Bright picture predicted for NY sales market.

"For the first time, you can feel tomorrow will be better and the sales market has exploded," confirmed Peter Hauspurg to an Association of Real Estate Women's luncheon crowd. "The bottom is just behind."

As president of Eastern Consolidated Properties, Hauspurg is one of the major forces in the New York sales market. He is a former tax attorney who has now found his true niche, said his wife and business partner Daun Paris, in her introduction. For the last 15 years, Hauspurg has brokered deals for buildings, mortgages and other real estate transactions.

In his remarks, Hauspurg observed the market had been so bad that the value of office buildings plunged 50 to 70 percent in since the 1980s. "It got so bad," Hauspurg joked, "that the IRS began treating the industry under its hobby rules." But there wasn't enough income to write off the losses.

The Architects & Designers Building at 150 East 58th Street, he said, a 660,000 square-foot property, sold in 1989 for $145 million or $243 a square foot, and traded in 1993 for $61.5 million or $100 a foot.

The residential side was similar, with values dropping 50 percent. Those who purchased properties towards the end of the rise at ten to fifteen times rent rolls "missed the boat and really got clobbered," Hauspurg said.

Residential buyers are now the local pros, while foreigners are dominating the office market, coming in with all equity or heavy equity, he said.

While the Downtown Business Improvement District - the Alliance for Downtown Manhattan - and the mayor's plan to reduce taxes are finally coming to fruition, Hauspurg believes they are six or seven years overdue.

He pointed to Downtown properties that have been trading under $30 a squarefoot: 110 Church for $18; 40 Exchange for $22; 116 Nassau at $12; and the vacant 25 Broad for $10.

Uptown, an offer of $120 million was made for 105 Madison in 1987. It sold last year for $9 million or $36 a square foot.

Because the market was dropping so fast, "bizarre side effects triggered defaults," explained Hauspurg. There were few comparable sales, so those mortgages that required yearly appraisals were often called. "It caused perfectly healthy buildings to go into default," Hauspurg said.

Trading picked up in 1991 and 1992 and now things are getting better. There were a record number of buildings sold in 1994, with the new purchasers planning on making large capital improvements.

Co-op prices are even starting to show signs of recovery. "Investors that were on the sidelines have jumped in with both feet," Hauspurg says.

Buildings like the 60,000 square-foot former home of Delmonico's at 48-60 Beaver Street are receiving the highest offers from residential developers, said Hauspurg, who is marketing the property.

The prime unconverted rental property at 327 Central Park West is getting offers coming in around $10 million, or eight times the actual rent roll, with condo conversion as a strong possibility.

While things could turn around quickly, it feels like the mid-80s and there is a "scent of voodoo economics," according to Hauspurg.

Pros are also coming into what appear to be losing transactions and flipping the deals within weeks - pocketing hundreds of thousands of dollars. "If it happens three times it's a trend," he said. If the buying continues at this strong pace, Hauspurg believes prices can reach 1989 levels within two years.

Those who are purchasing the properties as investments are just beginning to make the capital improvements and that will also help stimulate the local economy.

If New York is better tomorrow, people believe the rents will go up. "People are buying futures and the inherent value of bricks." For the most part, Hauspurg believes the market is coming back because "a lot of it is psychology."

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