Despite carnage on Wall Street, vacant storefronts on Madison Avenue and pricey restaurants offering “grill menus” (read: cheap burgers), some things remain unchanged in the great metropolis. The price of the average Manhattan apartment is still hovering at more than $1 million.
Signs of the inevitable, however, are everywhere, and nowhere more readable than in the Real Deal, a print and online magazine that mines the big-money, character-rich world of New York real estate as if it were a professional sport.
Here’s what its intrepid reporters were chasing for the August print edition:
* A Manhattan developer may demolish a half-built skyscraper because he can’t borrow cash to complete it.
* A highly leveraged apartment complex in the outer boroughs is on track to become a homeless shelter.
* A residential brokerage house fired its in-house masseuse.
The staff was also busy assembling a list of “the best and worst” ideas, companies and deals to emerge from the economic crisis stalking the city.
Really, there’s no telling how the real estate world here will unravel. Early indications are: not gracefully.
At a meeting this month in the Real Deal’s sparely (early-Ikea) decorated Manhattan office, Stuart Elliott, the executive editor, urged his tiny staff to keep tracking the behavior of developers trying to stave off meltdown -- and opportunists positioning to take advantage of it.
They’d already run a map of Manhattan apartment buildings with the highest concentrations of Bernie Madoff victims. They’d described ugly “divorce” battles between developers and their marketers. And they’d reported on a developer who got whacked over the head with an ice bucket during a dispute with his partner over a failing property.
Elliott also checked in with a reporter following up on an earlier story about lenders so reluctant to foreclose on developers with underwater loans that they “extend and pretend” the loan isn’t in trouble.
“Push it forward,” Elliott pressed the writer. “Look if regional banks are doing the same.”
This is relatively new territory for the Real Dealers, many of whom cut their professional teeth a couple of years out of journalism school covering New York’s historic boom. In just the last three years, $100 billion worth of New York property was sold -- and now many of those deals are in trouble. The Real Dealers are having to decipher new lingo to understand lawsuits that are piling up.
Of course, people have always been willing to pay for New York because of its location (location, location), beginning with the $24 worth of trinkets the Dutch forked over to the Indians for “Island Manhattes.” Undoubtedly, it was a pittance for what would become the most valuable piece of real estate in the world.
But in this last boom, New York prices went out of this world.
As recently as a year ago a condo with a view of Central Park topped the charts at $45 million, and a 50-story tower on Fifth Avenue went for $2.9 billion, the most expensive office sale recorded around the globe.
Amir Korangy, founder and publisher of the Real Deal, says his non-New York friends are always trying to correct him when he describes trading on the modern Island Manhattes:
“I talk about ‘billions’ and they say, ‘You mean millions’ and I’m like, ‘No, I mean billions.’ In New York, numbers are just bigger.”
Korangy’s magazine -- and a feisty band of competitors including the New York Observer and curbed.com -- has made a sport of trying to be first to report “firsts,” “mosts” and other metrics of New York real estate sales. As in, the most expensive co-op sold on the Upper East Side ($46 million) or the increase in prices of downtown town houses sold between 1997 and 2007 (379%) or the first house in Red Hook to sell for more than $1 million.
Yes, Red Hook. That’s Brooklyn.
With the rising tide of easy money that was being thrown at New York property, urban gentrification had spread through the outer boroughs, this time reaching not just upper Fifth Avenue in Manhattan but also Fifth Avenue in Flushing (Queens) and Fifth Street in Williamsburg (Brooklyn), and tens of thousands of developers, investors, brokers, mortgage bankers, contractors, appraisers and doormen had flourished along with the neighborhoods.
So did the Real Deal and Korangy, a real-life Horatio Alger story.
In just six years Korangy went from utter obscurity to being hailed among the 100 most important people in real estate, according to a list in the Observer last month. OK, so he’s No. 96. But he’s only 35.
Korangy, who moved to America from Iran with his family at age 8, got his start as an entrepreneur after college by scraping together enough money to start the Gringo Gazette, a newspaper for Americans living in the Baja area. He sold it within six months for $60,000 after a Mexican advertiser, who refused to pay his bills, began harassing him. Korangy eventually landed in New York, where, after several business ventures, he decided to start the Real Deal.
Korangy had flipped a dozen apartments in an edgy Brooklyn neighborhood when he realized “there was nothing out there for me to read as a small investor.
“All I got out of the Sunday newspapers were details about some gargoyle on the Upper East Side. I didn’t need architecture, I needed statistics, research, trends to base my decisions,” he says.
In April 2003, Korangy put out the first edition of the Real Deal from his own apartment in Brooklyn. Not long after, he hired Elliott, then a recent graduate of Columbia’s School of Journalism, who focused the coverage on residential brokers who loved seeing their names and photographs in print. The boom was in full swing and showing no signs of decline, with 100,000 brokers’ licenses being issued a year in New York, Korangy says.
“Amir was smart to focus on brokers,” says Tom Acitelli, who worked for Korangy before he was hired to start a real estate section for the Observer. “He filled a void in the coverage.”
The magazine broadened its scope over time, providing reams of statistics for the industry as well as lengthy profiles of eccentric characters such as a Russian cab driver who became an oil oligarch and began buying up New York buildings.
But even in heady times, New York is hardly an easy place to do business. Korangy barely prevailed in a lawsuit filed against him by an investment banker who owned a similarly named publication and wanted to buy the Real Deal.
The magazine has done improbably well at a time when the print media has lost advertisers and readers to the Web. Between its tabloid-sized monthly, circulation 60,000, and its online offerings that get 1.4 million page views a month, the Real Deal has become a must-read for real estate insiders. In September 2008, the magazine reached a zenith with 212 pages and $6 million worth of advertising.
Korangy notes the irony of the timing -- that was also the month that New York woke up to what the rest of the country had long been suffering because of the subprime mortgage disaster.
If New York’s real estate mavens know one thing about hard times, it’s this: They visit here last and stay here longer. But with the Sept. 15 market crash, Lehman Bros.’ implosion and Wall Street in chaos, gloom began rolling through Manhattan last fall with the determination of real estate agents descending like ants on a new Park Avenue listing.
The world of New York real estate took a psychological hit. It wasn’t that prices dropped precipitously in the last quarter of 2008. There were just half as many transactions, and a lot of office space had emptied as financial service businesses, the mainstay of the New York economy, tumbled.
But Robert Knakal, a broker once described as the “master of the under-$100-million commercial transaction,” (considered relatively small in this city), insists that after a miserable winter the mood among insiders is more upbeat. Even though everyone knows prices are on a slow, steady decline, they’re feeling better, he says.
“It’s as if you had both your arms hacked off and you were bleeding all over the place,” Knakal says. “But then the bleeding stopped and you feel a little better. You still have your arms hacked off, but everything is relative.”
Knakal turned up this month in a town house in the East 30s with about 100 property owners, developers and bankers (and an unemployed stockbroker trying to break into the business) for a bimonthly luncheon of a realty club. Over catered Mexican food, they heard from a panel of real estate journalists about what passes for news these days.
“News is when Bob calls Paul,” the Observer’s reporter, who is one year out of J-school, said in reference to Knakal and his business partner Paul Massey.
This got a big laugh.
The Real Deal’s Elliott, gray-suited and earnest, warned that his staff couldn’t sugarcoat the bad news. “From our point of view, that’s what’s happening,” Elliott said of the declining market. “If there’d been more transparency, the subprime mortgage might have not happened.”
This got cheerless nods.
A lot has happened since New York fell off a cliff last September:
An established residential brokerage house of 325-agents was shuttered.
One of New York’s most successful agents stopped carting her clients around in a Rolls Royce with the vanity plate “Sold1" and is instead driving a station wagon.
And some of those flamboyant developers -- the P.T. Barnums who a year ago were marketing condos with $19,000 window blinds and hosting openings for new buildings with big-name entertainers such as singer John Legend -- are now facing lawsuits and irritated buyers.
The Real Dealers are hard on the beat, learning the idiom of foreclosures and covering the ethics of residential brokerage firms that stiff their agents out of commissions. The August edition will be a slimmed-down 108 pages, but Korangy insists he has no plans for layoffs.
Whether they’re chasing stories of staggering success or creeping distress, Korangy said, the Real Deal has the same mission: “More than ever people need good information. Now they’re all looking for deals. They’re all calling banks, reading about loan defaults and foreclosures and seeing what they can pick up.”
Korangy is also trying to survive, by renegotiating with suppliers to stay in the black; he’s confident that New York will rebound.
“It always has in the past,” he says.
With this determined optimism, the Real Deal is again renting a house for two weeks in the Hamptons for the staff to gather around the pool and use the tennis court.