HIGHLIGHTS: Gowanus Development and Sales with Sam Charney and Dan Marks

(The following is an edited and consolidated series of excerpts from a 30-minute PincusCo Live discussion April 5 with developer Sam Charney of the Charney Companies, and broker Dan Marks of TerraCRG. The moderator was Adam Pincus of PincusCo Media. To watch the full episode, the fifth in the series, please click here.)

Dan Marks on Gowanus sales volume

In the last 10 years there have been about 53 transactions in the rezoned area, and of those about 20 of them were over 100,000 square feet or approximately $10 million-plus and so most of the transaction volume has actually already happened. And so you’re not going to see a tremendous amount of sales volume especially for these larger sites. (This moment on YouTube)

Sam Charney on Williamsburg rents

[We] underwrote in $70s [per square foot] in Williamsburg and now it’s $100… We’re seeing rents over at our Williamsburg projects, you know every day at over a hundred bucks a foot, numbers that you know pre-pandemic we were underwriting in the $70s. So New York has just seen a massive rebound. (This moment on YouTube)

Charney on underwriting rents in Gowanus

We’re certainly looking at rents and underwriting in the $70s. You know we’re not trending rents [ed. note, “trending rents” is underwriting at a level higher than current values based on anticipated rent growth]. We’re using what we think are extrapolated rents from the adjacent Park Slope and Carrol Gardens markets today, and so we’re comfortably underwriting $70 and hoping we outperform that. (This moment on YouTube)

Marks on Gowanus land pricing

Regarding land prices we obviously track those closely. We’re working on a number of transactions now in the neighborhood. The high water mark — whether Sam is proud of it or not — is when he and his team purchased the Casket Company properties through our marketing efforts in conjunction with Avery Hall. That was around $235 per square foot on a per buildable basis. That has not been topped yet. It certainly will be based on market feedback we’re getting on some larger sites that we’re working
on in the neighborhood. Our expectation is we will be able to hit and perhaps exceed $250 per buildable which is what I always thought that land value should be, post rezoning. (This moment on YouTube)

Charney on non-developer owners filing for entitlements

You have a lot of owners who are not developers and aren’t really sure what to do so they’ve taken a little bit of guidance and are going out and entitling right now with the plan to figure out how to get these things built or try to get them built, or or call guys like Dan and try to sell. (This moment on YouTube)

Marks on land pricing for smaller condo sites

Under the Mandatory Inclusionary Housing guidelines, if you’re building less than 12,500 square feet of residential you don’t have to provide inclusionary housing inside that project, it would be too prohibitive. So you’ll probably see an uptick in transactions for sites that really wouldn’t qualify for bigger buildings more than 13,000 or 14,000 square feet. You may have a little commercial component on the ground floor and so you’ll see that land trade you know around $300 or $300-plus per buildable because those are going to be for-sale housing that’s built. And the for-sale housing sale numbers are climbing. (This moment on YouTube)

Charney on QOZ on east side of the canal attracting different capital

Another interesting nuance between the two sides of the canal and why we focused on the eastern side, the Park Slope side when we were acquiring sites over the past years was the east side of the canal is a QOZ, it’s a Qualified Opportunity Zone. So under the recent tax code changes when qualified opportunity zones were set up we realized that there was an abundant amount of capital out there for QOZs and we wanted to make sure that that capital was coming to New York and not going to QOZs in other parts of the country. So we said if this is a QOZ and we do think it’s probably one of the best QOZs in the country, we want to be buying there and we want to be developing there. (This moment on YouTube)