The Ari S. Heckman Cayuga Capital Management Effect

Obama’s victory celebration, Bedford Avenue, Williamsburg, 2008 Housing for Hipsters

Key Themes The L-train as a transit corridor spine Neighborhood identification and evolution around subway lines The evolution of pricing and gentrification How to appeal to a specific target demographic A brief critique of who wins and who loses

The L-train as a transit corridor spine

Neighborhood identification and evolution around subway lines

The evolution of pricing and gentrification

How to appeal to a specific target demographic

A brief critique of who wins and who loses

Place Northwest Brooklyn, across the East River from Manhattan Medium density attached housing with retail corridors and activated corners Late 19 th /early 20 th century housing stock Decommissioned industrial buildings Located along the L-train (MTA) Bisected by the Brooklyn Queens Expressway (BQE)

Northwest Brooklyn, across the East River from Manhattan

Medium density attached housing with retail corridors and activated corners

Late 19 th /early 20 th century housing stock

Decommissioned industrial buildings

Located along the L-train (MTA)

Bisected by the Brooklyn Queens Expressway (BQE)

Map L L L L L L L

History 1820-1900: German/Polish Jewish immigrants 1870-1940: Manufacturing and commercial activity post bridge construction Williamsburg as manufacturing center Pfizer, Havemeyer (Domino Sugar,) Standard Oil Bushwick as Brewery Capital 1928: L-train opens 1970s: Riots in Bushwick 1980s: Pedestrian improvements along Bedford Avenue 1996: Improved L-train frequency 1990s: NYU, SVA, Parsons and Pratt students, along with artists, begin to settle in semi-abandoned industrial buildings Late 1990s: Williamsburg reaches critical mass in late 1990 Early 2000s : Retail rents increase, loft condo conversions 2004: Northside Williamsburg rezoned from industrial to mixed-use 2005-2008: Thousands of new construction units created 2006: Life Café (of RENT fame) opens in Bushwick 2008: Rents on Bedford Avenue hit $150 PSF 2009: 44 Berry and 38 Wilson open

1820-1900: German/Polish Jewish immigrants

1870-1940: Manufacturing and commercial activity post bridge construction

Williamsburg as manufacturing center

Pfizer, Havemeyer (Domino Sugar,) Standard Oil

Bushwick as Brewery Capital

1928: L-train opens

1970s: Riots in Bushwick

1980s: Pedestrian improvements along Bedford Avenue

1996: Improved L-train frequency

1990s: NYU, SVA, Parsons and Pratt students, along with artists, begin to settle in semi-abandoned industrial buildings

Late 1990s: Williamsburg reaches critical mass in late 1990

Early 2000s : Retail rents increase, loft condo conversions

2004: Northside Williamsburg rezoned from industrial to mixed-use

2005-2008: Thousands of new construction units created

2006: Life Café (of RENT fame) opens in Bushwick

2008: Rents on Bedford Avenue hit $150 PSF

2009: 44 Berry and 38 Wilson open

Transit L-train is a crosstown train that runs across 14 th Street in Manhattan, stopping at 8 th Ave, 6 th Ave, Union Square, 3 rd Ave and 1 st Ave First stop in Brooklyn is Bedford (Williamsburg) East Williamsburg = Lorimer, Graham, Grand, Montrose Bushwick = Morgan, Jefferson, Dekalb Runs 24 hours a day, 7 days a week 1994: 16.9MM annual riders. 2005: 30.5MM annual riders. 2009? New cars, cleaner than average, on time trip notification

L-train is a crosstown train that runs across 14 th Street in Manhattan, stopping at 8 th Ave, 6 th Ave, Union Square, 3 rd Ave and 1 st Ave

First stop in Brooklyn is Bedford (Williamsburg)

East Williamsburg = Lorimer, Graham, Grand, Montrose

Bushwick = Morgan, Jefferson, Dekalb

Runs 24 hours a day, 7 days a week

1994: 16.9MM annual riders. 2005: 30.5MM annual riders. 2009?

New cars, cleaner than average, on time trip notification

Hipster Demographics Difficult to quantify due to speed of transformation Tens of thousands of post-collegiate, transient, hipper than average people Williamsburg retains sizeable Polish population although now mostly “hipstergrants” and under 30 Bushwick is a heavily Latino with smaller hipster population NYC’s new epicenter of art, fashion, food, liquor, film

Difficult to quantify due to speed of transformation

Tens of thousands of post-collegiate, transient, hipper than average people

Williamsburg retains sizeable Polish population although now mostly “hipstergrants” and under 30

Bushwick is a heavily Latino with smaller hipster population

NYC’s new epicenter of art, fashion, food, liquor, film

The Hipster Under 30 College educated Culturally aware Liberal or apolitical Green-friendly Gay-friendly Drug-friendly Fashion sensitive Parentally supported Generally graduates of top 50 schools Sizeable Ivy League/Seven Sisters/art school population Seen as the opposite of the “Murray Hill/Midtown East Set” Tastemakers, creative class, artists, casually employed, parentally supported Less affected by recession

Under 30

College educated

Culturally aware

Liberal or apolitical

Green-friendly

Gay-friendly

Drug-friendly

Fashion sensitive

Parentally supported

Generally graduates of top 50 schools

Sizeable Ivy League/Seven Sisters/art school population

Seen as the opposite of the “Murray Hill/Midtown East Set”

Tastemakers, creative class, artists, casually employed, parentally supported

Less affected by recession

What Does a Hipster Look Like? Hair (head and facial) Fashion Art Sexuality Relative androgeny Loose sexual mores or definitions Music Body image Humor Body art

Hair (head and facial)

Fashion

Art

Sexuality

Relative androgeny

Loose sexual mores or definitions

Music

Body image

Humor

Body art

The Housing for Hipsters strategy Play the gradient Williamsburg = $1000 per head E. Williamsburg =$800-850 per head Bushwick = $650-700 per head Heads on Beds All rent is priced on a per head basis Reinforce with retail Create ancillary retail that attracts tenants Youth housing created by (relative) youth Know what your customer likes Follow design trends Walk to subway No more than .5 miles from L train stop

Play the gradient

Williamsburg = $1000 per head

E. Williamsburg =$800-850 per head

Bushwick = $650-700 per head

Heads on Beds

All rent is priced on a per head basis

Reinforce with retail

Create ancillary retail that attracts tenants

Youth housing created by (relative) youth

Know what your customer likes

Follow design trends

Walk to subway

No more than .5 miles from L train stop

Williamsburg Nationwide hipster epicenter Bedford Avenue is central corridor Divided into two sections: Northside (traditionally Polish,) Southside (traditionally Latino and Hasidic Jew) Great “natural” boundaries Famous hipster landmarks Hipsters are being pushed out along L-train due to influx of “square” Manhattanites, Toll Brothers, etc. Condo prices leveling out at $650-800 PSF (compare Manhattan at $1000)

Nationwide hipster epicenter

Bedford Avenue is central corridor

Divided into two sections: Northside (traditionally Polish,) Southside (traditionally Latino and Hasidic Jew)

Great “natural” boundaries

Famous hipster landmarks

Hipsters are being pushed out along L-train due to influx of “square” Manhattanites, Toll Brothers, etc.

Condo prices leveling out at $650-800 PSF (compare Manhattan at $1000)

East Williamsburg + Bushwick Rapidly emerging Recipient of Williamsburg emigrants (collectives) Centered on Maria Hernandez Park Underground art, music and film scene More “hardcore” than Williamsburg Was know as most dangerous neighborhood in NY in 1970s Suffered from riots, fire, blight 40% abandoned in 1978! Ongoing crime, property condition, foreclosure issues New retail

Rapidly emerging

Recipient of Williamsburg emigrants (collectives)

Centered on Maria Hernandez Park

Underground art, music and film scene

More “hardcore” than Williamsburg

Was know as most dangerous neighborhood in NY in 1970s

Suffered from riots, fire, blight

40% abandoned in 1978!

Ongoing crime, property condition, foreclosure issues

New retail

Housing for Hipsters (rental) 44 Berry Street Conversion of 1919 New York Chemical and Quinine Works Building (55,000 SF) 42 loft apartments 15,000 ground floor retail Lofts are 650-800 SF, designed with flexible layouts for sharing, mezzanines, temporary walls, etc. Finishes are old New York meets minimalist art gallery Lobby design Amenities

44 Berry Street

Conversion of 1919 New York Chemical and Quinine Works Building (55,000 SF)

42 loft apartments

15,000 ground floor retail

Lofts are 650-800 SF, designed with flexible layouts for sharing, mezzanines, temporary walls, etc.

Finishes are old New York meets minimalist art gallery

Lobby design

Amenities

Berry Floor plan

Housing for Hipsters (condo) 38 Wilson 15 affordable condominiums Parking on site (as required by DOB) Street-friendly Industrial metal skin, Ipe wood and white stone facade All 1-beds with potential for 2-bed conversion Simple, elegant, modern finishes (not $) Roof decks 3 blocks from Morgan L stop Priced from $259-325k FHA/HUD approved for 96.5% financing (little cash in with stimulus tax credit) Marketing began May 2009, 5 in contract

38 Wilson

15 affordable condominiums

Parking on site (as required by DOB)

Street-friendly

Industrial metal skin, Ipe wood and white stone facade

All 1-beds with potential for 2-bed conversion

Simple, elegant, modern finishes (not $)

Roof decks

3 blocks from Morgan L stop

Priced from $259-325k

FHA/HUD approved for 96.5% financing (little cash in with stimulus tax credit)

Marketing began May 2009, 5 in contract

Wilson Floor plan

Wilson Images

What Hipsters Want…

Layouts/Design Flexible plan New partitions/bedrooms Small private social spaces Large public social spaces Unique or odd spaces Translucent pocket doors Malleable palate

Flexible plan

New partitions/bedrooms

Small private social spaces

Large public social spaces

Unique or odd spaces

Translucent pocket doors

Malleable palate

Finishes OLD Preserve original details wherever possible Subway tile Historic/evocative Raw Contextual NEW Minimalism—don’t over-embellish Showers not tubs Metal, glass, wood Industrial finishes and materials Lesson: $ on finishes ≠ absorption!

OLD

Preserve original details wherever possible

Subway tile

Historic/evocative

Raw

Contextual

NEW

Minimalism—don’t over-embellish

Showers not tubs

Metal, glass, wood

Industrial finishes and materials

Amenities Roof decks Retail/bars/restaurants in roll-out-of-bed distance 24 hour markets Well designed lobbies and common spaces Odd balls: bocce, games, video screenings, art galleries Parks, bike lanes, flea markets

Roof decks

Retail/bars/restaurants in roll-out-of-bed distance

24 hour markets

Well designed lobbies and common spaces

Odd balls: bocce, games, video screenings, art galleries

Parks, bike lanes, flea markets

Marketing to Hipsters Keep Calm and Carry on Ditch Your Landlord Matchbooks Business cards Neighborhood blogs Model apartments cum art galleries Don’t try too hard—try for the opposite of development marketing Authenticity

Keep Calm and Carry on

Ditch Your Landlord

Matchbooks

Business cards

Neighborhood blogs

Model apartments cum art galleries

Don’t try too hard—try for the opposite of development marketing

Authenticity

The Market Today Rental market remains robust Rents down 10% Volume remains high Sales volume off 80% Sales pricing off 15-20% Shadow condo market Manhattanization of Williamsburg Bushwick migration

Rental market remains robust

Rents down 10%

Volume remains high

Sales volume off 80%

Sales pricing off 15-20%

Shadow condo market

Manhattanization of Williamsburg

Bushwick migration

$$$ Rent Financing Construction costs Cost per bed

Rent

Financing

Construction costs

Cost per bed

Unique New York Rent stabilization Loft law 421a + J51 The Speed of Sound Everything happens faster Neighborhood transformation in 2-5 years (rather than 5-20 observed elsewhere) 24 hour transit The art of compromise (size, PTAC, etc.)

Rent stabilization

Loft law

421a + J51

The Speed of Sound

Everything happens faster

Neighborhood transformation in 2-5 years (rather than 5-20 observed elsewhere)

24 hour transit

The art of compromise (size, PTAC, etc.)

Retail For Hipsters

22 Wyckoff Conversion of 10,000 SF auto parts storage to 24-hour grocery store, wine shop and bar restaurant Uphill battle with zoning and DOB Fight to eliminate loading berth Metal skin

Conversion of 10,000 SF auto parts storage to 24-hour grocery store, wine shop and bar restaurant

Uphill battle with zoning and DOB

Fight to eliminate loading berth

Metal skin

Winners and Losers Two sides to every story Gentrification The “problem” of self-bias What we (CNU) KNOW And our audience… Are we missing the big picture? Latino population growth vs. college graduate growth City vs. Suburbs The next out-migration?

Two sides to every story

Gentrification

The “problem” of self-bias

What we (CNU) KNOW

And our audience…

Are we missing the big picture?

Latino population growth vs. college graduate growth

City vs. Suburbs

The next out-migration?

The Future? Opportunity to redefine the American Dream Proselytize, lobby, penetrate sub-cultures Immigrant outreach Natural tendencies towards urbanism Big broken windows Fix urban schools Clean streets and parks Jobs Transit options Reverse urban disinvestment (esp in recession!) Stop simply preaching to the choir!

Opportunity to redefine the American Dream

Proselytize, lobby, penetrate sub-cultures

Immigrant outreach

Natural tendencies towards urbanism

Big broken windows

Fix urban schools

Clean streets and parks

Jobs

Transit options

Reverse urban disinvestment (esp in recession!)

Stop simply preaching to the choir!

Conclusions Urbanism is naturally attractive to the “next” generation Opportunity to keep new Americans in urban neighborhoods Suburbs seem ancient/passé/stifling Increased opportunities to make money in urban real estate Opportunity to make urban living the default again

Urbanism is naturally attractive to the “next” generation

Opportunity to keep new Americans in urban neighborhoods

Suburbs seem ancient/passé/stifling

Increased opportunities to make money in urban real estate

Opportunity to make urban living the default again

Ari S. Heckman [email_address] 227 West 11 th Street, Suite 4 New York, NY 10014 Cayuga Capital Management ASH Co. Design/Build HM Ventures