Crain's New York Business
July 1, 2013
Residential builder Naftali Group has completed the acquisition of a development site on the Upper West Side for $55 million.
The Jewish Board of Family and Children’s Services, one of the city’s largest social service nonprofits, was the seller in the deal. The organization acquired the site four years ago as a location to erect its new headquarters. But it reconsidered that plan after land values began to dramatically rise in recent months as a hot residential market has prompted developers to restart apartment projects again.
“We realized it made a lot more sense to take the money from this and use it for the long-term growth of the Jewish Board,” said David Rivel, who became the Jewish Board’s CEO on Monday. “There are new lines of business that we want to launch and more things we can do to help our clients.”
The deal, which Crain’s first reported in May, officially closed on Friday. It is part of a new wave of land purchases being done at record prices. About 76,000 square feet of residential space can be built on the site the Naftali Group is buying, which is located at 210 W. 77th St. It is currently home to a Hertz rental-car garage. Naftali is paying roughly $725 per square foot for the site.
Up until recent months, only a handful of development parcels in the city had broken the $700 per square foot market, but that threshold is being crossed more frequently now as condo prices have surged and developers have become willing to pay big sums for the chance to build.
“It’s a great sign for the market,” said Robert Knakal, chairman of the brokerage company Massey Knakal, who handled the deal. “This is one of the first transactions that is indicative of the new land pricing.”
Miki Naftali, the Naftali Group’s chief executive, said he will be able to effectively lower the price of 210 W. 77th St. into the $600s per square foot by adding about 20,000 extra square feet to the project, bringing the total of what can be built on the site to just shy of 100,000 square feet. Mr. Naftali said that he had received the bonus from the city in exchange for agreeing to build affordable apartments on another yet-to-be-disclosed site.
Mr. Naftali also pointed out that condo sales have risen high enough to justify land prices of $700 per square and more.
“If you’re getting prices around $2,500, $2,600 or $2,700, you can obviously pay more for the land,” Mr. Naftali said. “We’re going to be building something very high end here. On the Upper West Side, there simply aren’t new buildings like the one we’re going to develop here.”
Several nonprofit groups like the Jewish Board have moved to cash in on the strong land market in order to raise funds in recent months. Michael Rudder, a broker who specializes in office condo sales, said that Chamber Music America, which provides services for chamber musicians, just sold its headquarters space at 305 Seventh Avenue and will relocate to a smaller, less expensive commercial office condo it is in the process of buying elsewhere in midtown.
“There are a number of non-profits that have owned prime real estate that has a lot of value,” said Mr. Rudder, who operates his own brokerage company Rudder Property Group. “They can then purchase a less expensive space and come out with a profit.”