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Rubin Report - The Pulse of the NYC Development / Issue No. 18 - June 2024

Rubin Isak

Summer is upon us! In this issue we will run our first “The Developers Corner” where we highlight discussions from NYC real estate developers. By tracking developer conversations, interviews, and activity, we will understand real-time developer sentiment. The first one is from a June 5, 2024 Bloomberg TV interview with NYC Developer MaryAnne Gilmartin of MAG Partners. A lot of great takeaways from the interview. I trust you will enjoy it.

I highlighted 7 recent land sales along with 28 new building filings in Manhattan, Brooklyn and Queens; which accounted for nearly 3million ZFA.

We also saw that inflation trickled down slightly to 3.27%, but still not enough for the FED to start cutting rates. In the June 12th FOMC meeting, they announced they will keep rates steady; and are possibly looking at one rate cut this year, depending on future economic readings.

What’s going on in the land sales market? Today, in certain markets, it is simply the best time to sell a development site and reinvest those proceeds into the highest yield returns we have seen in decades. For example, Net Lease real estate investment with credit tenants are seeing cap rates north of 6% and 7%, Bank savings rates are at 5.5% levels and United States Treasury Bills & Bonds are in the 5% range. Set a real estate portfolio strategy meeting with your family/partners and have us in that meeting!

Have a great summer!

P.S. Happy Father’s Day to the great dad’s out there! I am an extremely proud dad of 3 wonderful children; Livia, David and Benjamin, and I am grateful everyday to be able to say I am their dad. So, cheers to my fellow dads and continue to serve as a great example to your kids!

The Developers Corner

The Developers Corner: From time to time The Rubin Report will cover interesting conversations, quotes, market insights and interviews with New York City developers, big and small.

Watch: “Impossible to Overbuild in This Market”:

MaryAnne Gilmartin, Founder & CEO of MAG Partners.

As seen on June 5, 2024 on Bloomberg TV

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Some of MAG's projects in NYC are:

  • 243 W 28th Street - A 480-unit mixed-income multifamily project
  • 335 8th Avenue - A 190-unit mixed-income multifamily project with ground floor retail
  • 300 E 50th Street - A 194-unit mixed-income multifamily project with ground floor retail
  • 44-02 Vernon Blvd, LIC - a 6-acre development site for an as-of-right 1.2million sf residential project (this will go through a zoning change for a much larger project)
  • 122 Varick Street - A 174,000 sf, boutique office development with ground floor retail

Takeaway Quotes:

"In my business, which is ground-up development, it's all about long-term value creation and in long-term value creation you really focus on the future. Interest rates are going to move. We are confident that over the term interest rates will settle down.”

“When you are building a massive skyscraper, your not thinking about what interest rates are today, you're trying to really get ahold of land & opportunity and think about the next cycle, building through cycles, not into any one particular cycle."

"It's all about the credit markets and the crisis, and the fact that being able to land construction loans and capital partners in the last 18-months, was near impossible."

"World-class capital wants to be with folks that know how to deliver value in world class markets...It's about the quality of the sponsorship and the quality of the dirt."

"In Multifamily today, vacancy rates are at 1.8%, this is a 50-year low. There just simply isn't enough housing. This week there was a lottery for affordable housing, 150,000 applications in 12-hours, so it simply isn't possible to overbuild in this market. Because of that, high quality sponsorship, lenders like Bank OZK, and capital that wants to be in New York realizes that there is no better asset class than multi-family."

"When we built "Ruby" a 480-Unit multifamily building in West Chelsea...we built that in the pandemic, when everybody ran away from New York and conventional lenders had no interest in going to an investment committee meeting and putting forward a construction loan for a building in New York City. And yet, Madison (Madison Realty Capital) stepped up. They understand development. Josh Zegen looked at it and said, "This is a bet on the future of New York. I've seen the obituary that's been written for New York many, many times over the course of my career and we bet on the fact that the pandemic would be a moment in time, or maybe a very long period of time, but that people would come back to the city."

"We're looking for capital that is patient, and that focuses on long-term value creation, which is what development really is. Debt funds and non-traditional lenders have really been an extremely effective source of capital for us."

7 Recent Land Sales

  1. 175 East 82nd Street, UES, MN - Sold for $124.5M- 245,337 ZFA - $507/ZFA - Zoning C1-9/R8B
  2. 6201 6th Avenue, Sunset Park, BK - Sold for $21.4M - 116,000 ZFA - $184/ZFA - Zoning M1-2
  3. 1411 Avenue U, Homecrest, BK - Sold for $7.7M - 33,191 ZFA - $234/ZFA - Zoning C1-3
  4. 2103-2019 Astoria Blvd, Astoria, QN - Sold for $10M - 46,968 ZFA - $213/ZFA - Zoning R7X/R7B/C2-3
  5. 240 West 54th Street, Midtown, MN - Sold for $21M - 75,300 ZFA - $279/ZFA - Zoning C6-7
  6. 142-06 41st Avenue, Flushing, QN - Sold for $5M - 19,240 ZFA - $260/ZFA - Zoning R7-1
  7. 159-02 Hillside Avenue, Jamaica, QN - 99-Year Ground Lease valued at $4,287,690 - 67,256 ZFA - $63.75/ZFA- Zoning R7A/C1-3/VIH

New Building Filings - MN, BK, QN

In the 28 New Building Filings I highlighted below, from mid-May to mid-June, 2,929,797 of Zoning Floor Area (ZFA) has been filed to be built in Manhattan, Brooklyn and Queens alone!

  1. 217 Canal Street, Chinatown, MN - Plans filed to build a 8-Story, 24,993 ZFA, 85’ Tall, Commercial Building.
  2. 125 Chrystie Street, Lower East Side, MN - Plans filed to build an 11-Story, 48,298 ZFA, 46-Unit Apartment Building with Ground Floor Retail.
  3. 343 Madison Avenue, Central Midtown, MN - Plans filed to build a 49-Story, 749,651 ZFA, Office Building.
  4. 133 E 55th Street, Central Midtown, MN - Plans filed to build a 19-Story, 52,378 ZFA, 31-Unit Apartment Building.
  5. 470, 480 & 490 Kent Avenue, Williamsburg, BK - Plans filed to build a 3-Tower, 519,281 ZFA, 607-Unit, Multifamily project.
  6. 1 Division Avenue, Williamsburg, BK - Plans filed to build a 21-Story, 295,619 ZFA, 218-Unit Apartment Building.
  7. 103 Vanderveer Street, Bushwick, BK - Plans filed to build a 4-Story, 5,399 ZFA, 8-Unit Apartment Building.
  8. 301 Stockholm Street, Bushwick, BK - Plans filed to build a 5-Story, 5,499 ZFA, 8-Unit Apartment Building.
  9. 196 Stanhope Street, Bushwick, BK - Plans filed to build a 5-Story, 12,001 ZFA, 10-Unit Apartment Building.
  10. 447 Fenimore Street, Prospect-Lefferts Gardens, BK - Plans filed to build a 6-Story, 16,617 ZFA, 10-Unit Apartment Building.
  11. 117 Winthrop Street, Prospect-Lefferts Gardens, BK - Plans filed to build a 7-Story, 22,707 ZFA, 31-Unit Apartment Building.
  12. 2379 84th Street, Gravesend, BK - Plans filed to build a 3-Story, 9,225 ZFA, 9-Unit Apartment Building.
  13. 927 41st Street, Borough Park, BK - Plans filed to build a 7-Story, 28,239 ZFA, Community Facility Building.
  14. 1514 60th Street, Borough Park, BK - Plans filed to build a 7-Story, 54,148 ZFA Community Facility Building.
  15. 215 Boardwalk W, Coney Island, BK - Plans filed to build a  23-Story, 188,485 ZFA, 282-Unit Apartment Tower.
  16. 624 Ocean View Avenue, Brighton Beach, BK - Plans filed to build a 5-Story, 5,478 ZFA, 8-Unit Apartment Building.
  17. 757 Flatbush Avenue, Flatbush, BK - Plans filed to build a 9-Story, 106,444 ZFA, 132-Unit Apartment Building.
  18. 1811 Nostrand Avenue, Flatbush, BK - Plans filed to build a 5-Story, 5,584 ZFA, 9-Unit Apartment Building.
  19. 28-08 21st Street, Astoria, QN - Plans filed to build a 7-Story, 17,127 ZFA, 25-Unit Apartment Building.
  20. 29-24 40th Avenue, Long Island City, QN - Plans filed to build a 12-Story, 129,305 ZFA, 190-Unit Apartment Building.
  21. 39-07 61st Street, Woodside, QN - Plans filed to build a 4-Story, 15,135 ZFA, 14-Unit Apartment Building with ground floor retail.
  22. 55-77 43rd Street, Woodside, QN - Plans filed to build a 4-Story, 34,366 ZFA, Commercial + Manufacturing Building.
  23. 78-02 Queens Blvd, Woodside, QN - Plans filed to build a 6-Story, 48,837 ZFA, Charter High-School Building
  24. 68-19 Woodhaven Blvd, Rego Park, QN - Plans filed to build a 7-Story, 91,080 ZFA, 120-Unit Apartment Building.
  25. 132-19 Pople Avenue, Flushing, QN - Plans filed to build a 7-Story, 34,933 ZFA, 39-Unit Apartment Building w/ ground floor Community Facility space.
  26. 166-13 91st Avenue, Jamaica, QN - Plans filed to build a 13-Story, 20,276 ZFA, 28-Unit Apartment Building.
  27. 144-06 135th Avenue, South Ozone Park, QN - Plans filed to build a 14-Story, 79,198 ZFA, Hotel Building.
  28. 3541 Shore Front Parkway, Far Rockaway, QN - Plans filed to build a 309,461 ZFA, 10-Story, 320-Unit Apartment Building with ground floor retail.

Financial Market Snapshot:

  • Federal Prime Rate: 8.5% (unchanged since July 2023)
  • Secured Overnight Financing Rate (SOFR): 5.31% (in the 5.3% range since August 2023)
  • United States Federal Funds Rate: 5.5% (unchanged since July 2023)
  • United States Annual Inflation Rate: 3.27% (down from 3.36% last month)
  • US 1-Year Treasury Rate: 5.06%
  • US 10-Year Treasury Rate: 4.25%
  • Treasury Bill Auction Rates:
  • 4-Week Term: 5.260%
  • 8-Week Term: 5.265%
  • 17-Week Term: 5.220%
  • 26-Week Term: 5.165%
  • 52-Week Term: 4.915%
  • US Bonds:
  • 20-Year Bond: 4.635%
  • 30-Year Bond: 4.635%
  • Mortgage Rates:
  • 30-Year Fixed Rate: 6.97%
  • 15-Year Fixed Rate: 6.38%
  • 5-Year ARM: 7.01%
  • Ground Up Construction Rates: 8.5%+
  • Hard Money Lending Rates: 10%+
  • Highest Interest Rate for Bank Savings Account: 5.55%