The New York Times

May 30, 2004 Sunday
 

SECTION: Section 11; Column 2; Real Estate Desk; Pg. 1

LENGTH: 2802 words

HEADLINE: Liberty Bonds' Yield: a New Downtown

BYLINE: By DAVID W. DUNLAP

BODY:
LIBERTY BONDS were meant to revitalize Lower Manhattan. They are on the verge of transforming it, too.

Several thousand rental apartments are being created in projects that have benefited from more than $1 billion in tax-exempt Liberty Bond financing, not only through the conversion of old office buildings but -- even more strikingly -- by the construction of new residential towers in the middle of the financial district and on the outskirts of the civic center.

A 45-story apartment tower at 10 Liberty Street, where tenants will begin moving this summer, shares an intersection with 1 Chase Manhattan Plaza and the Federal Reserve Bank. A block away, on tiny Gold Street, the concrete form of an even larger neighbor is rising toward the 52nd floor. And for a site near City Hall, Frank Gehry is designing an apartment tower with space for Pace University and NYU Downtown Hospital.

At 10 Liberty Street, rents start at $2,400 a month for a 650-square-foot, one-bedroom apartment; $3,870 for a 1,006-square-foot, two-bedroom unit. Downtown developers generally are seeking rents around $45 a square foot annually. ''What makes deals more attractive down there is that almost every building is offering incentives,'' said Andrew Heiberger, president and chief executive of the Citi Habitats brokerage firm.

Still, the buildings financed by Liberty Bonds unquestionably fall under the luxury rubric. Not everyone approves.

''It truly has changed how people are going to live in Lower Manhattan and who's going to live there,'' said Bettina Damiani, project director of Good Jobs New York, which monitors economic development subsidies. ''What Liberty Bonds are doing for the residential market of Lower Manhattan is, unfortunately, really speeding up the gentrification process.''

Housing officials respond that Liberty Bonds were not intended to create affordable housing, but to rebuild an area that was still staggering when the program began in 2002.

''At the time, the occupancy rate was 65 percent,'' recalled Emily A. Youssouf, the president of the city Housing Development Corporation and a downtown resident for 18 years. ''Living down here, and making a conscious decision to stay, I had a lot of neighbors who were fleeing, selling apartments at rock-bottom prices.'' The Liberty Bond program, she said, showed that the government was ''not afraid to make a statement about revitalizing Lower Manhattan'' at that precarious moment.

Residential occupancy rates are now 95 percent, according to the Alliance for Downtown New York. Carl Weisbrod, the president of the alliance, credited both Liberty Bonds and residential retention grants with reversing the post-9/11 exodus.

''In that sense, it was government programming at its very best,'' he said. On the downside, Mr. Weisbrod said, the fact that Liberty Bonds could be applied only to rental buildings ''skewed the decisions of developers from home-ownership product.'' That is important, he said, because ''ownership units provide a much greater stake in the community and much less transience -- not to say we don't welcome rental buildings.''

All told, the federal government authorized $1.6 billion in tax-exempt financing for multifamily rental projects in the so-called Liberty Zone south of Canal Street. Issuance of the bonds was divided between the city Housing Development Corporation and the state Housing Finance Agency.

''This isn't an $800 million giveaway,'' said Stephen J. Hunt, president and chief executive of the state agency. ''This is financing for $800 million. These developers are still taking a significant risk.''

Because interest on these bonds is not subject to federal, state or city taxes, purchasers accept lower interest rates. That means lower costs for borrowers, including builders like the Elghanayan family of Rockrose Development, the Albanese family of the Albanese Organization, Stephen M. Ross of the Related Companies and Leonard Litwin of Glenwood Management.

It also benefited Frank J. Sciame, F. Anthony Zunino III, Richard S. Berry and the Durst Organization, developers of an unusual project along Front Street in the South Street Seaport Historic District. Eight buildings are being renovated and three new buildings constructed to create 96 units. It received $46.3 million in state-issued bonds.

When the partners were negotiating to buy the property, the ''aftershocks of 9/11 were still rippling through the downtown residential market,'' said John M. Evans of Sciame Development. ''Liberty Bonds provided the critical margins that enabled the Bank of New York to step forward at that time and underwrite the project.''

To date, the city has closed $478.6 million in Liberty Bond financing for four projects with 1,934 units. Already completed is the conversion of 90 Washington Street by the Moinian Group into 398 apartments. The others involve the conversion of 63 Wall Street and 90 West Street and the construction of 2 Gold Street.

The corporation charges a 3 percent fee to developers and uses that to subsidize apartments at other sites for low- and middle-income tenants. Alluding to a tax-exempt financing program that reserves 20 percent of a building for lower-income tenants, Ms. Youssouf said, ''We, in essence, did an 80-20, but in a very inventive way.'' The four downtown projects will generate 390 units at 760 Melrose Avenue, 3880 Orloff Avenue and 1011 Washington Avenue in the Bronx; Beach 96th Street in Queens; and 1652 Park Avenue in Manhattan.

''The mayor does get credit for creativity,'' said Ms. Damiani of the Good Jobs watchdog group.

The state has issued or authorized $675.8 million in Liberty Bond financing for seven projects with 1,837 units: three new buildings at the north end of Battery Park City; new buildings at 10 Liberty Street and 10 Barclay Street; the conversion of 100 Maiden Lane; and the Front Street project.

The state's version of the affordable-housing provision requires developers to reserve 5 percent of their units for tenants earning no more than 150 percent of the median income in New York City. For one person, that would currently translate as a maximum income of $66,000 to qualify for a $1,650-a-month studio. A family of three could have a maximum income of $84,750 to qualify for a $2,119-a-month two-bedroom apartment. At 10 Liberty Street, for example, 10 one-bedroom and five two-bedroom units have been set aside.

New Buildings
Liberty Plaza And Golden Hill


The incongruity of 10 Liberty Street takes some getting used to. The slender tower is unmistakably residential. Its rosy-brick facade is folded into domestically scaled window bays that take advantage of surprisingly open vistas. The building benefits from being surrounded by Louise Nevelson Plaza, Chase Manhattan Plaza and its own 40-foot-deep plaza on Cedar Street.

The plaza generated a 20 percent bonus in a zoning district where floor area is limited to 15 times the lot size. That yielded a structure with a floor-area ratio, or F.A.R., of 18-to-1. But residential density cannot exceed 12-to-1, so Glenwood merged its zoning lot with two adjacent buildings on Maiden Lane. When the residential density from 10 Liberty Street is calculated over this larger site, the 12-to-1 ratio holds.

Since the rental office opened three weeks ago, 10 percent of the 287 units have been leased. Tenants are to begin arriving in mid-August. State-issued Liberty Bonds provided $95 million of the financing for the $125 million project.

The building, called Liberty Plaza and designed by the Stephen B. Jacobs Group, has no studios. In part, said Gary Jacob, the executive vice president of Glenwood, this reflected a belief that downtown is becoming ''more of a permanent community.''

There will be three-bedroom apartments at 10 Barclay Street, which will rise 56 stories alongside St. Peter's Roman Catholic Church and have 381 units. The architects are Costas Kondylis & Partners. Construction is to begin later this summer and be completed in January 2006.

The $185 million project will be financed with $135 million in bonds. Critics of the program have suggested that Mr. Litwin received preferential treatment from the Pataki administration because of campaign contributions, noting that Glenwood had been granted 29 percent of the total state allocation for residential Liberty Bonds.

But Mr. Jacob rejected the notion of favoritism, saying that the financing was awarded on the merits and that Glenwood's total represented only two projects.

''We're putting in a tremendous amount of equity and taking a tremendous amount of risk,'' he said. ''We bought these properties before there was a Liberty Bond program.'' Because Glenwood already owned its sites, he said, it was a step ahead in applying for a program that worked on a first-come-first-served basis.

Rockrose, too, was on the scene long before Liberty Bonds. It began assembling the site for what is now 2 Gold Street in 1998, when it envisioned a ''blockbuster corporate office building,'' in the words of Jon McMillan, director of planning.

What it is building is still a blockbuster -- by far the largest single apartment building under Liberty Bonds. Its 650 units are expected to range from $1,900 for a studio to $3,400 for a two-bedroom unit when they become available in the spring of 2005. The $225 million project received $170.3 million in city-issued Liberty Bond financing.

Avinash K. Malhotra is the architect of the tower, which has projecting glass bays to increase a sense of openness. David Rockwell is designing the lobby and other common areas, Thomas Balsley the plaza. And Gustavo Bonevardi, one of the designers of the ''Tribute in Light'' memorial near the World Trade Center, has devised a sculpture for the plaza forming the word ''two.''

Two Gold Street incorporates a tiny remnant of 19th-century mercantile New York: the front wall of 211 Pearl Street, a five-story red-brick counting house completed in 1832 for William Colgate, the founder of what is now Colgate-Palmolive.

The Pearl Street leg of the property will serve as the ramp to the underground garage. Rockrose intended to raze No. 211 and had received permits to do so. But preservationists intervened and a deal was struck to save the facade, as well as a section of interior brickwork with distinctive -- but mysterious -- triangular patterns.

Cars will drive into the garage between the original granite columns. The facade is now supported by a six-and-a-half-foot-deep steel framework. When that is enclosed, it will form a kind of shadow box. Mr. McMillan said Rockrose is talking with Creative Time, an organization that produces public artwork, to turn that unusual space into ''something wonderful.''

Stores in the new project will occupy two floors of the base. ''We're aiming at retailers that cater to the residential community,'' Mr. McMillan said, meaning food and housewares. ''With the addition of 2 Gold and 10 Liberty, there will suddenly be the critical mass and concentration of residents to make a neighborhood.'' Rockrose is even ready with a name, resurrecting the area's 18th-century designation: Golden Hill.

Old Buildings
Brown Brothers And a 9/11 'Miracle'


''We don't really see the building as catering exclusively to the Wall Street crowd,'' said Nathan Berman, though he and Yaron Bruckner are converting one of the more venerable addresses in the financial district: 59-63 Wall Street, long the home of Brown Brothers Harriman & Company, the oldest partnership bank in America.

Only 20 percent of the tenants who have signed up since April are financial district employees, Mr. Berman said. And somewhat to his surprise, about 30 percent of the tenants are committing themselves to two-year leases. The project was financed through $132.5 million in tax-exempt bonds.

Tenants are to start arriving in July. The 37-story tower will have 476 apartments, beginning at $1,800 for a 420-square-foot studio and rising to $6,000 for a 2,000-square-foot penthouse. Mr. Malhotra, who is working on 2 Gold Street, has also designed the conversion of the 73-year-old building. The original architects were Delano & Aldrich.

To obtain historical preservation tax credits, the developers are maintaining the great Brown Brothers rotunda and banking room, a 10,000-square-foot hypostyle hall with 24-foot ceilings. It is to be a grand lounge, designed by David Schefer Design, with a game room, 24-seat theater, television, billiard table, card table and baby grand piano. ''This becomes an extension of the tenant's living room,'' Mr. Berman said.

The entrance rotunda, where yoga classes may be held, is ornamented with ironwork bearing back-to-back B's, for Brown Brothers and -- as fate would have it -- Bruckner and Berman. ''We didn't even have to change the banister,'' Mr. Berman said.

Few structures downtown are as ornamented as 90 West Street, designed by Cass Gilbert and completed in 1907, six years before he awed the world with the Woolworth Building. And no landmark was as badly damaged on 9/11, though the mere fact of its survival, only 100 yards from the trade center inferno, was amazing enough.

''A lot of people called it the miracle building,'' said Ms. Youssouf of the housing corporation, which issued $106 million in financing for the $142 million restoration and renovation project by the Kibel Companies, Brack Capital Real Estate and BD Hotels. The developers are also taking advantage of historic preservation tax credits.

''It's more expensive and elaborate than anything we've done,'' said Peter Levenson, a principal in the Kibel Companies. The cost includes $4 million to rebuild the copper mansard roof. Contractors are also repairing, replacing or recreating the elaborate terra cotta and the massive granite base. ''At this moment, this is the largest hand-carved granite job in the world, I'm told,'' Mr. Levenson said.

Acknowledging vexations, he also relishes finding treasures like the original groined ceiling vaults in the lobby, which was long obscured by a false ceiling, and the surprisingly colorful terra cotta -- lemon chiffon, cornflower blue, jade green -- toward the top of the 23-story structure.

The restoration architect is H. Thomas O'Hara. But Gilbert's hand is present, too, in floor plans that wrap around a courtyard in a U shape, allowing apartment layouts without windowless ''home office'' rooms.

''It's as if this building were built to be residential,'' Mr. Levenson said. There will be 410 studios, one-bedroom and two-bedroom apartments that should be ready for tenants in the late summer or early fall of 2005, almost four years exactly after the landmark building was ravaged.

Future Buildings
Growing Demand, Shrinking Pipeline


In addition to Glenwood's 10 Barclay Street project, other large new residential buildings on the horizon include a one-million-square-foot mixed-use project designed by Mr. Gehry for the Forest City Ratner Companies. The city Housing Development Corporation is considering a $130 million bond issue for the residential portion of the project, at 170 William Street.

Should the corporation approve the Forest City Ratner project, it would be left with about $191 million in financing potential for a pipeline with nine applicants. ''We have a lot more demand than we have Liberty Bonds,'' Ms. Youssouf said.

Battery Park City will get two more buildings with state-issued bonds, which also financed the Solaire at 20 River Terrace.

The Albanese Organization, builders of the Solaire, expects to break ground next month on a 253-unit project at Site 18B, on Murray Street and North End Avenue. Like the Solaire, it is to be a ''green'' building, with elements to conserve energy, reduce water consumption and improve air quality. Cesar Pelli & Associates and SLCE Architects, collaborators on the Solaire, are designing the building. It received $100 million in Liberty Bond financing.

The Related Companies announced last week that work had begun on the 24-story, 274-unit Tribeca Green at Site 19B, on Warren Street and North End Avenue. It is also a ''green'' development, following the Battery Park City Authority's environmental guidelines. Robert A. M. Stern Architects and Ismael Leyva Architects are designing it. The $121 million project received $110 million in Liberty Bond financing.

Next month, the Housing Finance Agency board is to consider $120.35 million in bonds for a 346-unit project by A.I. & Boymelgreen at 88 Leonard Street. That will virtually exhaust the state allocation. Four applicants are still in line, which Mr. Hunt, the agency president, takes as an encouraging sign of confidence in Lower Manhattan.

''We've gone through $800 million and we did what Congress asked us to do: we provided jobs and hope downtown,'' he said. ''I think we gave it a good jump start.''

GRAPHIC: Photos: Among new rental apartments downtown with Liberty Bond financing are those being built at 2 Gold Street (above) and in the former Brown Brothers building at 63 Wall, which still has ''BB'' ironwork (upper left). It also has close-up views of the Deutsche Bank headquarters at 60 Wall Street (left). (Photographs by Ruby Washington/The New York Times)(pg. 1)
 

Two new apartment towers in the financial district: 2 Gold Street, in the center foreground, and the rosy-colored 10 Liberty Street just behind it. (Photo by Ray Jackson/Bernstein Associates)
Putting green for tenants on a setback at 90 Washington Street. (Photo by Ruby Washington/The New York Times)

Rear view of the facade of 211 Pearl Street, which will be the garage entrance to 2 Gold Street.
Terra-cotta grotesque at 90 West Street, a landmark that survived 9/11 and is being converted to apartments. (Photographs by Ruby Washington/The New York Times)(pg. 6)Map of Manhattan highlighting apartment buildings financed by Liberty Bond. (pg. 6)