Nation’s highest-taxed office buildings are all in one neighborhood

With its long history and concentration of skyscrapers, Manhattan is home to 82 of the 100 highest-taxed office buildings in the country, according to a new report.

In fact, every one of the top 10 is in Midtown, the analysis by PropertyShark found. The list serves as a reminder that for all the headlines about the district becoming dated or losing tenants to Hudson Yards, it remains far and away the city’s and nation’s greatest repository of commercial property wealth.

With its long history and concentration of skyscrapers, Manhattan is home to 82 of the 100 highest-taxed office buildings in the country, according to a new report.

In fact, every one of the top 10 is in Midtown, the analysis by PropertyShark found. The list serves as a reminder that for all the headlines about the district becoming dated or losing tenants to Hudson Yards, it remains far and away the city’s and nation’s greatest repository of commercial property wealth.

“The uncertainty of office space use given the shift to hybrid work is a large enough change that we could see the percent decline in the property tax revenues nearly match the percent decline in market values,” warned a June report from the city comptroller’s office.

Here are the 10 highest-taxed buildings in the country. Together, they were responsible for over $500 million in tax revenue in 2021.

1. The $75.3 million in tax revenue paid by the General Motors Building at 767 Fifth Avenue easily led the nation. The 50-story tower with 1.7 million square feet of office space occupies an entire city block at the southeast corner of Central Park. The building is owned by Boston Properties in partnership with Chinese billionaire Zhang Xin and Safra Bank.

2.Another product of the skyscraper boom of the 1960s, the MetLife Building at 200 Park Avenue paid $60.4 million in taxes last year. The 59-story building is owned by Tishman Speyer and Irvine Company.

3.The third-highest tax-paying office property in the city is actually three buildings at Rockefeller Center: The International Building and the two buildings flanking it, 50 Rockefeller Plaza and 1270 Sixth Avenue (better known as the office building on top of Radio City Music Hall). Together, this bundle paid $53.8 million in taxes.

4. Coming in fourth with a tax bill of $53.77 million is the Solow Building at 9 West 57th Street. It was built in the early 1970s by the late real estate mogul Sheldon Solow, founder of Solow Realty & Development, who passed away in 2020 at the age of 92. Solow’s firm still owns the building.

5.Also situated at Rockefeller Center, 1221 Sixth Avenue paid $53.1 million in taxes.

6. Another Midtown behemoth, the AllianceBernstein Building at 1345 Sixth Avenue paid $49.2 million last year.

7. One of the older buildings on this list, Google’s 1930s Art-Deco building at 111 Eighth Avenue paid $48.7 million. With 2.9 million square feet, the building occupies an entire block in Chelsea. Originally the Port Authority Building, it is now owned by Alphabet, Google’s parent company.

8. With a tax amount of $46.3 million in 2021, Vornado and the Trump Organization’s 1290 Sixth Avenue skyscraper comes in eighth. The 2.1-million-square-foot building is home to Cushman & Wakefield, Neuberger Berman and Hachette Book Group, but its largest tenant, Axa Equitable Life Insurance, plans to move down the street to the No. 6 payer, the AllianceBernstein Building, next year.

9. The newest building to make the 100 highest-taxed is One Vanderbilt, the SL Green-owned skyscraper completed in 2020. Its levy was just under $44 million, an amount that should increase substantially as the building fills up. It is already home to what may be New York’s highest office rent ever: Canadian environmental services company GFL Environmental this spring leased the supertall’s 73rd floor, for which SL Green was asking $322 per square foot.

10. Just cracking the top 10 is Paramount Plaza at 1633 Broadway, owned by the Paramount Group. The building’s tax amount last year was $43.9 million. The 48-story, 2.5-million-square-foot building gained a new Michelan-starred tenant in February, the Taiwanese restaurant Din Tai Fung.

Article: https://therealdeal.com/2022/06/29/nations-highest-taxed-office-buildings-are-all-in-one-neighborhood/

IDA closes on incentives for $72M industrial project

A project that will bring two new warehouses to Shirley is getting economic incentives from the Town of Brookhaven Industrial Development Agency. 

The $72 million project is a joint venture between Yonkers-based AVR Realty and Scannell Properties, a national developer headquartered in Indianapolis.  

The plan calls for developing a total of 401,000 square feet of warehouse and distribution space on a 47.26-acre site located just south of the Long Island Expressway at Exit 68. 

Dubbed Precision Innovation Park, the project includes a 150,000-square-foot building with 36-foot clear ceiling heights, 28 dock doors, 28 trailer stalls and parking for 150 cars and a 250,000-square-foot building will have 40-foot clear heights, 42 loading doors, 52 trailer stalls and parking for 250 cars. 

AVR purchased the vacant Shirley site in 2020. 

The IDA, which gave approval for the assistance in Dec. 2021, closed on the incentives agreement on June 16, according to an IDA statement. The project is expected to generate 70 full-time equivalent jobs within two years of its completion. Construction is expected to generate 91 jobs and the project is expected to be completed in early 2023. 

“This project will turn land that has been vacant for decades into productive real estate generating both jobs and revenues for the town,” Brookhaven IDA Chairman Frederick Braun said in the statement. 

The developers of the Shirley project have engaged JLL to lease the properties. The JLL leasing team includes Rob Kossar, Leslie Lanne, Seth Geldzahler, Tom DiMicelli, Doug Omstrom and Max Omstrom. 

Article: https://libn.com/2022/06/28/ida-closes-on-incentives-for-72m-industrial-project/

Smithtown developer appointed to Suffolk IDA board

A Smithtown developer has been appointed to the board of the Suffolk County Industrial Development Agency.

X. Cristofer Damianos, an owner of Damianos Realty Group in Smithtown, participated in his first board meeting last week. He succeeds board secretary Anthony Giordano who resigned in December 2021 after eight years because of increased work responsibilities as an agent for Major League Baseball players.

The seven-member board consists of business, union and nonprofit leaders, all unpaid volunteers and all appointed by the County Legislature.

Damianos told the other board members, “I’m excited to be here.”

His company owns more than 1 million square feet of space, primarily offices in Suffolk, and was started in 1968 by Damianos’ father, Xenophon, a physician who built medical offices.

Besides the IDA board, Cristofer Damianos serves on the Nissequogue Zoning Board of Appeals, helped to start Gold Coast Bank and was a Long Island Power Authority trustee in 2007-12.

Damianos’ appointment to the IDA board was lauded by Kevin Law of the Tritec Real Estate Co. in East Setauket and Kyle Strober of the developers’ group Association for a Better Long Island.

“As someone who is fully invested in Suffolk County, one can expect Cris Damianos to have both the region’s economy and taxpayers in mind when reviewing applications” for IDA tax breaks, Strober said.

Article: https://www.newsday.com/business/suffolk-ida-board-tax-breaks-cristofer-damianos-k2lh7s2m

On the dock-et: Shelter Island inn owner sues town

Aandrea Carter may be the new kid on the dock, but she isn’t letting Shelter Island dismantle her dreams.

Carter is taking the town to court after the municipality tried to destroy the dock leading up to the hotel she bought last year, Newsday reported. Carter purchased the 17-room Ram’s Head Inn, which includes a 110-seat restaurant, in part because visitors could arrive by boat.

But town officials claimed the dock that served it was not safe and erected a fence around it. After Carter took down the fence, workers with chainsaws and backhoes arrived to dismantle it.

In March, the town board voted unanimously that the dock was on town property and to authorize the town attorney to send a 30-day notice regarding its removal.

A formal letter was sent to Carter on May 11, giving her until June 9 to remove the dock, despite ongoing negotiations with the town.

An attorney for Carter said she tried to work out an agreement, arguing that the previous business owners used the dock for 50 years. The town floated an idea for Carter to build a dock on a neighboring property and cede control of the disputed dock, according to the complaint she filed last month.

Carter fought that suggestion, leading to the partial dock decimation.

In the lawsuit, Carter wants a declaration that she owns the dock, along with punitive and compensatory damages. The lawsuit claims that the town supervisor has admitted to the “appearance” of a conflict of interest by the town attorney, who has worked for the Soloviev family, owners of the rival Chequit.

“We are extremely confident that we will prevail when the court actually hears the case,” the town board stated.

The dock dispute isn’t preventing customers from going to the century-old inn. The property is accessible by another dock Carter purchased and by car. Guests can also use the damaged dock, though they would need to be ferried to shore in a smaller boat.

Meanwhile, activity at the dock is at a standstill because the judge granted a temporary restraining order on the day the lawsuit was filed. The case will resurface in court July 7.

Article: https://therealdeal.com/2022/06/24/on-the-dock-et-shelter-island-inn-owner-sues-town/

Hundreds of Syosset Amazon jobs in doubt, sources say

The prospect of Nassau County gaining hundreds of new jobs tied to the opening of an Amazon warehouse in Syosset is now in doubt.

That’s because the retailer intends to close one of its warehouses in Bethpage and transfer the work to Syosset, sources with direct knowledge of the plan told Newsday.

The county’s Industrial Development Agency last year granted Amazon and the developer of the Syosset warehouse about $11 million in tax breaks over 15 years in return for pledging to create 150 warehouse jobs in Syosset. The positions were to be in addition to those at two Amazon facilities in Bethpage and one in Carle Place, the application for IDA assistance states.

Besides the Amazon personnel, each warehouse is home to small transportation companies that employ dozens of van drivers to deliver packages “the last mile” to the customer’s doorstep.

An Amazon spokeswoman didn’t respond to requests for comment.

The retailer has told employees, vendors and government officials that it will leave the 161,360-square-foot warehouse at 201 Grumman Rd. W. in Bethpage for the new 204,000-square-foot warehouse in Syosset, said the sources who spoke on condition of anonymity.

Two Amazon warehouse workers, who requested anonymity because they weren’t authorized to speak about the matter, said they were told by managers to prepare to leave Bethpage by September for the Syosset warehouse.

The workers said they were assured that they could remain on the Amazon payroll – just not in Bethpage.

Including Amazon employees and workers at the small transportation companies, more than 500 people work out of the 201 Grumman Rd. W. facility, sources told Newsday.

Steel Equities, Amazon’s landlord in Bethpage, declined to comment through its real estate attorney. The future of a second Amazon warehouse in Bethpage, at 80 Grumman Rd. W., also owned by Steel Equities, isn’t known.

Amazon’s decision not to renew the lease on 201 Grumman Rd. W. comes as the retailer adjusts to smaller increases in online shopping after two years of rapid growth during the pandemic’s height.

Amazon has confirmed that it’s subleasing warehouse space nationwide that it had planned to use. “Subleasing is something many established corporations do to help manage their real estate portfolio,” spokeswoman Alisa Carroll said last month, referring to the company’s national strategy.

Amazon began renting 201 Grumman Rd. W. in 2016 after Steel Equities purchased the building as part of a $6.8 million project. The project was awarded tax breaks in 2015 by the Nassau IDA, according to state records.

The building had been a Goya Foods Inc. warehouse for 17 years and before that was the site of a runway used by aircraft manufacturer Grumman Corp.

Amazon has benefited from lower rent because the landlord has passed along a portion of the IDA property-tax savings, which totaled $1.1 million in 2019-20, the state records show.

Similarly, the owner of the Syosset warehouse, Syosset Park Development LLC, is expected to pass along some of its IDA property-tax savings in the form of lower rent to Amazon. At least $8 million of the $11 million in incentives is property tax savings  over 15 years, according to an estimate by the Syosset Central School District.

The school district opposed IDA aid for the $72 million project, which is now nearing completion on the site of the former Cerro Wire factory, north of the LIE.

Syosset Park Development and Amazon said in their IDA application that the new warehouse would not “result in the removal or abandonment of a plant or facility of the applicant…or relocation of any employee of the applicant” located within Nassau.

IDA chairman Richard Kessel said on Wednesday, “Amazon recently contacted the IDA and we are having discussions with them on both their old and new facilities.”

Besides Bethpage, Carle Place and Syosset, Amazon has plans for at least two last-mile warehouses in Melville and one each in Holbrook, Shirley-East Yaphank, Westhampton Beach and Woodmere.

A planned Hauppauge warehouse is in doubt after the developer sold the property to a rival. In Freeport, village officials have said they want to sell a school athletic field so that Amazon may build a warehouse, but school officials have sued to block the sale.

Article: https://www.newsday.com/business/amazon-jobs-warehouse-syosset-cerro-wire-bethpage-qme5l8xz

IDA projects on LI have created 40,700 jobs, DiNapoli says

Long Island ranks No. 2 behind New York City in the number of jobs created by industrial development agencies, according to a new report.

The office of state Comptroller Thomas P. DiNapoli found 40,697 people had been added to local payrolls as of Dec. 31, 2020, by expanding businesses, housing developments and other projects that were awarded tax breaks by the Island’s eight IDAs in recent years. That’s 24% of the 167,984 jobs created statewide by IDA projects.

In New York City, IDA projects had added 43,314 jobs as of the end of 2020. It was the first time in five years that the city edged out Long Island in terms of IDA-related job growth.

Locally, Suffolk County IDA projects hired the most people, 14,246, followed by Nassau County IDA projects with 9,909. The two trailed only the New York City IDA in terms of job creation across the state.

The comptroller calculated the “net jobs gained” at each project by comparing its 2020 employment with that for the year before the project received IDA help.

DiNapoli’s annual IDA report card looked at hiring that took place over multiple years because IDAs confer tax breaks for 10, 15, 20, and in a few cases, 40 years. The duration of the aid depends on the project’s size and the number of jobs to be created and retained. Companies failing to keep their employment promises can have their tax breaks rescinded.

“IDAs can play an important role in helping local economies and businesses expand and recover after the pandemic,” DiNapoli said on Friday. “The tax breaks they provide do impact local taxes and should be looked at closely.”

On Long Island, the Suffolk IDA’s 139 projects had the lowest tax incentives per new job, $720, while the Glen Cove IDA’s 10 projects had the highest, $60,437 per job, according to the report card.

Islandwide, the 2020 tax savings received by 820 projects totaled $210.4 million off their property, sales and mortgage recording taxes. That translates to $5,170 in tax breaks per job gained and $72 per Long Island resident.

The Suffolk IDA “is focused on identifying projects that strike the right balance in aiding business retention and expansion while also maximizing employment opportunities for residents,” said executive director Anthony J. Catapano.

In Glen Cove, Ann S. Fangmann, executive director of the city’s IDA, said it “has a higher percentage of residential projects than most other IDAs and these projects produce fewer jobs per dollar of benefit.” Glen Cove IDA projects had created 233 jobs as of the end of 2020.

She said the Garvies Point and Village Square housing projects in the city’s downtown “will spur spinoff economic development that does not show up in the state-generated statistics.”

The report card consists of data from all active IDA projects, whether they’ve been receiving tax savings for many years or just one year.

Among the Island’s new projects, Hempstead Town IDA’s support for the Selby apartment complex at 695 Merrick Ave. in Westbury had the highest investment by a developer — $127 million — and the largest total tax exemption — $2.2 million in 2020. The luxury apartments that overlook Eisenhower Park are to rent for between $2,700 and $8,000 per month, according to the developer, Beechwood Organization.

“Housing is absolutely necessary on Long Island and our board considered that the project was deserving of benefits,” said Fred Parola, CEO of the Hempstead IDA. “The property was lying vacant and dormant and this project, when completed, will provide an economic boost to the area with residents who are in a position to help the local economy.”

The Nassau IDA provided $75.6 million in tax breaks while the Suffolk IDA provided $10.3 million in tax savings in 2020. The large disparity is due in part to the Neptune electrical cable project that accounts for an outsized amount of Nassau’s tax breaks.

Nassau IDA chairman Richard Kessel said the agency is fulfilling its mission “to pump up the Nassau County economy and to create jobs and opportunities for people” through the support of proposed apartment buildings on the long-vacant Superblock site in Long Beach and an Amazon warehouse at the former Cerro Wire site in Syosset.

“I totally respect the report card, but I think that statistics don’t tell the story,” he said.

Article: https://www.newsday.com/business/ida-tax-breaks-jobs-dinapoli-economic-development-wjiu0w9c

Mount Sinai’s East Village infirmary weighed for sale, development

Concerned staff in the Mount Sinai Health System and have their eyes and ears on the future of an East Village medical building.

The New York Eye and Ear Infirmary at 218 Second Avenue is in talks to be sold and demolished, the New York Post reported. Since merging with its former owner in 2013, Mount Sinai has increasingly moved surgery, clinical and ambulatory departments to other locations with its system.

“Mount Sinai is going to close this building and make whatever they can on it,” an anonymous doctor told the Post.

A source told the outlet the number of operating rooms is already being halved from 18 to nine. In a video conference with senior staff, Infirmary president Dr. James Tsai talked about relocating the surgery department, faculty practice, emergency room, research facilities and other departments to different Mount Sinai sites.

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There’s a strong development opportunity for the land, which may make it appealing for Mount Sinai to market to the highest bidder. The infirmary buildings — which includes 310 East 14th Street — span 35,000 square feet of land. Residential zoning in place could allow for a 210,000-square-foot building.

The land could fetch around $70 million, source told the Post, citing an average of recent Manhattan sales of residential air space of $250-350 per square foot.

Mount Sinai did not respond to the outlet’s requests for comment on the future of the Infirmary buildings.

There is a grassroots effort underway to try and save the building via the city landmarking process. Last month, Greenwich Village Society for Historic Preservation director Andrew Berman wrote to both Mayor Eric Adams and Landmarks Preservation Commission chair Sarah Carroll about designating the building as a landmark, which would prevent demolishment or alterations without LPC approval.

State Sen. Brad Hoylman and Assembly member Harvey Shapiro are among those supporting the designation.

Doctors and staff at the Infirmary have bemoaned the possible loss of an important medical institution.

“The inter-departmental synergy that the Infirmary has always provided will be lost,” Joseph Burkart, a former Infirmary board chairman, told the Post.

Borghese sells portion of vineyard, retains winery, land

The owner of Borghese Vineyard & Winery last week closed on the sale of a 66-acre portion of his family’s Cutchogue vineyard, barns and home in a transaction that allows him to use the property while continuing to own and operate the winery, tasting room and an 18-acre tract of Long Island’s oldest vineyard.

In an email last week, Giovani Borghese, the son of founders Marco and Ann Marie Borghese, said closing of the transaction represented the accomplishment of the “original goal I set out to achieve” by keeping the core of the family’s operation while farming the land he sold to an unspecified buyer. He’ll also lease back the family’s former home on he property.

Financial terms of the deal weren’t disclosed but Borghese originally put that portion of the property on the market for $3.69 million, Newsday reported. Borghese later in 2021 considered putting the entire 84.39-acre property up for sale for $6.5 million, but earlier this year a buyer came along willing to accommodate his original plan to sell the 66-acre tract.

“Borghese will continue indefinitely and is a much stronger business now having paid off my parent’s old mortgage as well as the debt that was raised buying everyone out over the years,” Borghese said in the email.

Borghese retains ownership of 18 acres of mostly white grapes in a portion of the vineyard north of the LIRR rail tracks that run through the property, as well as the Borghese-branded tasting room on Route 48 in Cutchogue and all of the inventory.

Joseph DiVello, the agent for Borghese at Century 21-Albertson Realty in Southold, said the buyer worked out an arrangement for Borghese to farm the approximately 20 acres of the 66-acre tract that are planted with primarily red, Pinot Noir grapes — Borghese’s signature wine.

DiVello said the arrangement “worked out perfectly for both sides.”

“The new owner can enjoy having his farm for his family and kids, maybe plant crops, while not complicating things by having to run a vineyard,” he said.

Just over eight acres of the sold property have development rights intact, chiefly those associated with the house and wine barns, while the remaining acres are preserved farmland, DiVello said.

The Borgheses bought the property from the Long Island wine-pioneering Hargrave family in 1998, renaming it Castello di Borghese. Marco and Ann Marie died in 2014. Next year will mark 50 years since the Hargraves first planted grapes on the property.

“This is a big step and it allows us to grow our focus on viticulture, winemaking and the customer experience while continuing our top priority of creating a warm and loving atmosphere in which you can enjoy some of the best wine the North Fork has to offer,” Borghese said in his email.

Article: https://www.newsday.com/business/borghese-vineyard-winery-sale-cutchogue-tz4nbe5x

Office occupancy in New York finally hits 40%

The glass is almost half full for New York City’s office landlords.

Office occupancy pushed past 40 percent last week for the first time since the start of the pandemic, The City reported. The Kastle Back to Work Barometer increased to 41.2 percent; Kastle Systems measures office occupancy by entry into office buildings.

The attendance level represented a jump of nearly 5 percentage points from the previous week. Covid case numbers have been falling for about six weeks in the state, but considering how they have see-sawed in the past two years, it’s too soon to say the rise in occupancy will be sustainable.

Nevertheless, real estate leaders celebrated the milestone.

“This is good news for our city’s recovery as the presence of office workers in the central business district is critical for retail, restaurants and other storefront businesses hit hard by the pandemic,” James Whalen, president of the Real Estate Board of New York, told The City.

Occupancy has surged in the past few months. Toward the end of last year, attendance cratered as the Omicron variant gave New Yorkers a serious scare. Occupancy levels dipped as low as 10.6 percent.

Even as more workers report to their desks, the overall office picture remains gloomy. A recent report from City Comptroller Brad Lander estimated that office value declines could cost the city $600 million in annual property tax revenue. The city’s office market has a vacancy rate of 16 percent, while the sublease vacancy rate is 5 percent; both are higher than they were during recent economic crises.

recent analysis from a team at NYU estimated that by 2029, the city’s office buildings will drop in value by 28 percent, or $49 billion.

The return of people to the office is uneven across the country. Commuting remains one of the biggest obstacles for people returning to the office, as many have grown comfortable sliding out of bed and getting to work without sitting in traffic or taking mass transit.

Nationally, office occupancy hit 44 percent last week, also the highest since the onset of the pandemic. Three Texas cities led the charge, spearheaded by more than 60 percent occupancy in Austin.

But fewer than a third of workers are back in the office in San Francisco, where the occupancy rate hovers around 31 percent.

Article: https://therealdeal.com/2022/06/15/office-occupancy-in-new-york-finally-hits-40/

Outside investors see big opportunities in North Fork hotels

Jon Hoenig’s family and his business call New England home, but he feels a personal connection to Long Island’s North Fork, too. 

Hoenig and his wife of six years, Jennifer, were wed at a winery in the hamlet of Cutchogue, and for more than a decade, he says, he’s made countless trips on the New London ferry to Orient Point to visit family and friends out east.

It was around the time they got married, Hoenig says, that he and Jennifer began “falling in love” with the North Fork — a peninsula stretching roughly 30 miles on the East End of Long Island from Riverhead to Orient Point, which has long held itself as a sort of agricultural, small-town antithesis to its southern neighbor, the Hamptons.

“I knew [the North Fork] was kind of this sleepy place that was starting to wake up,” Hoenig said. “I felt that when we got married out there, it was kind of the cool new area, but not everyone knew about it.” 

Hoenig had his eye on the area in 2020 when he founded his investment firm, Atlantic Equity Partners, which specializes in buying and repositioning hospitality properties perceived to be either undervalued or underperforming.

One of his trips to the North Fork that year brought him to the Menhaden Hotel, a 16-room inn in Greenport with a restaurant and rooftop bar that opened in 2018. When Hoenig learned the owners might be open to selling, he jumped at the chance. His firm bought the hotel for $8.3 million last year — or about $550,000 per room.

“We saw an opportunity where we could get into this great market,” Hoenig said. “We can clearly see it’s growing, but there’s a long way to go. People have started to discover it, but we think there’s a long road ahead where people really figure this out.”

A changing of the guard

Hoenig’s story is one that has become increasingly common on the North Fork: Out-of-town developers and investors have been injecting millions into in a market where the barrier to entry is steadily rising and the limited number of lodging establishments tend to be owned not by private equity firms or hotel operators, but individuals — often with deep roots in the community. 

In 2016, Manhattan-based investment firm Eagle Point Hotel Partners bought the Sound View, a roadside motel and restaurant, also in Greenport, which had been owned by the same family since the 1950s. After a renovation, the Sound View now brands itself as “an elegant waterfront sanctuary” that provides guests with a “sweeping sense of nostalgia.” Room rates for the weekend of June 10 start at $536 per night, according to its website.

Three years later, Eagle Point picked up Greenport’s Harborfront Inn Hotel, built in 2003, for $9.5 million. 

On Shelter Island, accessible via ferry from both the North and South Fork, the century-old Pridwin Hotel and Cottages will reopen this month following a $28 million renovation by Curtis Bashaw’s Cape Resorts, which purchased the property last year from the Petry family, its owners and operators since the 1960s. The island’s largest hotel has been revamped into a luxury resort with larger rooms, a fitness center and a 100-seat restaurant.

In Cutchogue, developer Stacey Soloviev, ex-wife of Soloviev Group Chair Stefan Soloviev, is planning a 40-key boutique hotel and resort on her 53-acre Peconic Bay Vineyard in Cutchogue. The resort is also expected to include 12,000 square feet of retail and a five-star eatery to complement the wine.

Following the buyers

The North Fork’s trajectory from a quiet haven to a high-demand real estate destination can be traced as far back as 2014, when buyers priced out of the ultra-expensive Hamptons began settling for cheaper, less ritzy waterfront alternatives. 

“It’s a different lifestyle here. It’s more relaxed,” said Carol Szynaka, a local broker for Daniel Gale Sotheby’s International Realty. “What [people] were really looking for is that quality time to just kick back, take it a little easy. They still want the amenities, but they do not want the fanfare.” 

The pandemic only added fuel to the fire, as more city dwellers flocked east in search of additional space. With schools and workplaces upended, weekend visitors became seasonal dwellers. Others stayed year-round.

“The best part of what I’ve seen come off of Covid is … people discover all little nooks and crannies to the East End,” Town & Country Real Estate’s Judi Desiderio said. “There are people who actually said, you know what, I can work remotely, or it’s time for me to do my dream.”

Now, properties on both the North and South forks are routinely snapped up days after being listed, and buyers almost always have to be ready to put down the money — even before a home hits the market. 

With inventory down and demand up, prices have skyrocketed. The median home sale price in the North Fork rose 13 percent year-over-year to a whopping $800,000 in the first quarter of 2022, according to data compiled by Town & Country Real Estate. 

Meanwhile, the number of home sales dropped by almost 22 percent. Sales of homes for less than $500,000 declined by two-thirds — perhaps the most striking sign that the North Fork is increasingly resembling the Hamptons.

The wave of outside investment in even the most modest hotels has been spawned by the strength of the residential market and the price points at which buyers are now entering the region, locals say.

“I think that because of the affluence of the residents that are buying into the community, the developers are seeing an opportunity that there will be money, disposable income to spend,” Szynaka said.

Local skirmishes

Residents have long feared that these development projects could lead to more traffic and transform the North Fork from a peaceful waterfront oasis into an upscale tourist destination much like its counterpart to the south. 

As the New York Post described it in a May 24 dispatch, North Forkers “are furious about a post-pandemic influx of tourists and transplants turning their jut of land into a crowded playground for tone-deaf city folk, a.k.a. ‘cityiots.’”

Much of the North Fork is either off-limits to development, thanks to zoning and conservation easements, or has remained farmland because of tradition and profitability.

“It’s very hard to develop on the North Fork,” Erik Warner, co-founder of Eagle Point Hotel Group, told The Real Deal last year. “It will always be hard to develop on the North Fork, because not a lot of land is zoned for hotels.”

Last year, residents of Southold called on local officials to change the zoning code and limit the construction of massive homes they said block the sunshine, disturb natural resources and otherwise destroy the community character. A house on a 2-acre lot in Southold can legally exceed 40,000 square feet — perhaps a fit for Southampton, but unfathomably large for the North Fork . Although the town code limits height, there is no absolute maximum building area.

“It feels now like Southold is rapidly turning into the Hamptons,” East Marion Community Association board member Anne Murray said at the time.

But investors like Hoenig claim they aren’t interested in changing the fabric of the region for the sake of profit. It’s the quaint community of the North Fork that attracts their clientele to begin with, they say.

“If you come in with a heavy hand there and don’t communicate, I think you’d have a problem,” Hoenig said. “That’s just how these small villages work. They have a lot of control over development, and it’s smart because they’re the ones that live there full time and they know what the community is.”

Having owned the Menhaden Hotel for a year, Hoenig said he loves the property and that it’s been a good investment so far. His firm has plans to upgrade a few things at the hotel and add a new food and beverage concept, Hoenig said. But he ultimately wants to keep the hotel “simple and cool.”

Not all investors seem to share Hoenig’s vision, as evidenced by the decade-long battle over the nearby Silver Sands Motel and Cottages

Set on 30 acres, the beachfront 1950s-style motel was until recently owned by Jean Burden, whose parents opened it decades ago, along with her son, Terry Keefe, and Darline Duffy, her brother’s widow. Duffy sold her stake in the motel last year to Silver Sands Holdings, a limited liability company tied to developer Thunderbowl Capital, according to reports.

Keefe claimed Silver Sands Holdings was pressuring the family to turn the property into a high-end resort, which they had no interest in doing. Soon thereafter, Silver Sands Holdings filed a lawsuit alleging the family had mismanaged the motel’s finances.

Silver Sands Holdings ultimately acquired the motel for an unspecified amount in April and plans to spend $4 million to upgrade the property while keeping its old-school aesthetic, Newsday reported.

Another developer, Jonathan Tibbett, scored a victory in December, when the Southold Zoning Board of Appeals conditionally approved his planned Enclaves Hotel and Restaurant despite concerns from residents over possible traffic and noise issues. Plans call for the conversion of the Hedges — the existing bed-and-breakfast on the property — into a restaurant with a 584-square-foot addition as well as a two-story, 40-room hotel next door with parking for over 100 cars.

The catch: The 44-room hotel and 74-seat restaurant will not be permitted to host outdoor events, and indoor events will be limited to fewer than 100 guests.

Despite looming economic uncertainties, including concerns over rising interest rates, and a less than welcoming reception from some locals, investors like Hoenig are confident that the North Fork will remain a lucrative place to do business.

“I think it’s gonna be strong for the foreseeable future,” Hoenig said. “If we do have a recession or if we do have a correction coming up … there’s such limited inventory out there that I think most of the properties will still perform well.” 

Article: https://therealdeal.com/2022/06/14/outside-investors-see-big-opportunities-in-north-fork-hotels/

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