LONG ISLAND CITY’S RENAISSANCE

Mar. 12, 2013 - commercialobserver.com

Earlier this month, workers broke ground on the first phase of Hunter’s Point South, a mixed-use waterfront development that will include 5,000 residential units, 11 acres of parkland and a 1,100-desk school. It’s just the latest development at the center of New York City’s most promising building boom.

Miami native Rick Rosa stuffed a few bags with his belongings in 1999 and headed for New York City.

Though not the postcard image he envisioned, he stumbled upon the industrial waterfront neighborhood of Long Island City, where he found an affordable pad, close to Manhattan, with a yard for his dog, Benny.

“The neighborhood was very raw when I came here,” recalled Mr. Rosa, now an executive vice president at Douglas Elliman. “It all happened by accident. I just needed space for my basset hound.”

Mr. Rosa moved to the city looking for a change, but Long Island City would change more than he could have imagined. He now works out of Douglas Elliman’s new Elliman LIC office on Vernon Boulevard, as the firm, like many others, tries to capitalize on the neighborhood’s explosive growth.

“I’ve been whispering in Douglas Elliman’s ear about Long Island City for a long time,” he said. “The growth has been amazing.”

The neighborhood’s dramatic makeover from an industrial wasteland to a residential destination and viable alternative to Manhattan was paved by a 2001 residential rezoning that led a few pioneers, including real estate developer Rockrose, to prop up multiple residential towers along Long Island City’s waterfront, which until then had been a largely untapped market.

But the “cat is out of the bag,” developers said, and now residential development has pushed in from the waterfront, toward the Court Square, Queens Plaza and surrounding areas, where several new residential towers are in the works.

Retail and commercial development makes a valiant effort to keep pace, with a number of cultural institutions creating a home base for artists and an office population held together by neighborhood staples like Citigroup and JetBlue keeping businesses afloat, as young people and families priced out of Manhattan give the neighborhood a closer look.

“The transformation that folks were speculating about 20 years ago has tangibly taken hold, making Long Island City a dynamic and exciting neighborhood which is as close to being an adjunct of Manhattan as possible,” said Massey Knakal Chairman Bob Knakal, who has sold dozens of properties and residential development sites in the area.

The scope of the development that the Bloomberg administration is now pushing in the area is nearly unprecedented, breaking ground last week on the first phase of Hunter’s Point South, a mixed-use waterfront development that will include 5,000 residential units, 11 acres of parkland and a 1,100-desk school. The project is set to become the largest residential development initiative by the city since Co-op City was built in the Bronx four decades ago.

Related Companies, partnered with Phipps Houses, Monadnock Construction and SHoP Architects, is building the first two towers at the seven-tower complex, which will be 37 and 32 stories high, making up a combined 925 units geared toward “middle-income” residents.

“The neighborhood is only getting better and better and we wanted to get in on that,” said Frank Monterisi, a vice president at Related Companies. “Long Island City has become very popular with young families, so there’s a real need for this.”

The development of Long Island City, however, was spearheaded over a decade ago by Rockrose, a development company that had the foresight to invest in residential development along Long Island City’s waterfront.

Rockrose purchased a 40-acre site along the waterfront from Pepsi (hence the iconic sign, which remained as part of the deal) in 2003, beginning its massive erection of the soaring glass and concrete towers that are now synonymous with Long Island City’s waterfront.

“They are the reason why Long Island City is where it’s at,” Mr. Rosa said. “They took a piece of real estate that was very unattractive and turned it into what it is now. It’s night and day.”

In 2009, Rockrose, owned by members of the Elghanayan family, split into two entities (Rockrose and TF Cornerstone), with TF Cornerstone retaining most of the waterfront properties and Rockrose focusing in the Court Square area. Both continue to build aggressively in their respective camps, with a number of other developers and businesses following suit.

TF Cornerstone owns five residential buildings along Center Boulevard (including one condo building, The View), the street that winds along the waterfront. When two more buildings in the pipeline hit the market, it will bring the number of units the firm owns along its “East Coast” waterfront community to 3,500, said the firm’s chairman, Tom Elghanayan.

“The idea is that this is not West Queens—it’s the East Coast of Manhattan,” Mr. Elghanayan said. “We appeal to the same market as the high-end clientele of Manhattan.”

Condo sales at The View have topped $1,000 per square foot, and rental rates at TF Cornerstone’s other buildings have averaged around $50 per square foot, which, despite being well above the average for the neighborhood, are still 25 percent below their Manhattan counterparts, Mr. Elghanayan said.

“Long Island City is a real sleeper in terms of the quality of life,” he said. “This is exactly a four-minute ride on the 7 train to Grand Central. If you’re a young family, this is wonderful. You go to work easy, there’s a big park and schools.”

While the market was slow at first to appreciate the value of Long Island City, it’s finally catching on, as land prices and rents continue to rise across the neighborhood.

“The cat is out of the bag,” said Mr. Elghanayan’s nephew, Justin Elghanayan, who, after the 2009 company split, began running Rockrose with his father, Henry.

The father/son duo is spearheading development in Court Square, with more than 2,500 residential units planned over the next several years, as development pushes farther inland toward the Queens Plaza area, where Mr. Rosa at Douglas Elliman said he is marketing a 410-unit rental building being built at 23-10 Queens Plaza South.

Rockrose’s Linc LIC, a 790-unit residential building, will boast panoramic Manhattan views, a long list of upscale amenities and a 15,000-square-foot supermarket, with rents ranging from $1,900 for a studio to $3,400 for a two-bedroom.

Rockrose also is building a 950-unit residential building at 43-25 Hunter Street; Eagle Loft, a warehouse-to-residential conversion; and retrofitting a number of retail spaces located within a stone’s throw of one another in Court Square, an area where the 50-story Citigroup tower at One Court Square once stuck out like a sore thumb, amid low-lying warehouses and car repair shops. But, beneath the surface, a melting pot of artists and creative types has worked together in the neighborhood for many years.

“The thing that caught our attention about this neighborhood was the attractive transportation and its rich cultural history,” said Justin Elghanayan, noting that the 7 train subway ride into Manhattan clocks in at a brisk three-and-a-half minutes and pointing to the Sage General Store café and restaurant in Court Square as typical of the neighborhood’s artisanal vibe. “That’s why places like this survive—because of the office population and because of the artists living and working here.”

Like the residential and commercial development gripping the neighborhood, a plethora of cultural programs and institutions continue to grow with it, anchored by Moma PS1, The Noguchi Museum, SculptureCenter and the Socrates Sculpture Park, among others.

“We think this development is great—it adds to the diversity of the neighborhood and adds to its continued bright future,” said Gary Kesner, executive vice president with Long Island City’s Silvercup Studios. “The effect on the neighborhood has been tremendous.”

The film and television production studio itself even forayed into the neighborhood’s residential space with its development of The Industry, a 75-unit condo located just a couple blocks outside Court Square.

“People really understand that this neighborhood is perfect both for businesses and residences,” Mr. Kesner said.

The office population is held down by Citigroup (and its One Court Square tower), Jet Blue, the United Nations Federal Credit Union (next door to the Linc LIC building), as well as Publicis, the advertising and media firm that recently relocated to Long Island City from Manhattan. CUNY Law School also purchased six floors at Citigroup’s 2 Court Square in 2010.

Tishman Speyer also owns a site in Court Square slated for a 3.5-million-square-foot project, the first phase of which was the building at 2 Gotham Center, which was sold to Canadian REIT H&R in 2011 for $415.5 million and later leased to the city’s health department.

While plenty of room exists for additional retail development, the appearance of upscale bistros and even national brands is a stark contrast to the vacant storefronts of the past. Restaurants and bars like Dutch Kills, Burger Garage and Manducatis recently joined staples like the Sage General Store and Brooks 1890 along Jackson Avenue.

Corner Bistro and Dominie’s Hoek popped up on Vernon Boulevard; and Shi and Skinny’s Cantina represent the new wave of restaurants to hit the waterfront’s now-glitzy Center Boulevard, where gourmet stores and restaurants are joined by cycling gym Crank Studio, Emily Salon & Spa, and even a Pooches Sport & Spa.

“You can tell there’s affluence in the neighborhood,” said Noel Caban, a retail leasing broker with Winick Realty, noting the influx of high-end bistros and the traffic congestion along the strip that has accompanied the rise in retail rents, from roughly $35 per square foot years ago to $50 per square foot today.

Mr. Caban said he frequently visits the neighborhood and explores its new restaurants with his wife—when they can find a spot, that is.

“I used to be able to park here,” he said.