By Konrad Putzier
Greystone Property Development’s strategy resembles that of a truffle pig: It makes a living by searching where others don’t even bother to look.
This helps explain why the firm just became the first developer to bring new condos to City Island in more than 15 years.
Located off the far fringes of the Bronx in Long Island Sound, well beyond the subway system, City Island is one of New York City’s most remote residential communities.
The commuting distance to Manhattan, combined with its small size, means it has attracted little interest from developers — until Greystone came along.
Sales have now launched at “On the Sound”, the firm’s 43-townhome development at 226 Fordham Place. Greystone New Development’s CEO Jeffrey Simpson told Real Estate Weekly that the firm hadn’t specifically targeted City Island.
“One of our contacts came to us and said ‘we see an opportunity to work with a landowner’,” he recalled. “We were able to cut a deal, and are now full speed ahead.”
In Manhattan and Brooklyn, Greystone has applied the same strategy of keeping its nose to the ground and sniffing out off-market deals with potential for profit.
“Our strategy has always been to look for under-performing assets — for properties that are not in the market and opportunities that are not obvious to the street,” Simpson said.
The firm recently bought two sites in Clinton Hill from the Rabsky Group, where it will develop rental buildings. It is also turning a landmarked former public bathhouse in Gowanus into condos and building a rental tower on an adjacent parcel.
In Manhattan, Greystone is working on a 75-unit rental tower on East 125th Street and recently bought an interest in a six-floor, West Village condo development at 130 Seventh Avenue South.
Simpson said he has been targeting “boutique projects where we’re not competing with other developers.” That he has found so many sites fitting these criteria over the past year shows that there is still a niche for small, well-connected developers. As investors have flocked into New York’s booming real estate market, a growing number of local players have complained about getting crowded out by larger, more liquid competitors.
But while sovereign wealth funds and insurance companies are buying trophy skyscrapers at record prices, smaller properties have drawn comparatively little interest from outside investors. This has left an opening for firms like Greystone Property Development, the development arm of the New York-based financial services and investment firm.
Simpson said he has been successful at finding overlooked deals because of Greystone’s wide net of relationships. “People approach us because we have the track record and the success,” he argued.
One of Greystone’s most fruitful relationships is with Simon Dushinsky. In early 2013, Dushinsky’s Rabsky Group sold an unfinished Williamsburg condo conversion to Greystone for $15.95 million in an off-market deal.
“[Greystone] made (Rabsky) an offer he couldn’t refuse,” Itzhaki Properties broker Shay Zach told The Real Deal at the time. “(Rabsky is) usually not a seller, but if you come to [it] with a ridiculous offer, that’s usually what happens.”
After completing the project, Greystone sold the 36-unit property to Clarion Partners last November.
Last October, Greystone once again closed a deal with Dushinsky, buying two Clinton Hill Development Sites at 531 Myrtle Avenue and 100 Steuben Street for a combined $50 million.
On the Steuben site, Greystone is building an eight-story, 41-unit rental building, while the Myrtle site will become a 27-unit rental building with 6,000 s/f of retail space. Construction is set to begin this year.
In DUMBO, sales have just launched at Greystone’s condo development, Waterbridge 47. Greystone’s most interesting current project can be found further south, in Gowanus.
The firm had been in talks to buy a site at 225 Fourth Avenue for a while. The seller was entangled in a dispute with the owner of the neighboring property, the former public bath house known as Brooklyn Lyceum, over who owned the air rights necessary to build a rental tower.
Before the dispute could derail the project, the Lyceum’s owner, Eric Richard, defaulted. In the resulting auction, Greystone bought the landmarked building for $7.5 million, in effect, making the prior dispute irrelevant. It paid $13.5 million for the neighboring parcel.
On top of securing the air rights for its 12-story, 65-unit rental tower, Greystone also acquired a historic building with its very own potential for profit. The firm plans to turn the building’s upper floor into two or three luxury condos, with retail space on the ground floor.
Simpson said Greystone is currently going through the landmarks process for the Lyceum, while construction of the neighboring tower is set to begin this year.
The Lyceum purchase caps off an unusually active period for Greystone. Although it has developed properties since 1999, Greystone has long been known primarily for its financing arm. That this is starting to change is due in no small part to Simpson’s nose for deals.
Simpson explained that Greystone is already scouring Manhattan, Brooklyn and possibly Long Island City for its next projects — although he declined to give specifics.
For a firm that depends on finding properties few others know about, keeping information to itself is an important part of the business.