building and $600 million for a stake in Park Avenue Plaza.
But these mega purchases actually represent early, and relatively safe, forays into New York real estate for the Chinese. Many more anxious Chinese investors are waiting in the wings and are likely to be willing to take on even greater risk, said Terence Tang, managing director of Colliers International’s Asia capital markets and investment services team.
“They have no choice,” said Tang, who is based in Singapore. “The returns you can get from real estate investment in Asia have been unattractive.”
Economic strength and the value of the dollar, he said, make the U.S. “the brightest spot you can see in terms of growth.”
‘Unlimited’ demand
For the first time in 2014, wealthy Chinese buyers spent more on New York City real estate than Russian billionaires.
Chinese investors shelled out $3.35 billion on New York City real estate, both residential and commercial, in 2014, a roughly $1 billion jump from the year before, according to research firm Real Capital Analytics. As The Real Deal reported last month, the only country that invested more in the city was Canada, which spent $3.4 billion.
Other foreign investment trails well behind. Singapore, which clocked in at No. 3 on RCA’s list, threw down $1.6 billion. Rounding out the top five were Norway with $1.1 billion, Qatar with $770 million and Japan with $680 million.
“In terms of Chinese investors, I’m not kidding if I say it’s unlimited,” said attorney Min Chan, whose New York City-based Chan Law Associates advises clients participating in the wildly popular EB-5 visa program, which grants visas to foreigners who invest $500,000 in the U.S. economy in exchange for creating at least 10 jobs. More than 80 percent of the 10,000 visas went to Chinese nationals last year.
Chan, who is also a commercial broker at City Connections Realty, said China’s top institutional investors are also looking to make a splash.
“If the Chrysler Building was for sale,” she said, “I’m sure someone in China would pay whatever they’re asking.” (The Chrysler Building sold back in 2008 to an Abu Dhabi sovereign wealth fund for a cool $800 million and does not appear to be back on the block.)
But while the appetite for New York real estate has been strong among Chinese investors for a while, it recently ramped up because of a unique combination of factors, notably a rapidly appreciating Yuan, the slowing Chinese economy, and high property prices and complicated ownership rules in China. In addition, the growing middle class in China is increasing turning to institutional investors (like insurance companies) to manage and invest their newly acquired wealth.
Still, those factors pale in comparison to recent regulatory changes in China — namely looser restrictions governing how much money Chinese companies can invest abroad.
The impact of those new rules, which started taking effect in 2012, are showing up very clearly in the numbers.
Between 2008 and mid-2014, Chinese investors poured $33.7 billion into real estate in the U.S., predominately targeting New York, Los Angeles and Washington, D.C., according to Cushman & Wakefield. Of that total, $5.9 billion went to Manhattan and another $717 million was invested in the outer boroughs.
Ronald Sernau, co-chair of the real estate practice at the law firm Proskauer Rose, said more than half of all transactions valued at $150 million or more that were handled by his team involve a Chinese player. In two of the largest Chinese investment sales to date, Proskauer represented JP Morgan in its sale of 28 Liberty to Fosun, and Anbang in its Waldorf acquisition.
“There haven’t been many times in my career where there’s been such a noticeable influx of capital from a particular group of investors,” Sernau said.
As a result of China’s loosening of restrictions, the pool of Chinese investors in New York is also getting more diverse, sources said.
Joel Rothstein, an attorney at Paul Hastings who splits his time between the U.S. and China, predicted that Chinese private equity will soon start flowing into New York. Until now Chinese regulations have prohibited those players from making investments abroad.
Finding financial freedom
It’s hard to overstate the impact that changing domestic policy in China is having on New York real estate.
Those institutional investments are only poised to grow. Last year, the Chinese government took steps to streamline the complex set of approvals necessary for all outbound investment.
For example, investments under $300 million can now be registered on a provincial level, rather than with the central government.
“Before this change, [investors] would spend six months just waiting for approval. Now, for some of the investments, it’s one month,” said Ming Liu, research manager at Cushman’s office in Beijing. “It’s quite great.”
Coupled with money traversing the globe at the speed of email, more Chinese players are feeling the pressure to get their money out of their homeland. “It’s hard to make investments domestically,” because of China’s economic slowdown, said Liu. “But [investors] are also full of cash, looking for opportunities.”
Insurance companies, in particular, grew 13 percent between 2008 and 2013 and are now flush with new cash, according to the global commercial brokerage CBRE. That growth is largely the result of China’s expanding middle class. Since 2012, when the Chinese government raised the limit for how insurance companies could invest overseas, the firms have become voracious buyers of real estate.
In the past year, major Asian insurance companies like Anbang and Sunshine made their first forays into real estate in New York.
Looking ahead, Asian insurance funds are projected to increase their real estate investments abroad by $75 billion, to the tune of $205 billion in 2018, according to CBRE.
New York developers and property owners are already gaining in a big way, thanks to the aggressive bids from Chinese buyers that have helped to push up sale prices. “They’ll accept a lower rate of return for being in the New York market, which gives them an advantage. They’ll pay more, for good reason, than a private equity firm or investor will with a five- to 10-year horizon,” said Jay Neveloff, chair of the real estate practice at Kramer Levin Naftalis & Frankel. “It’s a great strategic move that gives them a significant advantage in buying properties.”
In many cases that long-term investment strategy has given them a leg up against competitors in New York, particularly private equity firms and REITs.
For example, Fosun outbid several others in its $725 million acquisition of One Chase Manhattan Plaza, including Scott Rechler’s RXR Realty. Sources said Fosun offered a 10 percent deposit on the deal, a sum that “gets your attention,” according to Proskauer’s Sernau.
While investors are hungry for trophy properties, office buildings and residential development, luxe hotels are particularly desirable.
Gilda Perez-Alvarado, an executive vice president at JLL’s hotel group, said investors recognize that Chinese tourism is growing. “They’re betting on the fact that there will be Chinese demand from the hotels they’re acquiring,” she said.
And lenders are lending
In the U.S, the Chinese-American East West Bank has $28.7 billion in assets under management and last year it issued a stunning $8.6 billion in commercial real estate loans, up a full 20 percent from 2013.
The bank’s East Coast region, which includes New York, represents 10 to 12 percent of the bank’s business.
“Everyone understands commercial real estate,” said Wendy Cai-Lee, the head of East West Bank’s eastern region and Texas. “It transcends the language and culture barrier.”
Chinese investment obviously isn’t limited to Manhattan and Brooklyn. It’s also growing in suburbs like Greenwich, Connecticut, parts of Long Island like Jericho and Great Neck, and in Jersey City, New Jersey, where developer China Overseas America is planning a 760-unit condo tower. Douglas Elliman’s Jennifer Lo, who works on Long Island, said she’s been to open houses where “you can see about 20 people per open house and they’re all Asian faces.”
Chinese buyers have accounted for roughly 25 percent of all buyers for homes $3 million and up in Nassau County between January 2013 and mid-February, she said.
Still, the bulk of investors are more focused on New York City. For example, Lo said one of her Chinese clients, who owns a $4 million home in Great Neck, also paid $18 million for a commercial building at 70 Broad Street. “They want to diversify their investments overseas,” she said.
The feeling is mutual
China’s love affair with New York City real estate isn’t one-sided. All of the major commercial brokerages in New York have offices in Asia, and many have stepped up their efforts in the past two or three years.
Meanwhile, Chinese companies are beefing up their operations in New York.
Since plunking down huge sums for New York properties, both Anbang and Fosun are staffing up in New York. At Fosun, Bo Wei and Erik Horvat are mapping out a U.S. investment strategy.
“They bought this building not to be a one-off,” said Horvat, of Fosun’s acquisition of 28 Liberty. “No one comes in to spend that kind of money to buy a single asset. … We will be building and expanding our presence here as we build our investment platform further.”
And the list of Chinese companies growing here goes on.
Xin Development, which is developing the 216-unit Oosten condo in Williamsburg, last year opened an office on 52nd Street that contains ample space to grow, John Liang, head of the New York office, told TRD at the time.
Last year, the State Administration of Foreign Exchange, which manages China’s currency reserves, set up shop on Fifth Avenue with the goal of increasing investments in private equity and real estate in the U.S. The exchange reportedly has about a dozen local staffers hunting for New York investment opportunities.
And China Investment Corp., China’s $600 billion sovereign wealth fund, is rumored to be moving its North American headquarters to New York from Toronto, the Wall Street Journal reported.
Still, while institutional investors have boots on the ground in New York, almost everyone reports back to higher-ups in China.
Carlton’s Swill put it this way: “Everything filters up through the chairman.”
Swill, like others, said Chinese investors are operating with a sense of urgency to find deals, even as they are still learning about the local market and grasping key financial lingo, like capitalization rate, which measures a property’s value by calculating the ratio of net operating income to the asking or sale price. “[In general,] they’re willing to invest at any dollar amount if they can get a cap rate above five,” he said. “They don’t know what it means, but they know it’s the going rate.”
Colliers’ Tang said Chinese investors who shied away from condo projects a few years ago because they were considered risky now feel confident enough to invest both in a joint venture partnership and on their own. A big part of that, he said, is that prices are continuing to rise.
In Manhattan, he said Chinese investors are increasingly interested in buying land, even as prices have risen to near-record levels and the competition has grown fierce. In part, that’s because in China, land is government property, and “buying” property there in fact means long-term leases.
Neveloff, who represents Forest City Ratner in its partnership with Greenland, noted that condo projects now can actually offer a “double-edged advantage.” Not only do condos allow Chinese investors to get a piece of U.S. real estate, but they can also turn around and market those condos to potential buyers in China who increasingly want investments here, too.
“It creates a huge market for potential sales,” he said.
Anatomy of a deal: Inside Related/Oxford’s unusual financing of Hudson Yards
Clockwise from top left: Stephen Ross, a rendering of the South Tower (courtesy Kohn Pederson Fox), Barry Sternlicht, Jeffrey Lenobel and Jeff Blau – See more at: http://therealdeal.com/blog/2013/08/16/anatomy-of-a-deal-inside-relatedoxfords-unusual-hudson-yards-financing/#sthash.P5Nanbim.dpuf
For better or for worse, every big-name New York City developer is defined by their most recent marquee project. Bruce Ratner’s Forest City Ratner propelled Brooklyn into a new phase with Atlantic Yards; Gary Barnett’s Extell Development is redesigning the white glove with One57, and Harry Macklowe is trying to erase the past with 432 Park Avenue. For Stephen Ross’ the Related Companies, the narrative of the past few years has been dominated by Hudson Yards.
The 13 million-square-foot project – developed jointly by Related and Oxford Properties Group — hit a milestone in April, when Barry Sternlicht’s Starwood Property Group led the origination of a $475 million construction loan to allow for the development of the joint venture’s first tower – the 1.7 million-square-foot Tower C, better known in industry circles as the South Tower.
Starwood provided $350 million in funding, while Oxford, the trade union United Brotherhood of Carpenters and Joiners, and luxury retailer Coach – which also purchased its commercial condominium in the building — coughed up the balance. “The team at Starwood showed impressive deal acumen proving to be both sophisticated and flexible,” Related president Jeff Blau said in an April statement.
Just how sophisticated the transaction, was, however, is still coming to light. Speaking to representatives from Related and Oxford’s legal team, the Metropolitan Transportation Authority, and industry observers, The Real Deal examined the anatomy of the deal, one of the most intricate in Manhattan’s history, according to Schulte Roth & Zabel’s Jeffrey Lenobel, who advised the Related-Oxford joint venture.
“There’s been nothing like this since Stuy Town,” Lenobel told The Real Deal, referring to the scale of the Hudson Yards project and comparing it to Tishman Speyer and BlackRock’s $5.4 billion acquisition in 2006 of the sprawling East Side housing complex.
Build it and they will come
Three aspects of the South Tower financing really stood out, Lenobel said. First, all construction loan proceeds – including an extremely rare construction mezzanine loan — came in prior to the equity money.
“I’ve been doing this for 37 years and never seen this happen before,” he said. “The basic theory of construction lending is that there should always be enough money left over to finish the construction. The borrower has to put in additional equity if the loan ever goes out of balance.”
But given the attention focused on this project, and as the viability of successive phases of Hudson Yards would depend on the success of the South Tower, Starwood felt confident that Related and Oxford would deliver. Indeed, shortly after the deal with Coach in April, the joint venture signed French beauty titan L’Oreal to a $417 million lease for 402,000 square feet, and German software giant SAP to a 115,000-square-foot, $136 million lease , as The Real Deal reported. Last week, Fairway Market committed to take 45,875 square feet on the ground floor, leaving the tower more than 85 percent leased.
“Starwood’s thinking was, ‘if they [Related/Oxford] screw up the first one, they screw up the entire project, so how can they not finish the building?’” Lenobel said.
“People here are looking to a single lender to fill all their needs,” Stuart Silberberg, an executive at Starwood, said during a mezzanine finance panel in May. That’s a niche we’ve played in a couple times.”
A spokesperson for Starwood declined to comment for this story.
Joanna Rose, a spokesperson for Related, deferred to the company’s release about the financing deal, but declined to comment further. Representatives from Oxford did not respond to multiple requests for comment.
The benefit to Starwood of doing things in reverse was that their money would stay in the project longer and at higher interest rates, Lenobel said. It also helped them stand out in a competitive bidding process, he said, one that included a consortium of banks with a “slug of 100 million bucks each.”
This deal structure also reassured the MTA — which owns the land under the project and leased it to the developers in a deal that is worth north of $1 billion — said the city agency’s attorney, Meredith Kane, a partner at Paul, Weiss, Rifkind, Wharton & Garrison. “
As a ground landlord, we’re concerned that once a building is started, it is finished,” Kane said. “The fact that the loan came in first gave us a level of comfort. No lender wants to leave their money in the building.”
Mezzin’ around
The second atypical aspect of the financing deal was that rather than being financed through senior debt – which is almost always the case — about 40 percent of the $475 million construction loan (or $190 million) was secured through mezzanine financing.
Mezzanine financing is considered much riskier for the lender, as in the event of a default, the debt is repaid only after all senior obligations have been satisfied.
A mezzanine lender’s usual recourse in the case of a default is to take control of the project or seize the equity stake, Lenobel said. “To come in at this point when there is still construction to happen and still equity to be advanced is highly unusual.”
Mezzanine construction loans – which require an intrepid lender but pay off in higher interest rates – were more commonplace in 2006, Lenobel said, “when capital stacks were at their peak.”
Indeed, since the collapse of Lehman Brothers in 2008, such loans have been few and far between, said Richard Abramson, co-chairman of the real estate department at Cole, Schotz. Abramson, who was not involved in the financing deal, said that was how lenders like Starwood are “filling the void.”
Coach double dips
Finally, Coach was both a lender on the debt and an investor on the equity side. The luxury retailer paid $750 million for its 738,000-square-foot condo at the tower in April. Representatives from Coach did not respond to multiple requests for comment.
“One of the difficulties was that the initial lenders couldn’t grasp that someone on the equity side was also a lender,” Lenobel’s colleague, Fonda Duvanel, who also advised the joint venture, said of Coach’s involvement.
“The magnitude of their purchase gave them a seat at the table,” she added.
“I have not seen a structure where the tenant has gone in and put up equity,” Abramson, the Cole, Schotz attorney, said. “These lenders want a cushion normally. They want to make sure that they have substantial skin in the game.”
The project required all parties to put all hands on deck, and then some. Both Related and Oxford hired several people to work on the project full time, Duvanel said, and top executives from both developers were always in the loop.
“It was Blau and Ross every day,” Duvanel said, referring to the Related president and chairman Stephen Ross, respectively. And Oxford had top representatives coming down from their Toronto headquarters for regular meetings with the MTA.
“The closing cocktail party had 250 people!” Lenobel added.
Public-private partnerships
That the MTA had structured the lease with so much flexibility built in allowed Related the latitude “to exercise the creativity that it did,” Jeffrey Rosen, the MTA’s director of real estate, told The Real Deal.
The MTA softened the developer’s financial burden by creating a ground lease that is “severable” — that is, it turns into multiple ground leases, which makes it easier to secure financing.
“Someone taking space in Tower C doesn’t want to be responsible for someone defaulting in Tower D,” Rosen said, adding, “professionals take pride in intricate financial structures, just like an architect takes pride in his designs.”
See more at: http://therealdeal.com/blog/2013/08/16/anatomy-of-a-deal-inside-relatedoxfords-unusual-hudson-yards-financing/#sthash.P5Nanbim.dpuf
Greenwich, Conn. sees influx of Chinese buyers
Greenwich Conn
549 North Street in Greenwich, Conn. listed for $9.5 million. The home is an example of a home that brokers hope will appeal to Asian buyers.
It’s not just Manhattan and waterfront Brooklyn that are attracting China’s real estate-crazed nouveau riche. Greenwich, Conn. is currently seeing an influx of Chinese buyers, spurring local brokerages to expand their global outreach efforts.
Late last month, Sotheby’s International Realty announced that it has opened a new office in Beijing — its second office in the Chinese capital.
Sotheby’s spokeswoman Kristina Helb told Greenwichtime.com that the move was “a continued effort to appeal to foreign buyers,” and a push to “market Connecticut listings to wealthy Chinese buyers looking to purchase or invest overseas.”
And with the Chinese economy showing continuing growth — and as the U.S. dollar depreciates against the yuan – brokers said they don’t expect the flow of foreign investment to slow. However, dangers remain for those moving millions overseas.
“In Manhattan a couple years ago, there was a big marketplace, where people were buying homes there sight unseen to bring their money into the U.S.,” Sotheby’s Shelly Tretter said. “But it’s become so expensive in Manhattan that I think people are realizing the value of Greenwich, the proximity to Manhattan, and I think we’re starting to get not only more primary residences for people buying from Asia, but also investment properties and secondary residences in town.” [GreenwichTime] – Christopher Cameron
– See more at: http://therealdeal.com/blog/2014/11/02/greenwich-conn-sees-influx-of-chinese-buyers/#sthash.ktaH2fbF.dpuf
The Education of the Luxury Buyer
Excerpt from Wall Street Journal
Seasoned buyers and first-time buyers agree both cited views and chef kitchens as the most important luxury-home features, according to a survey. Getty Images
Seasoned home buyers—people who described themselves as owning a “high-end luxury home”—approach the purchasing process much differently than those venturing into the high-end market for the first time, according to an online survey conducted by Realtor.com in March. These experienced high-end buyers focus less on extra space and glitzy home features and more are willing to pay over their budget to get a sound investment.
Generally, seasoned luxury buyers look at the long-term prospects for a property, says Christian Benites, associate real-estate broker with Town Residential in New York.
Still, seasoned buyers and first-time buyers agree on some things. They both cited views and chef kitchens as the most important luxury-home features, according to the survey. Seasoned folks saw luxury pools as third most important, whereas other buyers cited outdoor living areas.
First-time buyers ranked square footage and extra bedrooms, as well as smart home and eco-friendly features, higher than did current luxury homeowners. Of those currently planning to purchase a luxury home, 20% of seasoned buyers marked privacy as a top feature, compared with 13% of first-time buyers.
“They are not looking for golf simulators and children’s playrooms and those kinds of amenities—they are looking for what the building has to offer and the reputation of the developer,” Emily Beare, a real-estate agent with Core in New York City, says of seasoned luxury condo buyers. These buyers are more concerned with features like windows and humidification systems that protect high-end furniture and art.
Well-known architects and developers with a reputation for building good quality buildings are appealing for these buyers, says Leslie Wilson, senior vice president of sales at Related Cos.
First-time buyers tend to prioritize finishes and layouts because they want to move in right away without having to gut the property or conduct a lengthy remodel, says Ms. Beare. “It’s a totally different mentality from a seasoned buyer. The seasoned buyer is more interested in purchasing a trophy property in the right building at the right address,” she says.
Of those planning to purchase a luxury home, 40% of current high-end homeowners said they would be willing to pay over budget, compared with only 29% of nonluxury homeowners, according to the Realtor.com data.
After purchasing a two-bedroom apartment in Brooklyn Heights a few months ago for roughly $2 million, Namek Zu’bi knocked down walls and changed the layout. Mr. Zu’bi, 27 years old and a managing partner at a venture-capital firm, has owned several properties in Jordan and approached the home-search process from an investor’s standpoint. He focused on price a square foot instead of the overall price and looked for a neighborhood that would likely generate a 30% to 50% return in the next five years.
The majority of Silicon Valley real-estate agent Mia Simon’s clients are young, first-time luxury buyers who have done well in the tech sphere. “They want to be close to a downtown area,” says Ms. Simon, of Redfin. “They want to walk to a farmer’s market on the weekend or to a restaurant. They place high, high value on that.”
Write to Sanette Tanaka at sanette.tanaka@wsj.com
Tax Refunds May Fuel Windfall for Retailers
Accountants weren’t the only ones cheering this year’s record number of tax returns.
This past Tuesday’s dreaded tax deadline actually marked a pleasant occasion for most filers. Of the 100 million or so returns processed through April 4, nearly 80% resulted in a refund averaging $2,792. The total sum paid out was about $5 billion, or 2.5%, higher than a year earlier.
That bodes well for the nation’s retailers in the months ahead since many households treat returns as a windfall to be spent, not saved. Even better, Uncle Sam has been a lot quicker to whip out his checkbook than in 2013. Had that not been the case, retail-sales figures for the past two months might have looked different.
Sales for March recorded their biggest month-over-month gain in a year and a half, according to a report Monday from the Commerce Department. That came despite the fact that Easter, which fell earlier last year, in March, isn’t until this Sunday.
“I do believe that [tax refunds] were fuel for the consumer in the month of March,” said Jack Kleinheinz, the National Retail Federation’s chief economist.
And, although the dollar amounts were smaller, the impact of accelerated returns probably did much to offset the impact of frigid weather in February. An initial estimate of retail sales was revised higher for that month. For the week ended Feb. 7, for example, cumulative tax returns were $12.5 billion, or a whopping 24%, higher than at the same point a year earlier. By the end of February, that gain had fallen to 8.8%, and by the end of March, the difference was just 2.6%.
Last year was an entirely different story. At the end of February 2013, refunds were 14.3% lower than at the same point in 2012. That was mainly the result of administrative delays caused by the “fiscal cliff” standoff in Washington. The effect on spending was exacerbated by the expiration of the payroll-tax holiday.
The drag on spending early last year was particularly strong at retailers dependent on lower-middle-class customers, such as Wal-Mart Stores Inc. and Dollar General Corp. , or service providers such as no-contract cellphone carriers.
It seems a fair bet that they had a far less taxing start to this year.
Sunrise Terrace Condos
Relaunch of Flushing Condominium
Excerpt from The Real Deal
By David Jones, The Real Deal
DelShah Capital, led by investor Michael Shah, has officially re-launched the Sunrise Terrace Condominiums in Flushing, Queens, after acquiring the unsold shares at the stalled complex at a foreclosure auction in July. Victor Jung from Distinct New York was enrolled to rebrand, reposition and remarket the property.
DelShah, after acquiring the project’s original $9.6 million senior mortgage from ChinaTrust in November 2009, spent nearly two years working to take over the deal after negotiating a complex series of legal hurdles and direct negotiations with several creditors involved in the project.
Delshah acquired the property’s $6.9 million loan balance for $3.7 million in a foreclosure auction, after a judgment was issued against the previous owners, Paramount Management, in April.
Sunrise Terrace has operated in a tough submarket in Flushing, competing against larger rivals like SkyView Parc and other new condominiums.
Distinct New York, an affiliate of DelShah, is the exclusive marketing and sales agent along with Prudential Douglas Elliman.
Victor Jung, executive vice president at Distinct, said demand is strong for the newly positioned condos.
“It’s a great, unique product,” Jung said. “This property has Trump-like finishes for that community.”
The units have Whirlpool stainless steel kitchen appliances, Techline kitchen cabinets, stone countertops, Kohler bathroom fixtures, washer dryer units and optional parking spaces.
The 41-unit property, at 31-32 Union Street, is offering 17 units for sale ranging from 1,000 to 1,400 square feet and $439,000 to $652,500. Fifteen of the property’s residential apartments were previously sold.
The property’s commercial condos range from $229,000 to $899,000 and range in size from 650 square feet to 2,400 square feet.
DelShah owns a total of 1,750 multi-family units across New York, part of his firm’s 2 million-square-foot commercial real estate portfolio.
Just last month, DelShah purchased a mixed-use multi-family complex at 1356 First Avenue, between 72nd Street and 73rd streets for $9.1 million. The complex is also the home of Petaluma, considered one of the top Italian restaurants on the Upper East Side.
DelShah was an original investor at the Setai at 40 Broad Street in Lower Manhattan. In late December 2010, the firm filed suit to block Anglo Irish Bank from transferring the deed at 40 Broad.