The Wall Street Journal

Low Prices Lure New Residents, Replacing Those Who Fled

By: Motoko Rich
Published: 9/11/2002Source: The Wall Street Journal

THERE WERE TIMES in the past 12 months when David Vogler called the movers and got ready to abandon his high-rise apartment overlooking Ground Zero. "I was on edge, ready to crack -- my nerves were shattered," says Mr. Vogler, a free-lance creative director and consultant to the entertainment industry. Before last Sept. 11, he and his wife loved their apartment on the 27th floor of River Terrace for its spectacular view of the World Trade Center as well as the small-town feel of the neighborhood, the 92-acre Battery Park City residential and office enclave along the Hudson River. But every one of his 11 floor-to-ceiling windows faces what Mr. Vogler calls "the pit." In the early months after the terrorist attacks, with the ruins of the Twin Towers still smoldering, "it was like death every morning," he says. Close friends, especially those with young children, fled the morning of Sept. 11 and returned only long enough to pack up and move out. Restaurants and stores closed. Many of the amenities disappeared. What kept the 40-year-old Mr. Vogler and his wife in place, he now thinks, was nostalgia for the area's past as a gracious residential neighborhood and faith that it would somehow return. Very simply, says Mr. Vogler, "it broke our hearts to think of leaving. . . . And so we hunkered down." Thousands of other downtown residents did similiar soul-searching after Sept. 11, and many made a different choice. "We decided almost from day one that we were getting out of there," says Stan Epstein, who watched the South Tower burning from his living room, then raced down 10 flights of stairs in his T-shirt, shorts and slippers. He and his wife joined others in the street, staring in horror as people jumped to their deaths. "We said `Can these things fall?' and people said `Who knows?' " recalls Mr. Epstein, a retired real-estate attorney. When the first tower collapsed, the neighborhood went pitch black from the dust storm, and the Epsteins escaped on a ferry to New Jersey. For the next two months, they shuttled among hotels, relatives and friends. Now, they have rented a house in Santa Monica, Calif., to live near their daughter and grandchildren.

Beata Williams's experiences on Sept. 11 also made a return to downtown unthinkable. That day, the 32-year-old mother of two spent nearly two hours in total darkness in the basement of her Battery Park City apartment building with her then 22-month-old son and five-month-old daughter. They later were evacuated by a police tugboat to New Jersey. The family never returned to their apartment. Instead, they spent three months with Ms. Williams's parents in Chicago, and when they returned to the East Coast they bought a house in Summit, N.J. For several months, city officials and landlords worried the attacks had forever damaged the viability of downtown, which is home to about 30,000 people. In December, vacancy rates in rental apartments below Chambers Street, an east-west thoroughfare four blocks north of the Trade Center site, had soared to over 25%, according to Citi Habitats Inc., a real-estate firm. Scrambling to keep tenants and attract new ones, many building owners slashed rents by as much as 30%. Things started to change in February, when the Lower Manhattan Development Corp., a government commission that is overseeing the rebuilding of the Trade Center site, announced it would offer incentives totaling as much as $12,000 over two years to anyone who signed a two-year apartment lease downtown. So far, 8,100 tenants have applied for the grant, says the LMDC. At the 1,711-unit Gateway Plaza, where 726 tenants left after Sept. 11, the combination of lower rents and incentives has attracted an identical number of new renters and the towers are now full, according to a management affiliate of the owner, the Lefrak Organization.

In contrast to commercial real-estate downtown, the market for residential property shows surprising strength. By August, the apartment vacancy rate downtown had fallen to 4%, only slightly higher than the rate for all of Manhattan. In all, an estimated 6,000 tenants have left the area below Chambers Street, but nearly that many have moved in, according to Citi Habitats. "That [rent subsidy] grant completely cured the problem," says Chief Executive Andrew Heiberger. In some cases, those who moved in are different from those who left, much like the old New York story of one demographic group replacing another. Before Sept. 11, downtown's high-rises and lofts were populated chiefly by upscale young families who liked living near a waterfront esplanade and walking to work on Wall Street. Many of them have been replaced by boisterous young singles lured by the discount rents and government subsidies. Mr. Vogler says his building now feels a bit like a college dormitory. "Those expensive apartments that used to have hard-working couples suddenly have four or five guys," he says. "People perceive downtown as a value neighborhood with the amenities of luxury buildings," says Julia Hodgson, director of real-estate development for the World-Wide Group, which lost 30% to 50% of the tenants in the three downtown buildings it owned at the time. But the company saw them fill up again when the incentives were announced. Many of the area's new residents work elsewhere in the city. Shirley Lockwood, an administrator for a small nonprofit foundation in midtown Manhattan, had already viewed 15 apartments on the city's upper west side when her real-estate broker showed her an old office building that World-Wide had recently converted to apartments just three blocks north of Ground Zero. Ms. Lockwood fell in love with a one-bedroom apartment and the building's amenities, which include a concierge, gym and roof deck. "I really don't think I could have had the apartment I wanted if I hadn't had that incentive," says Ms. Lockwood, who will effectively pay $2,250 a month for the $2,750 unit for the next two years.

Bond trader Jon-Paul Rorech, 31, and his wife, Lucy, a 27-year-old electronic-commerce specialist for a bank, last month bought a three-bedroom apartment one block east of Ground Zero, more than doubling the size of their previous home on the upper west side. Mr. Rorech says the couple was able to afford a much larger apartment downtown than they would have if they stayed in their old neighborhood. Victoria Terri-Cote, a broker at Corcoran Group who sold the apartment to the couple, says they paid more than asking price, though about 15% less than the price paid by buyers of a comparable unit two years ago. Some longtime residents also got incentives to return. When Ellen Lambros and her husband and daughter moved back to their 18th floor apartment in Gateway Plaza in December, their landlord granted them a 15% discount on their rent for 15 months starting last January. "I don't judge anybody about what is right for them," says Ms. Lambros, 51 years old. "But for us, it was right to come back. I felt I did most of my healing after I returned." Just months ago "it was like a war-torn neighborhood," she says, with the streets coated with dust and debris. Many windows at one of Gateway's buildings had been blown in by the Trade Center's collapse, ruining the tenants' belongings and making apartments uninhabitable for months. Residents had to pass through military blockades to get to their homes. "But now, especially in the summer when it is so beautiful, it feels almost normal," says Ms. Lambros, who now works in a job showing apartments in the complex. "Sometimes, we feel almost guilty about feeling fine here."

Meanwhile, the market for apartment sales, while softer, hasn't weakened nearly as much as some had expected. According to Miller Samuel Inc., Manhattan real-estate appraisers, prices for condominium and co-op apartments in the neighborhoods below Chambers Street actually rose faster than in the rest of Manhattan this spring. Between February and July, median sales prices below Chambers Street rose 8.2% to $422,000 compared with the same period a year earlier. Median sales prices in all of Manhattan rose 3.5% to $471,125 over the same period. Scott Durkin, chief operating officer at Corcoran Group, a real-estate unit of Cendant Corp., says 82 homes have sold in Battery Park City since the attacks, compared with 83 in the 12 months prior to Sept. 11. The average price per square foot since 9/11 was $426, compared with $465 in the 12 months before that date. Millennium Partners, the developers of 113 luxury condominium units above a new Ritz-Carlton hotel just eight blocks south of the Trade Center site, say they have raised prices since Sept. 11, and have sold 17 since the attacks. Prices range from $700,000 for a one-bedroom apartment to $6 million for a penthouse. Yet some who decided to leave after Sept. 11 say they sold at a discount to preattack prices. The Epsteins sold their two-bedroom condo in Battery Park City in January for 20% less than what their broker said the apartment's appraised value would have been on Sept. 10.

Even though the strength of the downtown residential market is outpacing the area's business redevelopment, local officials still believe the neighborhood will remain primarily commercial. "The goal for lower Manhattan is to maintain and enhance its role as the financial capital of the country," says Carl Weisbrod, president of the Alliance for Downtown New York, which represents business interests. "The goal is not to make the neighborhood into Chelsea or Greenwich Village." Still, downtown residents will always share a special sense of community and shared history. Bobby Concister, 44, injured both feet while jumping onto a barge in the Hudson River to escape the debris cloud. The owner of a local pet shop, he says he is seeking counseling for post-traumatic stress disorder, and relies heavily on friends in the neighborhood. "When you go through something that traumatic," he says, "you can look at each other and know how you are feeling without ever saying anything." "At the end of the day, we came back for the community," says Craig Hall, a technology consultant for J.P. Morgan Chase & Co. in midtown. Concerned about the air quality, he and his wife, Helen, and two young children moved out of one Battery Park building, but moved into another just one block north, where they believed the landlord had conducted a better cleanup. Both the Halls are natives of Britain and after Sept. 11, their families assumed they would return to the U.K. immediately. "People kept saying `Aren't you coming home?' " recalls Ms. Hall. "I kept saying `this is home.'"

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