Wednesday, May 15, 2013

Roosevelt Island Riverwalk Building 5-6 Not Profitable For Developer Hudson Related Says RIOC Deal Memo - Negotiations For Building 7 Continuing, Update At Today's Executive Session RIOC Real Estate Committee Meeting

The Roosevelt Island Operating Corp (RIOC) Real Estate Advisory Committee is meeting later today in Executive Session (closed to the public) for an update on current negotiations with Hudson Related Companies regarding the future development of Southtown (Riverwalk) Building 7.

Image of Riverwalk Building 1-6 and future site of 7-9 from Wall Street Journal

According to RIOC:
PLEASE TAKE NOTICE that a meeting of the Real Estate Development Advisory Committee of the RIOC Board of Directors will be held on Wednesday, May 15, 2013 at 5:30 p.m. at the RIOC administrative office, 591 Main Street, Roosevelt Island, New York.


1. Chair�s Motion for Executive Session for Update on Current Negotiations Regarding Southtown Development (Building 7)

2. Any Other Committee Business That May be Brought Before the Committee
What are these current negotiations about? The RIOC Board of Directors had previously approved a Lease Amendment for Southtown (Riverwalk) Buildings 7-9 during the February 28 Board of Directors meeting. As previously reported:
... the Southtown Building 7-9 Ground Lease amendment with Hudson Related was approved during the February 28 RIOC Board of Directors meeting. According to RIOC CFO Steve Chironis the ground lease payment from Hudson Related to RIOC  for building 7 was reduced from $32 million to $28 million. The terms for buildings 8-9 remained the same.

Here's video of Mr. Chironis explaining the Ground Lease amendment to the RIOC Board.
Here is the February 26, 2013 Deal Memo prepared by Mr. Chironis to the RIOC Board. According to the Deal Memo (Page 3) tentatively agreed upon terms, the closing for Southtown (Riverwalk) Building 7 was scheduled for April 30 of this year.

Site Of New Southtown Building 7 Covers Northern Section Of Area By Shed/Tot Lot

The RIOC prepared Deal Memo also states (Page 1):
Hudson/Related (H/R) holds an option to develop the remaining three lots (7-9) of the Southtown Development Project, which expires on December 31, 2012 (the “Option”). In March 2012, H/R requested a modification of terms based on a claim that the last 2 buildings to be developed (5 &6) were not profitable and the overall market was not as favorable as the conditions in 2006 when the original agreement was reached. However, the original first four buildings (buildings 1-4) were very profitable and the agreement for 5-9 was designed to recover profits lost by RIOC.

Building 5, which is a condo that was completed in 2009, still has 15 unsold units out of a total of 122. On average, the sales prices of units sold from 2009 through 2010 have been approximately 25% below original condominium asking prices with a moderate rise in 2011 and 2012. Recent resale prices of sold units are still significantly less than the original purchase prices. However, Building 6 — originally intended to be a condo — was instead built out as a rental and is nearly fully rented.

Prior to the proposal and confirmation of the Cornell project on Roosevelt Island H/R gave little indication of their intent to exercise the Option. The agreement provides for a “De-designation fee”, an amount H/R must pay to RIOC in the event of not developing the project. The fee —based on the amount of undeveloped square footage in Southtown 7-9 at a rate of $2/SF — is collateralized by a letter of credit in the amount of $1,420,800. This fee would paid to RIOC in the event H/R does not go forward with 7-9. With the announcement of the Cornell project the prospects for the Roosevelt Island real estate market are brighter but at this point it would be difficult to quantify the impact given that: 1) completion of the first Cornell buildings is not scheduled until 2017; and (2) the overall market faces high-risks posed by existing global financial uncertainties.

At the commencement of negotiations in March 2012 RIOC was initially advised by Jones Lang LaSalle (JLL) and subsequently CBRE pertaining to deal modification issues. JLL, the original advisor to the Southtown project,was replaced by CBRE due to JLL’s financial interest through earned commission that would be due to them upon the closings of buildings 7-9....
and (Page 4):
... The financial components upon substantial construction completion are summarized as follows:
1. Ground Rent:
- Prepaid Ground Rent ($50/SF@ 201,600SF) - $10,080,000
- Starting Annual Ground Rent w/ 3% escalation - $765,760.00...

...  4. Public Safety Fees: $20/unit/month w/ 4% escalation (est. 200 units)
- starting annual public safety fee - $48,000.00...
 and (Page 2 of CBRE attachment to Deal Memo):
Subject to compliance with environmental and other law and to a modification to the GDP if required, RIOC will allow (but not require) below-grade parking at Building 8 and Building 9.
Click here for the full RIOC/Hudson Related Southtown (Riverwalk) Deal Memo.


Joe Carbo said...

these people only want to build market rent apartments. get rid of them. and bring in builders who will build affordable housing.

Joe Carbo said...

i will be running in the next rioc election .i will try to bring affordable housing back to the island. no more hipster housing.we will take this island back. and give it back to the poor and low income and the peons of the island.these hipsters moving onto the island they just come to new york to make money as new york pays the highest salary we are the true new yorkers vote for me.

Joe Carbo said...

well i see that bill deblasio is kissing the asses of illegal immigrants. oh sorry the pc word is undocumeted . he wants to give them driver licenses. well he will not be getting my vote.i am voting for anthony. because my tells me to. she love

CheshireKitty said...

UDC should have thought of this when they approved Eastwood. It should remain public housing. How did UDC think it could eventually be "privatized" and become - luxury housing? The turnover in rentals in RL now is unbelievable - and rightly so. UA is price-gouging on rents. That entire building should have been put into another affordable housing program upon exit from M-L - or put it another way, it should never have been in included in M-L in the first place. RL should remain affordable. Even hipsters moving in, immediately realize that they're being charged too much and leave.

Mark Lyon said...

Isn't Building 5 Riverwalk Court ( )? HR doesn't seem to be worried about selling those last 15 units - they don't even list anything in the building as for sale on their website.

Even Streeteasy only shows three active listings: Recent transactions look to have sold for over listing price.

I also noticed they tried to slip in more tax exempt units for not for profits. I'm sure Cornell would have appreciated that.

rilander said...

Pretty soon David Kramer (H-R) will have to figure out that removing the glass partitions from R-L to appease the newbies gang wasn't going to increase his profits either. Maybe he should read the general development docs and own up to the original spirit and intent of this planned community...and get the hell out of our lives! He should stop trying to boot out any semblance of affordable housing and retail...starting with Catsimidatis and his "grease-tides" market! And am I mistaken that the original approval for Southtown was to have 80% fair market and 20% affordable housing, or was that forgotten and now he's complaining and trying to get that changed too?

CheshireKitty said...

He's crying the blues to get more concessions from RIOC. How about H-R publicly disclose the numbers to back his claim of losing money on those buildings? R/e in NYC is booming. It seems to me H-R complaining is part of a disinformation campaign to elicit more concessions from RIOC. Let's see some numbers on H-R's profits - then we can decide if H-R's complaints have any merit.

bakgwailo said...

Wow, troll much? If you don't have anything remotely related to the article then don't post.

Ratso123 said...

You bring up an excellent point. The sixth building has no affordable housing units. There were numerous articles posted at the time of the approval about affordable housing. I don't know how all of these boards and committees let Related get away not providing the agreed upon housing.

Joe Carbo said...

can you answer this for me . the base rent of the apartments being paid by sec 8 a one bedroom does for 2150. a two bedroom is 2650 a three bedroom is 3400. a 4 goes for 4000. now doses the owner need the ok to raise the rents on these apartments from hud.

CheshireKitty said...

Don't worry neither of them will beat Quinn - unless they start raising a lot of money right away. And even then, they'll be up against the entrenched Quinn, billing herself as the "reincarnation" of BB, yet, at the same time, not BB. Unless things really spin out of control for Quinn, you can be sure the next Mayor of NYC will be the first female and first openly gay person to hold that post.

Joe Carbo said...

I like to know how much and who belson paid off in albany to take 870 apartments and immediately make them market rent.then have the tax payers which is sec8 paiy for each apartment. what a greAt deal he got

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KTG said...

Good Luck with that. You do realize that you are completely separated from reality.

Costs of running this island go up every year and revenue new developments is the only way to keep pace.

Also lets face it you are "anti" all new retail and residential development on island because all you care about is rent control and really just for you not out of any larger public interest.

Just to be clear a hipster is anyone with more disposable income than you.

bakgwailo said...

He also forgets that the GDP also calls for middle income affordable housing, and more so than low income, with middle income being define against the average current wages in the city.

bakgwailo said...

I am not 100% certain, but I think they claimed the % was for the overall complex, and that some of the other buildings covered the 6th, or something like that.

Westviewer said...

To be perfectly clear, he has no idea what "hipster" means.

YetAnotherRIer said...

I believe this is the building where NYU bought up a bunch apartments and sells them to its staff and faculty for a "better" price. Could be that the case why they are not listed otherwise? Maybe not. I checked the web site and nothing is listed there either.

Janet Falk said...

NYU bought 50+ apartments in 425 Riverwalk Landing (Building 4) and members of the faculty purchased them, beginning in October 2007. Some of the apartments were not sold to faculty; they were put on the open market and some of those units have recently been sold.