Downtown Real Estate Selling Fast

Empire Zone Coordinator Ann Conroy admitted she was somewhat shocked recently when she went hunting for real estate in downtown Poughkeepsie on behalf of an employer who wanted to buy a 10,000-square-foot commercial building and discovered there weren't any left on the market.

"It's very dramatic," says Conroy of the almost frenetic real estate activity that has bubbled up lately along the commercial real estate corridor. "There's been a very notable infusion of private investment in downtown commercial real estate."

That statement is borne out by the city's assessing department, which reports that, in the first four months of this year, 17 commercially-zoned properties along the Main Street corridor were purchased by corporations and individuals for just under $3 million. The list of transactions, provided to The Beat by the assessment department, shows a variety of buyers, many of them spending under $100,000 for individual properties; those are overshadowed, however, by a few high-profile deals, such as developer Robert Dooley's purchase in February of the sprawling former JD Johnson Plumbing Supply building on lower Main Street for $800,000 and Eitan Dor's buying the former Department of Labor Building on the corner of Academy and Church streets in April for $700,000.

City officials, more accustomed to seeing downtown properties languish unsold for decades, say a variety of factors appear to have energized the market—including the reopening of the closed portion of Main Street last fall and the announcement earlier this year that famed artist Peter Max may develop the Luckey-Platt building. As a result, they say, developers are more anxious to act upon their plans and speculators are moving in to get a piece of the action while real estate is still relatively cheap.

"There's a lot of faith that the real estate is increasing in value. A lot of this investment is a reflection of that conviction...You didn't have that a couple years ago," says Conroy. Among those investing in downtown are a core group of experienced local developers who—because of their willingness to buy and rehabilitate vacant, ramshackle structures—have proven to be a godsend to city officials like Development Director Edmund Murphy. He pointed to the city's "new wave" of builder/developers, pioneers like Dor and Jon Behrends, who are in the process of carving out niches in forgotten neighborhoods where most only saw degradation.

"This is why investors like Jon Behrends and Eitan Dor are a perfect fit for our city, because they see the diamond in the rough," Murphy said. "They're not afraid of it. They both have had experience in an urban setting. Where others fear to tread, they're ready to go."

Behrends caught the city's eye a few years ago when he resurrected a blighted string of three connected buildings at 202-206 Main St. that had been vacant for years. Now almost completely rented with apartments upstairs and retail spaces at the street level, the project helped lead to a rejuvenation of the block and stands as an example of the type of positive development the city is looking to attract. Since completing that task, Behrends and his company, Precision Contractor, have moved on to team up with other developers on other collaborative projects.

Earlier this year, the city sold the long-vacant former telephone company building at 412 Main to Behrends and Mark Pastreich, owner of the Commerce Building along with several other downtown parcels. The partnership has been rehabilitating the building at a breakneck pace and early this month hung out a sign trolling for tenants.

That, they say, is the difference between the kind of "speculative development" they've been practicing versus a relatively new phenomenon they've noticed—investors buying buildings in Poughkeepsie only to "sit on them" in hopes they will later appreciate in value.

"There is an increasing public interest in Main Street both as a result of the mayor (Colette Lafuente) opening up the street and of Peter Max's interest in the Luckey-Platt building. There is no denying the Mayor's strategy of bringing life to the Main Street corridor is working," Behrends stated this week. "This increased interest has sparked a wave of speculative interest in the abandoned properties, and has driven up the perceived value of the buildings. While this is wonderful for the existing property owners, acquisition costs are detracting from the construction budget. This translates into one of two things, either less money gets spent on construction or the asking rents are driven up to cover the increased budget or debt service." Pastreich, who has been hustling for years to keep the majority of his 100,000-square-foot Commerce Building rented, admits that attracting tenants to fill all this newly-created space may be a tall order, at least until a high-profile project like the Peter Max proposal comes to town. Speculation doesn't help, he said, adding that he he had heard of one medium-sized downtown building that had sold three times in the last year, each time for more money. "It all depends upon the second stage, which is people occupying the space," Pastreich said. "It's only real if it gets used."

Several local developers say they subscribe to the "if you build it, they will come" philosophy, believing that dramatically improving their buildings and their surroundings will help attract tenants. Among this school is Joseph Tockarshewsky, formerly chairman of the Poughkeepsie Savings Bank, who since leaving banking three years ago has ventured into the realm of downtown real estate development with at least two projects in the works.

Two years ago, Tockarshewsky partnered with developer Burt Gold to purchase the HSBC bank building on the corner of Main and Catherine streets. They're now ready to commence a major upgrade of the building's entranceway as well as construction of an adjacent public "pocket park," which will be built with a matching grant from the city and will feature compelling landscaping and sculptures. "We're hopeful that what we do will become contagious," he said, adding that tenant interest in his building has risen in the last three months, probably piqued by the re-opening of the Main Mall and news of the Max project. "The opening of Main Street was probably the first step toward rescuing the inner city." Down the street on the corner of Catharine and Mill streets, Tockarshewsky is collaborating with builder Larry Scardaci on rehabilitating two vacant city-owned buildings. With a closing planned for later this month, they hope to transform the two shells into eight market rent apartments within the next year.

"I see value here and I'm investing in what I perceive as unrecognized value," Tockarshewsky said. "The City of Poughkeepsie is long overdue for growth and development and whoever gets there first will be well-positioned in the game for the future."

Eitan Dor, an immigrant from Israel who has been living in Clinton Corners for the last 15 years, envisions downtown Poughkeepsie as a thriving arts and educational center. Within the last year, Dor has bought several vacant buildings along Academy Street and Cannon Street and has thrown himself into renovating them with a passion, recently unveiling a tastefully transformed storefront at 21 Academy St. as an example of his work.

"I want to take an area under a tremendous amount of decay in the city and turn it around," he said recently. "We cannot wait for tenancy...If we build the space, they will find it."

Many of the Main Street developers look to the city's waterfront as the barometer of the city's future, acknowledging that what happens there will greatly impact the entire commercial corridor and their investments. Along with Joseph Bonura's proposal to develop the DeLaval property on the city's southern shoreline, they point to projects already underway as the best indicator that the long-underutilized waterfront will soon meet its potential.

The business community was particularly pleased to see construction begin earlier this year at the Dooley Square project—a mammoth commercial development at the 60,000-square-foot former JD Johnson Plumbing Supply building at the foot of Main Street. After purchasing the building from Thomas Johnson Jr. in February and obtaining all the necessary permits, Robert Dooley recently broke ground on the estimated $3.8 million project.

A Spackenkill resident, whose company provides innovative geothermal heating and cooling systems for clients throughout the world, Dooley hopes to transform the long-dormant structure at the corner of Main and Water streets into a centerpiece of local commerce featuring a mix of office, retail and entertainment space. As its future headquarters, the building would also showcase his company's unique technology. During a tour of the construction site this week, Dooley's crews were busy drilling a series of 300-foot shafts on the property that will help drive the cooling-heating system as well as drive power-generating micro-processors.

Dooley said he has already inked six tenants to "letters of intent" to take space at Dooley Square and he remains confident that more will follow once the majority of the construction work is completed by the end of this year. When shown the property by Conroy nearly two years ago, Dooley said he was intrigued by the possibilities, the challenge and the opportunity of being one of the first to turn the waterfront around. "There really wasn't anything down here...Money goes to the water and that's where it starts," he said. "If you're willing to develop the private real estate then everything will fill in behind it."