By Connor Adams Sheets
Since the turn of this century, the storyline touted as the future of Flushing has been one of massive growth and development to accommodate the rising tide of new residents arriving each year from distant shores.
Real estate developers and politicians often evoke skylines of cities like Hong Kong and Shanghai when casting their visions of the transformation the neighborhood is set to undergo in coming decades.
For years these predictions have seemed prescient, as downtown Flushing has seen a number of flashy new buildings go up, some of which suggest the modern aesthetics of East Asia.
From TDC Development’s 12-floor Queens Crossing building, with its enormous, outdoor video screens, to the three towers of Sky View Parc, the streetscape has changed as money and bodies have poured in.
“Flushing has better prospects than most any other community in the U.S. because of what’s going on in Asia,” said Michael Meyer, president of TDC. “Flushing is really the beachhead and the stepping stone of what’s going on in the U.S.”
And today a survey of the Flushing area reveals that a series of large-scale development projects totaling several billion dollars has been approved to be built over the next several years.
But even the best-laid plans often end in the dustbin of history. Those high-profile projects are facing significant obstacles and may be scaled back significantly or never even break ground.
That prospect does not portend well for the future of New York City’s real estate and construction industries, the magnates of which are waiting to see if the Flushing boom turns out to be a bust before throwing big money at development proposals across the five boroughs. That increased focus on the neighborhood has cast Flushing as something of a bellwether for the city’s residential housing industry.
But some savvy developers know there is still money to be made today in Flushing real estate and are finding ways to build residential units even in the throes of an economic realignment.
Pie in the Sky
The first condominiums went up for sale at the $1 billion Sky View Center amid the financial chaos in February 2008, the month President George W. Bush signed the Economic Stimulus Act of 2008 into law.
It was a time of economic turmoil wrought in large part by the precipitous collapse of the American housing market. In 2007 and 2008, more than 5.3 million foreclosures were filed on properties across the country, leaving more than 1.8 percent of all households in some stage of foreclosure, up from less than 0.6 percent in 2006, according to a RealtyTrac report. By September 2008, average home prices in the U.S. had fallen by more than 20 percent from their peak in 2006, according to Standard & Poor’s.
Despite the dismal financial climate, 10 days after the luxury homes were offered to buyers for just under $400,000 to $2 million a pop, 40 had already been sold, according to Sky View’s then-developer Muss Development.
The project at the intersection of College Point Boulevard and Roosevelt Avenue seemed poised to flourish. Over the next couple of years, more than 100 buyers closed contracts on condos at the development.
But that surge of interest turned out to be temporary and as of last week only 42 condominium contracts had been closed, according to Helen Lee, director at Onex Real Estate, the partner company that took the lead on Sky View Parc from Muss in early 2010.
Once-spoken-for condominiums remained empty as the financial downturn took its toll on buyers’ wallets, and 118 people backed out of their contracts, settling with Onex for 75 percent of the $5 million total deposit they made on the homes, according to court documents. A lawyer for the condo buyers said it was the largest such settlement in the history of New York City.
The project was originally slated to include six residential towers with a total of 1,098 condos. So far, three towers with 448 condominiums have been built, and Lee said Onex will decide whether to complete the other three towers based on its assessments of market demand.
Three Flushing real estate watchers familiar with the project said Sky View condo prices have fallen by more than 20 percent since they were first offered to buyers, but Lee insisted that claim is unfounded and Onex has not downgraded prices.
Michael Nussbaum, a spokesman for developer Patrick Thompson, who has a large project of his own planned for Flushing, said Sky View was an incarnation of the depressed home sales market in the neighborhood.
“Sky View Parc was the telltale sign that condos in Flushing were very soft,” Nussbaum said.
Despite the fact that the three completed towers sit mostly unoccupied, Onex is bullish on Sky View, Lee said. Sky View’s 800,000 square feet of commercial space filled quickly, and Onex is courting investors in China and launching a new marketing campaign in a bid to re-brand the project.
“Onex would not be injecting capital or becoming a new sponsor if we didn’t have confidence in the project,” Lee said. “We see great potential for Sky View Parc.”
No Common Project
As Sky View Parc has struggled to fill its deluxe condominiums, other developers have watched from the wings, and a trend has emerged among new Flushing proposals toward offering rental apartments — or even commercial or office space — rather than condos.
The shift is aimed not only at filling the homes as customers switch from buying to renting, but also at better positioning the developers to secure financing.
Meyer, of TDC, a subsidiary of F&T Group, a company with six completed developments in Flushing, said capital markets reflect the reduced allure of condominiums.
“It’s very hard to get financing for condominiums given the market today,” he said. “When more people are renting, it’s easier to sell the bank on giving you a loan to do rentals.”
Last July, the city approved TDC’s proposal to build Flushing Commons, a mixed-use project with a price tag of more than $800 million, in the space currently occupied by Municipal Lot 1 in downtown Flushing.
But the company has yet to secure the funding it needs to move forward on the condominium-centric development. TDC has turned to Chinese investors and possibly breaking the project’s construction down into phases in hopes of getting a shovel into the ground soon.
Meanwhile, One Fulton Square, a lesser-known TDC development, is moving forward with greater ease. Coming in at $125 million, its two 12-story towers broke ground in April at the intersection of Prince Street and 39th Avenue.
Like many projects proposed recently in Flushing, it is smaller in scale than a Sky View or Flushing Commons, and its fate does not rest as heavily on the whims of the condo market. The project will offer condominiums, but it will also feature three floors of retail and one of its towers will be a 168-room hotel.
James McClelland, chief of staff to City Councilman Peter Koo (R-Flushing), said developers need to be flexible.
“They’re a slave to the economy,” he said. “I think everybody was too optimistic about their ability to secure financing considering the economy, and now they have to put their noses to the grindstone and look for creative ways to get projects off the ground.”
Waiting on Willets
With the economy still depressed, several other major projects, including the city’s $3 billion proposal to overhaul Willets Point, have yet to emerge from the planning stages.
Several sources close to the Willets plan, which Bloomberg announced in May 2007, say the project faces massive uncertainty.
At least one builder plans to ask the Bloomberg administration to push the deadline for development proposals back several months. And three sources said few companies plan to submit proposals because the project is too unwieldy, inflexible and expensive to justify the risk during this time of financial uncertainty.
Jennifer Friedberg, a city Economic Development Corp. spokeswoman, responded to those claims.
“Because of the strong interest from several developers, we are extending the Willets Point RFP deadline by four weeks, but it will not alter our project timeline,” she said in a statement earlier this week. “We look forward to the innovative responses that will form this project that has the overwhelming support from local electeds and will create thousands of new jobs and housing opportunities.”
And River Walk Place, LEV Development’s ambitious but doomed plan to build five mixed-use towers with 450 condominiums on an expansive lot between College Point Boulevard and the banks of the Flushing River, has stalled due to financing issues.
“We’re still involved with it. It’s going to be 1 million square feet, but right now we can’t get financing for it,” LEV President and Chief Executive Officer Eddie Shapiro said in May. “We won’t be getting financing for it in the near future.”
Until credit markets loosen up and developers regain confidence, the outlook is uncertain for big-dollar projects, but that has not stopped other development from forging ahead in Flushing.
New Way Forward
Smart developers are adapting to the adversity they face, and buildings are still being approved and constructed throughout Flushing at a dizzying pace.
Thompson, the developer behind a $160 million proposal to rework the RKO Keith’s Theatre on Northern Boulevard into a 17-floor mixed-use building, has listened to the winds of change.
In 2005, the city approved developer Shaya Boymelgreen’s proposal to build 200 condominiums above the landmarked lobby of the theater. After Boymelgreen’s finances fell apart and he lost the theater, Thompson bought it with different plans in mind.
He hopes to break ground by the end of the year on a building that will instead provide 357 rental apartments, a calculation that reflects the changes in the housing market, according to Nussbaum, a representative for Thompson.
“There were a number of condo properties in Flushing sitting empty,” Nussbaum said. “The whole marketplace is very soft for condos so he decided to go to rental units.”
Thompson’s plan is the highest profile manifestation of a trend toward new development approaches that is changing the look of Flushing.
And Helen Keit, an associate broker at Keller Williams Realty’s Flushing office, said the borough’s condo market is saturated with inventory, which has driven Flushing developers to rentals.
“That’s where a lot of developers have been going — in the rental market there’s a lot of demand,” she said. “Also, I think it has to do with financing when a developer makes a choice to do rentals rather than condos. They’re going to have a cash flow. With rentals they’re going to have a return on their investment more quickly.”
That shift continues as buildings crop up in downtown Flushing.
Fleet Financial Group broke ground earlier this year on the 80,000-square-foot North Queens Medical Center with the assistance of $17 million in federal stimulus money. The public funds helped Fleet secure financing for the center and the Eastern Mirage tower of rental apartments, retail space and hotel rooms, which will share a plot with the medical center at 42-31 Union St.
Shift to Smaller
Work has begun on two 12-story hotel towers to be built by Jia Ye Realty LLC and Leavitt Street LLC, at 36-27 Prince St. and 39-16 College Point Blvd., respectively. The fact that they are going in as-of-right, coupled with their relatively small size — for Flushing — enabled them to break ground shortly after gaining necessary approvals.
In another example of a new path to development profits, Nussbaum said a consortium of well-heeled foreign investors recently finished construction on a condominium tower at 37-20 Prince St. The group is waiting for the Flushing condo market to rebound before offering many of the building’s units to buyers, hoping to earn a greater return on its investment once sales pick up.
And Flushing’s Macedonia AME Church is moving ahead with a project slated to break ground this fall just adjacent to the planned footprint of Flushing Commons. A 14-story mixed-use building with 140 affordable housing units, its rents will be subsidized by public money, making it more attractive to loan providers, and allowing its construction timeline to remain unchanged since its approval more than a year ago.
Future is Now
Whether Flushing’s gargantuan projects rise soon from the well-trodden streets or go unrealized as fantasies of a bygone era will be a telling signal to developers looking to invest elsewhere in the city, industry insiders say.
The Flushing area has been better insulated from the economy than many other neighborhoods, earning it a reputation as a front-line testing ground for the development climate in New York as the city struggles to emerge from the housing slump.
As investment continues to flow in from overseas, experts believe that if Flushing cannot support new residential inventory, the outlook is bleak for sections of the city hit harder by foreclosures, unemployment and other economic woes.
“You have two or three large-scale projects happening right here in Flushing within a stone’s throw of each other,” McClelland said. “Maybe developers in Manhattan, Brooklyn and elsewhere will watch and see whether they can secure financing and start building, and decide based on that whether or not they want to do big development projects elsewhere in the five boroughs.”
Chuck Apelian, vice chairman of Community Board 7, which covers Flushing, said the trajectory of the real estate market there is strong in the long term.
But he said he is unable to predict whether projects like RKO Keith’s and Flushing Commons will ever be built or whether they will offer condos or apartments or both if they do.
“In a nutshell, what’s happening in Flushing is supply and demand, and there’s too much supply right now. I don’t think the future of Flushing is bad, I think it’s going to continue to grow,” Apelian said. “Everybody is in the same kind of flux … People are shifting and holding and a little more conscious of what the opportunities are.”
But for now, as mega-projects remain stalled and smaller buildings continue to break ground, the skyline is being shaped more by the economic realities of the present than by the lofty goals of the recent past.
Reach reporter Connor Adams Sheets by e-mail at [email protected] or by phone at 718-260-4538.