Brokers Weekly

East Side working to close the gap

By: Roland Li
Published: 10/13/2010Source: Brokers Weekly

The East River Waterfront has yet to match the progress of the west. The Greenway's largest gap, between 59th and 38th Streets, has long been a source of frustration for residents, but an elaborate land deal could finance a new esplanade.


Meanwhile, the Lower East Side's Waterfront remains underfunded, and the city is seeking alternate ways of raising capital.


The most established development appears to be the most southern part of the waterfront, near the South Street Seaport, where construction is proceeding with federal aid.


"The entire east side has been a second sister to the west side," said Roland Lewis, President of the Metropolitan Waterfront Alliance, a nonprofit waterfront advocacy group. You look at the state of the parks and the esplanades, and a lot of it's crumbling."


"There has not been adequate investment in maintenance and amenities," he added.


Part of the challenge is geography. The federal government created the Lower Manhattan Development Corporation in the wake of 9/11 to rebuild the Financial District, which has bolstered the development of the southern waterfront, and the funding remains intact, even after the recession. But the area above the Brooklyn Bridge lacks such aid, and the city almost inevitably has to partner with the private sector in order to progress.


Or, in one case, the city could trade land with the United Nations.


Midtown East


The gap between 59th and 38th Streets encompasses the United Nations complex and a large, stalled construction site, owned by Sheldon Solow. There is no indication what will be built on Solow's site, and when.


(Mr. Solow's spokesman did not respond to a request for comment.) However, the U.N. may be a crucial ally in financing waterfront development.


The city's Economic Development Corporation (EDC), Parks Department and U.N. officials are in talks for an elaborate land deal that would close Robert Moses Playground at East 41st Street and First Avenue and cede the land to the U.N. for around $75 million. It would then build a new tower on the site.


The city would then sell two buildings on East 44th Street, currently leased to the U.N., in order to fund the $150 to $200 million cost of building a new esplanade.


The U.N. is receptive to the deal, although no agreement has been finalized. Its staff has been spread out while it gut renovates its headquarters, and the organization leased 120,000 s/f on 730 Third Avenue in October of last year, as well as subleasing spaces at 380 Madison Avenue and 305 East 46th Street. Having space to build a new tower on the cramped East Side would solve a large logistical problem for the U.N.


"We are optimistic that an agreement can be reached, and until it happens we will continue to work with all parties," said Kyle Sklerov, a spokesman for the EDC.


Although residents have wanted to "close the gap" and build out the esplanade for decades, the proposal is still controversial. Midtown East is already the neighborhood with the lowest amount of park space in the city, according to a study, and the loss of Robert Moses Playground is seen by some residents as a slap in the face.


But elected officials, such as Congresswoman Carolyn Maloney, State Assemblyman Brian Kavanagh, and City Council Member Dan Garodnick have thrown their support behind the plan. Additional local plans by Manhattan borough president Scott Stringer and his land use director, Brian Cook, have been made to create an east side "Blueway."


There is additional urgency to make a deal because of the presence of 22 caissons, support structures in the water, which are remnants of the F.D.R. Drive. By using the caissons, the city could save $25 million in construction costs of a new esplanade. New York State has indicated that it wants to remove the caissons, but has delayed the removal, for now.


Despite the gap, midtown east has been a strong housing market for New Yorkers who want to live in a central location. East of the office district on Third Avenue and Lexington Avenue is a residential community, with the stores, restaurants and, if all goes as planned, soon a waterfront park.


Sonia Rehani, a vice president at Citi Habitats who works in the area, said she deals with a variety of professionals, including diplomats from the U.N. and doctors, some of whom work at the nearby New York University health center. These people generally want to buy condos, not co-ops, because of their fast approvals. Financiers and lawyers who work in the nearby office district often choose the area because they can walk to work.


Midtown east is also generally affordable compared to nearby neighborhoods, said Paul Buttenhoff, a managing director at Citi Habitats who lives in the area, and offers larger spaces for comparable prices.


"When I see someone try to wedge themselves in Gramercy for the money, I cringe," said Buttenhoff.


The area's housing stock is a mix of older co-ops and some new developments, although the newest buildings were built only as late as 2001, said Michael Gordon, a senior vice president and associate broker at Corcoran, who works in Midtown East. He represents properties including the Trump World Tower at 845 United Nations Plaza.


Along with the Solow site, one potential new development is Zeckendorf Development's 10 United Nations Plaza, which is a proposed 40-story building built next to the U.N., according to a July building permit, although the starting point for any construction is uncertain.


Otherwise, there's no other potential ground-up construction, because of the lack of available land.


"On the East River, most of the land is taken. To develop, you can convert," said Gordon. "There are two ways, you can take a rental and convert it to a condo, or you can tear a building down. There's no swath of land that you can develop."


Brokers were all in support of the building out of the esplanade, both as a selling point for midtown east's residential buildings, and also as a way to enliven the neighborhood.


"I think that would be a big selling point," said Citi Habitats' Rehani. "It would make the area even more residential. The residents would love it."


"That would definitely be a huge plus for any neighborhood," said Citi's Buttenhoff, who is also a runner, and finds himself going over to the west side.


"I think it's just gorgeous over there. I think it's exciting, and I think it would be great for the area," said Gordon of Corcoran.


Lower East Side


The Economic Development Corporation's current strategy at the East River State Park is to look towards the private sector for funding.


Over the summer, the EDC solicited film studios to store cars and equipment at a parking lot near Pier 42 on the Lower East Side. The Mayor's Office of Film, Theater and Broadcasting is working with the lot's operator to bring additional uses to the space, and all revenue will go towards maintenance of the East River Waterfront Esplanade, according to EDC spokesman Sklerov.


But there is simply not enough money to build a waterfront park, much to the frustration of the community. In previous plans, the EDC has indicated that commercial retail and restaurants would likely occupy Pier 42 and Pier 35, and rents could eventually pay for some of the construction. Meanwhile, Pier 36 would incorporate Basketball City, a private, for-profit gym.


However, some east side residents are against the presence of commercial entities that are comparable to the west side's Chelsea Piers or Related's future Hudson Yards site. O.U.R. Waterfront Coalition, a group of community organizations on the Lower East Side released an alternative plan last year for Pier 42, Pier 35 and Pier 36 that would not include commercial retail. O.U.R. argues that it can design the plan with a budget just over $52 million, and Congresswoman Nydia Velazquez spoke out in support of the plan.


Still, $52 million is unlikely to be available for years, and the EDC is focusing on maintaining the area, although it said it would be open to feedback.


"When funding becomes available for further work on the Esplanade, we will continue our dialogue with the community and welcome all feedback and input," said EDC's Sklerov.


Lewis, from the Metropolitan Waterfront Alliance, said that a compromise might be in order.


"I think adding life and vibrancy to the neighborhood is what the commercial sector can bring," he said, but added that he was sympathetic to the O.U.R.


The Lower East Side has largely avoided the march of gentrification. Many residents live in affordable apartments provided by the New York City Housing Authority (NYCHA), and there are only a handful of luxury buildings.


One such development, at 78 Ridge Street, has sold around a third of its 48 unit said Alan Louie, a broker for Citi Habitats and the exclusive agent for the building. The landlord is currently giving interested parties the option to either buy or rent the units, in expectation of a slow winter season, said Louie.


Louie sees the lack of luxury inventory an advantage for his property, but notes that only prospective buyers who specifically looking to live in the Lower East Side would likely consider moving in.


“That would definitely be a huge plus for any neighborhood," said Citi's Buttenhoff, who is also a runner, and finds himself going over to the west side.


He attributes the lack of luxury developments to the area's zoning and the small amount of land for sale.


The area east of Essex Street, between Houston and East Broadway, is zoned for buildings that are a maximum of 65 feet, and 80 feet after a setback, according to City Planning. Typical buildings with an average floor height of 10 feet, would rise to a maximum of around eight floors, which prevents sprawling glass towers from arriving.


Land is relatively scarce, and one prominent vacant area, the Seward Park Urban Renewal Area (SPURA), has been dormant for 40 years. But as with the waterfront development, plans have been stymied by a mix of neighborhood debates and a lack of clear financing.


Financial District


The southern part of the Esplanade has seen the most progress, compared to Midtown East and the Lower East Side.


"The esplanade between Maiden Lane and Wall Street will be completed by the end of the year. The sections from Broad Street to Pier 11, and Pier 15 and Pier 35 have started construction and will be completed by 2012," said EDC spokesman Sklerov.


Funding for the esplanade and piers included $138 million in federal funding from the Lower Manhattan Development Corporation, which was established in the wake of 9/11 to revitalize the area.


An additional $10 million came from the Federal Highway Administration (FHWA) and Transportation Enhancement Program (TEP) for improvements to portions of South Street adjacent to the Esplanade, said Sklerov.


The South Street Seaport has been a successful template for waterfront development. It has a mix of retail, including a mall controlled by General Growth Properties, as well as retail and restaurants along the entrance to Pier 17.


Additional activities include the summer Seaport Musical Festival, as well as Water Taxi Beach, an area that features a bar, restaurant and a rarity for New York: actual sand.


This cultural hub seems to have boosted nearby residential buildings. Rockrose's 200 Water Street, a former New York University dorm, was converted into a rental and was fully leased in June, being on the market less than a year.


However, just last week, tenants have complained about rent increases of over $500, which was blamed on the two months of free rent that was given in the first year.


Still, the Seaport could be a model for the rest of the city's waterfronts, balancing commercial, cultural and residential elements.


"The waterfront should be an attractive destination not just for the neighborhoods surrounding it, but for the entire city," said Lewis, the head of the Metropolitan Waterfront Alliance.