EMPTY TOWERS…New York City skyline dotted with many abandoned hirise luxury apartment house jobsites, by next year, building trades unemployment may hit 50%, contractors association says

from the NEW YORK DAILY NEWS:

Many high-rise buildings left unfinished or empty

BY BRIAN KATES
DAILY NEWS STAFF WRITER

Sunday, December 28th 2008, 12:20 PM

Costanza for News

The Nobu Hotel and Residences at 45 Broad St., whose owners include actor Robert De Niro. Planned as a 65-story glass tower with 77 ’superluxury’ condos and a 128-room hotel. Financed by Lehman Bros.

Costanza for News

A 65-story luxury hotel and condo at 50 West Street. Work stopped with foundation one-third complete. Seeking additional financing.

Adams for News

Gino Vitale, co-owner and founder of real estate company Vitale Builders.

Now that the building boom is bust, the city’s got a new and unwelcome addition to its skyline – the empty tower.

As the credit crisis deepens, construction and real estate experts see a growing trend: whole swaths of the city pockmarked with empty foundations, half-finished buildings and completed – but empty – properties.

Projects from trendy Chelsea to Williamsburg’s hip enclave sit not quite complete, their units unsold, their owners unable to raise cash to finish the jobs.

“It will be a city of empty towers and holes in the ground,” predicted Eric Zipkowitz of the law firm of Wachtel & Masyr, one of the city’s top real-estate analysts.

It already has begun.

“I’d say that 80% of all new developments across the city have been postponed or canceled,” said Shaun Osher, CEO of the Core Group Marketing, a leading real-estate brokerage.

The statistics are ominous:

- At least $4 billion in construction projects have been canceled or delayed, industry analysts say. New residential construction in the city will drop from 35,000 units a year to about 18,000 by 2010.

- In Manhattan, developers sought permits for only three new buildings in September, the fewest in any month since 2001. In September 2007, 23 applications were filed.

- Last month, the city Buildings Department issued just 72 initial demolition permits for new construction. That’s down from 205 in November 2007.

- In 2005, the start of the boom, developers applied for an average of 645 new building permits a month. The monthly average this year is under 300, records show.

The reason is basic: Developers can’t get loans to start – or finish – their buildings.

Lenders used to seek a 15% equity contribution from developers; now they want 40% or more.

“I have entire blocks on Conover St. and Luquer St. that have approved plans and demolition has taken place, but I can’t go forward because I can’t get the money,” said builder Gino Vitale, a 15-year veteran of Brooklyn development. “They’re standing there empty.”

Vitale said he invested $3 million out of his pocket to build five one-family homes in Carroll Gardens because “the bank flatly turned me down.”

“This isn’t just me suffering; it’s everyone down the line – carpenters, electricians, plumbers, tile men,” said Vitale, who owes subcontractors about $600,000.

Louis Coletti of the Building Trades Employers Association said he expects 40% to 50% unemployment in city construction next year. That means as many as 50,000 hardhats out of work.

“This is a crisis unlike we have ever seen,” Coletti said.

The crisis spiked in September when Lehman Brothers – the financial giant that bankrolled the building boom – went bankrupt, putting many premium properties into what analysts call “Lehman Brothers limbo.”

Lenders and developers are reluctant to discuss troubled properties, but experts privately tick off many buildings they say are stalled or can’t find tenants.

On every list is 50 West St. in lower Manhattan, a much-hyped, 155-room luxury hotel with 280 condo units. Construction began this summer. Work stalled with the foundation one-third done.

“We don’t have a full construction loan for the project,” said Phillip Gesue, director of acquisitions and development for developer Times Equities.

Developers who manage to finish buildings face another hurdle: They may not be profitable.

In a monthly market snapshot for this month, real-estate company Newmark Knight Frank reports that Manhattan office vacancy has risen to 10.9%, the highest since late 2005. At the same time, the average rent dropped from $66.57 to $57.49 a square foot in 10 months.

Among the hard-hit developers is Swig Equities. Its projects include the ultraluxury Nobu Hotel at 45 Broad St., whose partners include actor Robert De Niro, and a high-end condo conversion a block away at 25 Broad St.

At 25 Broad St., contractors who haven’t been paid by Swig have filed 33 mechanics liens in an attempt to recoup $2.8 million in unpaid bills.

Developer Kent Swig wouldn’t discuss his troubled properties except to state in an e-mail, “These are uncharted territories, as we have never before experienced a major U.S. investment bank going into bankruptcy.”

In September alone, 800 contractors filed mechanics liens across the city, the highest since before 2006 and nearly double the number filed in September 2007, a Propertyshark.com study showed.

“Mechanics liens are an incredibly valuable gauge for serious defaults,” said Bill Staniford, CEO of Propertyshark.com. “When you stop paying your contractors, they stop working for you and you’re done.”

Many plans may never even get off the drawing board.

The American Institute of Architecture tracks the work of architects through a billing index, and any score below 50 indicates a decline in work. Last month, the index plunged to 34.7, the lowest since 1995.

“The future is a big question mark,” said Richard Anderson, of the New York Building Congress. “The big crunch will come in 2010 or 2011.”

bkates@nydailynews.com