Rentals to the rescue
- By Elsa Brenner, The New York Times
- Published April 2012
Sidelined several years ago by the economy, five apartment projects are finally getting under way again. The big difference this time around is that all are now to be built as rentals.
The shift away from ownership housing is being repeated across the country, said Douglas M. Bibby, president of the National Multi Housing Council.
"In 2008 everything started falling apart," he said. "In the two previous years, condos represented a third of all multifamily completions, with everyone betting on their values going up." Instead prices began to fall, and as a result, he said, many "fractured condo deals" were sold at bargain prices to buyers who are converting them to rentals.
On 4.5 acres in Ossining along the Hudson, Ginsburg Development and Cappelli Enterprises broke ground in 2006 on what was to have been a mixed-used project, including 180 condos, shops, a restaurant and a public park. Today only a small grassy area and a couple of picnic tables mark the site. But the developers have reworked the plans to fit the current lending environment.
"Financing for for-sale housing is simply not available these days," said Joseph Dziegelewski, SVP and director for development of Ginsburg Development. A revised plan for Harbor Square, as the complex is called, is now before the village. It calls for a 188-unit rental apartment building, an additional two-story building to house a restaurant and retail, and a public park. The developers hope to move ahead with the new plans later this year, and Valerie Monastra, the village planner, said municipal officials were eager for that to happen without further delay, so the project can finally begin generating tax income. Rents have not yet been set for the one- and two-bedroom apartments.
Martin Ginsburg, the founder of Ginsburg Development, will be reworking another project, the River Club, also near the Hudson, which was to have been a 400- unit condo high-rise but is morphing into luxury rentals.
"We were in high gear for condos when the rug got pulled out from under us," said Ginsburg, a Hudson Valley developer since the 1960s, "and we had to adjust our operations and reposition ourselves. The market for condos isn't there right now, nor is the financing. But since the market for rentals is, we're proceeding on that basis."
Potential renters at the River Club include empty nesters who missed the chance to sell the family home and buy a condo when the market was stronger. "But even if they're just renting now," Ginsberg said, "they still want something special with lots of amenities, and that's what we'll be offering them."
Similarly, Frank Boccanfuso, a longtime developer and managing partner of FMB Asset Management and Phoenix Capital Partners, has shifted gears. He had plans for two luxury condo projects, each on 1.5 acres: the 100-unit Mariner, with 25 boat slips on the Byram River, and the 83-unit Castle, close to the village train station. Now, rents have tentatively been set at $1,800 to $2,900 for the waterfront development and $1,600 to $2,600 a month for the Castle.
Boccanfuso explained that in 2007, the flagging economy forced him to "put everything on hold, even though we had all our approvals in place."
For the Mariner, which is nearing completion, he used his own capital, including $5.5 million to buy the land and $2 million to clean up the underlying brownfield site. Construction costs, he said, are $25 million. For the Castle, he paid $6 million for the property and will seek bank loans for construction, which has not yet started.
"It has obviously been frustrating dealing with this market," Boccanfuso said, "but that's something none of us have any control over, so we're just doing our best to hang in there." He said he hoped to break ground on the second project later this year.
Even for developers of rental housing, the lending environment until recently has been unsettling. Now, after a hiatus of several years, Collins Enterprises of Stamford will finally be able to complete the third and final phase of Hudson Park, its luxury rental development. The company has teamed with Berkshire Property Advisors, a multifamily real estate investor and property manager in Manhattan, on a 20-story residential tower with about 200 apartments.
In 2001, the company led by Arthur Collins and his brother Dwight, broke ground on the first phase-263 one- and two-bedroom apartments plus shops, restaurants and office space. The second phase, completed in 2008, has 294 one-and two-bedroom apartments in two towers. Both are 95 percent leased; rent for one-bedrooms at Hudson Park ranges from $1,850 to $2,100.
Bibby summed up the rental trend this way: "It's better to have something built than nothing there, especially since, at least in the housing market, this recession doesn't seem to be going away quickly."