Washington Week: Student Voices (O)

Higher ed benefits from housing market meltdown
By Betsy Morais
UWIRE
June 08, 2009

Many New York City developers struggle to sell individual apartments and condos to potential tenants now strapped for cash, some universities have been buying in bulk.

Last year, Columbia University purchased the Arbor condominium in Riverdale, an upscale Bronx neighborhood most known for its private schools like Horace Mann. The university put in a bid to buy the 127-unit building and, at $67.6 million, developer L&M Equity Partners accepted the deal in July 2008. At the time, L&M had been having trouble selling the condos piece by piece.

“The market was slow to absorb the product and L&M was willing to take a discount for a deal that would allow them to sell the entire inventory of apartments to one buyer in a single transaction,” explained Vincent Carrega, executive managing director for investment services at real estate investment firm Grubb & Ellis Company, which represented L&M.

Carrega added that his firm helped L&M “identify a logical buyer with ability to act quickly; desire to take advantage of a significantly discounted price; understand the value opportunity.”

The Arbor, which overlooks the Hudson River, boasts floor to ceiling windows, a fitness center, and elegant décor. But the digs aren’t meant for college kids.

The building is one of around 7,000 units that Columbia owns, about 30 percent of which are reserved for faculty and other staff or administrators, with the rest designated to graduate students. For these apartment-seekers, Columbia housing is often known as being hard to come by, and the Arbor helps meet the vast demand.

Former Columbia University Provost Alan Brinkley, who stepped down from the post at the end of this academic year, wrote in a memo during the fall semester that, “the current housing climate in New York City has made it very difficult” to accommodate all the housing requests Columbia receives. He added, “we are experiencing enormous pressure on our existing housing stock and are finding it increasingly difficult to meet demand.”

The Arbor purchase seems to have been one step Columbia has taken towards relieving that pressure.

“From time to time Columbia is offered an opportunity to consider purchasing buildings which may be located in places other than Morningside Heights,” University spokesperson Robert Hornsby explained, citing the Arbor’s location on the subway’s 1-line, which Arbor residents can ride down to the Columbia University Medical Center or the school’s main campus in upper Manhattan. The university is also working on a shuttle bus service for commuters.

Hornsby added that “housing costs are variable, as is the demographic of ‘who lives where.’”

Columbia Vice President for Facilities Joseph Ienuso told the Columbia Daily Spectator following the purchase that, “we look at real estate all the time and evaluate opportunities as they come and will continue to do this in the current market.”

Hornsby declined to comment on the relationship between the university and the city’s real estate market.

But following Columbia’s purchase of the Arbor, “The Real Deal”—a New York real estate magazine—remarked that one institution buying up a whole building indicates a lack of confidence in the neighborhood’s housing market. The Real Deal also reported that units at the Arbor ranged from $400,000 to $900,000, which local brokers deemed too pricey to attract independent tenants.

Still, Carrega noted, “I see it as a positive development for the neighborhood since a university like Columbia is very selective about putting faculty and students into only safe secure and rich diverse communities.”

Yet schools don’t necessarily just buy housing that might have otherwise gone unsold. For New York University—which provides faculty housing mostly through rentals around the school’s main campus in Washington Square—condo-shopping was geared towards offering an option for home ownership.

In 2006, NYU contracted 58 condos at the Riverwalk Landing luxury development on Roosevelt Island for $43 million. The apartments are part of a faculty housing program that will resell individual units at affordable rates, NYU provost David McLaughlin said when he announced the deal in January 2008.

NYU spokesperson John Beckman said this “wasn’t timed to the market,” but rather “because not everybody wants to be a renter, some people want to own a home.” Prices range from $345,000 for a studio to 3-bedroom condos starting at $1 million, and 29 homes have already been sold.

Beckman added that, because the Riverwalk Landing apartments were bought before the recession began, “this didn’t emerge out of some crisis that real estate developers were going through.”

Joanna Rose, a spokesperson for Related—the company that manages the Riverwalk Landing development—echoed Beckman and called the bulk deal “unusual.”

Still, Riverwalk Landing—part of a nine-building development over halfway through construction—has also had other buyers finance big blocks of condos. Buildings and additional units have been designated for institutions such as Memorial Sloan-Kettering Cancer Center and Weill Cornell Medical College. Rose declined to comment about how sales were going for individual apartments.

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