Subject: Weep over Harlem
July 26, 2007 Edition > Section: Real Estate > Printer-Friendly Version
City's Developers Agree: "Harlem Has Arrived"
BY MICHAEL STOLER
July 26, 2007
A state-of-the-art, 640,000-square-foot office building with retail on the lower levels, a 200-room hotel, Manhattan's first big-box retail center, and a blossoming of trendy boutiques and restaurants: This is a description not of Chelsea, the fast-rising High Line area, or Lower Manhattan. The neighborhood is the legendary home of the Apollo Theater, the great community of Harlem.
"It is incredible witnessing the resurgence of this once-overlooked area," the principal at KG Plymouth Group, Michael Davis, said.
"There are so many projects taking place that are shaping what the future of what Harlem will look like; and while a number of questions linger from the river-to-river 125th street rezoning, and others the most significant certainty is that Harlem has arrived."
He continued: "The market has created a magnitude of opportunities for owners and developers to create projects that will have a long-term positive impact on the city and will be the springboard for Harlem's continued prosperity and growth."
Next month, construction is scheduled to begin on Hotel 124, a 130,000-square-foot property located on 125th Street and Fifth Avenue. It is the first new hotel in Harlem in more than 40 years and may include residential condominiums on the top floors. The Upper Manhattan Empowerment Zone intends to provide a $2.8 million subordinated loan, based on a projected project cost of $75 million, which will create in excess of 61 full-time permanent jobs for the community.
The president and CEO of the Upper Manhattan Empowerment Zone Development Corporation, Kenneth Knuckles, said Harlem real estate has strong value because of "the incredible housing stock, great transportation network, and central location, and, of course, the considerable price difference in comparison to Manhattan below 96th Street.
"Building on the rezoning and the extensive development of Frederick Douglas Boulevard between 110th and 125th streets, we see the emergence of Frederick Douglas Boulevard as a prime mixed-use corridor with a core concentration of national retail," he said.
This fall, a joint venture of Vornado Realty Trust, MacFarlane Partners which is representing the California Public Employees Retirement Systems and Integrated Holdings is expected to break ground on Harlem Park, a 640,000-square-foot tower at 125th Street and Park Avenue, adjacent to the Metro North train stop. The 21-story tower would have about 100,000 square feet of retail, underground parking, and 540,000 square feet of Class A office space. The office space is expected to rent for more than a 50% discount for brand new space in Midtown.
Last month, a total of 16 prime retail buildings on the 125th Street retail corridor were sold for a record price of $50 million, the highest price ever paid for retail space in Harlem. These buildings, totaling 35,000 square feet of space, were sold to the Sigfield Group for $1,429 a square foot. The properties are located at 112-118 W. 125th St., 250 W. 125th St., 301-303 W. 125th St., and 2331-2349 Frederick Douglas Blvd.
"The Harlem sales market continues to outpace the rest of Manhattan with demand exceeding supply, and new shops and restaurants opening weekly," the managing partner at Massey Knakal Realty Services, Shimon Shkury, said. "The infrastructure is back-filling at an ultra-aggressive pace, which makes Central Harlem one of the most dynamic markets in the country."
A principal at USHA Holdings, Atul Bhatara, said Harlem "is becoming a total residential, commercial, retail, and intellectual hub. From the luxury developments to the commerce on 125th Street, to the expanding restaurant destinations all over Harlem, and of course the expansion of City College and Columbia, Harlem is forging an identity for itself, not only distinguishing itself from other areas of Manhattan, but from Manhattan itself."
This September, Touro College Medical School's first class will begin studying in the former Blumstein's department store building at 230 W. 125th St. across from the Apollo Theater. The Upper Manhattan Empowerment Zone provided a $4.7 million loan to Touro College to help build a 50,000-square-foot campus in the former department store, which had been dormant for nearly three decades. The new campus will employ 156 people and serve 1,000 undergraduate and 300 graduate students.
Across the street, adjacent to the Apollo, a joint venture of Grid Properties and the Gotham Organization, the developers of Harlem USA, are planning to build a30,000-square-foot retail complex at 261 W. 125th St. Harlem USA, a 285,000-square-foot retail complex located at West 125th Street and Frederick Douglas Boulevard, opened in 2000. Tenants include Magic Johnson Theater, HMV, Modell's Sporting Goods, K&G Fashion, Old Navy, and Hueman Bookstore.
A developer, Wharton Realty, which is owned by Jeff Sutton, one of Manhattan's most active retail landlords, is planning to construct a 230,000-square-foot tower on the corner of West 125th Street and Lenox Avenue. It would contain retail, a community facility, and apartments. Real estate sources say Bed Bath & Beyond may be the anchor tenant.
Last year, the first Harlem-based bowling alley in more than 30 years, Harlem Lanes, opened at the corner of West 126th Street and Adam Clayton Powell Boulevard, below the Alhambra Ballroom. The 24-lane bowling alley is the only facility north of 42nd Street. The Upper Manhattan Empowerment Zone provided a $350,000 loan to the owners, Sharon Joseph and Gail Richards.
Real estate and community leaders expect the Empire State Development Corporation and its subsidiary, the Harlem Community Development Corporation, to finally select a developer for the Victoria Theater site on West 125th Street. As reported in The New York Sun last month, the Jazz Museum in Harlem is part of a bid by Danforth Development Partners to renovate the Victoria Theater. The Jazz Museum would get between 10,000 and 20,000 square feet of exhibition space. The buildings would include two theaters to be used by the Classical Theater of Harlem, the Bill T. Jones & Arnie Zane Dance Company, and the Harlem School of Arts.
"The capital market drivers are so strong, and they are supported by Manhattan fundamentals of office leasing, that we're in for a long rise in interest in the area," the CEO of the metropolitan region of Cushman & Wakefield, Joseph Harbert, said.
At the southwest corner of 126th Street and Lexington Avenue, Blumenfeld Development is planning to construct Gateway II, a 60,000-square-foot mixed-use office and retail development. The building will be directly behind Gotham Plaza, a 90,000-square-foot three-level building that Blumenfeld Development completed in December 2002.
Next year, Blumenfeld Development and Forest City Ratner expect to complete construction of East River Plaza, a multi-level 500,000-square-foot retail center spanning three city blocks adjacent to the FDR Drive between 116th and 119th streets. It will also have an attached 1,248-car parking facility. The center will be anchored by Manhattan's first Target, a Home Depot, and a Best Buy. Industry leaders expect the project to be one of the most successful retail developments in Manhattan.
Last year, the city's Economic Development Corporation issued a request for proposals for the redevelopment of nearly six acres in East Harlem between 127th and 125th streets and Second and Third avenues. When completed, the project could include about 1.7 million square feet of new residential, retail, and commercial space. The project would facilitate the replacement of most vacant and underutilized land with new affordable housing, press and entertainment businesses, cultural space, and retail uses, and would contain a replacement for the MTA bus storage facility now occupying the space.
According to real estate sources, the leading contenders for the project include Forest City Ratner, Blumenfeld Development, and Vornado Realty Trust.
Industry and community leaders often doubted the renaissance of Harlem. I think a comment by the president of Blumenfeld Development, Ed Blumenfeld, is most appropriate: "I guess we weren't as nuts as everyone thought we were. Unfortunately, we didn't invest enough in Harlem when we had the opportunity to."
Mr. Stoler, a contributing editor to The New York Sun, is a television and radio broadcaster and senior principal at a real estate investment fund. He can be reached at firstname.lastname@example.org.
July 26, 2007 Edition > Section: Real Estate > Printer-Friendly Version
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