Ariel Properties: Uptown development site sales are looking up

According to Ariel Property Advisors, there is an uptick in development site activity in Northern Manhattan, according to Shimon Shkury, the company's president. In the last two months, the company has put six separate development sites throughout Upper Manhattan into contract. Located throughout East Harlem, Central Harlem, and Washington Heights, the sites total 100,000 buildable s/f. The company also said that activity remains steady and that they are on the cusp of putting several other uptown development sites into hard contract. "We're seeing a substantial increase in bidding activity for development sites in Northern Manhattan compared to a year ago," Mr. Shkury said. "Prices are attractive and buyers are seeking to build rental or condominium developments because the fundamentals for these projects have remained strong." Shkury said that rising rents, stable condo prices, and relatively low construction costs as the primary drivers for this higher activity. He also noted that while the price per buildable square foot can vary greatly from site to site, properties located in well received locations are seeing more consistent bids at 5-10% higher levels than a year ago. Many developers today are considering developing rental multifamily buildings and pursuing financing offered for mixed-income development projects. The stronger rental market, availability of advantageous financing for 80/20 deals, and a tax abatement available for these transactions allows for the economics to look favorable. While financing for market deals has remained a challenge, Shkury said that some lenders and international investors are returning. Another positive sign is several residential projects that stalled during the recession have traded in recent months and, as a result, will be completed. The development sites Ariel Property Advisors recently placed in contract include: 1642 Madison Ave., 166 East 100th St., 77 East 110th St., 142 West 131st St., 446-48 West 167th St., and 492 St. Nicholas Ave. During all of 2010, a total of 26 Northern Manhattan development sites traded for a total aggregate consideration of about $60 million. Development site sales represented 15% of total transaction volume and 10% of dollar volume in the area in 2010. Yet smaller sites saw more action overall simply because the price per buildable square foot was low enough to allow either near term development or land banking in anticipation of greater appreciation in the future. The average price per buildable s/f was relatively stable in 2010 at $69, a 3%increase from 2009. For more information, please contact Shkury, 212-544-9500, ext. 11, [email protected], Michael Tortorici, ext. 13, [email protected], or Victor Sozio, ext. 12, [email protected].