New York's Cooperative and Condominium Community
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Developer Jerry Rosengarten looks back at the ups and downs of 20 years developing New York real estate.
When Carol Ott asked me to describe my 20 years of developing New York City real estate, the first thing that occurred to me is that real estate development is similar to whitewater rafting. Like whitewater rafting, it begins with painstaking preparation by planning and mapping the route, scheduling the trip, purchasing supplies, and, most importantly, choosing the crew. But every journey is fraught with obstacles and peril that could not possibly have been anticipated. As you are negotiating these obstacles, there is a recurring thought, "Why am I doing this?"
When I started in real estate, New York City was on the verge of bankruptcy and Ed Koch had just been elected mayor. I took the money I had earned on the sale of my house and put a downpayment on a building on 23rd Street. At the time, people were living in factory buildings illegally, and I thought that there would be great demand for legal lofts, so I created 12 lofts in that building. I met Carol when she came to look at one of the units. We hit it off at the start and have remained friends ever since. Over the years, I have continued to develop real estate while Carol has become the publisher of her own magazine.
When I started loft development in the '70s, it was a trailblazing task. The buyers, as well as the developers, were pioneers. By converting old factory buildings into residential loft space, we were using property against zoning law. Rather than stem the tide of new development, city officials wisely chose to look the other way in order to fill up some of the vacant space throughout the city. The artists in residence program made living in factory buildings seem reasonable. The numbers of illegal renters grew and the world of lofts became chic, which put new pressures on the business — both good and bad. The good was the tremendous demand; the bad was that the city had to address the widespread flaunting of residential code requirements.
The government created the Interim Multiple Dwellings (IMD) program, better known as rent stabilization. These changes gave power to the tenants by taking it from building owners. At the time, I found myself with rental buildings that I was in the final stages of legalizing. This policy shift threw me into a tailspin (the raft hit the rocks hard). I sold those projects and moved into commercial development.
After the lofts, I renovated a 12-story factory building into a medical center. I was expecting a simple and straightforward job until I encountered an IMD tenant on the fourth floor. In an attempt to extort money, he was refusing to allow me to pass plumbing lines to the upper floors. He was breaching his lease by doing this, but it didn't matter. Ultimately, I succeeded with some legal but highly unconventional plumbing, and the medical building has been fully occupied for the past 17 years.
In the years that followed, I saw the New York market reach new highs as well as lows. In 1987, we watched as the stock market plummeted 23 percent in one day and took the real estate market along for the ride. People had entered into tax shelters that overbuilt real estate throughout the country and contributed to this steep decline. The federal government eventually changed the laws and eliminated the shelters, but it would take nearly ten years for the real estate market to recover.
At that time, I was doing a gut-renovation opposite the Brooklyn Museum. I had sold half of the units when the downturn struck, forcing me to keep the remaining units as rentals. In another turn for the worse, my bank played hardball and tried to avoid fulfilling parts of the loan agreement. It tried to increase its percentage of draw when I closed with the buyers. Fortunately, I got the last laugh when the Resolution Trust Corporation padlocked that lender's door. I suppose I wasn't the only one my bank had played hardball with.
If building a new building over a theater seems like it would be very difficult, then no one should be surprised that it is extremely difficult. From union problems to cranes falling to 9/11, this must take the prize as the most dangerous turn in the whitewater rapids. Every day was guaranteed to be exciting, dangerous, and frustrating.
At the very beginning, the difficulties had already begun to show themselves. Our initial test borings couldn't find bedrock and we concluded that this was the one place on earth that didn't have a bottom. Guts and good engineering triumphed and, ultimately, we built a 17-story condominium.
One winter evening, about eight months into the construction phase, I turned on cable TV's NY1 to watch the news. I was lying in bed with a fever and, through my delirium, I was able to understand that they were reporting on some kind of building accident. Apparently a crane had fallen onto the building that it was constructing. It was my building! Needless to say, I was suddenly very alert despite my poor state of health. After three months of unbelievable red tape with city agencies and insurance companies, and other problems, we were able to restart work, delayed but ultimately more unified in our determination.
The building was progressing steadily for about six months when September 11 happened. I was standing on the roof of the newly topped-off building with my contractors when the towers crumbled to the ground.
With tears in my eyes and a hardened heart, I know that the New York of lofts, office towers, apartment buildings, and street vendors will survive. And so will I. Even though our mayor stopped all deliveries to our mostly open building for the next two weeks we managed to weather this storm.
The next turn in the river came from an unscrupulous scoundrel who tried to extort money from me by filing a petition for involuntary bankruptcy. He had purchased the debt from a questionable creditor and found two others who were willing to join him in his claim. It was shocking, unorthodox, probably unethical, and ridiculous. I thought it was a joke until it appeared in the New York Post. I wanted to fight and squish this cockroach, but, in the end, I settled for a very low figure simply because I am very close to closing with my purchasers and I wanted this last phase of the job to go smoothly.
Over the years I have been involved with many interesting deals. I feel that there are few careers that are as challenging and as exciting as real estate, and that's why I love it. I love New York because this city makes it possible for things to happen. Now, on to my next project in the next hot neighborhood, the Bowery.
Learn all the basics of NYC co-op and condo management, with straight talk from heavy hitters in the field of co-op or condo apartments
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