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by Cicero, The appraisal philosopher

In that annual rite of spring the new rent stabilization increases have been announced by the Rent Guidelines Board.  This year the increases are fairly modest, only 2% for a 1-year lease and 4% for a 2-year renewal.  The vacancy allowance remains the same.  This is great theater for us real estate nerds, where the landlords are all depicted as greedy villains by the tenants, and the tenants are all depicted as greedy freeloaders by the landlords.  The current increases are the lowest that they’ve been in ten years, and well below the 10-year average of 3.5% and6.53% for one and two-year leases, respectively, as illustrated below:

For Leases                               ————Lease Term——-

Starting Between                                 1 Year              2 year

10/1/02 – 9/30/03                             2 .0%               4 .0%

10/1/03 – 9/30/04                             4.5%                7.5%

10/1/04 – 9/30/05                             3.5%                6.5%

10/1/05 – 9/30/06                             2.75%              5.5%

10/1/06 – 9/30/07                             4.25%              7.25%

10/1/07 – 9/30/08                            3.0%                5.75%

10/1/08 – 9/30/09                            4.5%                8.5%

10/1/09 – 9/30/10                            3.0%                6.0%

10/1/10 – 9/30/11                            2.25%              4.5%

10/1/11-9/30/12                              3.75%              7.25%

10 year average                                 3.50%              6.53%

From James Dunne in The CREative Department

Want to be on the 90th Floor of One57?  You’ll have to pay $90 Million.  I happen to be jogging through Central Park and noticed that the construction appeared to have topped off – according to the Commercial Observer today, it has.  Here’s the shot I took; One57 towers above all the surrounding buildings:

ONe 57 from CP

Gary Barnett of Extell Development announced back in May that an unnamed billionaire was in contract to purchase a penthouse unit for $90+ Million.  Here is a picture of the views from the One57 website:

CP view one 57

While much uncertainty remains in the housing market across the U.S., including NYC, the luxury market continues to break records.  Extell reports they have $1 Billion worth of units in contract at One57.   However, the penthouse sale represents the very top of the luxury market, and as Jonathan Miller estimates, a view of Central Park can add 25% to an apartments price, plus there is a 9% premium in NYC for condo vs. a co-op.  This adds up to 34% premium to be in the newest luxury condo building with views of Central Park.

Wooden water towers are a common feature visible atop many mid-rise buildings here in New York City. I had the good fortune to observe a new tank being constructed atop a neighboring building right outside my window last week. The industrious team seen in the photograph below managed to put this thing together faster than I had thought was possible.

Here are some interesting facts about these wooden wonders:

  • In Manhattan, most buildings with more than six stories need some type of water tower and pumping system to ensure sufficient water pressure.
  • Water is delivered up to the tanks by electric pumps, and is then distributed throughout the building by the force of gravity.
  • There are only two companies that build wooden water towers in the city: Rosenwach Tank Company and Isseks Brothers. Each has been in business for over a century.
  • Towers built by Rosenwach can be identified by the four “R”-shaped pieces of wood around the uppermost portion of the tower’s central post. (As can seen in my photograph.)
  • The average wood tank holds 10,000 gallons of water.
  • Wood tanks have several advantages over steel tanks: They are cheaper (average cost of $30,000, compared to as much as $120,000 for steel), can be built more quickly, require less maintenance, and provide better insulation.
  • A crew of six men can remove an old tank and replace it with a new one in 24 hours.
  • Wood tanks have no lining or sealant keeping the water in. Newly built tanks will actually leak when first filled with water (indeed I saw this occurring with the new tower shown in the photograph), but before long, the water in the tank causes the wood planks to expand, closing up any gaps between them.

Water Tower

Drove by this beauty earlier this week and just had to stop for a picture. I can only imagine how a listing agent might describe it:

House for sale. Cozy one-story with walkout basement. Lots of natural light. Needs a bit of TLC.

In all seriousness, one has to wonder why the owner (assuming he or she is not flat-out broke) did not simply raze this trash heap and perhaps do a basic site clearing before putting the property up for sale. My only guess is that the local zoning may allow a higher floor-area-ratio for development involving the extension of an existing structure, as compared to what is permitted for a ground-up new construction.

House for Sale

I noticed this marvel of engineering on the way back from lunch today. It’s right on our own block at 63 West 38th Street (aka 62 West 39th Street), where a 12-story office building is getting a 6-story addition and being converted to a hotel. I’m sure these fine folks know exactly what they are doing, but personally I would think twice before spending any time on that scaffolding – the support beams look just a bit “sill”-y to me . . .

Scaffolding

by James Dunne – The CREative Department

As a kid visiting NYC in the 80’s, I was always fascinated by the graffiti covering subway cars and buildings. However, by the time I moved here as a young adult in 2001, the city had been cleaned up.  I was on Davis Street in LIC this morning, and happened upon one of the last graffiti-covered blocks I know of.  As LIC has now been as part of the Hunters Point Subdistrict Rezoning, these buildings (in their current form) may not be around for much longer:

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The view outside my 15th floor window.  For the past month I’ve watched this building on West 37th Street go up and this week, topped off.  Considering the zoning and other new construction on the block I am guessing that it’s going to be a hotel. The pace at which it went up reminds me of a computer game I used to play with my son when he was around 5 years old, Tonka Trucks.  In the game an army of construction workers would scurry around and build a tower, in about five minutes!

IMG_5762

Photo by our own Informed Appraiser, Marc Kushner.

As the construction of Lower Manhattan’s newest crown jewel approaches completion, it has emerged that there is some controversy surrounding the uppermost section of the skyscraper. The 408-foot antenna that will bedeck the top of the tower was originally supposed to be enclosed within a geometric, ornamental shell. However, much to the chagrin of the building’s architects, the owners (the Port Authority and the Durst Organization) have recently changed course, scrapping this design in favor of leaving the antenna’s basic metal support structure exposed.

The reported reason for the change is that the planned shell would have been too expensive and dangerous to maintain. In addition, doing without the shell will shave some $20 million off the construction costs. (Considering that One WTC is already the most expensive office building ever constructed, and running nearly $1 billion over budget, that’s probably not a bad thing.)

Just last month, One WTC became the tallest building in NY State when it reached 1,271 feet, edging past the venerable Empire State Building. One WTC’s lengthy antenna was specifically designed to bring the tower up to the symbolically significant height of 1,776 feet. At that size, it would register as the tallest building on the continent. However, now that the decision has been made to do without the antenna’s external shell, questions are being raised about whether this part of the structure will actually count towards the official height of the building. (Without those additional 408 feet, One WTC’s base building height of 1,368 feet would make it only the third-tallest building in the country – close, but no cigar. However, that number might hold some appeal to China when they eventually take over the country, as construction of the current Great Wall of China began in the year 1368.)

This design change is significant in this context because under the commonly accepted rules for measuring building height, architectural spires are included in overall building height, but plain old antennas are not. With the ornamental shell, there would have been no question that the antenna’s structure would qualify as a spire. Without the shell, however, it may well be considered no more than a mere antenna. Although the building’s owners steadfastly maintain that this uppermost part of the building will indeed still be a spire, others in the know are decidedly less sure. Ultimately, the decision will rest in the hands of the Council on Tall Buildings and Urban Habitat, which has yet to make the call.

Even if One WTC loses the height contest, I would submit that the building’s monolithic, octagonally tapering design is still nothing short of in“spire”ing.

By James Dunne – The CREative Department

I’ve been working on project in Prospect Heights, Brooklyn, a neighborhood just north of Prospect Park, which has become greatly gentrified over the past decade. Many of the buildings in Prospect Heights are under cooperative ownership. Washington Avenue, which runs diagonal through the photo below, is the traditional boundary between Prospect Heights on the west side and the neighboring Crown Heights neighborhood to the east. The stark contrast of the revitalization of Prospect Heights is apparent by the building roofs: on the Prospect Heights side most roofs are covered in fresh “silver coat” (aluminum-based reflective material to keep energy-costs down in the summer), whereas on the east side of Washington Avenue, Crown Heights, the roofs are clearly not as well maintained.

Areal Photo

In today’s New York Times Julie Satow writes about commercial appraisals in her article Accuracy of Appraisals is Spotty, Study Says.   The article was not particularly flattering to commercial appraisers as it noted that in a recent study that examined sales prices and appraised values, the appraisals were high 64% of the time.  Overall, though, I think that she did a great job with this article.  I am quoted commenting (complaining?) about the commoditization of appraisals and the evolution of the appraisal from integral professional service to commodity.  (A frequent comment of mine!)

I agree with the comments of Bill Garber, the director of government and external relations for the Appraisal Institute, that comparing the values with prices can be misleading.  I did not review the study that Ms. Satow referred to in her article but from my many years in this profession I have seen how frequently appraisals are misinterpreted.  Price and value are not synonymous.  For example:

  • What was the time difference between the date of value in the appraisal and the eventual sale? Remember that the appraised value represents a point in time and a sale six months, a year or more after that time can reflect very different market conditions.
  • Is the study confusing a stabilized value for an “as is” value?  If a property is not operating at stabilized occupancy (whatever that is for a particular property type in a particular submarket) the lender will typically ask for a future value upon stabilization as well as the value based on the lower occupancy (in its “as is” condition).  Was the property in the same condition and occupancy at the time of sale as premised in the appraisal?
  • Was the appraisal based on any extraordinary assumptions.  Per the Uniform Standards of Professional Appraisal Practice (USPAP) any specific assumptions regarding a property must be clearly specified in the report.  For example, did the appraisal assume that a major lease that was out for signature get executed, whereas by the time the property sold that lease negotiation fell through?
  • Did the circumstances of sale truly meet the definition of market value?

The list of potential differences between the premises of the appraisals and the circumstances of actual sale can go on and on.

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