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Phase three: New work on the Temple Building hinges on parking spaces.

Rochester Business Journal
February 1, 2013

Work could begin in the coming weeks on development of 30 more units at the Temple Building, with the availability of convenient parking for downtown residents an emerging issue.
The third phase of transformation for the 14-story structure-built in 1926 as a skyscraper church for Rochester's Second Baptist Church-will be done on floors nine through 12, said James Costanza, president of Costanza Enterprises Inc.
The work hinges on an agreement between building owner Costanza Enterprises and the city of Rochester for as many as 40 parking spaces.
"We have received bids," Costanza said this week. "We've been working on the specs and the construction. From a construction point of view, we're ready to start within the next 30 days."
The work will take four to six months to complete, at a cost of $3 million, Costanza said.
"We think we'll have these units on the market for the fourth quarter," he said.
The building at 14 Franklin St. is an icon of Rochester's downtown transformation, with 50 residential lofts and commercial space. The building would have 80 units when the latest work is done.
Costanza bought the building in the early 1980s and invested $5 million to launch its redevelopment in 2001.
"That was the big lift, because that included all the new infrastructure and 40 units, as well as a 65-car underground garage," he said.
The first phase resulted in 10 penthouse lofts on the top two floors, seven lofts on each of floors four through seven, and two two-story suites on the second and third floors. The average size was 1,350 square feet.
The original plan called for seven two-story home office suites on floors two and three, Costanza said. Five of the seven have never come to fruition, the space remaining vacant.
"We found that the market for the large units-in most cases, 2,100 square feet or larger-was very thin," Costanza said. "The idea was to lease those to people who wanted an office and a loft combined.
"Typically, people looking to rent those units were just looking for large lofts. For that price, the people who wanted to spend that amount typically wanted to be up higher and not so low to the street."
The second phase, in 2010, added 10 studio and one-bedroom units at 750 square feet each on the second floor to the two existing two-story units.
"We completed reversed our thinking on the second and third floor, going from very large, two-story units that were very dramatic," Costanza said. "They really wowed people, but those were the only units that were difficult to rent.
"We made much smaller units in about six months, and we had those all leased by the fifth month of construction. The demand for the smaller units was very strong, which is what we were hoping for."

Next phase
Units in the third phase are in the range of 1,000 square feet, smaller than the first phase and larger than the second.
"With what's going on, we just feel that we can lease these," Costanza said. "We're kind of making a hybrid unit."
Being among the first 12 years ago to redevelop an older building downtown, Costanza had neither a blueprint nor trends to follow.
"When we first started the project in 2001, the market didn't exist, so we didn't know where the sweet spot was in terms of the unit size and, really, the price," he said. "There really was not anything going on in the market for lofts back then. It was kind of an experiment."
The 1,350-square-foot average for the initial phase seems large these days, Costanza said, but many of the units have two bedrooms and two bathrooms for possible future sales as condominiums.
"This we thought would occur 10 or 15 years down the road, but we still thought it would be important in terms of the floor plan," he said. "But as we went forward in time, over the last decade, the sweet spot in terms of the loft market downtown turns out to be somewhere around 1,000 square feet."
The new units will replace the original plan for commercial space on floors nine through 12. They will be a mix of one and two bedrooms, and one and two baths, with the two-bedroom units likely to have two bathrooms, Costanza said.
"We lost some tenancy over the last 10 years on those floors," he said, resulting in a vacancy rate as high as 90 percent. "We couldn't attract commercial customers, so we made a decision to convert it to residential."
Costanza Enterprises offices are on the eighth floor.
A Jackson Hewitt Inc. tax service office and a Cricket Communications Inc. retail store are at ground level.

The parking challenge
Parking for residents of the 30 units is a challenge, Costanza said.
"Parking presents a problem for us at this point because those last units require probably an additional 30 to 40 spots, and we're maxed out now," he said. "When we completed phase 2, we pretty much maxed out our parking in our garage downstairs.
"That's one of the conditions we haven't totally finalized, but we think we've got a solution for that."
The additional spaces need to be safe and secure, Costanza said.
"It doesn't necessarily have to be indoor parking," he said. "One of the amenities we offer here is an indoor parking space that is secure and heated. There are some lofts in the city that have that, but not all of them do.
"It's a nice feature in a climate like Rochester's. If you drive into the building with a foot of snow on your car, by the next morning it's completely melted and your car, instead of being at 10 degrees, is at 50 degrees. It makes life a little bit easier on everybody."
Costanza is looking for space for 40 vehicles, to go with 65 spaces in the building's three-level underground garage.
"If we just parked 40 cars in an open lot, there would be a lot of vandalism," he said. "We don't think that's workable.
"We're looking for secured parking, and there's a distance issue we're trying to bridge. We're thinking about some sort of a valet solution that creates virtual parking so people won't feel like they're not parking in our garage."
Downtown is in the range of 5,000 residents, said Heidi Zimmer-Meyer, president of the Rochester Downtown Development Corp. The population grew 11.5 percent from 2000 to 2010, data from the U.S. Census Bureau shows.
"We need a more robust parking policy, and it needs to be negotiated with private property owners and developers," Zimmer-Meyer said.
She said she understands the thinking of those who promote the use of buses and bicycles, or walking.
"The problem we run into in a weaker commercial market in this region is people just won't sign a lease down here," she said. "You can say, 'Well, you should just walk four blocks.' They'll say, 'No, we'll simply go out to the suburbs.'
"We're still in a tenuous position as a competitive commercial zone. Parking becomes an amenity that is crucial to negotiating leases."
The issue is not about price, Zimmer-Meyer said, but rather about the perception of availability.
"I think that's where the biggest conflicts have risen between private property owners and the city," she said. "We need to do far more to get on the same page on this. We don't have a parking situation that's working adequately for us."
The problem is exacerbated by recent construction of housing.
"My biggest concern right now is all of the units that are coming into the market," Costanza said. "I think that's both a positive and negative. On the long term, it's a positive. On the shorter term, it may be a negative for the market."
Costanza worries about the impact of incentives provided by New York State on privately financed, new or revitalized housing.
"A lot of these loft projects have been granted $1 million or $2 million, which is 20 or 30 percent of the capital requirements," he said.
  "The city is behind those grants and advocating those projects, which makes perfect sense from their point of view. But they have to be careful, because when they subsidize specific projects, it can hurt the non-subsidized projects."
If supply outpaces demand, all owners suffer from low rental rates, Costanza said.
"If you have projects that wouldn't otherwise get done (without incentives), you wouldn't have that additional supply coming on to the market," he said.
Costanza would rather see incentives go to renters.
"Give people incentives to come and live downtown," he said. "That, then, would help everybody equally. The private market would bring in that additional supply as the demand materializes. We're doing it the opposite way.
"We're pushing specific supply and hoping demand will catch up. We're making it unfair, because if demand lags, it's going to hurt and penalize the market unequally."
In addition to his request for incentives for the upcoming $3 million project at the Temple Building, Costanza received tax breaks totaling $41,600 in 2010 for the $1.3 million second phase.
"There are developers who've spent their own private money, and there are developers who have received 20 or 30 percent of their project capital from grants," Costanza said. "I agree with the ultimate goal. I just don't agree with the mechanism they're using to get to that goal."

2/1/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email

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