Luxury Digs Hop Aboard New High Line
By CRAIG KARMIN
The Wall Street Journal
MAY 13, 2011
With the next section of the elevated Chelsea park known as the High Line poised to open next month, New York developers are gearing up numerous projects along the route in hopes of capitalizing on rising interest in the area.
Among them is one from Chicago property baron Sam Zell, chairman of Equity Residential. The company is building its first New York City development, a 111-unit luxury rental property at Tenth Avenue and 23rd Street known as TEN23.
While construction isn't expected to finish until year's end, Equity Residential is already planning to charge some of the steepest rents in the neighborhood. The average studio will rent for more than $3,000 a month, and 1,053-square-foot two-bedrooms will average more than $5,800.
Given the recent strength of Manhattan's high-end rental market and the growing buzz over the High Line, property analysts say Equity Residential shouldn't have a hard time filling up the building. "I expect it to lease up quickly and probably faster than they are expecting," says Haendel St. Juste, an analyst who covers the company for Keefe, Bruyette & Woods.
The High Line has helped transform an area that remains a long walk from public transportation, offers less retail than other downtown neighborhoods, and until recently was associated with crime and industrial blight.
Today, it's known for art galleries, restaurants and night life. The city's commitment to the High Line several years ago seemed to inspire some of the city's most interesting architecture, including buildings by Frank Gehry and Jean Nouvel, near a 1.5-mile stretch on former elevated railroad tracks from below West 12th Street to 20th Street.
The second section, which is slated to open sometime in June and will run from 20th Street to 30th Street, is a less-developed area but has already attracted new construction.
A condo building at 245 Tenth Avenue has restarted its sales effort after stalling out during the financial crisis. A striking 14-story residential building at 23rd Street known as HL23, adjacent to the High Line, has three units in contract; a condo called + art next to the High Line at West 28th Street has sold about one-third of its 91 units since it restarted sales last June.
The Hotel Americano at 27th Street, designed by Mexican architect Enrique Norten and offering 56 rooms in a 10-story building, is expected to open in the second half of the year.
Even before its own High Line project, Equity Residential was becoming increasingly focused on New York. The company entered the market for the first time in 2004 and now owns and manages a dozen properties in the metro area, with more than 7,800 apartments. New York is now the company's No. 1 market, accounting for 13% of Equity Residential's net operating income, according to Mr. St. Juste.
The company sometimes has looked to acquire projects that were under financial stress. Equity Residential last year bought three Manhattan apartment buildings from Harry Macklowe for $475 million when the developer was desperate for cash.
Around the same time, the company purchased the Chelsea lot from developer Shaya Boymelgreen, whose business was hit by the downturn, for $12 million, including the ground lease. The company is spending another $44 million in construction and development of its first ground-up project in New York.
The property is a few steps from the High Line, and its own outdoor spaces include a rooftop lawn and cabana area. Jason Saft, an associate broker at Citi Habitats, says the projected rents are about 5% to 10% higher than other luxury rental buildings near the second section of the High Line.
Write to Craig Karmin at firstname.lastname@example.org