ITHACA, N.Y. — Generally, it is not our policy at the Voice to cover a story broken first by another local outlet.
Our next-door neighbors (yes, really) at the Ithaca Times had quite the scoop this morning — “Months after opening, City Centre building up for sale.” The brand new, $52 million mixed-use project in the heart of Downtown Ithaca was placed on the market by Newman Development Group (NDG), it’s Vestal-based owner.
As is often the case, the truth seems a little more nuanced. The short answer is that yes, City Centre was placed up for sale. However, it’s a sale developers say they are not actively pursuing.
“It’s really just gauging interest,” said Marc Newman, Principal at Newman Development Group. “We’re not actively out there looking. We’re just looking to see if there’s a market, just to gauge things.”
The best way to describe the listing might be as “market research.” Say you own a house in Fall Creek. You see the ever-rising prices other houses are going for nearby, and you place yours on the market, at what you think is a ridiculously high price, to see if someone will really pay that much. In City Centre’s case, the period to submit offers on the undisclosed-price building ends December 10th.
“With respect to this, let me say, there is no gun to our head, there’s no pressure to sell, we’re 100% occupied practically (the listing says 99% of its 193 units are rented), and we’re extremely pleased with it. We’re more than happy with the way the project came out, but in the normal course of business this is what we do, we’re just checking our options, seeing if Ithaca is really a hot market,” said Newman.
Why might they want to check their options? Well, there are a couple of plausible reasons. If it did sell at a ridiculously high price, then that’s quite the payday. But it also gives an idea of what their building is worth by getting bids from interested parties just to see what they’re willing to offer. That can help determine what City Centre is worth. If they have a good idea of the building’s value, then they might be able to refinance their loan deal to a better interest rate and negotiate a lower monthly payment on their construction loan. That frees up cash equity that they can put towards other projects. M&T Bank lent them $47.9 million-plus interest, so a small percent reduction can result in big savings and a hefty amount of cash to put towards renovations, acquisitions, or pre-development costs at another site.
But they should know what their building is worth, right? Roughly, sure. But there’s a problem with getting accurate figures. There aren’t really any other buildings like it on the Ithaca market, which can make it tough to gauge its value. For example, the county assessor’s approach in determining property value relies in part on comparable buildings in terms of size, condition and many other factors.
Newman stressed that the “gauging of interest” is no way meant to slight against Ithaca or its city leaders. In fact, Newman said they were looking at additional opportunities in and around the city. “When we gauge a market, we think we understand it, but it is always evolving. Every market evolves, we’re just doing our best to stay on top of it.”
“We think Downtown (Ithaca) is doing very well and it is where we thought it would be. But as responsible owners and developers, we always are gauging the market and checking our options.”
Granted, that sounds like a bit of bet-hedging. They don’t want to close the doors on any options, sale, refinancing or otherwise. That said, city and county officials are not keen on feeling like partners jilted at the altar. The Times piece was later updated with a quote from JoAnn Cornish that stated she and Newman had spoken and that City Centre was not actively up for sale. Once again, we get into that whole nuanced “market research“ thing, which is clearly not going as quietly or smoothly as NDG had intended.
Newman also took exception to another detail, the focus on the listing saying “student housing”. They listed it with a major multi-family and student housing marketing firm down in Texas, Newmark Knight Frank, so some situational awareness may be lacking. But it’s not a big secret that as of 2016, 40% of Downtown Ithaca’s renters are students, either those from Ithaca College or graduate and professional students from Cornell.
In Cornell’s 2016 residential study, less than 1% of Cornell undergraduates (<145 students) live in Downtown Ithaca and the State Street Corridor, but 14% of their graduate and professional students (over 1,000 students) do.
Contrary to the type of patrons one sees coming in and out of Moonies on a Friday night, it’s not really the undergraduate crowd living Downtown — it’s the older Ph.D. students and law students and MBA enrollees, with some Ithaca College kids in the mix. Since most don’t fit the mold of partying undergrad students often warned about in community meetings, they tend to get overlooked.
“We did not design the building so that it would appeal to the undergraduate type, that’s Collegetown,” said Newman. “We have a mix of non-students and students, it’s a good balance. It’s where we like it and where we thought it would be.”
So the long story short is that it was up for sale, but they don’t expect to sell it, and they say that they have no strong desire to sell anyway. The primary intent is to get some offers so that they can help determine options for refinancing and potentially getting better terms from their lender.
It kind of begs the question of whether the negative publicity makes it worse, or, following the adage of “any publicity is good publicity”, it actually helps them get more offers with a broader set of data to work with. As this shows, things don’t always go as planned.
With that question answered, one disclaimer: we worked with the Times to get the details straight once it appeared there were concerns with their scoop. There’s always pressure to outperform our next-door rivals in reporting speed and clarity. Both the Voice and the Times know that feeling all too well, and sometimes the details are missed in the rush to be first. But when things are a bit sketchy, we’ll gladly work together to make sure the full story is as accurate as can be.