real estate department co-chair matt kasindorf hosts symposium of

New York City Market Highlights p. 36
Northeast Snapshots p. 40
Cost Segregation p. 46
Is Your Deal Right for a CDO? p. 48
Volume 4, Issue 6
CONNECTICUT
New Jersey
www.NortheastREBusiness.com
DECEMBER 2007
•
•
DELAWARE
New York
•
•
MAINE
PENNSYLVANIA
OFFICE UPDATE
Industry experts weigh in on the activity of major office
markets in the Northeast.
•
•
MASSACHUSETTS
RHODE ISLAND
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NEW HAMPSHIRE
VERMONT
SURPASSING EXPECTATIONS
New York City continues to be a hot retail destination.
Moderated by Jerrold France, Randy Shearin and Stephanie Mayhew
Stephanie Mayhew
T
his month, Northeast Real Estate
Business sat down with experts
in the office industry to discuss
the current activity in their respective
markets and what can be expected in
the future.
New York City Is
Riding High
The office market in Manhattan,
New York City, continues to surpass
all expectations. A tight market with
low vacancy rates and high rental
rates has led to new development
and a blockbuster investment market.
“The velocity of leasing in Manhattan is outpacing supply and demand
continues to be healthy and strong,”
says Cynthia Wasserberger, senior
vice president at Jones Lang LaSalle in Manhattan. “Although leasing
activity is below 2006 levels, availability remains tight and rents have risen
to unprecedented levels; thus, most
buildings that have single digit or low
single digit vacancies and rents will
continue to tick upward.”
SEE OFFICE, PAGE 50
Manhattan Office Market
3Q 07
Manhattan Class A Direct Avg. Asking Rents
Class B Direct Avg. Asking Rents
Absorption
Midtown
Class A Direct Avg. Asking Rents
Class B Direct Avg. Asking Rents
Absorption
Downtown
Class A Direct Avg. Asking Rents
Class B Direct Avg. Asking Rents
Absorption
2Q 07
3Q 06
$83.75
$81.82
$54.89
$52.46
2,208,602 911,923
$65.80
$43.86
388,533
$93.46
$90.30
$61.89
$59.41
1,152,603 84,010
$73.54
$49.91
574,117
$60.39
$44.67
648,729
$45.58
$34.03
-272,960
$59.41
$41.10
149,953
Source: Grubb & Ellis
PRESRT STD
U.S. POSTAGE PAID
Lebanon Junction, KY
Permit No. 140
The new towers at the World Trade Center site are set to change the dynamics of the
retail market in Downtown Manhattan, New York City.
R
ecently Northeast Real Estate
Business and Shopping Center
Business held their annual New
York City Retail Roundtable at the
office of Meister, Selig and Fein LLP
in Manhattan. Many thanks to Meister, Selig and Fein for hosting us once
again. A unique mix of brokers, developers, and lenders came together to
discuss the current state of retail activity in this most sought after market.
Participants included Damon Hemmerdinger of A&Co., Joel Braun
of Acadia Realty, Andrew Pittel of
Andrew Pittel & Company, David
Cohen of GE North America Lending,
Matt Harding of Levin Management,
Ariel Schuster of Robert K. Futterman, Danielle Brunelli of R.J. Brunelli
& Company, Franklin Zuckerbrot of
Sholom Zuckerbrot Realty, Deborah
Jackson of Weiser LLP, Simon Ziff
of Ackman-Ziff Real Estate Group,
David Silver of Levin Management,
Ed Hogan of Brookfield Properties,
Ken Benjamin of Benjamin & Associates, Andrew Fawer of CIBC World
Markets, Gary Schwartzman of Grubb
& Ellis Retail Group, Ben Fox of Winick Realty, Lynn DeMarco of Staubach
Capital Markets, Michael Stone of
Cushman & Wakefield, Cory Zelnik
of Zelnik & Co., Charles Cristella
of Stanberry Development and Matt
Kasindorf, of Meister, Selig & Fein.
From Northeast Real Estate Business. ©2007 France Publications, Inc. www.northeastrebusiness.com
SEE RETAIL, PAGE 56
NEW YORK CITY RETAIL SURPASSES EXPECTATIONS
RETAIL from page 1
Jackson, Harding, Demarco and Silver
NREB: How is the current credit crunch affecting commercial real
estate? Deborah [Jackson], as someone
who watches the industry from the
outside in, what is your opinion?
Jackson: The impact on the retail side
is not what people would expect from
what is being said in the press. Our
business is impacted by two things.
One is tenants wanting space, and,
two the demand for space. First of all,
it is not impacting the luxury market
because there is so much money chasing so little product. What happens
too in this market is when the credit
gets a little bit crunchier, people use
cash, so we are really not seeing the
type of impact that you would think.
Some retailers might be feeling it in
their sales, but overall, sales are good,
investor interest is strong, and in this
city, in particular, all sorts of tenants are coming in, both foreign and
domestic, and many of these new tenants want to have flagship stores here.
Space is such a commodity in this city
that the impact of the credit market is
not as much of a factor.
NREB: David [Cohen], do you want
to comment on the market for lenders?
Cohen: There is a lot of volatility in
the markets, both on the swap side
and on the credit side, which is also
having a major impact on the CMBS
market today. There is obviously a
slow down in the amount of acquisitions and new financings right now.
The types of product are getting creative in order to create more value.
You look to the sponsors to increase
their net cash flow over a short period of time by taking below market
leases and bringing them to market,
backfilling vacancies and obviously
56
going towards the rent growth. That is
where you are going to see most of the
financing today. There is an unlimited
financing in the markets that is mixed
financing. I don’t think the CMBS
market is back to where it was before
the summer.
NREB: Simon [Ziff], do you want to
touch on the current lending climate?
Ziff: The last 2 weeks have been
significantly better than the last 2
months. We have been working on
some retail transactions with spreads
that are 30 to 40 basis points not from
the low point, but from the high point.
We do a lot of large construction loans
and the foreign banks have kind of
paused, which has probably had the
biggest impact on our largest deals.
As far as floating rate financing, there
is definitely a shortage of transitional
financing right now and I am hoping
that it will come back in first quarter
2008.
NREB: Lynn [DeMarco], you deal
primarily with the investment community and institutional investors.
How are they seeing demand for
properties? What are they looking for
and how are they buying them.
DeMarco: Institutional investors
have been aggressively seeking core
properties, which have not undergone
too much change in cap rates. In the
secondary and tertiary markets there
is more of a widening of cap rates.
NREB: On the sales side, are sellers
holding properties, or are they possibly waiting for the end of the year?
DeMarco: There has been a big push
for the end of the year. We have been
very active in pitching new business
and bringing new products onto the
market. There are a couple different
kinds of deals that are most attractive
right now. Deals that have financing in place that people can assume,
which will be attractive because somebody can actually measure the returns
that they are going to get as opposed
to having uncertainty as to where they
could be. As far as the core properties,
we have brought several core and
closed several core properties on the
East Coast that have been very well
received.
NREB: Switching the focus to the
New York area. Michael [Stone], do
you want to talk about the investment
community and how properties are
being looked at and acquired in New
York City?
Stone: Activity is still strong, but
there is a lack of product, which is
not expected to change anytime soon.
I have not seen any rent compression, and a lot of players are sniffing
around for product, but there is not
enough coming on the market.
NREB: Are owners holding out or
waiting for better pricing? Or, is it
simply just a lack of product to sell?
Stone: It is lack of product to sell.
On rare occasions, owners are holding out. In secondary markets, for
New Leases Signed
At The Shops At Atlas Park
E
leven new leases have been signed at the Shops At Atlas Park in Queens,
New York City. Located at 8000 Cooper Avenue, the retail center, which
is owned and operated by Atlas Park LLC, a division of Atco Properties
and Management, sits on 12 acres of land and offers a unique mix of men’s,
women’s and children’s apparel, as well as jewelry, shoes, fashion accessories, house wares, gourmet foods, and a variety of cafes, bistros and restaurants. The new leases, which includes eight retailers and two office tenants,
totals approximately 20,000 square feet. New tenants include The UPS Store,
Advance Health Nutrition, Chopin Chemists, Dance & Beyond, Floris Day
Spa and Nails, Frankie’s Playce, M12ThirtyOne, NY Sun Club Tanning, Precise Optique, PSI Examination Services and R.K. Gupta Corp.
— Stephanie Mayhew
Eleven new leases totaling 20,000 square feet have been signed at Atlas Park in
Queens, New York City.
NORTHEAST REAL ESTATE BUSINESS From Northeast Real Estate Business. ©2007 France Publications, Inc. www.northeastrebusiness.com
DECEMBER 2007
Ziff and Pittel
instance, in the Gold Coast of New
Jersey, owners are trying to ride the
wave of rent depreciation in the primary markets, but they can only hold
out for so long because there is just
not as much product and there is
strong demand.
NREB: Matt [Kasindorf], what are
you seeing in terms of the market
activity here?
Kasindorf: On the investor side, the
major move across the board is owners and developers trying to back-fill
their equity. So, everybody is quick
to align themselves with institutional
equity players and preferred equity
players to combine forces. Everybody
is now quoting 65 percent to 75 percent and zero appetite for mezzanine,
which is forcing all of the developer’s
investors to rush to restructure those
deals with equity instead of debt.
NREB: Andrew [Fawer], do you
have thoughts on this?
Fawer: Generally speaking, there
is some liquidity in the marketplace
to finance, and the level of fixedrate financing and the cost of funds
for fixed-rate financing isn’t unusually higher than historical levels. We
have just gotten so used to having
extremely cheap financing over the
last couple of years that it becomes
sticker shock to borrowers. A lot of
deals are not making sense for a lot
of borrowers. The fundamentals in
the New York area are still good,
but we are underwriting at normal
levels. That said, obviously activity is
down, but if you have a good project
it will get financed; albeit, at a higher
cost and more equity involved, but it
WP Realty Tackles Redevelopment In A
Tight Market
Settlers Ridge to Bring Upscale Retail
to Robinson Township
F
aison, in a joint venture partnership with CBL & Associates Properties, is
currently constructing Settlers Ridge, a 77-acre retail center in Robinson
Township in the metropolitan area of Pittsburgh. The approximately 600,000square-foot regional lifestyle center will include a nationally recognized book
store and sporting goods store, as well as a 40,000-square-foot health club,
120,000 square feet of home and apparel fashion retailers, 150,000 square feet
of specialty stores and 65,000 square feet of select restaurants. In addition,
the center will feature a 60,000-square-foot Cinemark theater and a 150,000square-foot Giant Eagle Market District, the food purveyors new concept
superstore. The Giant Eagle store at Settlers Ridge will be the third store in
Pittsburgh and the first ground-up store for the company.
The site lies along Parkway West, which offers retailers excellent visibility
and shoppers easy access because of the newly opened Settlers Cabin/Ridge
Road Interchange. According to Howard Biel of Faison, Robinson Township
have become a hot bed of commercial development. “The draw for the Robinson trade area spans from eastern Ohio to northern West Virginia, but the
Robinson Township marketplace was missing a high quality lifestyle collection with entertainment and restaurants,” he explains. Ground was broken
on the site in October and is slated for completion in 2009.
— Stephanie Mayhew
Settlers Ridge, a 600,000-square-foot regional lifestyle center in Pittsburgh, will feature a 60,000-square-foot Cinemark multiplex theater.
DECEMBER 2007
Robinson Township, Pennsylvania
W
P Realty is in the midst of planning the redevelopment of one of their
latest acquisitions, Valmont Plaza, in Hazleton, Pennsylvania. Originally constructed in 1960 as a community shopping center, the site was later
expanded in 1990 to its current square footage of 200,164 square feet. WP
Realty acquired the property last March and plans to completely redevelop
the site into a power center that will feature more than 600,000 square feet
of retail. Located in a mature and densely developed market in which new
development is limited, the center provided tremendous value-add potential.
The vacant, former 96,600-square-foot Ames anchor will be demolished,
and new big-box anchor space, inline space and four pads totaling 14,800
square feet will be constructed on the site. The Bryn-Mawr, Pennsylvaniabased developer has also purchased 36 acres of undeveloped land situated
to the front and back of the plaza to accommodate the future expansion and
redevelopment.
Situated in the northeastern region of the state in the center of Luzerne
County along State Route 93 (Susquehanna Boulevard), the major route
leading into downtown Hazleton, the new center will serve the more than
25,000 residents in the semi-rural city. Valmont Plaza enjoys excellent highway access with its location less than a mile from exit 145 of US Interstate
81, close proximity to Route 309 and I-80, great visibility along Route 93
and access via a signalized intersection. While a full tenant roster has yet
to be announced, the project will include national credit anchor and junior
anchor tenants, complemented by notable specialty tenants, both inline and
freestanding. Occupancy rates for neighboring retail centers in Hazelton
remain high, and Valmont’s strategic location will allow it to capitalize on
traffic from a 230,000-square-foot center with tenants such as Lowe’s Home
Improvement Warehouse, Weis Markets and Staples, as well as Laurel Mall,
a 610,000 square foot regional mall of 77 stores anchored by Kmart, Boscovs,
JC Penney and Regal Cinema less than a mile away along Route 93.
The project is currently in the design phase and the necessary land development approvals are underway. Construction is scheduled to begin spring
2008. Charter Realty is marketing the property to tenants and G & Albert
Consultants, P.C.is the engineer of record for the project.
— Stephanie Mayhew
NORTHEAST REAL ESTATE BUSINESS
dicated or represented by the above drawings are property of ka inc. and were created for the sole use in connection with the specified project.
eas therein shall be duplicated or used in whole or part for any other purpose whatsover without the expressed written permission of ka inc.
SETTLERS RIDGE
will get financed. It certainly has put
the brakes a little bit on the amount
of building and buying that will be
done.
NREB: Who are some of the retailers
that are coming to the market in New
York City proper? Who is active?
Schuster: In terms of active retailers,
I think the luxury tenants are expanding. For example, Tiffany and Hermes
on Wall Street and now Tumi. The
rents there have quadrupled in the
last 2 to 3 years. Rents on Madison
Avenue, which has become a jewelry
strip, are now north of a $1,000 per
square foot, and the jewelers are making money there. The meatpacking
district is also attracting luxury tenants. That is one sector of the market
that is very strong. On the other hand,
there are several new, interesting projects that have come on the market in
the last few years because developers are getting creative in creating
space for big-box tenants. Bed, Bath &
Beyond was the leader in terms of suburban boxes coming to New York City.
Oftentimes, with multi-level build-
Conceptual
Design
From Northeast Real Estate
Business.
©2007SK-4
France Publications, Inc. www.northeastrebusiness.com
the architecture of life
216.781.9144
kainc.com
dt: October 03, 2007
# 07043-01
57
Braun and Fox
ings, the loading docks aren’t there,
but the sales volume is still great, so
there is a huge demand to enter the
city. We did a project at 270 Greenwich, which was a power center with
a Whole Foods and a 70,000-squarefoot Bed, Bath & Beyond. There is a
similar project at 808 Columbus with
a Whole Foods and some other boxes,
and it might possibly include some
department stores. We are also working on another project on 57th and
Second Avenue, which will include
180,000 square feet, the bulk of which
will be below grade. Developers are
getting more creative architecturally
and being smarter. That kind of highdensity space may cost a little more to
operate the store, but because of the
amount of returns it makes sense.
Jackson: A project like 808 Columbus is intriguing because there is a
movement up in the Upper West Side,
and having a Whole Foods right there
is going to encourage people even
more. It is an area that is transitioning.
For example, you have the local ten-
ants on the Upper West side that are
being displaced by the national tenants, and foreign tenants are looking
at the area as well. Mango is opening
and Japanese companies are coming
in, and Hollister is going to open a
flagship store here. Foreign tenants or
tenants looking to open up a flagship
store want it to be here. Tenants are
being creative and going to areas that
they might not have considered before
or are downsizing their space needs to
fit into the city. Whole Foods is a great
example of that. They are creative
because they want to be here.
NREB: Andrew [Pittel], do you want
to speak about some of the retailers
you are working with and where they
want to go?
Pittel: We are handling a large space
up on Columbus Avenue, not far from
808 Columbus, and because of Whole
Foods, the landlord is holding off to
try and get better rents. The asking
rate was $60 per square foot last year
and now the rate is $85 to $100 per
square foot. I think it is giving luxury
Hogan and Schuster.
retailers the opportunity to look at
other areas. Also, in the Bowery, the
landlord we are working with there
is holding off on renting the space.
Brokers are asking each other what
they are asking for in rent and it just
keeps going higher and higher. It is a
wait and see.
NREB: Ben [Fox], you are representing that new project [808 Columbus],
do you want to talk a little bit about
it.
Fox: In addition to Whole Foods, we
have a lease out with another supermarket, fashion stores, and other bigbox retailers. In some cases, I think size
does matter. You can take a retailer that
is in the 25,000- to 60,000-square-foot
range, and that retailer does not necessarily have to compromise on location.
Retailers are staking out unchartered
territory, but because of who they are,
their name, their brand, what they sell
and the uniqueness of their product,
New Yorkers will beat a path to their
door. The key is really the brand and
who the retailer is. As far as rents go,
Starbucks is a good barometer. They
know the value of a dollar, and I think
you will start to see resistance from
some of the bigger tenants, which I
think is healthy.
NREB: What are some of the new
areas in New York City that retailers
want to see and be in?
Zuckerbrot: Outside Manhattan.
Fox: There is not such a thing as an
emerging neighborhood in Manhattan
anymore. There will probably be more
action on Delancey Street because the
city has issued some RFPs for the
Essex Street market and a few other
sights in that area to the Bowery going
east.
NREB: Is Harlem still a hot area?
Fox: It is still a hot area, but the
Construction Underway
on Edgewater Square
L
easing has begun on Edgewater Square, a new mixed-use development in Edgewater, New Jersey. Situated between River Road and
The Hudson River, the project will include 75,000 square feet of retail
along with 410 luxury residential units and the first LEED-certified
municipal building in the state of New Jersey. Developed by National
RE/Sources, the mixed-use project will comprise five buildings that
mix residential and retail functions, as well as four parking garages
for residents and shoppers and an 11,000-square-foot outparcel,
which the developers plan to market to a bank or a drug store. “The
area, which is known as the Gold Coast, has undergone a significant
residential and retail development to support a population that is
Situated between River Road and The Hudson River in Edgewater, New Jersey, Edgewater
growing both physically and economically,” explains David Silver,
Square will offer 75,000 square feet of retail space.
corporate director of marketing for Levin Management Corporation,
the exclusive leasing agent for the site. “Shoppers from the immediate area, as well as from the affluent suburbs north of the George Washington Bridge, flock
to Edgewater’s riverfront and its upscale retail opportunities.” In addition to spectacular views of Manhattan, the strategic location along River Road, which
carries 43,750 cars per day, makes it an ideal location for retailers. As leasing for the project gets underway, Levin is targeting several types of retailers. “There
are two locations near the river that would provide the perfect ambiance for fine restaurants,” explains Silver. “Levin is also in discussion with a number of
lifestyle retailers in several different segments for the remaining space.” The leasing team is also hoping to bring in a health club at the location to drive even
more business to the neighboring retailers. Construction is set to begin on Phase I first quarter 2008 with a projected completion date at the end of first quarter
2009. The remainder of the project is expected to be complete approximately a year later. The Lessard Group architectural firm is designing the facility and the
engineering is being done by Keyspan Business Solutions/ Paulus, Sokolowski and Sartor, LLC.
— Stephanie Mayhew
58
NORTHEAST REAL ESTATE BUSINESS
From Northeast Real Estate Business. ©2007 France Publications, Inc. www.northeastrebusiness.com
DECEMBER 2007
All Eyes on New York City
T
Cristella and Stone
problem is 125th Street is maxed out.
There is no space and it is getting a
little too expensive. There is no other
street in Harlem that matches 125th
Street for action, so that is the problem. You could find a terrific site on
116th Street, but retailers are hesitant
because the foot traffic is not there. It
will take a powerful retailer to go off
125th Street in order to create synergy
that will attract other retailers.
Luxury Tower Offers
Ideal Retail Space
P
hilips International, in a partnership with The Wings Group,
is also developing 10,073 square
feet of retail space at 200 East 86th
Street. Located at the base of the
new luxury residential tower, The
Brompton, the space is located on
one of the most sought-after corners in Manhattan’s Upper East
Side. Robert K. Futterman is marketing this facility as well.
— Stephanie Mayhew
Philips International, in a partnership
with The Wings Group, is developing
retail space at 200 East 86th Street in
Manhattan, New York City.
DECEMBER 2007
Hogan: There is a lot of merging
taking place in Manhattan. Bank of
America tower is going in at the corner of 42nd and the Americas, Blackstone reskinning the Verizon Building,
Brookfield is making upgrades to the
Grace Building. The density in that
corner will be amazing; however, the
retail at that corner and the office
population don’t match, so there will
be a retail change as that office population fills up. There will also be
tremendous growth in the Hudson
Yards area. The whole West Side of
Manhattan is a huge opportunity for
retailers. The density of the Hudson
Yards project is 12 million square feet
of new space, which be similar to a
small city in 26 acres with 70-story
office towers and 50-story residential
towers. Retailers will do back flips to
have that type of density above them,
so as that gets built and matures, it
will be another venue for retailers to
be. Retailers love Manhattan because
of the density. Downtown, the retail
at the World Financial Center will be
redeveloped, which will double retail
offerings there, but the biggest problem for retailers downtown is where
to go. There are not enough stores on
Wall Street, the street is too broken
up. It could become a solid shopping
district, it is just a matter of someone
building the right sandbox for the
retailers to come Downtown.
Pittel: Construction on the Second
Avenue subway should increase retail
traffic on the East Side tremendously.
Schwartzman: On the other side,
where Silverstein will be building, is
the perfect combination for retailers.
That area has a growing residential
population that has doubled in the
last couple of years, and it is located at
a convergence of transportation. The
walk to work concept is really driving
the development in that area.
Harding: As was mentioned earlier,
activity is moving outside of Manhattan. We are working on a 24-acre
he eyes of New York City are intently watching many areas and neighborhoods in regards to future development and activity, but the one area that
has international attention is “Ground Zero.” The official designs for the
remaining towers have been released and the installation of steel columns
continues as the concrete slab is being poured to form the Freedom Tower’s
base. Aside from the already completed 52-story 7 World Trade Center, the
World Trade Center site will house 1 World Trade Center, or what is known
as the Freedom Tower, as well as Towers 2, 3, 4 and 5.
In addition to the 2.6 million square feet of office space, the World Trade
Center site will offer a plethora of amenities to users and shoppers. The site
will contain approximately 500,000 square feet of retail and restaurants, as
well as access to the PATH, subway, and World Financial Center. The future
of Downtown is here as construction projects throughout the area are bringing residential towers, new parks, office towers, transportation hubs, highend designer flagship boutiques, fashion brands and local service-oriented
retailers. Downtown is transforming into a 24-hour, 7-day-a-week high-end
community!
Another area in the city that is drawing attention is the development of a
neighborhood that will actually be a mini-city within itself — Hudson Yards.
The Hudson Yards property, located to the west of the island of Manhattan,
is controlled today by the MTA, which recently put out an RFP for development of the site. Five developers submitted proposals. Among them was a
proposal from Conde Nast Publications to move their corporate headquarters from 4 Times Square to Hudson Yards. This is a bold move on their
behalf, and it will certainly endorse the credibility of the area and its success.
Other proposals include commercial skyscrapers as tall as 70 stories, residential towers creating more than 4,600 apartments and retail to support it all.
Aside from future development hot spots, the concern for the future of
Mom & Pop retailers in New York City is growing. So much so that local
residents are taking a stance with their local politicians. The recent rash of
bank openings throughout the city has pushed rents sky-high across the
board. The local charming shops, Mom & Pop stores and service-oriented
retailers cannot afford to pay the new rental rates when their leases come
due, which in turn hampers new Mom & Pops from entering the market. On
the Upper West Side of Manhattan, Councilwoman Gale Brewer and her fellow members are eagerly working to keep the Mom & Pop stores. Hearings
were held recently to discuss zoning changes that would prohibit larger and
national chains from entering certain areas and to consider tax breaks that
would assist the independent stores. All of this and more is under review by
the Bloomberg Administration; however, there has been no course of action
to enforce this as of yet.
— Andrew A. Pittel, president of Andrew A. Pittel & Company, LLC
Upon completion, the World Trade Center site in Manhattan, New York City, will
feature approximately 500,000 square feet of retail and restaurant space.
NORTHEAST REAL ESTATE BUSINESS
From Northeast Real Estate Business. ©2007 France Publications, Inc. www.northeastrebusiness.com
59
Hemmerdinger, Brunelli and Benjamin
mixed-use redevelopment with about
75,000 square feet of retail and restaurants in Edgewater [New Jersey] on
the Gold Coast. Many of the retailers
we are talking to are from here [Manhattan], so residents are familiar with
them.
NREB: What about retail activity
in Brooklyn? Is it tough to find space
there?
Fox: The growth in Brooklyn is
unparralled. There is a growing middle class, a growing lower-middle
class in addition to an upper income
community as well. All of the infrastructure is there, making it a terrific
place to open a store and more and
more retailers are seeing that. There
is probably more growth in Brooklyn
now than in Manhattan in the last 5
years. We are handling more than 1
million square feet of retail space there
from Myrtle Avenue in Williamsburg
to Atlantic Avenue.
NREB: Franklin [Zuckerbrot], you
are doing some projects out there as
well?
Zuckerbrot: Yes, I concur with Ben
[Fox]. In all of the boroughs, there is
a continued testing of formats and
growth of formats to get power center
retailers into the city of New York and
The Shoppes at Hamilton, located along Route 130 in Mercer County in Hamilton,
New Jersey, will feature 150,108 square feet of retail space situated on 5.16 acres.
the boroughs. Bed, Bath & Beyond
opened the door to that and Target
also helped with the concept of multilevel stores. The stacking concept is
occurring in all of the boroughs. In the
east side of Harlem, there is a plaza
being built by Forest City Ratner and
Bloomingfield Development, which is
allowing entry for Target, Home Depot
and the like. In the southern section
of the Bronx, about 1 million square
feet is being developed by Related
with some of those same retailers.
Vornado is building Rego Park in
Queens, which will also include those
national retailers as well as a Century
21 department store. In downtown
Brooklyn, a second Target is set open a
second location just about a mile from
the first. Two Targets so close to each
other in downtown Brooklyn is an
amazing story. Aside from the stacking trend, a large supply of national
retailers with an emphasis on food
are coming into the boroughs, all of
which are doing well and succeeding.
We just did our first Panera Bread in
Queens and the numbers are off the
charts.
Schwartzman: It is a matter of build
it and they will come.
Zelnik: It shows the overall density of these markets in terms of
population and the general economic
strength of New York City as a whole.
The downturns that we are reading
about in other parts of the country just
don’t seem to happen in New York
City. It just continues this upward
climb. People that find Manhattan too
expensive to live in go to Brooklyn or
Queens, and they need to be serviced
as well. Some of the up and down
development has to be done because
of the cost; therefore, the prices have
worked their way out from an acquisition perspective and come back into
The Shoppes at Flemington, a 149,203-square-foot shopping center in Flemington,
New Jersey, will feature tenants such as Talbot’s, J. Jill, Jo. S.A. Banks, Children’s
Place, Coldwater Creek, New York & Company and Bensi’s Italian restaurant.
Stanbery Development Breaks Ground on Two New Retail Centers in New Jersey
T
his fall, Stanbery Development broke ground on The Shoppes at Flemington, a 149,203-square-foot shopping center situated on 19.6 acres in Flemington,
New Jersey. The retail project will contain a mix of high-end tenants that are unique to the area. “There is really nothing like this in Hunterdon County at
all,” says Ray Brunt, the head of leasing for all of Stanbery’s retail projects. “Flemington has always been the central trade area for the county, so it is a natural
place to put tenants like this because Route 202 and Route 31 converge at Flemington Circle where the shopping center is located.”
The center will feature tenants such as Talbot’s, J. Jill, Jo. S.A. Banks, The Children’s Place, Coldwater Creek, New York & Company and a free-standing
Bensi’s Italian restaurant. “The tenant mix is the key to the project’s success,” says Brunt. “The Shoppes at Flemington does not have a traditional big-box
anchor. It is the synergy of all of the tenants together that functions as an anchor for the center.” In fact, according to Brunt, the catalyst for a Flemington retail
center was based on one of their key tenant’s desire to be there. “About 5 years ago, Talbot’s said that they wanted to eventually do a store in the Flemington
trade area because they had such a great response for mail order and Internet sales there,” he explains. Stanbery began to canvass the Flemington trade area
for a viable site and eventually ground leased the property from Garden Commercial. The center is slated for completion fall 2008.
Stanbery Development is also constructing another lifestyle center in neighboring Hamilton, New Jersey. The Shoppes at Hamilton, located along Route 130
in Mercer County, will feature 150,108 square feet of retail space situated on 5.16 acres. Tenants include Banana Republic, Coldwater Creek, Chico’s, White
House|Black Market, Icing, Gymboree, Limited Too, New York & Company, Ann Taylor Loft, Jo. S.A. Banks, The Children’s Place, Starbucks, Salsaritas, Bensi,
Lane Bryant and Clarks Shoes. The project will also include two outparcels, which are slated for Bensi’s and First Choice Bank, and a small strip center.
The center is strategically located along Route 130, a major north/south corridor through most of central New Jersey, and it is in close proximity to routes 195
and 295 and the New Jersey Turnpike. Aside from the center’s proximity to so many major thoroughfares, Brunt notes that the center is in close proximity to an
extremely successful power center, Hamilton Place The combination of such a successful power center down the road and the void in upscale retail provided a
tremendous opportunity for Stanbery. In addition, Brunt notes that the Hamilton area is still a relatively affordable place to live in New Jersey. “Many people
are able to live there and commute to New York, Philadelphia and really anywhere within New Jersey because of the road access and the large train station
that was built here,” he explains. The new center is set for completion November 2008.
— Stephanie Mayhew
60
NORTHEAST REAL ESTATE BUSINESS
From Northeast Real Estate Business. ©2007 France Publications, Inc. www.northeastrebusiness.com
DECEMBER 2007
Zelnik, Kasindorf, Benjamin and Cohen
the development cost which works its
way back to the retailers. I think it is
a very positive sign that retailers like
Target and Bed, Bath & Beyond have
figured it out. All of the hesitancy is
internal, and it just takes one to make
it work. It takes time to get to that
point, but there are very few if any
retailers that have tried it and failed
World-Wide
Group Aids in
Transformation of
Upper East Side
A
t 250 East 57th Street in Manhattan, New York City, the WorldWide Group’s proposed mixed-use
project will offer 170,000 square feet
of retail space. Situated within a 59story residential tower in the Upper
East Side, the development will also
include two new public schools.
— Stephanie Mayhew
The World-Wide Group is offering
170,000 square feet of prime retail space
in Manhattan’s Upper East Side neighborhood.
DECEMBER 2007
at that level.
NREB: Damon [Hemmerdinger],
you developed The Shops at Atlas
Park in Queens. How is that doing?
Hemmerdinger: One of the things
that is interesting to watch, but can be
hard to get your arms around, is how
quickly the demographics are shifting
in some of these neighborhoods. As
residential prices go up, the pace in
which residents are moving into the
other boroughs or New Jersey neighborhoods is astounding. Tenants are
starting to understand that and are
contacting us for more information
about what is going on in certain areas
and what customers are coming to the
properties.
NREB: Who are some of the tenants
you have worked with?
Hemmerdinger: We are in communication with virtually all of the better
tenants. We have limited our search
to certain retailers and they are all
starting to take a different look at
the area. Foreign tenants see Queens
as an area with a large immigrant
community and residents who know
the international brands, which gives
them a different level of comfort with
the market than some of the American
brands. The area is definitely building
momentum.
Zuckerbrot: Are food retailers a big
part of your project?
Hemmerdinger: Yes, I think that is
true of most of the lifestyle oriented
projects around the country because
more and more people are spending money on life experiences and
on social interaction. We have seven
restaurants in our project and we are
planning to have more in the second
phase.
NREB: Joel [Braun], you are developing a couple of projects in the Bronx.
Tell us about the activity in that neighborhood?
Braun: It is amazing
to see the changes from
month to month in the
boroughs. There are so
many projects coming
onto the board. In downtown Brooklyn, there is
so much going on, it is
almost unstoppable at
this point. We have a
large project in the Bronx
on Fordham Road, and
from a retail perspective
it was leased up very
quickly. If we had waited
to lease it up, we probably would have ended
up with better rents, but
we thought we needed it
leased up for financing
purposes. As far as retail
is concerned, Fordham
Road has always been
very strong. Retailers have been willing to take basement, second floor and
even third floor space.
NREB: What types of retailers are
most interested in the boroughs right
now? A couple of years ago it was
all big-box, so who wants to be there
now?
Zelnik: There are still places that
the big-box retailers can fill. I think
there will be a handful of opportunities for mid-sized big boxes and there
will be back-fill spots in the different
projects or in between them. In terms
of emerging markets, it is the spaces
between all of these new projects.
Some tenants are still going to need a
place to go with some level of affordability from a rent perspective. I think
there will be an interesting dynamic
throughout the city between this project and that project, wherever they
may be in Manhattan.
Zuckerbrot: The retailers that are
really focusing on the outer boroughs
are those that offer basic good and
services and moderately priced soft
goods. By and large the higher-end
retailers are not focusing on the outer
boroughs. The needs for the basic
goods and services are unmet, especially because of the explosive growth
in population. In areas in downtown
Brooklyn, the surrounding areas and
in parts of Queens, the residential
growth is unbelievable. The largest
zoning the city has ever seen is in
Jamaica in Queens. Jamaica Avenue is
a very strong market in the boroughs
and it will get even stronger. I think
you will see more opportunity for
boxes to come in and fill the need
for basic goods. That is why Target is
Retail — A Key
Component of
Mixed-Use
A
s mixed-use development
continues to sweep the nation,
developers are finding that retail
is a key component. The Silcon
The Silcon Group is including a 21,000Group is including a 21,000square-foot retail component in its new
square-foot retail component in its
384,000-square-foot mixed-use develop- new 384,000-square-foot mixedment, Skyview at Carriage City Plaza in use development, Skyview at CarRahway, New Jersey.
riage City Plaza in Rahway, New
Jersey. According to Jason Pierson
of CB Richard Ellis, the exclusive leasing agent for the retail portion of the
project, downtown Rahway has undergone an extensive residential and retail
revitalization, and its close proximity to Manhattan and Newark make it an
ideal location for retailers, residents and travelers.
The retail component will include a high-end fitness center and spa, a
restaurant and specialty retail on the ground floor facing the new Rahway
Train Station. “CBRE is aggressively seeking tenants,” says Pierson. “We are
looking for a New York City-style restaurant and for the ground floor retail
we are pursuing many different types of tenants.” Designed by Nadaskay
Kopelson Architects and Arturo Palombo Architecture, the 16-story mixeduse development also includes 222 condos, a 102-room Hotel Indigo and a
6,650-square-foot Phi Bar and lounge.
The new train station will allow for easy access to Manhattan, Atlantic City,
Philadelphia and the Meadowlands Sports Complex. “The newly remodeled
train station is only 10 minutes from Newark Penn Station, which is key for
travelers flying into the Newark airport,” says Pierson. “The location and the
hotel will be a major attraction for the building.” Located at 77 East Milton
Avenue, the project is slated for completion second quarter 2008.
— Stephanie Mayhew
NORTHEAST REAL ESTATE BUSINESS
From Northeast Real Estate Business. ©2007 France Publications, Inc. www.northeastrebusiness.com
61
Schwartzman, Fawer and Zuckerbrot
doing so well in the outer boroughs.
NREB: What is driving the development?
Pittel: It is like a mall concept. It
is a common thread between all of
the boroughs. An anchor tenant is
brought in, traffic is generated and
other tenants follow.
NREB: Andrew [Pittel], what do
some your clients see in terms of the
boroughs? What types of tenants
want to locate there?
Pittel: In areas such as Williamsburg, interest is still coming mostly
from the smaller/local retailers and
not so much the major nationals.
NREB: Changing gears a bit, Levin
manages a number of properties in
New Jersey. Can you give an overview
on how the market is doing in terms of
tenancy and occupancy rates?
Harding: We have not seen any
rent compression in New Jersey. There
are some bankruptcies that happened
recently that have put some more
space on the market, but we see that
space generally being absorbed. New
York City retailers have been moving
out into New Jersey and vice versa.
Fairway, a New York City retailer,
opened in Paramus, so it will be interesting to see how they do.
NREB: Danielle [Brunelli], R.J.
Brunelli does a lot of retail leasing in
New Jersey. Who are some of the tenants looking in that area? And what
kind of properties are they asking
for?
Brunelli: Right now I am working
with a few restaurants that are new to
the market. Kona Grill, a 7,000-squarefoot Asian-American restaurant similar to PF Changs, as well as Boston
Pizza, which is a sports bar, and also,
Kudo Bean, a new café that is trying
to compete with Starbucks. Sonic is
now entering New Jersey and will be
62
opening several restaurants over the
next couple years, and ULTA Cosmetics is strategically expanding. It is
hard to find space, so retailers often
have to make deals now and wait a
couple years. In New Jersey, I estimate
that there is about 4.5 million square
feet under development or has been
constructed in the past year, and more
than a million square feet of that are
lifestyle centers.
NREB: Charles [Cristella], your
company is active in developing
smaller lifestyle centers, and you have
had success throughout New Jersey.
Can you discuss some developments
that are going on now or that you
have opened in the last year?
Cristella: Our first project was and
80,000-square-foot center in Denville,
New Jersey, on Route 10. We look for
maturity more than growth in the
markets and northern New Jersey has
been great for that. As markets shifts,
mature customers still have some disposable income. Our most recent project, which opened in October, is the
Shoppes at North Brunswick at the
intersection of Route 1 and 130. It is
about 175,000 square feet and fills a
void for tenants in that market. Many
tenants in New Jersey are concerned
about cannibalization, but they are
downgrading their radius restrictions.
Most were looking at a 12 to 20 mile
radius and are now they are looking
at 5 to 7 to 10 miles.
NREB: You have several tenants that
follow you around and go where you
go. How do you develop that kind of
cache with tenants?
Cristella: We are actually very tenant
driven. For example, Talbot’s told us 5
years ago that they wanted to be in
Flemington, so we spent 5 years looking for a location and we now have the
Shoppes at Flemington in Fleming-
ton Circle. Banana
Republic told us that
they wanted to be in
North Brunswick, so
we found a location
there. We are very
tenant driven and
we listen to the tenants. Once a quarter we meet with the
key retailers that we
deal with and we
ask them where they
want to be.
NREB: Michael
[Stone],
where
do you see the
demand?
Stone: There is a
lot of demand for
downtown areas.
There is still a fair
amount of gentrification and a significant amount of
residential development up and down
the coast and along the Gold Coast.
Retailers are taking a look down there
because of the income and density.
NREB: Matt [Kasindorf], are you
seeing any issues in leasing?
Kasindorf: I think the biggest problem in Manhattan is coordinating space
for stores that have very definitive
models into unique turn-of-the-century buildings. That has been a logistical problem in Manhattan for years,
but as these retailers who have yet
to experience New York City before,
come here for the first time, it causes
some retailers some strain.
NREB: Ariel [Schuster], is that still
a concern with your clients looking
for space?
Schuster: Yes, but it is just a function of trying to think outside the
box. Tenants have to be creative and
think away from their model and ROI
because the top line and the bottom
line is so substantial in New York
City. Tenants have to get a little more
involved because it is a higher level
of understanding than your typical
retail deal.
NREB: Ed [Hogan], are you getting a
lot of interest from retailers outside the
city for the World Financial Center?
Hogan: Yes. Just in the last 3 months,
there has been a whole new level of
interest from retailers asking where
they can be Downtown. Sales for retailers that have opened Downtown have
been very healthy, so the demand is
definitely there. In Manhattan, the
space is expensive, so for retailers it is
a different pro forma from their other
models, and whether they are based
in New York, or the Midwest or California, the retailers have to come into
the city and look at the property to
understand it.
NREB: Are you seeing that same
high level of desire for properties in
the boroughs?
Zelnik: It is mixed in regards to
where a retailer will look first. It is
mostly demographically driven. It
starts with a number on piece of paper
and then the retailers spend time in the
Robert K. Futterman is marketing 47,000 square feet of retail space at 2075 Broadway in Manhattan, New York City.
Prominent Retail Space
Takes Center Stage on Broadway
P
hilips International and Rhodes NY, in a joint venture partnership, are
currently developing 2075 Broadway in Manhattan, New York City. Also
known as 72nd and Broadway, the new retail space features 47,000 square
feet spanning five levels on one of the most prominent corners in Manhattan.
Set at the base of a 19-story luxury apartment building, the location makes it
an ideal flagship location with spectacular visibility, exposure and access to
millions of shoppers annually. The space features 22-foot ground-floor ceilings and glass storefronts with 200 feet of wraparound frontage. Robert K.
Futterman is currently handling the leasing for the facility.
— Stephanie Mayhew
NORTHEAST REAL ESTATE BUSINESS
From Northeast Real Estate Business. ©2007 France Publications, Inc. www.northeastrebusiness.com
DECEMBER 2007
outer boroughs and work their way
into Manhattan in order to understand
Manhattan’s vertical concepts. There is
really no specific percentage on where
retailers will go. If it is a flagship store
or a major retailer they will want to be
in Manhattan to make a certain statement, but if it is about numbers, more
retailers will go for the outer boroughs.
Target is a perfect example of this.
They are spending time in the outer
boroughs to figure it all out and then
will work their way in.
NREB: Ken [Benjamin], can you give
us an overview of the theater industry?
Benjamin: The theater business is
going through another evolution as
it did in the mid-1990s when theaters
were converted to stadium seating and
larger theaters. After some bankruptcies in 1999 and 2000, theater owners
came back with more upscale theaters
in which quality was emphasized.
Now, the current evolution is focused
on bringing in the food concept. Food
is being served in either restaurants at
the theater or in the auditoriums themselves. There are very limited number of companies that would consider
coming into the city because they are
just afraid of it. There will be more
changes in the theater industry as the
distribution of film changes and theaters are digitalized.
Zuckerbrot: We are actually working with a theater chain, Village Roadshow, which is bringing a higher-end
food component into the theater. It is
a smaller platform with five- to sixscreen theaters, low density seating of
approximately 100 seats per theater.
It is a much higher price point, but
the concept is more of an evening out
and is likened to a home theater style
experience. It is an international concept that is coming stateside and it has
been doing very well.
Benjamin: There are a couple other
concepts like that, Muvico is putting
a theater in at Xanadu. They are wonderful theaters, but are expensive to
build. Another high-end company is
IPic Entertainment, and their concept
mixes the theater, a bar, food, bowling
and other recreational concepts.
NREB: What are some of the projects that are going up in Manhattan
that are really catching people’s attention? Also, what about the boroughs
and New Jersey?
Schuster: A project at 250 East 57th
Street on 2nd Avenue is probably one
of the hottest developments going
on right now. Phase I is set to come
online in 2009 and phase II is slated
for 2011. It is being developed by the
Worldwide Group and will include
condos and 180,000 square feet of
retail, which was designed specifically
DECEMBER 2007
for the national and bigger boxed tenants.
ochester rossing ills oid
NREB: How do you think the Meadin
ew ampshire etail
owlands Xanadu project will impact
the retail market?
onstruction is currently underway on Rochester Crossing, The Wilder
Pittel: I am working on a few deals
Company’s 315,000-square-foot retail center in Rochester, New Hampthere. The developers are staying away
shire.
Located at Washington Road at Route 202 just off the Spaulding Turnfrom calling it a shopping mall. It is an
pike
(Route
16) at exit 13, the project sits on 50 acres and will include tenants
entertainment facility, so it should not
such
as
Famous
Footwear, maurices, Mattress Giant and Fashion Bug, as
have an impact on city retail what so
well
as
a
Kohl’s,
which
opened in October, and a Lowes Home Improvement
ever. They are building a subway sysWarehouse,
which
opened
mid November. The 69,000-square-foot Kohl’s
tem that will make it very easy to go
is
the
first
location
to
utilize
the retailer’s newly enhanced and designed
back and forth. It is really an entertainlayout.
The
new
layout
features
an expanded Junior’s department, spacious
ment place.
fitting
rooms
and
lounge
areas,
updated
restrooms, redesigned customer serBraun: It is not going to effect New
vice
and
checkout
stations.
The
center
will
also feature Rochester’s first StarYork City, but what is it going to do to
bucks,
which
will
include
a
drive-thru
and
outdoor patio seating. According
Paramus?
rochester, new hampshire to Lori McWeeney, vice president of leasing, Wilder is currently hoping to
Pittel: I don’t think it is going to
include additional tenants such as a cards and gifts store, a sports store, additouch it. People will go to Xanadu
tional apparel retailers and a sit-down restaurant to round out the shopping
with their kids to go skiing or go to
center. Rochester Crossing will also feature three outparcels, one of which is
the movies. The retailers going into
already being utilized by Starbucks, and the possibility of a fourth.
Xanadu are not your typical retailers.
Rochester Crossing is part of the retail portfolio that The Wilder CompaBrunelli: It is going to be more of a
nies
purchased from the Flatley Company in May. McWeeney notes that the
tourist attraction. People will have to
$35
million
center sits right on Route 16, offering excellent highway access
think about it in advance before they
and
visibility.
“Route 16 is also a major route that takes people to the Lakes
go and they will spend an entire day
region,
the
White
Mountains, neighboring ski areas and other tourist attracor even a weekend. It will be amazing
tions
along
the
sea
coast,” notes McWeeney. “There is a substantial amount
how much will be there. There will
of
growth
potential
in this market, and there was a huge demand for retail
be 200,000 square feet of restaurants
in
the
area.”
Once
the
facility is completely leased up, Rochester Crossing
alone. It will be families or couples
will
bring
more
than
20
new businesses to the New Hampshire/Maine trade
going there to spend time, so I don’t
RETAIL D
area.
The
entire
center
is
slated for delivery spring
2008. The Wilder Comthink it will take away from Paramus.
panies
is
also
planning
a
companion
center,
Rochester
Crossing East, on the
Harding: Xanadu is so specialized
diagonal
corner
across
from
Rochester
Crossing.
Development
is set to begin
and it is pulling from such a wide
in
2008.
The
companion
center
will
comprise
approximately
28,000
square
radius, so the impact is going to be
feet.
Staples
is
currently
committed
to
20,000
square
feet
with
approximately
spread out.
7,200 square feet still available. Brunelli: Developers of Xanadu
— Stephanie Mayhew
expect roughly 55 million people to
visit every year.
Schwartzman: I think it is notable
that a few retailers, such as Cabella’s
and Lucky Strike, are making their
first entry into the market in the Xanadu development.
Jackson: In all of these markets —
Paramus, Downtown, parts of Brooklyn and the Upper West Side — it is
really about the economic and demographic profiles. There is an expanding
The Wilder Company is currently developing Rochester Crossing, a 315,000population base with high incomes,
square-foot retail center in Rochester, New Hampshire.
so retailers are going into those ares
to service those people. When Gar- the wilder coMpAnieS
800 Boylston Street
but I think the most amazing project
Schwartzman: Stamford [Connectiden State Plaza expanded, everyone developMent.
phone 617.247.9200 |
MAnAgeMent.
leASing.
thought Paramus Park would go is the Gateway project in the South cut] is doing very well. The retail
under, but the sales at Paramus Park Bronx, which will be about a million diversity is growing, attaining new
did not feel any impact because it was square feet of retail development. As highs on rents at the main interseca shopper that wanted to be able to go well as the Harlem East Rive Plaza tions. Stamford is really starting to
to a two-anchor center and walk in and development, which will be unique to come into its own and that should
continue.
walk out and not have to go through a Manhattan.
Zelnik:
Retailers
are
starting
to
see
an
Benjamin: There are a number of
huge experience. Garden State Plaza
economic
and
demographic
difference
projects
in Westchester — Bridge Hill,
does phenomenally well because it is
in
the
neighborhoods
in
the
Bronx.
a
redevelopment
in Downtown Yonall about the economics and the demoIn
Brooklyn,
Atlantic
Yards,
Brooklyn
kers.
White
Plains
has been very sucgraphic profile of the area. The density
Heights
and
Park
Slope
are
all
great
cessful.
We
put
a
theater
there and a
is great and the income level is high, so
locations,
but
there
is
a
tremendous
health
club
for
Capelli.
q
retailers want to be there. Xanadu will
marketplace throughout Brooklyn that
just be a different type of experience.
NREB: What about projects in the will start to develop as more projects
come online.
boroughs?
NREB: Any aspects of the market
Zuckerbrot: Atlantic Yards is an
that
we have not covered?
interesting project in the boroughs,
R
N
C
H
F V
R
C
Rochester Crossing
NORTHEAST REAL ESTATE BUSINESS
From Northeast Real Estate Business. ©2007 France Publications, Inc. www.northeastrebusiness.com
63