Can Bull Market Bail Out The Beav?

Posted by jeff

Mon Jun 8th, 2009 09:39 AM

Beaver.jpg
I was grinding through my zombie condo data when I arrived at the numbers for 15 William Street. It took me a little while before I realized that the data I was looking at was for Andre Balazs' William Beaver House. My recent article on the potential for a new bull market ("Bull Market Break Out On Tap?") got me thinking that it might be worth kicking around some data on The Beav in the context of new expectations for Wall Street and by extension the downtown real estate market in light of a definite warming trend in financial markets. Is the romance with Wall Street over? or can rekindled markets bring the downtown real estate market back. What better development than William Beaver House to test the notion that Wall Street is still sexy. After all in November of 2006, a time many yearn to re-live renumeratively speaking, the New York Times described the Billie Beaver House and it's cartoon mascot thusly:

Andre Balazs, the club maestro turned hotelier turned developer created the chracter to promote William Beaver House, a 330 apartment building under construction at William and Beaver Streets.

In the race to attract high-end condo buyers, the martini sipping mascot is aimed straight at the downtown singles market, Anyone arriving at the building's entrance will pass under a glass-bottomed Jacuzzi on the sun terrace of the health club on the floor above. the lobby includes a conversation pit with a fireplace, left, a billiards table and a bar.


So here are the numbahs according to ACRIS, New York's online city register. The William Beaver house has 320 residential units available (at least that's how many lots the original parcel of land was initially sub-divided into - recent media reports suggest there are 330 units for sale). As of June 7, 2009, ACRIS showed 65 units sold - I define sold as a deed having been recorded. Not only do I not have access to any data on contracts signed, but these days contracts signed are, shall we say, of less predictive value in assessing future sales than in the past. So in this case 20.3% of the units available have been closed, this is nowhere near the 71% threshold level for units sold or in contract needed to get most mortgage providers to extend financing to a new development ("Coming Soon ! The Zombie Condos that Ate New York".) But again, we don't know how many units are in contract. The Real Deal recently had an article covering a lawsuit by one of the brokerage firms that had previously handled sales in the building for alleged non-payment of sales commissions owed. In the article, brokerage firm Prodigy, who continues to handle sales at the property, asserts that 208 units have been sold (contracted for) or 65%, but they expect that 15% of these won't close. That figure reportedly includes 31 units sold in a $40 million bulk deal to some foreign investors. The 31 units is in itself an interesting number, because from what I hear Fannie & Freddie's guildelines for lending within a new development include a prohibition on lending to a development with 10% or more of the units sold to bulk investors - so they are staying under that threshold so far.

To me the more interesting figures are those on sales proceeds, which tote up to $76,454,021 from the units for which deeds have been filed, versus the outstanding first lien debt on the building. According to the mortgage release documents filed as these units have been sold, it looks like the property has $247,000,000 of debt owed to REIT iStar (I believe the loans were originally made by the now defunct Fremont Mortgage, which iStar acquired....can you say buyers' remorse). Now I don't know if there is any mezz debt outstanding on the property and to be honest I have not figured out how to find mezz debt in public records if it is recorded anywhere (help anyone with expertise). But even sans mezz debt which was commonly used, and without deducting the 5% in sales commissions for the units sold (insert your favorite joke about unpaid commissions here) and not tacking on say $25 million in interest on the loans, there is still a long row to hoe for The Beav to get it's head above water. So let's take a look at the rate of unit closings in 2009 (defined as a deed being filed and showing up in ACRIS).

Beaver%20Deeds.jpg

As you can see, the rate of closings recently has been less than inspiring. June is still young and there has been 1 deed recorded so far this month, but let's face it, they're gonna have to pick up the pace. I'll report back periodically to update on any changes here. But it may take a whole lotta bull to pull The Beav through.

Just as an aside as i look through this type of data for many developments around Manhattan, I often see media quotes of much higher rates of contract signings than I see deeds filed in ACRIS. There is definitely a lag between contract signings and closing, which has probably been increasing due to the difficulties in getting financing deals done. There is also probably a lag between closings and data showing up in ACRIS. But the spreads are often very wide and my guess is that behind the scenes there are tons of folks trying to get out of contracts signed pre-Lehman.





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