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The Rubin Report - The Pulse of the NYC Development / Issue No. 12 - December 2023

Rubin Isak

Development Policy News:

The US Senate just proposed bipartisan housing tax credit legislation called “The Workforce Housing Tax Credit” (WHTC). This bill would establish a WHTC which would increase the supply of housing for middle-income Americans designed to best meet the housing needs of individual communities by allowing housing finance agencies to use the credit to support both low-income and middle-income families. This is the first-ever middle-income housing tax credit, which is estimated to finance approximately 344,000 affordable rental homes. The tax credits would be provided to developers over a 15-year period, with a 15-year compliance period and 30-year extended commitment. For new buildings, the credit would equal 50% of the cost of the building over the lifetime of the credit. For rehabilitated buildings and bond-financed buildings, the credit would equal 20% of the cost of the building. To qualify for the credit, at least 60% of the building’s units must be occupied by individuals with area median incomes of 100% or less where the rents are restricted to 30% of the designated income. The affordability restrictions would remain in place for up to 15 years after the compliance period (for a total 30-year affordability period). WHTC also works in conjunction with LIHTC to support low-income affordable housing. WHTC can help the financial feasibility of affordable buildings by combining LIHTC and middle-income housing tax credits for different units as long as at least 20% of the total units are middle-income units.

421a Watch:

The powers that be are optimistically whispering that a 421a like program will be introduced and passed in Q2 2024. My own opinion is that IF the NY legislature cannot or will not get it done, Governor Hochul will get it done via Executive Orders, similar to what was just done in Gowanus. As her spokesperson says: “After the Legislature flatly rejected (Hochul's Housing Plan) and failed to introduce a viable alternative, Governor Hochul refocused her efforts on sweeping Executive Action that took effect in July. Until the Legislature is ready to come back to the table with a serious approach to build more housing in New York, the Governor is focusing on using her executive powers to address the housing crisis."

CRE & Development Site Transaction Market:

The commercial real estate market is down 33.49% in transaction volume so far this year (I expect we will end the year roughly 30% down) and 37% down in dollar volume. The Development Site asset class is down 26.92% in transaction volume so far this year (I expect we will end the year at 22% down) and down 42% in dollar volume.

With decades high interest rates, a lack of 421a and a myriad of other issues, the development site sector has been challenging, ultimately seeing a 55.8% drop in transactions since 2018 and a stunning 72.3% decrease since the height of the market in 2015.

I am an optimist and I do see a turnaround for NYC. On my wish list for 2024: A new 421a, The federal reserve starts rate cuts, mortgage rates start coming down; the CITY OF YES zoning changes gets approval, less red tape and a more streamlined process to BUILD in NY. If just these things happen (and all are in the works), we will see a solid multi-year upward trajectory in our great city.

Just sold.

We just sold 37-11 Crescent Street between 38th Avenue and 37th Avenue in Long Island City for $2,640,000 in an all-cash transaction. The property is a mid-block, 49’ x 95.5’, 4,565 sq. ft. lot improved by a single-story plus mezzanine 4,907 sq. ft. warehouse building located in three (3) zoning districts! M1-2/R6A, M1-2/R5D & M1-2/R5B within the special LIC/Dutch Kills Subdistrict. The zoning allows the developer to construct a 10,899 ZFA boutique condominium building. (Utilizing the manufacturing bonus the developer would be able to build 15,746 ZFA)

The sales price equates to $242/ZFA and $538/Existing SF.

Our Due Diligence Accelerator Package® coupled with our targeted marketing strategy utilizing our Developers Database, allowed us to achieve 37 offers from qualified buyers, which ultimately led to sending multiple contracts, achieving the highest price and best terms for the seller. We were the exclusive and sole broker in the transaction.

Fun Fact: This property was family owned since 1967!

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25 Recent New Building Filings:

These 25 selected filings alone over the last 2-weeks account for 1,701,411 ZFA & 1,490 Apartments

  1. 140 Jane Street, West Village in Manhattan - Plans filed to build a 105,173 ZFA 11-Story, 15 Unit Apartment Building.
  2. 534 E 5th Street, East Village in Manhattan - Plans filed to build a 5,188 ZFA, 4-Story, 4-Unit Apartment Building
  3. 280 E Houston Street, East Village in Manhattan - Plans filed to build a 112,889 ZFA, 12-Story, 287-Unit Apartment Building.
  4. 354 W 52nd Street, Hell’s Kitchen in Manhattan - Plans filed to build a 46,377 ZFA, 7-Story, 32-Unit Apartment Building.
  5. 280 8th Avenue, Chelsea in Manhattan - Plans filed to build a 12-Story, 88,549 ZFA, 104-Unit Apartment Building.
  6. 648 W 48th Street, Hell’s Kitchen in Manhattan - Plans filed to build a 6-Story, 132,552 ZFA Manufacturing Building.
  7. 364 W 54th Street, Hell’s Kitchen in Manhattan - Plans filed to build a 9-Story, 300,202 ZFA, 112-Unit Apartment Building.
  8. 251 E 39th Street, Murray Hill in Manhattan - Plans filed to build a 10-Story, 128,983 ZFA, 157-Unit Apartment Building.
  9. 1725 Amsterdam Avenue, Harlem in Manhattan - Plans filed to build a 9-Story, 142,602 ZFA, 200-Unit Community Facility Building.
  10. 1578 Lexington Avenue, East Harlem in Manhattan - Plans filed to build a 12-Story, 123,979 ZFA Community Facility Building
  11. 25-23 Newtown Avenue, Astoria, Queens - Plans filed to build a 7-Story, 22,461 ZFA, 27-Unit Apartment Building.
  12. 40-25 Crescent Street, Long Island City, Queens - Plans filed to build a 8-Story, 176,411 ZFA, 238-Unit Apartment Building.
  13. 25-86 31st Street, Astoria, Queens - Plans filed to build a 6-Story, 26,282 ZFA, 25-Unit Mixed-use Apartment Building
  14. 67-17 Roosevelt Avenue, Woodside, Queens - Plans filed to build a 6-Story, 8,783 ZFA, 10-Unit Mixed-use Apartment Building
  15. 43-05 Crescent Street, Long Island City, Queens - Plans filed to build a 9-Story, 26,840 ZFA, 39-Unit Apartment Building
  16. 132-14 41st Road, Flushing, Queens - Plans filed to build a 6-Story, 13,201 ZFA, 10-Unit Apartment Building
  17. 90 Herbert Street, Williamsburg, Brooklyn - Plans filed to build a 5-Story, 4,998 ZFA, 7-Unit Apartment Building
  18. 192 Withers Street, Williamsburg, Brooklyn - Plans filed to build a Three (3), 4-Story Apartment Buildings for a total 7,766 ZFA
  19. 161 Meserole Avenue, Greenpoint, Brooklyn - Plans filed to build a 8-Story, 21,368 ZFA, 32-Unit Apartment Building
  20. 17 Middleton Street, Williamsburg, Brooklyn - Plans filed to build a 7-Story, 51,198 ZFA Community Facility School Building
  21. 1024 Manhattan Avenue, Greenpoint, Brooklyn - Plans filed to build a 7-Story, 28,736 ZFA, 35-Unit Apartment Building
  22. 392 Graham Avenue, Williamsburg, Brooklyn - Plans filed to build a 6-Story, 7,498 ZFA, 8-Unit Apartment Building
  23. 221 Middleton Street, Williamsburg, Brooklyn - Plans filed to build a 6-Story, 14,973 ZFA, 10-Unit Apartment Building
  24. 211 Nostrand Avenue, Bedford-Stuyvesant, Brooklyn - Plans filed to build a 6-Story, 26,933 ZFA, 18-Unit Apartment Building
  25. 96 Vermont Avenue, East New York, Brooklyn - Plans filed to build a 9-Story, 77,469 ZFA, 110-Unit Apartment Building

Financial Markets Summary:

  • The Federal Prime Rate is steady at 8.5%.
  • The Secured Overnight Financing Rate (SOFR) is 5.31%. (We started the year at 4.31%)
  • The United States Federal Funds Rate stayed at 5.5%.
  • United States Annual Inflation Rate: The current inflation rate has dropped down to 3.14%, from 3.24%. That is the 2nd consecutive drop after 3 consecutive increases; which is a positive sign for the market.
  • The US 1-Year Treasury Rate has decreased to 4.9% from last month’s 5.27%. This is also the first time we dropped below 5% since May. (1-year ago this was 4.64%)
  • The US 10-Year Treasury Rate continues to trend downwards. It now stands at 3.91%, dropping from a recent high of 4.98% in October.
  • Mortgage Rates: the 30-Year Fixed Rate has taken a turn downwards with rates at 6.62% from 7.45% last month on the daily rate, and the 15-Year Fixed Rate has dropped to 6.15% from 6.75% last month.