real estate

Saturday, December 22, 2007

In Reversal, Fed Approves Plan to Curb Risky Lending

WASHINGTON — The Federal Reserve, acknowledging that home mortgage lenders aggressively sold deceptive loans to borrowers who had little chance of repaying them, proposed a broad set of restrictions Tuesday on exotic mortgages and high-cost loans for people with weak credit.

The new rules would force mortgage companies to show that customers can realistically afford their mortgages. They would also require lenders to disclose the hidden sales fees often rolled into interest payments, and they would prohibit certain types of advertising.

Borrowers would be able to sue their lenders if they violated the new rules, though home buyers would be allowed to seek only a limited amount in compensation.

“Unfair and deceptive acts and practices hurt not just borrowers and their families,” said Ben S. Bernanke, chairman of the Federal Reserve, “but entire communities, and, indeed, the economy as a whole.”

The new regulations, expected to be approved in close to their proposed form after a three-month period for public comment, amount to a sharp reversal from the Fed’s longstanding reluctance to rein in dubious lending practices before the subprime market collapsed this summer.

The proposed changes, which do not apply to standard mortgages for borrowers with good credit, stopped short of banning all heavily criticized practices in subprime lending and did not go as far as many consumer groups had sought. But they won praise as worthwhile steps from some industry critics who had long complained that the Federal Reserve under its former chairman, Alan Greenspan, persistently ignored signs of trouble.

“Reading these proposals today is almost painful,” said Dean Baker, co-director of the Center for Economic Policy Research, a liberal research group in Washington. “These are all just simple, common sense regulation. Why couldn’t Greenspan have done this seven years ago?”

If the measures had been in place earlier, they would have applied to as many as 30 percent of all mortgages made in 2006.

Some advocacy groups that had warned for years about reckless practices said the Fed’s move was too little and too late.

“The Federal Reserve’s proposed guidance is riddled with loopholes and exceptions that will undermine its effectiveness,” said Deborah Goldstein, executive vice president of the Center for Responsible Lending, a nonprofit group in Durham, N.C. “The proposals fall far short of what was needed, and in some ways fall short of where the industry was already headed.”

The new rules would do nothing to help the hundreds of thousands of people who are either already defaulting on subprime mortgages or are likely to lose their homes when their introductory teaser rates expire and their monthly payments jump by 30 percent or more.

Soaring default rates among subprime borrowers have already caused a crisis on Wall Street, all but shutting down the subprime mortgage market since August because lenders could no longer raise the cash to make new loans. The Bush administration has pushed for voluntary agreements aimed at avoiding some, but far from all, of the foreclosures expected next year.

The American Banking Association praised the Fed’s action as “an important proposal that would make a significant difference in protecting mortgage borrowers.” But the industry group warned that some provisions might go too far. “We worry that replacing important lending flexibility with rigid formulas might also limit lending to some creditworthy borrowers.”

In Congress, leading Democratic lawmakers said the Fed had been too cautious.

Representative Barney Frank of Massachusetts, chairman of the House Financial Services Committee, said the central bank showed it was "not a strong advocate for consumers." Senator Christopher J. Dodd of Connecticut, chairman of the Senate Banking Committee, called the proposal a "step backward."

The House recently passed a bill last month that would impose even tougher restrictions on many subprime practices that the Fed addressed on Tuesday. The Senate has not acted on a bill, but Mr. Dodd recently introduced a measure with many of the same goals as the House bill.

Despite their limitations, the central bank’s new proposals would nonetheless cut a wide swath across the nation’s fragmented mortgage system. They would govern practices for all mortgage lenders, regardless of whether they are banks, thrift institutions or independent mortgage companies. And they would apply regardless of whether a lender is supervised by federal or state regulators.

The most important indicator that the Fed wanted to throw down the gauntlet is in how it defined the mortgages that would be subject to special consumer protection.

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source: nytimes.com

Columbia's Expansion Enters Endgame

Lee Bollinger, the president of Columbia University, knew from the get-go that in order to expand, he had to win over Harlem. He and his aides went to great lengths to get neighborhood leaders to see what a new campus could do for them.

Somehow, months or even years later, Harlem, or at least a vocal portion of it, is still not convinced. At a Dec. 12 City Council hearing, Mr. Bollinger drew a groan from the audience when he posited that there existed “a sense that we have established trust between Columbia University and the surrounding neighborhood”—a groan that was loud enough to draw gaveling and an admonishment from the City Council member chairing the meeting.

The opposition may not matter in the end: The City Council was expected to ratify on Dec. 19 or, at the latest, by mid-January, with just a few symbolic "nay" votes, the rezoning that would make the 17-acre campus in West Harlem possible.

But why, if the university spent all this time—not to mention money—trying to reach out to Harlem, do so many people feel that Columbia has not been listening?

Early on, Mr. Bollinger spoke of the need to overcome the town-gown tensions of the past, and several instruments were set up to forge a cooperative relationship. Community advisory meetings were held and a turning point in the relationship was promised.

“I think now I was incredibly naïve in thinking that we could work together on this,” said Jordi Reyes-Montblanc, the chairman of the local community board. “They did nothing to actually change their plan when we raised objections to it.”

A pastor of a West Harlem church on the edge of the expansion zone, the Rev. Earl Kooperkamp of St. Mary’s Episcopal, was more moderate in his appraisal, though nonetheless skeptical.

“Columbia has resources and a good vision, and that’s a good thing,” he said. “But all too often there has been a dialogue to the deaf. I’m not sure Columbia has been hearing it.”

To some extent, any plan to build seven million square feet of anything anywhere would run into resistance. The transformation of the proposed site—most of it between Broadway and 12th Avenue from 125th to 133rd streets—would be total. A low-slung manufacturing area with dissolving sidewalks is about to be turned into a new-fangled campus with gleaming 25-story buildings. Just two or three historic buildings are to be preserved under Columbia’s plan. The current residents would be moved, somehow with their consent.

From Columbia’s perspective, the move would be historic, comparable to the decision to move to Morningside Heights over 100 years ago. The new campus would address a severe space deficit that Columbia says it suffers compared to other top schools, and add enough floor area to grow for another 30 years.

But in this case, Columbia’s history with the community, the nature of the opposition it faced and the awkwardness with which it stated its case conspired to make the expansion a particularly difficult sell.

It was clear from public hearings that the memory of the university’s attempt to build a gym in Morningside Park lives on strongly, even though it happened almost 40 years ago. “Don’t trust Columbia University,” Councilman Charles Barron, an East New York Democrat, proclaimed at last week’s City Council meeting. “History has shown that they cannot be trusted.”

On top of that, Harlem’s well-organized tenants groups, already upset about gentrification that it could not control, saw in Columbia an enemy it could recognize and fight. They launched a no-holds-barred assault on the plan, booing Mr. Bollinger, and even former Mayor David Dinkins, a Columbia professor, when they spoke in support of the expansion at a public hearing in August.

The opposition may have turned off political leaders, but it energized its base with a clear message: Columbia was an outsider eating up Harlem. The university tried to defuse this argument by pledging that it would not seek to use eminent domain to displace residents, only businesses. Yet the distinction was publicized only late in the game, and it did not do anything to temper the objections of two commercial property owners who did not want to sell to Columbia. One, Nick Sprayregen, hired a lawyer and publicist to fight it. The other, Anne Whitman, supported an opposition group, the Coalition to Preserve Community, by contributing money to pay for photocopies and the like, according to Tom DeMott, a founder of the CPC.

Columbia, on the other hand, seemed to be spreading several messages. One was that it was misunderstood. Mr. Bollinger, for instance, told The Observer in January that the relationship with Harlem was “quite positive, much better than it was, and not as appreciated as it ought to be.” He went so far as to say about surrounding residents, “Their lives will be very significantly improved by Columbia’s presence. If I didn’t believe that, I would not have reached the decision to go there.”

Meanwhile, other officials and university brochures tried to play up how much the school already was doing for Harlem by advertising its community health services, a legal aid clinic and the fact that 30 percent of its workforce lived in Upper Manhattan. They trumpeted a “Columbia-assisted” public high school that would be located on the new campus—although, the university’s senior executive vice president, Robert Kasdin, said last week that Columbia is not paying for the construction of the school, just the property on which it will stand.

source: nyobserver.com

MTA takeover puts Factory in Flux

At a converted warehouse on the edge of Queens sits a New York of the imagination. More than a hundred imaginations, actually, one for each of the artists who labored on the massive "New York New York New York" installation that presents a sort of wishful alternative universe to the Robert Moses Panorama at the Queens Museum of Art.

But piece by piece, the artists' dizzying scale-model replica of the city is going to come down and with it the Flux Factory, the warehouse turned art space that houses it, in an eminent-domain takeover by the Metropolitan Transportation Authority for its $6.3 billion East Side Access project.

"We love this city, and we think in some small way we've added something to the life of the city," said Morgan Meis, Flux Factory's co-founder and president. "We are the kind of thing the city is always promoting about what makes it so great. But then we lose our space. There is some root hypocrisy there."

Flux Factory began in Williamsburg in 1994 and moved to its present location five years ago to flee the rising rents of Brooklyn. It has grown into one of the city's most beloved art groupse city, sponsoring such off-beat projects as building a monument to the city of Paterson, N.J., marathon group novel-writing, and walking tours of fake street art.

"Our whole thing is about not going out and getting work but creating work out of a collaborative process, and getting people together to create our own little unique world with each project."

They settled in Long Island City in 2002, and signed a 15-year lease only to find out last year that they would be homeless again.

Meis said that the MTA for years failed to communicate its intentions for the site. "They are not interested in an open flow of information. It's unbelievable. They don't see themselves in anyway responsible to the public."

An MTA spokesman denied the allegations and said that site was crucial for its East Side Access project, which would bring a tunnel underneath the East River to connect the Long Island Rail Road with Grand Central Terminal.

"The MTA is in negotiations with the property owner to acquire the site," said the spokesman, Jeremy Soffin, in an email message. "The MTA held a public hearing on February 22, 2007, at which time it clearly detailed the properties being acquired and the intended uses for those properties. Flux Factory, as well as all other affected parties, was advised of the public hearing by mail; the announcement for the hearing was also advertised in the local press."

But Lenny Gartner, the owner of Flux Factory's building, said that the MTA made one, "take-it-or-leave-it" offer.

"This whole thing is done for a bunch of commuters coming in from once section of Long Island into Grand Central," he said. "They have a tremendous amount of space. I don't see why they have to wipe out a whole area."

Devastated Fluxers, meanwhile, are grappling with the idea that home could be no more.

"Flux Factory is one of those special places in the city because it builds the kind community of artists and thinkers that is so hard to have in this town," said Mikey Barrington,23, a member of the group for a year and half. "It's the kind of place that you picture what being an artist in New York would be like."

source: amny.com

Williams Sonoma bringing ottomans to outer boroughs

Soon more residents of the outer boroughs will be able to shop for upscale home furnishings in their own neighborhoods, just like residents in Manhattan, who will also be getting even more venues to buy leather club chairs and cashmere baby clothes.

Williams-Sonoma Inc., the parent company of several furniture and housewares brands like Williams-Sonoma, Pottery Barn and West Elm, is known for being one of the first retailers in Soho and sniffing out emerging neighborhoods. It has embarked on an expansion of its brands in New York City.

Some of the brands are new, such as Threads, a test store for upscale children's clothing. The company is also planning on opening its first New York City location for Williams-Sonoma Home, a recent spin-off brand, on either 59th Street near Bloomingdale's or in the Flatiron District next year, said Mark Finkelstein, president of Retail Strategies and Williams-Sonoma's broker.

The retailer also plans to bring West Elm, a furniture chain aimed at younger consumers, to the Upper West Side.

Beyond Manhattan, look for Pottery Barn to make its Brooklyn debut in either Brooklyn Heights, Cobble Hill or Park Slope in late 2008 or early 2009. Queens and Harlem could also be on tap, Finkelstein said.

The store openings follow Williams-Sonoma's time-tested real estate strategy.

The San Francisco-based company, which has $3.8 billion in revenue and is the fifth-largest retailer of home goods, is notoriously rent-sensitive. It cushions the blow of high New York rents by placing stores on less-expensive side streets and by pioneering uncharted territory, making it an early entrant into both Soho and Dumbo in Brooklyn.

The retailer declined comment for this story.

Threads builds on Williams-Sonoma's bid to broaden its portfolio of home concepts. The test store is based on children's apparel sold at Pottery Barn Kids and is located at 1551 Second Avenue at 76th Street, mere blocks from Pottery Barn Kids. That's an example of a classic Williams-Sonoma strategy -- clustering complementary retail brands just a few blocks apart.

The Threads store used to house Chambers, the now-defunct Williams-Sonoma brand, reflecting Williams-Sonoma's practice of recycling its stores to test new concepts in secondary locations as opposed to using new, prime real estate, said Robin Abrams, executive vice president at the Lansco Corp.

Second Avenue in the East 70s has blossomed into a destination for kid's clothing, with retailers such as Talbots Kids and Lester's, Abrams said. Retail rents on Second Avenue in the 70s average between $150 and $200 a square foot.

Life in Bloomie's Country

The retailer faces pricier rents in what's been called "Bloomie's Country" on Third Avenue in the 50s -- for its tony Williams-Sonoma Home concept, which sells mother-of-pearl-handled cheese servers and custom-upholstered couches.

Rent in that neighborhood is around $250 to $300 per square foot.

In addition to longtime marquee fixture Bloomingdale's, the area is home to more recent tenants such as the Home Depot, Ethan Allen and Domain.

A spot for Williams-Sonoma Home near the Decoration & Design Building, at 979 Third Avenue, which houses over 100 upscale home showrooms, is ideal, Finkelstein said.

The retailer "works closely with the decorators and designers in the D & D Building and also serves as an alternative to the design showrooms," he said. "If they move into the D & D area, they'll get the designer and decorator business, the tourist traffic that comes from all over the world to shop in that neighborhood and the bridge-and-tunnel crowd," said Faith Hope Consolo, chairman of the retail leasing and sales division at Prudential Douglas Elliman.

The retailer will also likely consider side streets, possibly angling for a spot on 59th Street off Lexington or Third avenues to shave costs.

It currently operates a Williams-Sonoma kitchenware store and a Pottery Barn furniture store on 59th Street near Lexington Avenue, and a West Elm furnishings store on 18th Street.

"Side streets are half to a third of the rent of a major avenue," Abrams said. "It was unusual for a national chain to go on a side street."

Farther downtown in the Flatiron District, another possible location for Williams-Sonoma Home, rents are even steeper. They range from $400 to $500 per square foot on Fifth Avenue and are about $300 per square foot on Broadway by ABC Carpet, sources said.

Like "home furnishings-centric" 59th Street, the Flatiron District is dotted with stores like Design Within Reach, Waterworks and Ann Sachs Tile & Stone.

In both neighborhoods, Finkelstein said, "It's about finding the right opportunity and affordability. They need to show profitability at the bottom line."

Although the cost of doing business in New York is high, so is the potential payoff.

"The New York stores do well," Finkelstein said. The Williams-Sonoma, Pottery Barn and West Elm brands can generate volume of roughly $1,000 to $1,400 per square foot in New York, sources estimate.

West Elm branches out

Emboldened by the success of West Elm stores in Dumbo and Chelsea, which offer more moderately priced furnishings, the retailer is looking to open a third New York City unit on the Upper West side in the Lincoln Center area.

The retailer also operates catalogs and Web sites for its brands, which aid it in choosing new locations.

"Williams-Sonoma has a tremendous advantage with all their catalogs," Finkelstein said. "Their demographic maps show where each sale came from in each zip code. [That tells them] where they're missing a store and where a store would be good."

To that end, the retailer is scouting locations for Pottery Barn in Brooklyn Heights, Park Slope and Cobble Hill, where rents range from about $100 to $150 per square foot, Finkelstein said.

And a store in the Forest Hills section of Queens could come down the pike, he said.

"The boroughs have long been underserved. There is a big population there with buying power," Abrams said.

Finding the next hot spot

Brokers said Williams-Sonoma has a good nose for sniffing out emerging neighborhoods and underserved areas.

"They're very good at selecting locations ahead of the curve," Finkelstein said. "In Soho they were one of the first on Broadway and Houston -- it was a very cheap deal then. They could never have afforded it today."

The same is true of 86th Street and Madison Avenue, where Williams-Sonoma opened a Pottery Barn about 15 years ago. At the time 86th Street, with its mom-and-pop stores, was a nondescript neighborhood considered too far north for high-profile commercial real estate.

Today, Carnegie Hill is filled with chic restaurants, national retailers like Borders and new residential development, Consolo said.

Will Williams-Sonoma continue north to Harlem? "I hear they're looking at 125th Street," Consolo said. Don't be surprised "if in the next year or 18 months they lease something up there."

source: therealdeal.net

Governors Island design team announced

Governor Eliot Spitzer and Mayor Michael Bloomberg announced the winning design team at Governors Island, and officials talked up the "whimsical" plan, which proposes tearing down the island's barracks and converting them to hills. But the challenges facing the 90-acre project are serious.

Spitzer, Bloomberg and Assembly Speaker Sheldon announced that West 8, a Rotterdam firm with landscape experience from Singapore to Toronto, will lead the design team for the island's western-facing half with a grand 2.2-mile promenade and three public spaces. West 8 and its partners beat four other finalists to convert the harbor's underused jewel over the next two years into what Deputy Mayor Dan Doctoroff promised could surpass Prospect Park and Central Park for "idyllic" charm and views.

The design competition represents a new phase in the island, which the state bought for $1 from the federal government during the Clinton administration. An earlier request for development ideas underwhelmed the city-state sponsoring agency, the Governors Island Preservation and Education Corporation, leading Doctoroff to more aggressively guide planning efforts.

Doctoroff today spoke of the island as the linchpin in an emerging "Harbor District" connecting Hudson River Park, the under-construction Brooklyn Bridge Park, and the planned esplanade along South Street. That area encompasses waterfront development in Lower Manhattan and Brooklyn, where residents are paying up for new condos and clamoring for matching new parks.

Perhaps heeding that call, GIPEC required submitters to propose ways to make the island a unique park and downplayed questions of what sorts of permanent facilities could work there. Today, Speaker Silver, whose district includes Lower Manhattan, praised GIPEC for promising to deliver "exactly what residents in Lower Manhattan deserve."

For the next two years, GIPEC will fund environmental impact studies and design work and continue to offer tours and summer programs of the relatively bucolic island. The presumption is that West 8's team -- which also includes one of the High Line's lead designers and the firm that transformed 55 Water Street's roof to a tranquil landscape -- will produce something so enchanting that New Yorkers will continue to visit until a private investor underwrites the roads and sewers the island will need to prosper.

"We've always seen parks as the catalyst for the sensible redevelopment of the island," Doctoroff said, mentioning think tanks and research facilities as possible occupants. Law prohibits residential uses on the island: Bloomberg said that his foundation might answer a request for proposals with a scheme to site a public health center there.

For now, the park planning is all the public can track. On that score, West 8 principal Adriaan Geuze promised to pay attention at public forums and online comments, which GIPEC promised in the coming months.

"Engaging people is very important for a park," Geuze said. "You cannot simply build a park, ship it and bring it." The same holds, more emphatically, for an island. By Alec Appelbaum