Commercial Grade

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.

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.

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 . . .

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.

There has been more than ample debate about where the blame for the housing crisis lies. (”Lies” being the operative word, perhaps?) Well, according to a recent WSJ MarketWatch article, the Boston Fed, after much careful analysis, has concluded that the housing bubble and ensuing bust were not the result of the financial industry having deceived mortgage borrowers and investors (though, I must point out, there can be little doubt that such deceptions did occur). Rather, the primary factor responsible for the formation of the housing bubble was that home buyers and mortgage investors held overly optimistic beliefs and expectations about future home value trends.

In other words, the Boston Fed is making the case that above all else, the housing crisis was brought on by basic human psychology (itself being susceptible to the wiles of Greed & Folly, of course) and the madness of crowds. If history is any guide, it seems that the occasional asset bubble is an unavoidable, inherent quirk of free market behavior. After all, if it can happen to tulips, it can happen to houses, too.

There are countless books and websites purporting to offer easy techniques for striking it rich in real estate. I’d like to toss my own hat into the proverbial ring and offer a simple, foolproof, step-by-step process for achieving this goal.

Step 1: Become famous.
Step 2: Buy a condo apartment.
Step 3: Wait for values in the building to rise as a result of your fame.
Step 4: Sell at a tidy profit.

Of course, this process can be repeated again and again in as many different buildings as you’d like. Eventually you might become even more famous due to your real estate prowess, which would then lead to greater fame-induced profits, which would lead to more fame, and so on.

Sound to good to be true? According to a recent Wall Street Journal article, Alex Rodriguez of the Yankees has recently done exactly this. He closed on a 3,600 SF, four-bedroom apartment on the 35th floor of the Rushmore (80 Riverside Boulevard) in June 2011 for $5.5 million. Brokers have stated (or perhaps more accurately, speculated) that A-Rod’s well-publicized purchase led to increased sales activity and prices within the building.

Just four months later in October 2011, Mr. Rodriguez put the apartment back on the market with an asking price of $8 million. The unit went into contract in January 2012, and brokers familiar with the sale reported that the contract price was sufficiently high so as to net Alex a substantial profit on the unit. (As of this writing, City records do not show a deed transfer for this deal, so apparently the sale has not yet closed.)

Now, that’s what I call a HOME run!

Location, location, location. An inherent quality of real estate is that no two properties share the exact same location. Making appropriate comparisons between properties with disparate locations is one of the basic challenges in the practice of real estate appraisal.

One basic aspect of a property’s location is the street along which it is situated. Within a given neighborhood, some streets are typically regarded as more desirable than others, for any number of possible reasons. While we don’t normally pay much attention to the character of a street’s name in and of itself, it is entirely possible that in some cases, the particular name of a street may have an effect – for better or for worse – on its image and appeal.

As covered in the NY Times and elsewhere, a group of shareholders in the Southgate co-op complex are convinced that changing the name of their street would result in higher property values. The Southgate complex is located along the easternmost block of East 52nd Street in the prestigious Turtle Bay neighborhood of Manhattan. These co-op owners are seeking to change the name of the street along their block to something more elegant; a leading contender is “River Place”. Their theory is that this renaming would give the block greater cachet, and bring property values up to the levels enjoyed by similar properties located nearby on Beekman Place to the south and Sutton Place to the north.

While it is unclear whether their efforts will be met with any success (full-blown street name changes within Manhattan are by no means an everyday occurrence), I must agree that River Place has a better ring to it than East 52nd Street. Would such a name change actually result in higher values? Some brokers interview by the NY Times believe that it would. Ultimately, only the market could answer that question definitively.

New York’s Rent Control and Rent Stabilization laws were introduced many decades ago, originally intended as temporary measures. They have proven to be surprising durable, and owing to their longevity have grown to become part of the very fabric of the housing market in New York City. Some people – particularly those who do not happen to live in a regulated unit with a sub-market rent – view these laws as unfair, essentially giving an arbitrary windfall to select individuals while leaving others paying sky-high rents.

Over the years, there have been various challenges to these laws, and the Supreme Court is currently considering a case filed by James Harmon, a Manhattan landlord  who is questioning New York’s rent control laws on the basis that they constitute a unconstitutional taking of property. How the court will decide this case remains to be seen, but given that similar challenges have been struck down in the past, it would be surprising if the challenge is upheld.

On the surface, it would seem that this battle is just about dollars and cents. However, a recent feature in the New York Times suggests that there might be more than financial implications at stake here. The article tells of one Mr. Arnold Warwick, who, thanks to rent control, has the good fortune of occupying a 1,200 SF apartment in Greenwich Village for a the measly sum of $331.76 per month – a small fraction of what it would rent for at market. Mr. Warwick, who has lived in the unit for over 50 years, is quoted as saying “I don’t plan on dying, because I don’t want to give up a rent-controlled apartment.”

So, rent control may be much more than a financial boon. In some cases, it may represent nothing short of a reason to go on living. If New York’s rent control laws are struck down, could this cause some folks to give it all up and go on to a better place?

After a bit of an interruption, the saga continues.

In previous editions of USPAP, the Ethics Rule included a requirement that the appraiser maintain adequate records (workfiles).  Some folks had voiced concern about this state of affairs, under which an appraiser could be found in violation of the Ethics Rule for failing to maintain an adequate workfile, even by mistake. While such a failure is certainly irresponsible – perhaps even negligent – it seems unfair to automatically categorize this as “unethical”. Appraisers are only human, and mistakes can happen.

In response, for the 2012-2013 USPAP the Appraisal Standards Board made the bold move of taking this requirement out of the Ethics Rule and instead fashioning it into a brand-spanking-new Record Keeping Rule. (If you ask me, it should really be the Recordkeeping Rule; alas, they did not ask me.) Now, failure to maintain an adequate workfile is only a violation of the Record Keeping Rule rather than a more serious Ethics Rule violation.

There is, however, a major caveat: In conjunction with this change, the ASB also added a new provision to the Ethics Rule. This provision states that anyone who willfully or knowingly violates the Record Keeping Rule is also in violation of the Ethics Rule.

In order words, the ASB is saying that the intentional failure to maintain adequate records does indeed rise to the level of being unethical. I, for one, think this is a reasonable assertion.

However, the ASB has left me scratching my head on this one, and here’s why:

Could not this very same distinction – between intentional and unintentional infractions – be applied to several other requirements within the Ethics Rule? For example, one of the Ethics requirements is that the appraiser “Must not misrepresent his or her role when providing valuation services that are outside of appraisal practice.” I would consider this unethical only if the misrepresentation was intentional. So perhaps the ASB should create a separate Misrepresentation Rule, and leave a provision in the Ethics Rule to cover intentional misrepresentation.

The same could be said of another Ethics Rule requirement, which states that the appraiser “Must not engage in criminal conduct.” (Yes, this is akin to a law making it illegal to break the law.) Shouldn’t this be an Ethics Rule violation only if the appraiser engages in criminal conduct intentionally?

Editor’s Note:  I promise that this will be the last post on USPAP for a while!

by The Informed Appraiser

This post will be relatively short, as it covers a rather straightforward change in the new edition of USPAP. Specifically, a Definition has been added for “Exposure Time”. In previous editions of USPAP, a definition of Exposure Time was included only as part of Statement On Appraisal Standards No. 6 (SMT-6), which covers the topic of exposure time in depth. As there is a section of USPAP devoted exclusively to definitions (entitled, appropriately enough, “Definitions”), the ASB has now decided that this definition should be added to the Definitions section.

This change makes sense and was technically long overdue; however, as it carries no practical ramifications, I suppose it could hardly have been considered urgent. Ironically enough, as part of the 2012-2013 USPAP revisions, SMT-6 (which will be discussed in a future post in this series) now includes a full citation of the Exposure Time definition that has been added to the Definitions section. As the saying goes – the more things change, the more they stay the same . . . .