“I just feel like we got sucked into this giant tsunami that isn’t letting up anytime soon,” Belew told me recently when I visited him in his offices on lower Fifth Avenue. It had been a demoralizing nine months since the party; not surprisingly, Belew and Berger failed to get enough units into contract to begin construction, and by January they were issued an eviction notice at their sales office for not paying rent. (Today the space has been turned into a flea market on weekends.) While they had positioned their development as a sophisticated alternative to the cookie-cutter condos going up in the neighborhood, it now stands as a particularly vivid case study in the limited options—all bleak—that many Williamsburg developers are faced with. “People say to us all the time, ‘Why don’t you just turn it into cool, raw apartments, rent them out, and then convert it back into condos when the time is right?’ ” Belew said. “What they don’t understand is that it’s not nearly so simple.” Indeed, the savings in construction costs are less than one might think, and with banks currently dealing with their own pressures on the road to solvency, such loans are nearly impossible to secure. “It’s really crushing,” Belew added, “to work so hard and to spend so much time on something just to see it fall apart like this.”
Though he continues to hope that the economy will recover enough to build the Steelworks Lofts as originally conceived, it was clear as we spoke that Belew recognized the odds were slim. (He had trouble avoiding the past tense: “For the kitchens, we were going to have these great, industrial fixtures—excuse me, are going to have these great, industrial fixtures.”) At the moment, they’ve been able to renegotiate their loan with the Anglo Irish Bank, which, having imploded and then become nationalized over the last year, is in an even more precarious situation than their own. They are making their monthly payments with the help of private investors, who would prefer to sink more money into the project than see their entire investment vaporized by the bank. But this is a holding pattern that won’t last much longer. Most likely, Belew and Berger will try to take the building rental (if successful, this could bring in around $3 million a year, which would cover their monthly loan payments), but they are considering other options, too.
“Lately, we’ve been thinking of turning part of it into a kind of youth hostel,” Belew admitted.
For a moment, I wasn’t sure I had heard him correctly. “A hostel?” I asked.
“Yeah,” Belew said, shaking his head. “A hostel.”
A few days after my drive around the neighborhood with David Maundrell, I spent a warm Sunday afternoon meandering through a handful of open houses. My first stop was a building called the Rialto, on North 5th Street, a choice block near the Bedford Avenue subway station. “Conceived to create special homes for design-conscious urbanites,” according to its sales brochure, the building in many ways epitomizes the style favored by developers in the area: slick, modernist, with “soaring” ceilings and “European-style” kitchens featuring teak cabinetry and CaesarStone counters. The Rialto has been on the market since May of last year, but only seventeen of its 31 units have sold. Hoping to entice new buyers, the developers have begun to offer incentives that would have been unthinkable to those who purchased fourteen months ago. In April, for instance, anyone who bought an apartment was treated to an all-expense-paid trip to Venice—to walk the actual Rialto Bridge! Alas, there were no takers.
It says something about the current state of the market that Ted and Marianne Hovivian, the husband-and-wife team behind the project, are in a far better position than many in the neighborhood. With just over half the building in contract, the Hovivians have made it past one major hurdle—the fact that most banks will not release closing funds until at least 50 percent of a building’s units are in contract. (Most sales were made before Fannie Mae upped its threshold to 70 percent.) And because they’ve owned the land since 1983—it was the site of their furniture-manufacturing company, Rialto Furniture—they can afford to be patient. “Thank God for that,” Marianne told me when I called her after visiting the property. “If we’d paid the high prices that some people around here paid, we’d be in a much worse position.”
The idea to convert the property had been on her and her husband’s minds since the late nineties, when they got an unexpected call from someone with Starwood Hotels. “That sparked our awareness that the neighborhood was really beginning to change,” Marianne said. Though she still felt that she and her husband made the right decision, she conceded that “we’re not as happy as we’d like to be.” The Hovivians had figured the building would sell out quickly, in as little as six months, allowing them to retire in style. “There were many grand plans of what might be when we first got started,” Marianne told me, laughing ruefully. “But now, obviously, those are all on hold.”