The

Ari S. HeckmanCayuga 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

Place

• Northwest Brooklyn, across the East River from Manhattan

• Medium density attached housing with retail corridors and activated corners

• Late 19th/early 20th 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

Transit• L-train is a crosstown train that runs across 14th Street in

Manhattan, stopping at 8th Ave, 6th Ave, Union Square, 3rd Ave and 1st 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

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

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

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

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)

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

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

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

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

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!

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

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

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

$$$

• 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.)

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

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?

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!

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

Ari S. Heckman

ari.heckman@gmail.com227 West 11th Street, Suite 4New York, NY 10014

Cayuga Capital ManagementASH Co. Design/BuildHM Ventures