Making All Stops, From Reasonable to Ritzy
By CLAIRE WILSON

FIVE years ago, no one would have bet on a housing renaissance in East Harlem, or on the farthest reaches of the Upper East Side as the next hot neighborhood.

Well, it’s not exactly on fire just yet, and the hipster element hasn’t discovered it. But more people are finding their way every day to the wealth of apartments springing up on the banks of the East River between 96th and 125th Streets and along tree-shaded blocks between the river and Fifth Avenue.

The city has set aside some new units for people of low and moderate income, but outside of those, there is a vast selection of rental apartments, condos and co-ops.

They run the gamut from spacious no-frills units without amenities like doormen or gyms, to One Carnegie Hill, a half-condominium, half-rental tower with a pool, pet spa, people spa, outdoor barbecue pits, roof deck and children’s playroom.

With two-bedroom, two-bath units priced at $1.32 million to $1.495 million, One Carnegie Hill is at the top of the market. Also, it is at 96th Street — more Upper East Side than East Harlem.

But farther north, prices can be as reasonable as $400,000 for a one-bedroom condo or $699,000 for a 1,345-square foot, three-bedroom, three-bath unit with 500 square feet of outdoor space.

Price, above all, is the driving force for change in the neighborhood, which has long been considered one of the city’s poorest and is still very short on services like retail shops and restaurants.

According to Valerie Dominguez, a broker with the Corcoran Group, East Harlem buyers are willing to trade those things, and building luxuries, for bargains on extra space. “They will give up the doormen and gem amenities and buy just the apartment,” she said. “People are coming up here for value.”

What You’ll Find

East Harlem has 13 public housing projects, one of the largest concentrations in the city, with a population of 35,000. Among these are blocks of former tenements and brownstones, some refurbished, like the row declared a landmark on the north side of East 118th Street between Pleasant Avenue and First Avenue.

Few are as grand as their West Harlem <http://topics.nytimes.com/top/classifieds/realestate/locations/newyork/newyorkcity/manhattan/?inline=nyt-geo> counterparts, but they are much cheaper to buy when they come onto the market, and fixer-uppers are still available. Buildable vacant lots are disappearing quickly. Many of the remaining ones have been turned into gardens which, at this time of the year, are filled with tomatoes, basil and sunflowers.

A majority of East Harlem residents are young Hispanic families, many of them immigrants. New strictly regulated housing built by private developers with city-assisted financing offers both rental and purchase options.

Town houses on East 118th Street between Madison Avenue and Fifth Avenue, for instance, are for sale as part of this arrangement. Apartments in the Hampton Court, a 230-unit complex built by Glenwood Management, or the 238-unit Aspen, built by BFC Partners and L & M Equity, are for rent. Twenty percent of these rental units are reserved for low-income tenants; in exchange for these, the developer gets either a parcel of city-owned land free of charge, or state- or city-issued bonds to finance low-interest loans.

Sonya O. Pua Scott, a broker with Citi Habitats, says newcomers represent a cross section of city workers, court officers, artists of all kinds and young professionals. “Most people are singles,” said Ms. Scott, who lives in the neighborhood. “Or they are young couples with newborns.”

At the Palm and the Rio, two new subsidized middle-income co-op buildings on East 119th Street built by the Briarwood Organization, 52 of the 110 units sold by lottery went to single professional women, said Vincent Riso, president of the company.

Singles also abound at luxury rental buildings like the Stamford, said Ms. Dominguez of Corcoran, adding, “We have three Ivy League <http://topics.nytimes.com/top/reference/timestopics/organizations/i/ivy_league/index.html?inline=nyt-org> attorneys, a surgeon and a doctor, all in their 20’s.”

Being fresh out of college or graduate school, with high incomes but no credit history, some end up in East Harlem by default after being rejected by buildings downtown, Ms. Dominguez explained.

Michelle Gabriele-Plaia and her husband, Leonardo Plaia, looked for a year before buying a $560,000, 1,250-square foot one-bedroom duplex condo on East 112th Street earlier this year. They had rented nearby for three years and liked the neighborhood, deciding to stay because of the easy commute by car for Ms. Gabriele-Plaia, a fitness trainer in Scarsdale, and Mr. Plaia, who manages a restaurant in Manhasset, on Long Island <http://topics.nytimes.com/top/classifieds/realestate/locations/newyork/longisland/?inline=nyt-geo> .

“There is always a parking spot when I come home,” she said.

What You’ll Pay
There are four apartments still available at the Crown, a nine-story, 30-unit condominium complex at Second Avenue and East 110th Street. According to Christopher Halliburton, executive vice president of Warburg Realty Harlem, they include a 2,800-square-foot four-bedroom, four-bath triplex with 1,100 square feet of outdoor space and two parking spaces for $3.5 million, and a 900-square-foot, two-bedroom, two-bath unit for $600,000.

Town houses on the market include a four-story, nine-room brownstone on East 101st Street listed by the West Harlem broker Willie Kathryn Suggs for about $1.3 million.

Two-bedroom, two-bath units in most new buildings rent for $2,500 to $3,000 a month. Of the new regulated town houses for rent, two-bedrooms cost $1,700 to $2,000 a month, according to Ms. Scott of Citi Habitats.

The Commute

Easy access to subway express trains makes East Harlem convenient for commuters to all Manhattan <http://topics.nytimes.com/top/classifieds/realestate/locations/newyork/newyorkcity/manhattan/?inline=nyt-geo> business districts and downtown Brooklyn <http://topics.nytimes.com/top/classifieds/realestate/locations/newyork/newyorkcity/brooklyn/?inline=nyt-geo> . The Nos. 2, 3, 4 and 5 express trains stop at 125th Street, and the No. 6 train offers local service along Lexington Avenue.

Crosstown buses along 96th, 106th, 116th and 125th Streets meet buses running north and south along the avenues, and there is a Metro-North Railroad station at 125th Street and Park Avenue. Some new buildings offer shuttle buses to the subway. There is also a direct bus, the M60, to LaGuardia Airport.

What to Do

The 18-month-old Harlem Tea Room, in a new apartment building at the corner of Madison Avenue and 118th Street, is one of a growing number of new restaurants and bars catering to changing tastes in the neighborhood. The cuisine scene had until recently been dominated by small ethnic restaurants and legendary Italian eateries like Patsy’s Pizzeria and the exclusive Rao’s, where nobody who isn’t somebody ever gets a table.

Patricia Clayton, who owns the tea shop and lives in the neighborhood, serves light fare like sandwiches and pastry. Other alternatives include Camarades, which serves tapas; Orbit East Harlem, which has an eclectic menu; Ricardo Steak House; Piatto d’Oro, with its Italian specialties; and MoBay, which offers Caribbean food.

Shoppers in the area will have a Target close at hand when it opens in the 475,000-square-foot East River Plaza in 2008 — on a site originally considered by Costco. The Home Depot will also open at the center, a joint venture of the Blumenfeld Development Group and Forest City Ratner.

(Plans to build a 220-room Marriott Courtyard hotel at 125th Street and Park Avenue have been scrapped, according to a company spokeswoman.)

Besides Central Park spread out at its feet, East Harlem has the 20-acre Marcus Garvey Memorial Park on Madison Avenue between 120th and 124th Streets, as well as the 15-acre Thomas Jefferson <http://topics.nytimes.com/top/reference/timestopics/people/j/thomas_jefferson/index.html?inline=nyt-per> Park, which is bounded by First Avenue, the Franklin Delano Roosevelt Drive, 111th and 114th Streets.

Both parks have pools and recreation centers with fully equipped gyms, weight rooms, computer rooms, basketball and volleyball courts, tracks, soccer fields and dance instruction, among other things. The Pelham Fritz Recreational Center at Marcus Garvey also has a senior center.

The Schools

East Harlem parents have an array of public schools for children in the lower grades and middle school but fewer choices at the high school level. Many of these schools have fewer than 500 students, and some have fewer than 300.

A number are new charter schools and some are specialized, like the TAG Young Scholars School on East 109th Street, which teaches kindergarten through Grade 8 and has about 430 students. Of fourth graders there, 100 percent scored at or above grade level in both math and English. Among eighth graders, 91 percent scored at or above grade level in math, 73.5 percent scored at or above grade level in English and 98.5 percent scored at or above grade level in science.

Another specialized school is the Manhattan Center for Science and Math, on Pleasant Avenue, which teaches Grades 7 through 12. Students there taking the SAT in 2005 scored an average of 455 on the verbal section, compared with 497 statewide, and 508 on the math section, compared with 511 statewide.

Roman Catholic schools include two that teach kindergarten through Grade 8. They are St. Bernard’s School on East 98th Street and St. Ann’s School on East 110th Street. The History

City lore most often ties East Harlem to its thriving Puerto Rican population, from which came the familiar name El Barrio.

But according to the Encyclopedia of New York City <http://topics.nytimes.com/top/classifieds/realestate/locations/newyork/newyorkcity/manhattan/?inline=nyt-geo> , all of Harlem, East and West, was once home to a Jewish community second in size only to the Lower East Side’s. In about 1917, there were some 90,000 Jewish residents living uptown, side by side with Italian immigrants who started arriving in the late 1880’s.

The Puerto Rican influence grew most rapidly in the 1920’s through the 1950’s. The area now has a large Mexican population, although it is becoming more mixed.

What We Like
The wide streets, broad sidewalks and low-rise buildings, including a great deal of the new construction, make the neighborhood feel much less crowded than some other places in a densely populated borough.

Going Forward
East Harlem will be more desirable to live in once the retail and restaurant scene starts to catch up with residential development and the tastes of an ethnically and economically diverse population.

HARLEM ADJUSTS TO POST-BOOM HOUSING MARKET

Harlem deals no longer as plentiful; townhouse bargains disappearing

By Melissa Dehncke-McGill

"Places on Central Park North that have views of the park can be $1,000 a square foot and even a bit higher than that," said Michael Goldenberg, executive director of sales for the Wide Side at Halstead, adding that new condos throughout Harlem are typically selling for $550 to $650 a square foot.

Developer Joseph Holland, who is developing the Lenox at 129th Street, is even more enthusiastic about the condo market in Harlem, adding it is "at the tip of the iceberg" due to "pent-up demand."

Like the rest of Manhattan, the rental market is getting quite hot.

"We find a lot of people are renting," said Sandy Wilson, managing director of the Harlem office for the Corcoran Group. "They want a feel for the neighborhood before they buy, so our rental market is very strong."

Which brokers are going to benefit from all this business -- the big Manhattan firms who have moved into the area over the last two years or the mom-and-pops that have been there historically - remains an open question.

"It's too early to say anything about market share," said Holland. While the big brokerages are being hired to market new developments, according to brokers, Holland added that "mom-and-pops have been able to hold on to customers they've had historically. It will be a battle over whether the new residents will stay with locals or a big shop."
Christopher Halliburton executive vice president, Warburg Realty Harlem

Q. Which part of Harlem is faring worst as the overall market slows in the city?

A. Probably the west side of Harlem from 135th to 155th streets has a little bit more resistance amongst
buyers. Some of it has to do with amenities and transportation. There is only the local No. 1 train
there, as opposed to central Harlem with access to all those trains.

Q. What is the most overrated neighborhood in Harlem as far as there being an upside in prices?

A. I don't think at this time there's an area of Harlem that's overrated or overpriced. If you look at the brownstone market, one might look at Hamilton Heights or Strivers Row as areas that are pricey. They deliver a great product in most cases. Washington Heights delivers a great product; you have to deliver services to complement it. That's something people question at this time and thus deem it pricey.

Q. Which is the strongest property type in Harlem right now -- condos, co-ops or townhouses?

A. If you have a townhouse between 110th and 125th street west of Fifth Avenue, it's going to be snapped up quickly because it is highly desirable. You can take the condo market and say the same thing. The city is a set of concentric circles and as close as possible to between 110th and 125th street is very desirable.

Q. What group of sellers is the most active right now in the overall Harlem market?

A. Developers, in terms of the total numbers and then, second, owners of unrenovated townhouses.

The newly constructed nine-story luxury development will offer 30 residential condominiums and three retail stores to be marketed by Brian Thornton and Chris Halliburton. Frederick W. Peters, President of Warburg Realty, made the announcement.

Commented Peters, “The Crown Condominium offers the high-quality living buyers are coming to demand and expect. We are thrilled this developer and others have turned to Warburg’s luxury service, experience and professionalism to market these new properties.”

The Crown Condominiums will provide a combination of one- and two-bedroom luxury homes. Prices range from $249,000-$720,000 with the units available for occupancy in Fall 2005.

This is an exciting time for Warburg, with the planned opening of its newest storefront office in TriBeCa, as well as the overwhelming success of its Harlem and Real Property offices.

Carlos Aguila calls his new neighborhood the city's "greatest place for a new retail store in 30 years." The "whole Upper West Side" is moving there, he says, so he's setting up shop before big-name competitors arrive.

Aguila is opening a branch of his health food store, Karrot, in Harlem. Taking a look at the area's recent transformation, his effusive description is not surprising. Even by recent standards, the blocks around Aguila's new store on 117th Street and Frederick Douglass Boulevard are rapidly transforming. "Come in a few years and you will say, 'This is Harlem? There used to be poor people here,'" Aguila said on a walk around the neighborhood.

The new retail isn't just confined to food stores – residential real estate offices are also moving in. Three big Manhattan real estate players appear to agree with Aguila's assessment of the Frederick Douglass Boulevard corridor, an area of southern Harlem being redeveloped at a rapid pace.

By summer, Warburg, Corcoran and Douglas Elliman will all have Frederick Douglass Boulevard offices within a three–block stretch. Warburg opened a 2,500-square-foot office in October on Frederick Douglass and 120th Street. Corcoran is renovating a 1,900-square-foot storefront across the street and plans to open June 1. Douglas Elliman plans to open its 1,300-square-foot office at 117th Street, next door to Karrot, by July 1. The three offices have desks for between 15 to 20 agents.

Brokers predict they'll be busy. "The more that are there, the more traffic that will be generated," said Christopher Halliburton, executive vice president of Warburg Realty Harlem.

"We think it's an absolutely great location, primarily because we are in a development corridor," said Sandy Wilson, managing director of Corcoran Harlem.

Elliman's director of sales Gary Cannata, who will manage the Harlem office, agreed. "We've looked at the corridor and the new rentals and condominiums there and we thought having a position in that lower part of Harlem was a smart move," he said.

Beyond brokerages, an 8,000-square-foot Rite Aid opened in February. Its manager, Genaro Marmol, said the store is "surpassing goals," although he declined to provide specifics. North of the drug store is a new UPS store and a wine store, Harlem Vintage.

Solange Godi, 36, an immigrant from the Ivory Coast, moved her hair-braiding salon to Frederick Douglass this year. She pays $2,500 a month for a storefront, down $500 a month from her previous spot on 126th Street and Madison Avenue. Retail rents are typically around $40 a square foot, according to Elliman, which also has a retail division, although some pending deals may range from $60 to $75 per square foot.

Driving retail demand are the new and renovated apartment buildings lining Frederick Douglass, with 600 new units in the works on or near the boulevard, according to Edwin Marshall, the Department of City Planning's team leader for Upper Manhattan. That's on top of the 530 units created since 2003. All this is quite a shift for a stretch of Harlem that, three decades ago, was a testament to failed urban renewal dreams. Huge lots were cleared for major redevelopment that never came. Federal funds disappeared, and the land lay fallow. This happened in other neighborhoods, but Frederick Douglass between 116th and 122nd Street was hit particularly hard.

In the late 1990s, the Manhattan Borough President's office and other groups got worried that the surging market could create out-of-scale buildings because zoning regulations had no height limits. The population was growing in West Harlem below 124th Street, creating a need for new housing. The 2000 census showed a 17 percent population jump, compared with 8 percent in Central Harlem and 3.3 percent for all of Manhattan.

While the neighborhood is known for tree-lined streets with six- to eight-story row houses, the existing zoning, in place since 1961, encouraged supersized public housing-style buildings.

A change was in order, and the rezoning passed by the City Planning Department preserved the brownstone blocks but called for buildings between nine and 10 stories on the avenues, including Frederick Douglass, to encourage new housing construction. The rezoning plan, which affected 44 blocks, was passed in October 2003, and development took off.

One urban renewal site, a full-block bounded by 118th and 119th streets and Manhattan Avenue and Frederick Douglass, now has two new developments, with a third planned. Brownstone Lane, marketed by Corcoran, includes 48 apartments at 309 West 118th Street. Eight-story apartment buildings are planned on the avenue sides, one of which is under construction.

Gentrification fears pop quickly to mind in Harlem these days as market rents in the corridor reach $1,800 for a two bedroom. To counter this, projects with city subsidies include some portion of low- or moderately priced housing, anywhere from 10 to 100 percent. Buildings with public subsidies also must set aside 50 percent of new units for Harlem residents.

The new development is a mix of for-sale and rentals. Harlem Horizon, for example, is under construction on 115th and Frederick Douglass, with occupancy expected in the fall. Twelve of the 15 condominiums have sold, with prices ranging from the mid $400,000s to mid to high $800,000s, according to Corcoran.

This development bodes well for Aguila, who held a grand opening for Karrot on May 18. Aguila, a former Bank of America vice president, knows the risks and rewards of opening up in gentrifying neighborhoods. He has two other stores in Clinton Hill and one in Washington Heights. "See any bodegas?" Aguila asked during the tour as he looked at a new apartment building near his store. "When they get up in the morning and they want a piece of bread, where are they going to go?"

More people are trying to live as close to work and their families as possible, which is one of the reasons for the tremendous growth in development that is currently going on in Harlem, according to Chris Halliburton, executive vice president of Warburg Realty, sellers of co-ops, condos and townhouses.

"The Harlem market is somewhat insulated from the any downturn in the market," said Mr. Halliburton, during a recent luncheon hosted by the Young Mortgage Bankers Association here.

"People talk about how far or high this can go. I think it's one of the neighborhoods that's not going to fall backwards because of what developers have been doing to create that critical mass we won't retract from."

Harlem is serviced by trains on the East and West Sides of New York including the 4-5-6 and A-C-E lines. It's probably the most accessible place in Manhattan via mass transportation, Mr. Halliburton said.

Recently, there has been a rise in the value of condos and apartment units south of 96th street where properties are now worth well above $1,000 a square foot. There are some properties at $2,500-$3,000 a square foot that are new construction in downtown Manhattan, as well as in the 70s and Park Avenue, he said.

"As a result, the Harlem landscape and opportunities there caused developers to develop beautiful homes that are affordable. At the end of March, the average listing in the Harlem market closed at over $560 a foot. Two years ago no one would have done a pro forma based on that, said Mr. Halliburton.

"New development is making available housing units that people can get into for $350-$500 per square foot. A lot of people have chosen to make changes to their lives and move to Harlem. People are coming from downtown, the East Side and the West Side. You see a large percentage of people from outlying areas - Long Island, Westchester and New Jersey. They are thinking, 'Why am I spending two to three hours in my commute time away from my family and other things I want to do when I can be living very close to work and be able to have a better quality of life?'"

Developers are building properties such as one- and two-bedroom apartments that are a little larger than what a borrower can find downtown, said Mr. Halliburton. And the young professionals who are first-time buyers who can easily get into a 450-600-square-foot apartment below 96th street are finding 800-square-foot or larger apartments in Harlem.

"There has been an economic shift from 15-20 years ago. The model was rentals. That market has been soft for several years. The numbers make sense to move in the direction of sales when you are able to get $450 to $500 a foot for a property."

It has been a trend to see artists move into Soho and Tribeca. Now, those same groups are coming into neighborhoods in Harlem. According to Mr. Halliburton, artists, non-related couples, and more recently single-parent families are coming up to Harlem. Large families are moving because their children go to private schools on the East or West Side and find the area to be more convenient and affordable, he said.

"There is a tremendous amount of wealth creation for people who have been owners of property elsewhere. There are empty-nesters from the suburbs who decided to cash out and move back to the city to take advantage of the cultural aspects of New York. Or you have people who are living downtown who may have gotten married and bought an apartment seven or eight years ago."

As a result of the market, these borrowers often find a tremendous return on their investment and take that money to move to Harlem and purchase a place. In Harlem, these borrowers can put the other half of the money into savings or oftentimes into a second home or a summer home.

Also during the YMBA program, "Opportunities in New Harlem," Jerry Migdol, president of Migdol Realty Management LLC, spoke about the rich history of the area. Mr. Migdol, a licensed New York attorney, developer and broker of residential property, showed slides of mansions that were built in the early 1900s. "Walking the streets is poetry in motion over there," he said. "In the 120s and teens there are blocks and blocks of brownstones. Some have been restored."

In 1902, during the Harlem Renaissance, great thinkers, musicians and artists made Harlem the "black capital" of America, Mr. Migdol said. "W.E.B. Dubois, Duke Ellington and Langston Hughes would gather here. It was a very innovative time."

The developer described many of the amenities that go along with new rental units in today's market such as granite kitchens, hardwood floors and fireplaces. Mr. Migdol mentioned that a particular famous person, the painter Norman Rockwell, lived on the top floor of one the tenement buildings he has worked on. "He moved there with his family in 1905. Why? More space, more light, for less money. Things don't change."

Is there room to grow in Harlem? Yes, according to Mr. Migdol, especially in the townhouse market. In fact, $3 million is as high as the market has gone for selling a townhouse here, he said. But Mr. Migdol warned developers about how much work goes along with completing a project.

"Sometimes, you don't know what's inside or how to estimate this sealed-up building. You hope for the best and prepare for the worst. A lot of the vacant shells only have a roof or a front wall," he said.

"Buyers need to be careful. In Harlem, there is property that has been neglected. You start doing work on it and everyone comes out of the woodwork. You have to be accountable. Don't think you can go up and do a smear job and just get out."

Oskar Brecher, president of AFC Realty Capital Development, which has a number of projects going on Harlem, observed that most of the members in the YMBA have not witnessed a downturn in the market.

"Before 1995, it was not a pretty place to be. We have had an unprecedented real estate boom since them. A very long cycle," Mr. Brecher told the audience. "The values are significantly about the comfort level in many cases. In development now, you look at two to three years before you realize a project."

While Harlem has been undergoing a transformation for a number of years now, with residents and retailers alike flocking there in search of new opportunity, demand has passed a new litmus test.

"The biggest change in the last 18 months has been a willingness among financial institutions to loan here almost without exception," observed Chris Halliburton, executive vice president of Warburg Realty Harlem, the office that the brokerage firm opened in the submarket in mid-October.

Three to four years ago, Halliburton noted, it was difficult to obtain financing without a certificate of occupancy. But with demand so strong, lenders now will finance even before that point is reached. And why not? Prices for residential space, while still below those for Manhattan neighborhoods south of its borders, according to a recent study, have reached $400 to $600 per square foot for condominium space and $250 to $550 per foot for townhouse space, he said. And while leased retail space on the main corridor of 125th Street was $25 to $35 per foot three years ago, now a retailer is lucky to pay $70 per foot.

"It's allowing a lot more people to get into the market and thus a lot more deals to close," Halliburton said.

On the residential side, the number of condo and co-op sales skyrocketed to 177 last year from 35 the year before, with many purchasers moving from other areas of Manhattan, viewing Harlem as a place where they can afford a three- or four-bedroom apartment, according to the recent study, produced by Miller Samuel Inc. for Prudential Douglas Elliman. In response, developers have announced a steady stream of new projects. "It's probably the highest concentration on the island of new construction," observed Jonathan Miller, president & CEO of real estate appraisal company Miller Samuel.

"There's a whole new class of investors (in Harlem as elsewhere in New York City) that has not invested in real estate before," added John Cicero, managing principal of Miller Cicero L.L.C., a partnership with Jonathan Miller that focuses on apartment rentals." He estimated that cap rates for apartment buildings are at 5 to 7 percent in Harlem, following a decline over the past three years from what used to be 9 to 12 percent.

And residential activity is taking place everywhere, though much of it is south of 125th Street, with disagreement among real estate players as to the extent of effect it is having on the demographic mix. While much of the condominium development (little is co-op) taking place is on vacant lots or replacing abandoned buildings, old brownstones are undergoing renovations and being made available with special low-financing options but are seeing a fast increase in their prices. And as units in some of the rent-controlled buildings are vacated, they are being gutted, Cicero acknowledged, so the new landlords can rent them at market rates.

The ongoing shift in retail away from the mom-and-pop shop to national brands is contributing to this change in residents. But developers are striving to create distinctive character in various neighborhoods, noted Matthew Gorman, a vice president in the retail group at CB Richard Ellis Inc. "A lot don't want to put in traditional fast-food; developers don't want to make (their block look) like every other block in Harlem."

Gorman's own deals in the active areas along Frederick Douglass Boulevard, Lenox Avenue and Third Avenue have included a mix of what he terms "local flavor" like the Harlem Vintage wine store and an as-yet-unidentified upscale local fashion designer together with national retailers.

Transportation's Draw

While new condominium buildings are creating opportunities for new retail, though, the biggest concentrations of change are occurring, as they traditionally do, along the transportation corridors. The greatest attractions have been the subway stops on 125th Street between Third and Lexington avenues on the East Side and, farther west, between Fifth and Lenox and where St. Nicholas Avenue intersects 125th Street, with a combination of luxury, mid-level and service retailers. To a lesser degree, 116th Street around Lenox has also seen activity, as have 135th and 145th streets. "Retail will tend to flourish where the subway stations are," observed David Rosenberg, executive vice president with Robert K. Futterman & Associates.

Already, available space is tough to come by on 125th Street, Rosenberg noted. There is one development site at Lenox Avenue due to break ground this spring, with 30,000 square feet of retail on three levels and apartments above it.

On 116th Street, the ground-floor retail underneath condos and rental apartments is filling in with national service retailers. Among them, the Store 24 Cos. is planning to enter the market, he said.

A challenge for such national retailers, though, is the tight spaces mandated by the size of Harlem buildings, something Halliburton warned the market will have to grapple with.

But a different sort of opportunity will be available on 125th Street as Majic Development Group and 1800 Park Ave. L.L.C. build Harlem Park, a $236 million mixed-use project that broke ground in February on the southeast corner of 125th Street and Park Avenue, adjacent to the 125th Street Metro-North commuter rail station. That project will include a 204-room Courtyard by Marriott hotel, along with 167,000 square feet of Class A office space, the 62,000-square-foot Shoppes at Harlem Park and 100 residential units (either co-ops or condos), along with a number of other amenities.

Already, the project, which is striving to attract higher-end retail, has committed Starbuck's, and at press time was well into negotiations with Brand Jordan, according to Majic chairman Michael Caridi. The developer, he said, has also attracted the interest of a home-goods and a telecommunications store.

But the office and hotel components are perhaps even more noteworthy. The hotel is the first with a national flag in Harlem since 1966, according to the developer, though Starwood Hotels & Resorts Worldwide Inc. is among those in the running to redevelop the Victoria Theater, with hopes of making it a W hotel. (Other contenders include retail and entertainment providers.)

As for Harlem Park's office space, Harlem has traditionally attracted government and non-profit tenants rather than major corporations, Caridi noted. But Caridi is designing his project to win Fortune America and is already getting good response, he said. For example, he listed telecommunications, music and entertainment companies as possibilities he is talking to, along with some financial service companies, since Harlem's being on a separate electrical grid from greater Manhattan makes it an attractive alternative that is also closer to the main business district than other possible markets. The city is also providing incentives in Harlem that further reduce rents that are already significantly lower than Midtown's.

Caridi envisions more office users moving to Harlem in the future, but with a study on 125th Street now under way and no existing supply, he predicted it will be two to three years before he has any real competition. Said Caridi: "I think this project is going to set the pace."

"We moved to our current home two or three years ago, just before it boomed over here," says Justin Muntean, a merchant banker who owns a one-bedroom on 110th and Central Park West. “The appreciation in our neighborhood is ridiculous. And we’re hoping the same thing is going to happen in East Harlem.”

“The interest has been tremendous,” says Chris Halliburton of Warburg Realty Harlem, which has already sold 19 of the building’s 22 units. “We’ve sold to people from the Upper East Side, the Village, Westchester, the Upper West Side and as far off as Italy. Not to mention to people who already live in the neighborhood.”

The condos in the seven-story building, at 227 E. 111th St., have 10-foot ceilings and oversized windows. The kitchens have dishwashers, and there are double sinks in the baths. In addition, the upper-floor units boast outdoor spaces.

But the real reason these apartments are flying off the market is the price. Ranging from $219,000 to $650,000, Roosevelt Lane represents some of the more inexpensive Manhattan real estate available.

For example, the condos fetch $485 per square foot, while the Upper East Side goes for around $974 per foot. The reason for the differential is inconvenience.

Though East Harlem has grocery stores and laundromats (and some great ethnic food) it doesn’t offer much in the way of shopping, cafés entertainment.

"It does concern me a little that there aren’t a ton of restaurants around," says Muntean, 27. "But I’m a five-minute subway ride from 86th street."

"In the immediate neighborhood there are a couple of little coffee shops that are opening or redoing themselves, a yoga/reflexology spa that’s opening on 114th, and a Ricardo’s Steak House that opened around the corner about eight months ago," rejoins Halliburton.

"It’s my hope that as the neighborhood improves we’ll have more options," says Muntean. "And really that’s just a matter of time."

Real estate firms like Corcoran, Brown Harris Stevens and Prudential Douglas Elliman have a new appreciation for their clients' quests for homes on the Upper West Side: they are not easy to come by.

The three firms were forced to search for new places because their neighborhood offices are being converted to condominiums by the owner, the Apple Bank for Savings. About a year ago, according to the firms, the bank began to give indications to its tenants that their upper-floor leases in the 1928 landmarked building at 2100-14 Broadway, between 73rd and 74th Streets, would not be renewed.

In the competitive world of New York real estate, storefronts have become a distinctive way to help market a company's brand. And although only one ended up in retail space, all showed interest in the precious few Upper West Side storefronts.

It may be true that most agents work on the run, using their cellphones to conduct business. But passers-by inevitably look at the pictures and text on real estate windows, and in some cases an impulse to stop in leads to a sale or purchase.

The increasing presence of brokerages at the street-front level is particularly apparent in TriBeCa, Harlem and Brooklyn Heights, which are viewed as untapped markets for large Manhattan-based firms.

In the next six months, the Corcoran Group, Prudential Douglas Elliman and Dwelling Quest will open offices in Harlem, and Dwelling Quest and Prudential Douglas Elliman will open in Brooklyn Heights. Last week, Brown Harris Stevens opened a new office in TriBeCa. All have street views.

"Historically in Manhattan, real estate offices were not in retail locations," said Hall F. Willkie, the president of Brown Harris Stevens. But he said storefront offices are something firms are beginning to value as much for marketing as for the quality of the workspace. "Just having your name on a sign, it reminds people you're there," Mr. Willkie said. "Hidden up in an office building, no one knows you're there."

After Brown Harris Stevens learned it would need to leave its current Broadway home, the firm rented West Side office space at the bottom of a newly constructed rental building opposite Lincoln Center, at 1930 Broadway, which is to open in summer.

Jim Gricar, director of sales at the West Side office, called it a "hybrid" property, with more than 10,000 square feet, including a large-windowed retail space at the bottom with a floating staircase up to more traditional office space upstairs.

Mr. Willkie of Brown Harris Stevens said that the search wasn't easy - three firms were looking for space in the same area - and that only a handful of properties were suitable. "We were lucky to identify it and get it," he said.

In the wake of the exodus from 2100-14 Broadway, Prudential Douglas Elliman found a 9,000-square-foot office space at 1995 Broadway, at 68th Street, which is to house about 80 agents and open in the summer.

Pamela Liebman, president and chief executive of the Corcoran Group, said her firm decided against going the storefront route. In May, the company will open a 19,787-square-foot office on the 39th floor of 888 Seventh Avenue, at 56th Street. It will house West Side brokers and the marketing department. It will be more space and more expensive than its 9,000-square-foot Broadway space, which rented for $43 a square foot annually. Asking annual rents at 888 Seventh are $75 a square foot.

"Not every broker wants to be in a storefront," Ms. Liebman said, citing what she called "floor duty," which she said takes time away from serving existing clients. Although Corcoran has six storefront offices, she said, they exist mainly to market to the consumer, while at the new Corcoran offices, the emphasis is more on what the brokers need, including a lounge and flat-screen computers. "We have clear glass refrigerators," she said. "Massage therapists. We're looking to have a butler."

Brokerages are usually most eager to be at street level when they are new to a neighborhood and struggling to make inroads.

Warburg Realty, which opened a storefront office in Harlem at 2235 Frederick Douglass Boulevard, at 120th Street, last October, has been getting steady walk-in business from 4 to 10 people a week, according to Chris Halliburton, head of sales at Warburg Realty Harlem.

"There is no reason to have a residential brokerage firm in Harlem if it can't be accessible to the people," Mr. Halliburton said.

Mr. Halliburton will have more company when Douglas Elliman opens an office three blocks south, at 304 West 117th Street, and Corcoran moves into its new office at 2224 Frederick Douglass Boulevard, near 119th Street. Both will be storefront offices with display space in the windows, and both are planning to open this summer.

For Daren W. Hornig, the president and chief executive of Dwelling Quest, which is opening a new 2,000-square-foot storefront office at 528 West 145th Street next week, "pictures of properties on the windows are old school." He said that the firm's Web site, with virtual tours and photographs, would lead people to the office.

Downtown, at Brown Harris Stevens's new office at 43 North Moore Street in TriBeCa, the attitude toward window space is a little different.

Kurt D. Weyrauch, director of sales there, said that the corner office of the 1888 building has 65 feet of window space facing south on North Moore Street and 25 feet of window space facing west on Hudson Street. The company plans to put up 15-by-11-foot placards to highlight properties.

Storefronts, or gallery offices, as some firms call them, do have drawbacks. The most obvious is the steep rent in many areas. According to Benjamin Fox, principal and executive vice president of Newmark Retail, prime retail space on Broadway and Columbus Avenue (from 62nd to 86th Street on Broadway and from the mid-60's to 77th Street on Columbus) rents for $175 to $225 a square foot annually.

"Retail space is so expensive," Mr. Willkie of Brown Harris Stevens said. "It takes a while for companies to realize that it is worth it."

In addition to the cost of facilities, storefronts have to be staffed on weekends unlike operations that are tucked away in office buildings. Ms. Liebman of Corcoran said that, for storefronts, "we figure about half of it is rent and half of it is advertising." She added, "It is putting your name on the street."

Now that Brown Harris Stevens, Corcoran and Douglas Elliman have settled on new West Side locations, one major question remains: who will get the contract to market the Apple Bank condos?

Warburg Realty Harlem has been appointed the exclusive sales agent for The Roosevelt Lane Condominiums, one of the newest residential developments in East Harlem located at 227 East 111th Street in Manhattan. The sales team, led by Chris Halliburton, Executive Vice President of Warburg Realty Harlem, will market the remaining available apartments in the 22-unit building. Frederick W. Peters, President of Warburg Realty Partnership, made the announcement.

"We are thrilled to be named the exclusive sales agent for Roosevelt Lane Condominiums, the first luxury high-rise in the neighborhood, which has generated a great deal of interest in the market," commented Mr. Halliburton. "The value of this product is excellent; the design team led by Gary Silver created a highly desirable space in an increasingly popular location, ultimately attracting many professionals."

The Roosevelt Lane Condominiums was designed by Gary H. Silver Architects, P.C., a full-service architectural firm based in New York and developed in partnership with HSE Realty LLC. The seven-story property offers loft style units ranging from studios to three-bedroom, two-bath penthouse units with outdoor space. The homes were designed to fully maximize on the light and airy qualities with ten-foot ceilings and continuous banks of windows. Prices for the condominiums range from $219,000 to $650,000 with the units available for occupancy in February 2005.

"Warburg Harlem was a natural choice when selecting a marketing agent for The Roosevelt Lane Condominiums," stated Mr. Silver. "The team's intimate knowledge of this market combined with their excellent personalized service made them the ideal brokerage to handle the condominium sales."

This is an exciting time for Warburg, as the partnership continues to evolve and remain competitive in this dynamic market. As the first major real estate brokerage firm to offer a full-time presence in Harlem, Warburg is excited to now provide residents in every neighborhood of Manhattan with its renowned luxury and personalized service.

Frederick Peters considers his firm a pioneer in Harlem’s real estate renaissance.

His company, Warburg Realty Partnership, just opened an office in Harlem, and Peters calls his company the first major brokerage to move into the neighborhood.

After languishing for years, Harlem’s housing market no is booming. Prices are rising, and developers are putting up new buildings.

“They have some of the most gorgeous turn-of-the-century housing stock you can find anywhere in New York City,” says Peters, president of Warburg. “There’s a lot of excitement in the area.”

Of course, Warburg isn’t the only company to see opportunity in Harlem. Corcoran Group, a unit of Cendant Corp., also plans to open an office in Harlem.

Peters named Christopher Halliburton, a veteran broker who specializes in the Harlem market, to run the office.

“One of the things that’s wonderful about Harlem is it still feels like a community,” Peters says. “We want to come into the community as a partner. That’s one of the reasons we wanted to open an office there rather than just having our agents come into that area. We want to invest in the community as well.”

Peters aims to hire about 30 agents for the 2,500 sf office. So far, he says, about a dozen have joined, and Peters says the recruiting pitch as been low-key. In fact, agents have approached Warburg because they want to work at a firm that has committed to the Harlem market, Peters says.

“If they’re ambivalent about the area,” Peters says, “then I’m not interested in them.”

Warburg Realty Partnership marked the grand opening of its Harlem office recently, drawing local dignitaries, residents and real estate professionals. More than 250 people gathered at the 2235 Frederick Douglass Boulevard location to join Warburg in celebrating the firm’s commitment to the Harlem community as the first major Manhattan brokerage to provide residents with a full–time, dedicated sales force in this market.

“Warburg is incredibly pleased to be celebrating the opening of the Harlem office. We are excited to have officially joined the Harlem community and provide residents with the first-hand, intimate knowledge and full suite of services we have offered Manhattan neighborhoods since 1896, “ said Frederick W. Peters, the company’s president.

“As part of the Harlem community, we are thrilled to participate in the area’s current real estate renaissance, while playing an active role in supporting and preserving this neighborhood’s extraordinary heritage and culture, “ he added.

The Harlem office will be managed by Christopher Halliburton, a native New Yorker with a long family history of involvement, both politically and economically, in the Harlem community. Since 1982 Mr. Halliburton has been involved in buying and selling real estate in the area and now specializes in residential and commercial property sales.

“In the Harlem office, we will provide both buyers and sellers with the luxury services once only readily available in neighborhoods below 96th Street- this is an exciting time for Warburg and Harlem residents,” Mr. Halliburton said.

“In a time where mammoth brokerage houses are the norm, Warburg is proud to offer the firm’s trademark personalized service and attention to the city’s finest neighborhoods,” said Mr. Peters. “We pledge to remain true to our century old practice of luxury services, while embracing the industry’s continuous modernization efforts in order to provide our clients with the complete professional package in this dynamic real estate market.”

Warburg Realty Partnership marked the grand opening of their Harlem office, drawing local dignitaries, residents and real estate professionals.

Over 250 people gathered at the 2235 Frederick Douglass Boulevard location to join Warburg in celebrating the firm’s commitment to the Harlem community.

The Harlem office will be managed by Christopher Halliburton, a native New Yorker with a long family history of involvement, both politically and economically, in and around the Harlem community.

Since 1982 Halliburton has been involved in buying and selling real estate in the area, and now specializes in residential and commercial property sales.

Warburg Realty Partnership is gearing up to open a Harlem office this month at Frederick Douglass Boulevard between 120th and 121st streets. The first major brokerage to open there, they won’t be alone for long. The Corcoran Group has begun negotiations for space not far from there. It’s no surprise big brokers are finally heading uptown; what’s surprising is how long it took.

“In opening a Harlem office, we want to celebrate the community’s extraordinary heritage and Warburg’s ongoing investment in Manhattan’s finest neighborhoods,” said Warburg president Frederick Peters. “Warburg is committed to bringing Harlem’s residents the same first hand, intimate knowledge and services it has provided since 1896.”

Pam Liebman, Corcoran’s president and chief executive officer, noted, “We wanted to wait until there was a more robust market of second-generation buyers and sellers – those who intend to remain Harlemites instead of purchasing for a profitable flip. After completing several projects here, we’ve determined that the neighborhood is hot for professionals of all ages.”

July 5, 2004

BOTTOM’S UP
Super-low interest rates made us brave spenders, hid the recession, and even helped keep political peace. But good-bye to all that.

By Daniel Gross

One year after cutting the federal funds rate to the modern-day low of 1 percent, and four years after embarking on a protracted game of interest-rate limbo, Federal Reserve chairman Alan Greenspan finally raised the interest rate he controls. Widely predicted for months, the increase was perhaps the most anti-climactic scrap of news to cross the tape since Nathan Lane came out. And though it was but a mere quarter of a point, the hike is likely to be the first of many. “When rates reverse, they typically start going in a new direction,” says James Grant, the proprietor of Grant’s Interest Rate Observer. If this is, in fact, what comes to pass, the implications for New York City—at least the version of it we have known and grown comfortable with over the past three years—could be dire.

Just as the Wall Street boom defined the eighties, and the dot-com era branded the nineties, the first half of this decade can be considered the era of cheap money.
The long-term cycle started way back in the early eighties, when Paul Volcker, the cigar-chomping Federal Reserve chairman, launched a jihad on inflation by jacking up interest rates into the high double digits. (In 1980, my bar mitzvah money went into a Dreyfus money-market account that yielded about 18 percent.)

After generally falling throughout the eighties and nineties, with some upward bumps along the way, rates plunged in the past few years to record lows.

Many factors were responsible: a recession and anemic recovery, rampant productivity, and the widespread disillusionment with stocks after the dot-com crash. Above all, we’ve had a Fed chairman whose preferred response to virtually every crisis—from the Asian meltdown of 1997 to the 9/11 attacks—has been to lower the price of money. Last June, fearing deflation, Greenspan took the federal funds rate to 1 percent—down from 6.5 percent in May 2000—and left it there.

Such low rates, of course, were accessible only to banks like Citigroup and Goldman Sachs. But ultracheap money for the few translated into cheaper money for the masses, a verifiable case of trickle-down economics. Thirty-year mortgage rates fell from 8.5 percent in 2000 to below 6 percent last year. The Big Three automakers rolled out unprecedented zero percent car loans in the fall of 2001.

But it was in New York that the effects of cheap money were most visible and far-reaching. The city is populated with more people, companies, and public agencies that borrow and spend than anywhere else. It houses the industries for which low interest rates are a license to mint money—bond-trading notably, as well as the securitization of mortgages and other financial instruments. And because housing costs more here than virtually anywhere else in the country, and because people borrow heavily to buy it, New York real estate was among the nation’s greatest beneficiaries of the era of cheap money. The city has been awash in cash in a way that we will come to appreciate ever more deeply as Greenspan begins to tighten the spigot.

Over the past three years, super-low interest rates offered a psychological salve for New Yorkers who found their nerves frayed by 9/11 (and by that suddenly smaller matter of the dot-com collapse). For many of us, spending became a kind of therapy. We took the windfalls from mortgage refinancings and hastily blew through them: on $300 meals at Alain Ducasse, on spa treatments and trips to the Ocean Club.

Nationwide, inflation may have been muted. But the cost of daily life in Manhattan rose spectacularly: 95 cents for a Gray’s Papaya hot dog, $2.50 for a gallon of gas, $10 for a movie ticket, $100 for a Producers ticket, $16,000 for nursery school. We accepted the higher prices with alacrity because cheap money acts as the ultimate absorber of sticker shock.

Cheap money also paced the relentless march of the Upscale. Whole Foods replaced the Korean grocer as the supplier of choice for produce. Barneys revived from its long post-bankruptcy slumber. The $40 Gap button-down gave way to the $130 Thomas Pink in the closets of middle management. On the Lower East Side, dining used to mean a $3 falafel and a $1.25 Snapple. Now it’s the lamb with aged goat cheese and hibiscus date purée ($30), accompanied by a 1999 Meo-Camuzet Bourgogne ($48) at WD-50.

Most of all, New Yorkers spent their cheap money on condos, co-ops, brownstones, lofts, carriage houses, and country homes. In the seventies, cash disappeared up the noses of the upwardly mobile; more recently, yuppie cash was shoveled into brownstone Brooklyn. Since the end of 2000, the nation’s total household debt has risen from $7.01 trillion to $9.46 trillion, up 35 percent. Nearly three-quarters of that debt resides in mortgages.

Bonuses may have been flat and new jobs still hard to find, but thanks to falling interest rates, homeowners found themselves sitting on cash—much as the Beverly Hillbillies discovered black gold in their backyard. They refinanced or took home-equity loans at absurdly low rates to pay bills or tuition, or to renovate—which stimulated the businesses of architects, plumbers, and contractors. In 2001 and 2002, Home Depot opened eight stores in the city.

Cheap money created a virtuous, profitable, and satisfying circle of consumption, investment, and sales. And so early this year, according to Douglas Elliman, the average sales price for a Manhattan apartment below 96th Street on the East Side and below 116th Street on the West Side rose to $998,905, up 28 percent from the year before. And why not? Even as houses were getting more expensive, they were getting cheaper.

Paying down a 5.6 percent, $800,000 mortgage over 30 years costs $4,593 a month; at 8 percent, the prevailing rate in 2000, the monthly payment on the same was $5,870—over 30 years, that’s a savings of $460,000. Just as people who came of financial age in the nineties believed that stocks moved only in one direction, those who matured financially in the early part of this decade knew that interest rates moved only in the opposite direction. You could overpay for that four-bedroom Colonial in Montclair, or for the two-and-a-closet in Gramercy, secure in the knowledge that you could quickly refinance.

In 1996, the 35 brokers at the Manhattan Mortgage Company, a firm founded in 1985 by Melissa Cohn, originated about $700 million in mortgages. Last year, Manhattan Mortgage’s 140 brokers, working out of offices from Amagansett in the east to Croton-on-Hudson in the north, clocked $5 billion. Cohn herself did $1.125 billion in 2003, closing 2,700 loans—more than seven closings per day, every day of the year. That earned her the rank of No. 2 originator of the year from >Mortgage Originator magazine. “It was insane,” says Cohn, who speaks almost exclusively in short, clipped sentences, one eye on her e-mail; no time for lengthy discourses when home buyers are queued up like 737s at La Guardia.

The neighborhood in which the effects of cheap money and falling interest rates were most pronounced was a metaphorical one: Wall Street. A few years ago, the financial industry was laid low. The stock-market crash, the attacks of 9/11, corruption scandals and indictments, Eliot Spitzer. One by one, the ringleaders of the stock-market circus left the scene.

Into their soft leather shoes stepped the bond guys. In the late nineties, M.B.A.’s who entered the bond-trading field were thought to be chumps. There were millions to be made instantly in startups. And with the sudden appearance of a federal surplus, there was talk of the government’s paying off the entire national debt, thus obviating the need for bond traders. In retrospect, however, it was a classic contrarian move. Low interest rates spurred waves of refinancing—by home buyers, companies, governments—and the massive accumulation of new debt. Most of that debt was packaged into bundles and sold as bonds. In 2000, $482.4 billion in mortgage-backed securities was issued; last year, there was $2.14 trillion. The explosion created constant work for bankers, lawyers, accountants, and printers. Happiest was the lot of traders. Daily trading volume of mortgage-backed securities rose from $69.5 billion in 2000 to $211.5 billion in the first quarter of 2004.

Companies, like consumers, have refinanced their debt by selling huge amounts of bonds. That added to the profits of the Wall Street firms that specialized in bonds, like Lehman Brothers and Bear Stearns. But it also gave screwups a new lease on life. Many companies that overborrowed to overinvest in the nineties faced a reckoning in 2002. And just at the moment that lots of debt needed to be restructured, interest rates began to fall to new lows. “In 2002, companies that we thought were bankrupt pulled themselves together,” said Steve Rattner, principal at the Quadrangle Group and member in good standing of John Kerry’s economic-team-in-waiting.

On Wall Street, minuscule interest rates gave rise to the carry trade—the phenomenon whereby professional investors borrow cash short-term and buy higher-yielding long-term securities. So long as short-term rates remain low, it’s automatic money. With IPOs slow to recover and the stock market generally flat, proprietary trading—i.e., gambling with the house’s money—helped restore Wall Street profits to their boom-era levels. Those who made the bets won the internal sweepstakes. Lloyd Blankfein, an unassuming former gold-coin broker, rose in the past several years to head Goldman Sachs’s fixed-income unit, the company’s profit engine. He earned $20 million in 2003, and was catapulted to the posts of president and COO. “Fixed income, commodities, and currencies—these guys had a huge run, because they were strapped to a rocket ship on a trading desk going to Mars, and it landed,” said David Hendler, an analyst at Creditsights.

All this activity—the forgiving interest-rate climate, the creation and packaging of bonds, the frenzy of housing sales and the rise of property values—also redounded to New York City’s benefit. New York City is America’s great civic borrower. But even as the city’s debt rose from $37.78 billion in 1999 to $47.765 billion in 2003, or 26 percent, the cost of maintaining and paying it down fell sharply. In the New York City general fund, total funds spent on debt service went from $3.74 billion in 1999 to $2.52 billion in 2003, from 10.4 percent to 5.7 percent of total expenditures. “New York City now pays 1.2 percent on its variable debt,” says Marcia Van Wagner, an economist at the Citizens Budget Commission. “If you go back to ’94 or ’95, the city was paying about 3.5 percent on its variable-rate debt.” Without low rates, Mayor Bloomberg would have been forced to enact budget cuts and tax increases far more vicious and relentless than we’ve seen.

Now the era is ending much as morning cracks over the East River—gently, until the light spreads across a broad canvas. Stock-market cycles tend to end cataclysmically, on a single day: October 29, 1929; October 19, 1987; April 3, 2000. But the interest-rate worm is turning slowly. With signs of inflation and stronger economic growth, investors since March have started to push interest rates higher, even as Greenspan sat on his hands. The interest rate on the ten-year Treasury bond has risen nearly 25 percent since March. It’s not just that interest rates are going to spike and run up hugely, but that people are beginning to realize they won’t fall anytime soon. “The next ten years won’t be like the last ten or twenty years,” says Columbia University economist Richard Clarida, a former assistant Treasury secretary in the Bush administration. “There aren’t going to be those big powerful forces pushing interest rates down, because the Fed has won that victory over inflation.”

The mortgage brokers are already feeling the pain. “The refinancing market has dried up to a great extent,” says Melissa Cohn, whose firm’s business will probably decline by 20 percent this year. “My entire industry is going to contract tremendously this year.” And real-estate brokers are having to hustle. “If you did 30 or 40 deals last year, you’ll probably have to work a lot harder to do the same thing,” says Chris Halliburton, a broker with Warburg Realty who specializes in Harlem. Prices aren’t falling by any measure yet, but the likelihood of a repeat of the past few years is increasingly distant.

As the Fed continues to raise interest rates in the coming months, the discomfort will spread. On Wall Street, it’s dangerous simply to extrapolate a whole year based on the first six months. But thus far, it’s shaping up to be a typical rate-rise year. Both the bond and stock markets are flat, and trading volume hit the summer doldrums in springtime. In mid-June, David Goldfarb, CFO of Lehman Brothers, hosted a conference call to report the latest earnings and crowed about the company’s second-best quarter ever. There were cracks in the smiley façade, though: Revenues fell 10 percent from the first quarter. Bond underwriting was flat. Goldfarb added that the firm is “looking for a fixed-income origination, probably down somewhere between 10 and 15 percent” in the second half of the year, and suggested that Lehman could make up for the declines with more stock-market and advisory businesses. Investors didn’t bite. Lehman has other lines of businesses for the same reason Peter Luger has salmon on its menu—more for show than for true diversification. Bonds are Lehman’s porterhouse and home fries. The day earnings were announced, Lehman’s stock, down about 15 percent since March, fell another 4 percent.

Bad as it may be for Lehman, New York City could eventually be hit with a double whammy, paying more to service its huge debt and raking in fewer tax receipts from Wall Street. That means the already-bitter partisan warfare between the Republican mayor and the Democratic City Council will intensify, as they battle over painful choices on taxing and spending.

And what of the rest of us? Just as cheap money made us all feel and behave a little richer than we really were, an era of more expensive money will leave us all feeling and behaving a little poorer. People will start to scrutinize restaurant bills more closely—“That’s your $18 martini”—and think twice about Anguilla in February. Fort Myers is warm then, too.

But housing is where we’ll see and feel it most. When interest rates rise by one full percentage point, it saps about 10 percent of buying power. Worse, we’ll have to pay down the mountain of debt that has piled up on our homes and credit cards. And refinancing at a lower rate may not be an option for years. “We’re addicted,” warns hedge-fund manager John Succo, “and we will go through withdrawal.”

But instead of going cold turkey, many New Yorkers are turning to harder stuff. The great blessing of the era of cheap money was that you could get a low interest rate and insulation from credit risk—a guaranteed low rate for 10, 15, or 30 years. And so when interest rates rise, borrowers’ first step is frequently to assume greater risk in exchange for a temporarily lower rate. This winter, Alan Greenspan, momentarily morphing into CNBC personal-finance therapist Suze Orman, suggested that people make greater use of adjustable-rate mortgages—inviting people to expose themselves to interest-rate risk precisely at the time when it would have been smartest to lock in a long-term rate.

And New Yorkers are taking heed. Melissa Cohn says buyers are looking at interest-only products, variable rates, 40-year mortgages, or shorter-term debt—anything to keep the payments low. Meanwhile, the smart money is moving in the other direction. “I have gone the other way and fixed a bunch of stuff,” says a partner in a high-profile private-equity firm.

In time, we may look back nostalgically on the cultural artifacts of the era—the Lincoln Navigator we bought with a zero percent loan, that apartment with an asking price we thought preposterous until it was topped by three bidders. We’ll reminisce about all this with the same fondness with which today’s fortysomethings rhapsodize about the Wall Street bonuses and the Columbus Avenue singles bars of the eighties—a great good time that slipped away, never to return.

June 16-22, 2004

WARBURG REALTY PARTNERSHIP TO ESTABLISH MAJOR HARLEM OFFICE

New York, NY – Warburg Realty Partnership one of New York City’s oldest and most respected luxury residential brokerage firms, announced it will open a Harlem office this fall. This will make Warburg the first major brokerage to open a neighborhood office offering a full-time, dedicated and knowledgeable sales force to the Harlem community. In recognition of the neighborhood’s current renaissance, Warburg intends to provide Harlem residents, including the newly arrived, with the best possible service.

Frederick W. Peters, the company’s President said, “Warburg is committed to bringing to Harlem’s residents the same first hand, intimate knowledge and full suite of services which it has provided to Manhattan’s other luxury neighborhoods since 1896.”

Warburg’s core philosophy – providing extraordinary service and forging strong relationships between the company’s professionals and the clients and the community in which they work – sets the firm apart from competitors and warrants its impeccable reputation. As Warburg prepares to open its newest office, the firm stands ready to offer the same ideals and dedication to the Harlem community.

“In opening an office in Harlem, I want to celebrate both the community’s extraordinary heritage and Warburg’s ongoing investment in Manhattan’s unique neighborhoods. My family has lived and worked here since the middle of the 19th century, so I have the lifelong New Yorker’s love for and belief in the excitement and diversity of our city,” Mr. Peters explained.

The Harlem office will be managed by Christopher Halliburton, a native New Yorker with a long family history of involvement, both politically and economically, in and around the Harlem community. Since 1982, Mr. Halliburton has been involved in buying and selling real estate in the area, and now specializes in residential and commercial property sales. “In the Harlem office, we intend to fully represent the buy-side as well as the sell-side. We want everyone to win,” commented Halliburton. As one of the top sales brokers in the community, he is a natural to lead the office.

“Chris’s reputation in the industry is impeccable, he was our first choice to lead Warburg’s Harlem venture,” said Mr. Peters. “He represents the best qualities of a Warburg professional – an interactive, modern-thinking broker who provides our time-honored trademark of personalized service.”

“In a time when brokerage consolidations are the norm, these ideals enable Warburg to not only compete, but flourish in Manhattan’s luxury market,” commented Mr. Peters. “As the number of luxury firms diminishes, our highly personalized service and ongoing modernization efforts, will undoubtly serve us and the communities we serve – such as Harlem – as well in the upcoming century, as it did in the last.”

June 2004

Warburg Adds Office

Warburg Realty Partnership will open a Harlem office this summer. The office, which will be Warburg’s third in Manhattan, will be located on the ground floor of a new middle-income co-op development at 2235 Frederick Douglas Blvd., between 120th and 121st streets.

Former Corcoran Group broker Christopher Halliburton will manage the 2,400 square foot site, which is slated to open in August and plans to ultimately operate with 25 brokers.

Halliburton has bought and sold real estate in the area since 1982, and specializes in residential and commercial property sales.

“In the Harlem office, we intend to fully represent the buy-side as well as the sale-side,” said Halliburton. “We want everyone to win.”

“Warburg is committed to bringing Harlem residents the same first-hand, intimate knowledge and full suite of services which it has provided to Manhattan’s other luxury neighborhoods since 1896,” said Warburg president Frederick W. Peters.

June 2, 2004

MOVING ON UP

Warburg Realty Partnership announced that it will open a Harlem office this summer.

According to Frederick W. Peters, the company’s president, “Warburg is committed to bringing to Harlem’s residents the same first hand, intimate knowledge and full suite of services which it has provided to Manhattan’s other luxury neighborhoods since 1896.”

The Harlem office will be managed by Christopher Halliburton, a native New Yorker with a long family history of involvement in the Harlem community.

June 2004

WARBURG REALTY PARTNERSHIP TO ESTABLISH MAJOR HARLEM OFFICE
First Luxury Residential Brokerage To Have Dedicated, Formidable Presence In Exciting Harlem Market

Warburg Realty Partnership, one of New York City’s oldest and most respected luxury residential brokerage firms, recently announced it will open a Harlem office. Warburg is the first major brokerage to open a neighborhood office offering a full-time, dedicated and knowledgeable sales force to the Harlem community. In recognition of the neighborhood’s current renaissance, Warburg intends to provide its residents new and old with the best possible service.

Frederick W. Peters, the company’s president said, “Warburg is committed to bringing to Harlem’s residents the same first hand, intimate knowledge and full suite of services which it has provided to Manhattan’s other luxury neighborhoods since 1896.”

Warburg’s core philosophy –- providing services and forging strong relationships between the company’s professionals and the clients and community in which they work – sets the firm apart from competitors and warrants its impeccable reputation. As Warburg prepares to open its newest office, the firm stands ready to offer the same ideals and dedication to the Harlem community.

“In opening an office in Harlem, I want to celebrate both the community’s extraordinary heritage and Warburg’s ongoing investment in Manhattan’s unique neighborhoods. My family has lived and worked here since the middle of the 19th century, so I have the lifelong New Yorker’s love for and belief in the excitement and diversity of our city,” Mr. Peters explained.

The Harlem office will be managed by Christopher Halliburton, a native New Yorker with a long family history of involvement, both politically and economically, in and around the Harlem community. Since 1982 Mr. Halliburton has been involved in buying and selling real estate in the area and now specializes in residential and commercial property sales. “In the Harlem office, we intend to fully represent the buy-side as well as the sales-side. We want everyone to win,” commented Mr. Halliburton. As one of the top sales brokers in the community, he is a natural to lead the new office.

“Chris’ reputation in the industry is impeccable, he was our first choice to lead Warburg’s Harlem venture,” said Mr. Peters. “He represents the best qualities of a Warburg professional – an interactive, modern-thinking broker who provides our time-honored trademark of personalized service.”

“In a time where brokerage consolidations are the norm, these ideals enable Warburg to not only compete, but flourish in Manhattan’s luxury market,” commented Mr. Peters. “As the number of luxury firms diminishes, our highly personalized service and ongoing modernization efforts, will undoubtedly serve us and the communities we serve – such as Harlem – as well in the upcoming century, as it did in the last.”

WARBURG REALTY TO OPEN OFFICE IN HARLEM

To better serve both buyers and sellers
during the neighborhood’s renaissance, Warburg will open a Harlem office this fall.

Frederick W. Peters, the company’s president said, “Warburg is committed to bringing to Harlem’s residents the same first hand, intimate knowledge and full suite of services which it has provided to Manhattan’s other luxury neighborhoods since 1896.”

Warburg is one of the city’s oldest luxury residential brokerage firms, with a core philosophy of providing services and forging strong relationships between the company’s professionals and the clients and community in which they work.

The Harlem office will be managed by Christopher Halliburton, a native New Yorker with a long family history of involvement, both politically and economically, in and around the Harlem community. Halliburton has been buying and selling in the area since 1982, and specializes in residential and commercial property sales.