New York City Builders Turn Focus to Housing Market

In a sign of New York City’s rapidly shifting real estate market, the Durst family, whose empire was built on a forest of Manhattan office towers, is plunging into the housing market with an ambitious plan for a sprawling residential development on the Queens waterfront.

The Dursts, whose two skyscrapers on 42nd Street helped fuel the renaissance of Times Square, are now looking to spend $1.5 billion to transform a knobby, windswept peninsula in Astoria, where the East River meets the Harlem River, across the water from Gracie Mansion.

The Dursts’ move to Astoria highlights a trend in the city in which a seemingly insatiable demand for luxury housing has upended the traditional pecking order in the real estate world. Building glamorous office towers for Fortune 500 companies is not the surefire route to fame and riches it once was.

With the cost of land soaring and high-end apartments commanding soaring prices, developers whose reputation and wealth rests on gleaming office towers are leaping into the residential market in the hunt for profits.

Brookfield, a longtime commercial developer whose holdings include the former World Financial Center in Lower Manhattan, is putting down $1 billion for nearly 4,000 apartments in northern Manhattan and on Roosevelt Island.

In Queens, not far from the Durst project, Tishman Speyer Properties, the owner of Rockefeller Center and the Chrysler Building, is planning to build a rental complex with 1,600 apartments. In Downtown Brooklyn, Tishman Speyer is bidding against Vornado Realty and other developers for a former Macy’s property on Fulton and Hoyt Streets with an eye to turning it into a residential project.

The Fisher real estate family, which is also known for its office towers, is turning toward the residential side with the development of a 950-foot-tall condominium tower in TriBeCa and a 37-story apartment building on the East Side.

Although the Dursts have built a few apartment buildings in recent years, the Queens project represents a major, long-term investment in the city’s booming housing market and its first foray outside Manhattan.

Plans call for a set of seven apartment buildings with more than 2,000 apartments — 20 percent reserved for poor and working-class tenants — an esplanade, a school and a supermarket where industrial buildings now stand.

“Times are changing,” said Douglas Durst, a third-generation developer. “Large-scale office development opportunities are sparse and Manhattan land is cost-prohibitive to build rentals. It is time for the family to go deeper into residential and to cross the ocean to Astoria.”

The changing economics of the real estate market have made housing more appealing. Land costs have doubled and tripled in recent years to $600 a square foot and more as residential developers snapped up one site after another. Commercial developers have often found themselves priced out of the market.

High-end apartments in Manhattan and parts of Brooklyn sell for $4,000 or more per square foot, far more than most commercial tenants are willing to pay.

“The economic dynamics make it good to be in multifamily,” Richard B. Clark, chief executive of Brookfield Property Partners, said.

Of course, even as they venture into residential real estate, many prominent developers are still investing in commercial deals.

Still, Robert A. Knakal, a real estate broker who has sold a long list of development sites and buildings this year, said he no longer sends out property listings to select groups of commercial, retail, hotel or residential developers and investors. “Today,” he said, “we send out our listings to a much wider audience of potential buyers.”

The Dursts, who own 4 Times Square and 10 other office towers in Manhattan, spent more than a year mulling whether to buy the residential development in what was for them far-off Astoria.

Douglas Durst’s father, Seymour, a prominent developer who died in 1995, used to brag that he could walk to any of his properties from the family’s Midtown office. He built office towers in which his tenants went home at night; residential buildings were “messy” and complicated.

But the family ran out of land in Manhattan after it built the 55-story Bank of America Building at 42nd Street and Avenue of the Americas in 2010.

More than a year ago, Lincoln Equities Group contacted the Dursts, asking if they were interested in buying a residential development it owned in a working-class section of Queens. This week, the Dursts paid well over $100 million for a 90 percent stake in the project. Lincoln will retain about 10 percent.

Known as Hallets Point, the site is next to Astoria Houses, a city housing project built in the 1950s that is home to more than 3,500 residents, and nearly a mile from the nearest subway stop. There are warehouses and a ball field. It is by no means a gentrifying neighborhood.

Joel Bergstein, a principal at Lincoln, spent seven years putting together a string of adjoining industrial properties there and working with residents and city officials on a proposal. Last year, the Bloomberg administration approved his plans.

“The Dursts got it right away,” Mr. Bergstein said. “This will be an iconic property that’ll completely change this portion of the Queens waterfront.”

Hallets Point will eventually have 2,404 apartments, including 483 units for poor and working-class tenants in seven buildings. In an unusual arrangement with the New York City Housing Authority, the developer will build and own two buildings on the grounds of Astoria Houses for affordable housing for older adults.

There will also be three market-rate buildings, ranging from 17 to 31 stories, and two buildings in which 20 percent of the units will be subsidized.

The complex will open up the waterfront to local residents with an esplanade and include a supermarket, retail space and a school. The city has promised better bus service, and there is talk of a ferry to Manhattan.

The plans won the support of elected officials, local residents and the community board. Claudia Coger, president of the Astoria Houses Resident Association, said the neighborhood had a “deserted” feel, because there were few stores and the industrial buildings were closed at night.

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“The mere fact that somebody would want to develop over there is a plus for the quality of life for the residents,” Ms. Coger said of Hallets Point. “We gave them our feelings about tall buildings blocking our beautiful Manhattan views and the need for a grocery store. They listened to what we had to say.”

The city’s Planning Commission is expected to vote by the end of the month on a second residential project nearby, Astoria Cove, which includes 1,723 apartments. Like Hallets Point, the developer has promised that 20 percent of the units would be for low- and moderate-income tenants.

But Mayor Bill de Blasio has made affordable housing a high priority of his administration. He and the City Council are expected to push the portion of affordable housing closer to 30 percent before Astoria Cove receives final approval.

“Record-breaking land values and market demand are causing historically Manhattan-based developers to rework their business models and consider new products and locations,” said Ross Moskowitz, real estate partner at Stroock & Stroock & Lavan, a Manhattan law firm. “Commercial developers are now following the money outside of the Manhattan core and considering residential projects, which never would have happened a few years ago.”

Source: The New York Times