Are developers playing "chicken" with the market?

David Goldsmith

All Powerful Moderator
Staff member
We are starting to see failed projects heading towards new life as lenders are unloading.

Zeckendorfs buying foreclosed UES condo project for $250M​

Children’s Investment Fund took control of Ceruzzi Properties’ Hayworth development​


The Zeckendorfs are back with another big development deal.
Brothers William Lie and Arthur are buying Ceruzzi Development’s foreclosed condo project on the Upper East Side for around $250 million, The Real Deal has learned.
Zeckendorf Development is buying the 61-unit Hayworth condo at 1289 Lexington Avenue from U.K.-based lender Children’s Investment Fund, which took control of the property through a foreclosure auction in January.

It’s the second big acquisition in recent weeks for Zeckendorf Development, which inked a deal to develop a $1 billion in Hudson Square.
Representatives for Zeckendorf and the Children’s fund did not immediately respond to requests for comment.
The sale represents a new chapter for the Hayworth, which had been eyeing a sellout of about $375 million.

Ceruzzi founder Louis Ceruzzi, who died unexpectedly in 2017, began assembling the site about a decade ago. The project moved forward and launched sales in 2019 — during a slowdown in the condo market — and fell behind on its construction loan with Children’s.

Ceruzzi’s president, Arthur Hooper, tried to secure rescue financing for the project and later sought to sell his firm’s equity position. But the price was too high, according to a source familiar with the project, and potential investors balked.
Children’s hired a team at Cushman & Wakefield led by Adam Spies and Adam Doneger to market Ceruzzi’s interest in the project at a UCC foreclosure auction and at the same time market the site to potential buyers. The hedge fund ended up taking over the ownership stake itself and then turned around to sell it to Zeckendorf.

It’s similar to what Children’s did with HFZ Capital Group’s stake at the XI project in West Chelsea, which the lender took over and sold to a partnership of Steve Witkoff and Len Blavatnik’s Access Industries.

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David Goldsmith

All Powerful Moderator
Staff member
If you think supply is getting tight, note that city wide "Factoring in sales and new units coming online, the supply has only fallen by about 1,000 units to 14,000."

New development activity spikes in February — even in Queens​

Sales remain robust across city as demand shows no let-up​

New development sales stayed hot in February.
Developments reported 402 sponsor contracts last month, a 35 percent increase from February 2021, according to a report from Marketproof. They asked a combined $1.07 billion, or about $2.7 million per unit.

February was a particularly strong month for some of the city’s most prolific builders. JDS Development reported the biggest contract, for a penthouse at 111 West 57th Street asking $53.8 million.
Naftali Group nabbed second and third place, selling a pair of five-bedroom apartments at the Bellemont, its limestone condo building on the Upper East Side. The asking prices were $25 million and $19 million.
As usual, Manhattan led the way in pricing, with 175 contracts worth a combined $719 million, or 73 percent more than in pre-pandemic January 2020. The median unit price hit $2.73 million, or $3,134 per square foot.

Buyers at new developments in Brooklyn signed 184 contracts, a 55 percent annual increase, as tight inventory in Manhattan pushed buyers to the outer boroughs. Brooklyn’s aggregate contract price of $304 million was a 113 percent leap year-over-year.
The borough was buoyed by Fortis Property Group’s Olympia Dumbo, a sail-shaped luxury development that nabbed Brooklyn’s three biggest contracts of the month, led by Unit 29A, asking $12.9 million. Based on sales velocity, or average number of contracts signed per month, the building has become one of the fastest selling projects in the borough.
Queens, always the bridesmaid, still snagged a handful of major sales, as aggregate prices jumped 54 percent from January and 25 percent annually. The median unit price was just over $1 million, and the Galerie, Adam America Real Estate and Vanke US’s artful stone-and-glass development in Long Island City, had the top contract, for a unit asking $2.3 million.

As bidding wars remain common, Marketproof looked at new development inventory to see where the housing stock stands compared to a year ago. Factoring in sales and new units coming online, the supply has only fallen by about 1,000 units to 14,000.
That opens the door to institutional investors, who could begin buying in bulk and renting units out, according to Kael Goodman, the data firm’s co-founder and chief executive officer.
“With resale inventory tight and rental prices high, there’s still plenty of sponsor inventory out there,” said Goodman. “If you’re a resale buyer or institutional buyer, there’s an opportunity to find what you’re looking for with increased negotiability.”
 

David Goldsmith

All Powerful Moderator
Staff member
Is Downtown Brooklyn ready for $2,300+ per SF? This is another deal structure I'm not crazy about with only 150 condo units sitting on top of 400 rentals and 100,000 SF of retail. Will 11 foot ceilings and high end finishes boost sales to $500 over City Point and 11 Hoyt St?

New York’s First Supertall Tower Outside Manhattan Rises in Brooklyn​

The 1,066-foot Brooklyn Tower is starting sales as the luxury market once again booms, but concerns about supertall tower construction are still fresh in buyers’ minds

Near the top of the 1,066-foot Brooklyn Tower in Downtown Brooklyn, wind whipped across the unfinished concrete slab, and the developer, Michael Stern, showcased the stunning, sky-high views.
There was the shimmering New York harbor; the distant beaches of Queens; the mottled rooftops of low-rise Brooklyn; and the building’s closest spiritual kin: the supertall condos of Manhattan’s Billionaires’ Row.
But don’t expect a tour.
“The price of admission to the observation deck?” Mr. Stern deadpanned. “You’ve got to buy or rent a unit.”
After five years of construction, his firm, JDS Development Group, has nearly completed the city’s first and only supertall tower outside Manhattan — defined as exceeding 300 meters, or 984 feet. The next tallest tower in the borough, the nearby Brooklyn Point condo, is almost 350 feet shorter than the Brooklyn Tower — the difference of a Statue of Liberty, plus a few townhouses stacked on top.

The project is hitting the market as luxury real estate is once again surging in the city, especially in parts of Brooklyn where tight inventory and growing demand has pushed prices above prepandemic levels. But this is also a market more wary of supertall apartment towers, which critics have derided as piggy banks for the ultrawealthy. And complaints of serious construction defects last year at the nearly 1,400-foot tower at 432 Park Avenue on Billionaires’ Row may have fueled more hesitancy about their future.

Still, the developer is betting on high design and higher altitudes to stand apart from its peers across the river — and perhaps break price records in the borough.
The tower at 9 DeKalb Avenue — designed by SHoP Architects, the firm behind the supertall at 111 West 57th Street in Manhattan, another JDS project — will have 150 condos ranging from about $875,000 for studios to $8 million for four-bedroom apartments. The penthouses have yet to be priced, but the developer will likely aim higher.

The condo units begin at 535 feet in the air and will have 11-foot ceilings, European white oak flooring, and interior design by Gachot Studios, the modern-minimalist New York design firm that was cited in Architectural Digest’s AD100 list.

There will also be about 400 rental apartments, of which 30 percent, or 120, will be reserved for “middle-income” renters, in exchange for tax breaks from the city. The income-restricted units, all but 19 of which will be studios or one-bedrooms, will be pegged to renters making 130 percent of the area median income.

Prices have not yet been set, but a single person applying for an income-restricted unit could make up to $108,680 a year, while a family of three would be capped at $139,620. The median household income for renters in Brooklyn was about $54,000 in 2019, the latest reliable survey, according to the New York University Furman Center.

Leasing begins in the summer, and the developer expects its first residents to move in before the end of 2022. Douglas Elliman Development Marketing will lead sales and rentals, and MGNY Consulting, based in New York, will handle income-restricted units.
But since the project broke ground in 2017, attitudes toward supertalls have changed. Reports last year of flooding, stuck elevators and safety hazards at 432 Park may have shaken buyer confidence, said Nancy Packes, the president of Nancy Packes Signature Marketing Services, a consulting firm.
“There may be some reticence because of issues that might arise,” she said, adding that the emergence of residential supertalls is still a very recent phenomenon.
Among the apartments currently listed, the average price per square foot is nearly $2,300, which places it above its closest competitors, according to Marketproof, a real-estate analytics company.

But the apartments will likely sell, said Kael Goodman, the company’s chief executive.
“Big buildings are selling very well right now,” he said, in part because remote work has given an edge to projects with more space and amenities. (And the prices are still a far cry from Manhattan, where some units have sought well over $10,000 a square foot.)

New development sales in Brooklyn, especially on the high end, are booming. Sales volume in 2021 was more than $1.5 billion, up 154 percent from 2020, and up 77 percent from 2019, before the pandemic, according to the consulting and marketing firm Brown Harris Stevens Development Marketing.
The tower stands out for other reasons: It is connected to the landmark Dime Savings Bank, a palatial bank hall with 40-foot ceilings and a domed ceiling created by the famed Guastavino Fireproof Construction Company. With the purchase of the former bank’s unused development rights, the tower gained about 30 more floors than it could have otherwise built. The bank hall will become a “flagship” retail space, part of a 100,000-square-foot retail plan, Mr. Stern said.

The bank interior, with its hexagonal tiles and patterns, inspired the facade of the building, a mix of stainless steel and anodized aluminum in contrast to many of the blue-glass towers around it, said Gregg Pasquarelli, a founding principal at SHoP Architects.
Where the new tower connects to the roof of the bank, the building will have three outdoor pools surrounding the dome. There will be an array of amenities, including a movie theater, gym, billiards room, children’s playroom and — a late pandemic addition — co-working spaces and conference rooms for remote workers. Renters get access to all the amenities, except the 85th floor “sky lounge,” which is reserved for condo owners.

Other features lean into the building’s toweringheight. Two open-air amenity spaces, on the 66th and 85th floors, will include alfresco basketball (with fencing to prevent an errant pass off the side of the building) and perhaps the world’s highest dog run, Mr. Stern said. The floors are open to the elements in part because it helps wind pass through the tower to mitigate building sway — a complaint raised at other supertall towers.

But the pandemic delayed construction for about four months, and more recently, supply chain issues have slowed the delivery of several items, including doors and some high-end finishes, Mr. Stern said.

And in February, companies connected to the Chetrit Group, a former partner on the project, filed a lawsuit in New York State Supreme Court. The companies say they are owed more than $17 million as part of a buyout agreement with JDS and Mr. Stern. A spokesman for JDS said Mr. Stern and the company would not comment on the lawsuit, and Chetrit did not respond to requests for comment.

As for concerns about the perception of supertalls, Mr. Stern is undeterred. He points out that, unlike the skinny supertalls in Manhattan, some of the slenderest in the city, his building has a wider base that is less prone to swaying, and they have studied the problems at other supertall towers.

“When you pioneer, sometimes there are growing pains,” he said in defense of the developers of 432 Park Avenue, where residents are suing for at least $125 million after reports of intolerable noise, electrical explosions and burst pipes related to the construction of the building.
“I think we’ve learned all these lessons already,” he said.
 

David Goldsmith

All Powerful Moderator
Staff member
Extell offloads Far West Side dev site for $52M

ZD Jasper picked up parcel with three industrial buildings​

Extell Development is moving on from a Far West Side site, selling it for more than $50 million.
Gary Barnett’s firm sold the three-parcel site to Tom Zhidong Wu’s ZD Jasper Realty for $51.7 million, according to a deed recorded on Friday. The deal closed on March 24.

The three-parcel site spans three addresses, each housing an industrial building. According to PincusCo, the three properties combine for more than 28,000 square feet of built space and 90,000 square feet of additional rights, creating nearly 119,000 square feet of buildable space.
Barnett finished acquiring the three sites — two adjacent lots at 430 West 37th Street, 434 West 37th Street and another one at 429 West 36th Street — in 2011 from Central Parking System for $44 million. It wasn’t clear at the time what Extell was planning for the site, but it never came to pass.

In 2014, Barnett made a play for at least $30 million worth of air rights from the Port Authority of New York & New Jersey. Those air rights were seemingly in service of a potential residential development at the site.

A rendering from the firm BARCHs, reported in 2018 by City Realty, showed a 32-story project that could accommodate 470 housing units, including 80 for affordable housing. Amenities in the rendering included a fitness center and a rooftop garden.

Extell and ZD Jasper did not return requests for comment.
Extell recently purchased part of the former Walt Disney Company-owned ABC campus on the Upper West Side for about $930 million. The developer scored at least $900 million in acquisition financing to buy the campus from Silverstein Properties.
ZD Jasper surfaced last year when it purchased a 7,500-square-foot parcel at 45-17 Davis Street in Hunters Point, Queens for $11 million. The developer has plans for a 21-story, 90,000-square-foot mixed-use building with 82 residential units.
 

David Goldsmith

All Powerful Moderator
Staff member

NYC new development sales stay hot, but prices show signs of stabilizing​

Nearly 1,200 contracts were signed for sponsor units in Q1, the city’s third-busiest quarter since 2015​

Steroids, a rocket ship or a magic beanstalk — whichever metaphor you choose to describe New York’s hot new development market, it just keeps on climbing.
Sales of new development condos in the city just posted their strongest first quarter — and third-most-active quarter overall — since at least 2015, according to a new report from Marketproof. Developers in Manhattan, Brooklyn and Queens reported 1,178 contracts signed for sponsor units in the year’s opening months, asking a combined $2.9 billion.

Buyers remained busy in March, though price increases showed signs of leveling off after months of gains. Developers inked 461 contracts worth $1.1 billion last month. The median unit sold for $1.61 million, or $1,641 per square foot.
While the median unit price has risen 25 percent since March 2021, it remained relatively unchanged compared to February — a short time to infer anything approaching a trend, but a possible sign that prices are stabilizing as mortgage rates rise.

Marketproof CEO Kael Goodman cautioned that prices still haven’t reached the astronomical levels of growth seen in some Sun Belt cities. And while rates continue to climb, Goodman said he has not seen any signs that they’ve hit the new development market just yet.
Manhattan had the hottest March, with a 32 percent leap in deal volume compared to February, more than double the 15 percent increase observed across the three boroughs covered in the report.
Major penthouse sales on the Upper East Side led the way, like a six-bedroom penthouse at Naftali Group and Rockefeller Group’s 200 East 83rd Street that was last asking $32.5 million.
Sales outpaced supply in the first quarter, as offering plans were accepted on 46 new developments totaling 725 units, while 1,178 units went into contract. That said, about 12,500 new development condos remain on the market, compared to 3,500 resales.

The top-performing building in the quarter in terms of sales velocity was the 800-unit Skyline Tower in Queens, a coup for the third-borough skyscraper, which averaged 14.3 sales per month. Sales at Queens’ tallest tower, developed by Chris Jiashu Xu, launched last March.
Manhattan new developments reported 231 contracts in March totaling $774 million, essentially the same deal and price volumes the borough saw a year ago. There were bright spots for projects that have spent years struggling to sell out, as inventory gets ever thinner.
The Cast Iron House in Tribeca, a 19th-century industrial building converted into luxury lofts, finally sold a $15 million penthouse that had been on the market since 2014. And the Fitzroy, developed by Michael Stern’s JDS Development Group, closed on a $15 million unit that had spent six years on the market.

Extell Development’s Central Park Tower closed two sales for $18.4 million each, one of which represented an 18 percent discount.
In Brooklyn, the median unit price rose 40 percent year over year, but fell slightly compared to February. The 196 contracts signed mark a slight increase from last year.

Fortis Property Group’s Olympia Dumbo at 30 Front Street signed each of the top four contracts in the borough, last asking a combined $28.5 million before closing — nearly 10 percent of the borough’s overall dollar volume for the quarter. The development is 21 percent sold since launching sales six months ago, according to Marketproof.

Queens was the only borough to experience a decline in contract activity from February, and it was a big one at that: The borough’s new developments reported just 34 sponsor contracts, a 28 percent dip from February and a nearly 50 percent decrease from a year ago. But in a market like Queens, where a few projects tend to drive the bulk of new development activity, an off-month for one key building could account for such a seemingly precipitous drop.
Despite slowing price growth and thinning inventory, challenging macroeconomic conditions might not be strong enough to stop the engine, according to Goodman.
“These external factors like interest rates and wars,” he said, ”they’re not touching us yet.”
 

David Goldsmith

All Powerful Moderator
Staff member
Looks like at least $350 million written off.

Witkoff, Blavatnik set to resume XI condo project with new contractor
Stalled by former developer HFZ’s woes, luxury High Line building is now expected to be completed in 2024

With a new developer and general contractor in place, the long-stalled XI condo project in Chelsea is poised to begin rising above the High Line once more.

Construction on the beleaguered project will soon resume, according to YIMBY, which reports that a sign posted at the development site proclaims a revised completion date of winter 2024.

Once the crown jewel of developer HFZ Capital Group’s portfolio, the twisting-tower luxury development at 76 11th Avenue recently fell into the hands of Steve Witkoff’s Witkoff Group and Len Blavatnik’s Access Industries, who bought it in a December foreclosure sale triggered by HFZ’s financial struggles.

According to YIMBY, the price was $900 million. Witkoff Group and Access Industries then secured financing to resume construction on the 900,000-square-foot development, where work had been paused since late 2019. Asset management firm Monroe Capital is also a partner in the venture.

The two towers are slated to rise to 26 stories and 36 stories, respectively. The project will include 235 condos, 137 hotel rooms, 85,000 square feet of retail space and a public plaza.

In addition to the change of developer, there’s also been a change in contractor. According to YIMBY, the sign at the construction site indicates that Suffolk Construction Corporation has replaced Omnibuild as the project’s general contractor.

The project’s lender, a subsidiary of The Children’s Investment Fund, scheduled a UCC foreclosure on HFZ’s stake in the project in October, culminating in December’s sale to Witkoff and Blavatnik.

The hedge fund had provided HFZ with a $1.25 billion construction loan in 2017, including a senior mortgage and a pair of mezzanine loans.

It was just one of numerous foreclosures, lawsuits or liens faced by Ziel Feldman’s HFZ in recent years. Feldman has largely pinned the firm’s demise on his former business partner, Nir Meir, who Feldman alleges used HFZ money on personal expenses kept him in the dark about financial problems at the XI; Meir’s attorneys have denied the allegations.

An appellate court recently ruled against Feldman regarding another HFZ project, partially reversing a lower court ruling that had authorized a lender to go after Meir for money it said it was owed, but not HFZ.
 

David Goldsmith

All Powerful Moderator
Staff member

Rising rates slow new development sales in Brooklyn, Queens​

Manhattan stayed hot, but activity cooled in the outer boroughs, where buyers are more reliant on financing​

The buying frenzy that’s defined New York’s new development scene for the past year is showing signs of calming. But that’s not necessarily good news for all condo hunters.
New developments in the city reported 397 signed contracts for sponsor units in April, a 14 percent dip from March, according to a new report from Marketproof. Most of the decline can be attributed to Brooklyn and Queens, where activity plummeted 26 percent and 24 percent, respectively.

Typically less expensive than those in Manhattan, new developments in the outer boroughs attract a class of buyers more heavily reliant on mortgage financing, and thus more sensitive to rising interest rates. As it’s grown more expensive to borrow in recent months, some buyers have pulled back, while high-rolling Manhattanites who can make all-cash offers aren’t as phased. The new development market has begun to split, with two tiers of buyers separated by interest rate sensitivity.

“We’re right at the beginning of the next phase of New York City real estate,” said Kael Goodman, CEO of Marketproof.
While the market has come down from its apex, contract volume was still up 45 percent in April compared to the same month in 2019, before the pandemic. The nearly 400 listings that went into contract last asked a combined $1.04 billion, down 7 percent from March’s total, but higher in terms of the median asking price and price per square foot.
As usual, Manhattan reported the bulk of new development deals. The borough notched 226 contracts worth a combined $786.7 million, both figures consistent with March. JDS Development’s supertall at 111 West 57th Street had a big month, grabbing the borough’s two largest contracts for units asking around $30 million apiece, as well as the priciest confirmed closing, at $28 million.

Brooklyn took the biggest hit in April, with activity and dollar volume both falling by about 25 percent compared to March. Brooklyn developers reported 145 contracts for homes asking a combined $228 million.
Fortis Property Group’s Olympia Dumbo, which has dominated Brooklyn’s new development market in recent months, secured the borough’s three priciest contracts in April. Each unit was asking between $5.4 million and $7.7 million.
And then there was Queens. While developers already own much of the up-and-coming borough’s dirt, there’s still a long way to go before its housing stock will be able to compete with Brooklyn and Manhattan. But some developments, like Risland U.S. Holdings’ Skyline Tower in Long Island City, performed well.

Skyline reported two of the borough’s three priciest contracts, for units asking $1.9 million and $1.7 million. Nest Seekers will soon begin selling the building’s penthouse units, and Marketproof projects the development will sell out in under two years.
In all, Queens developers reported 26 contracts, down from March’s 34 deals. Combined, the 26 listings asked $28.3 million — about enough to buy a single unit at 111 West 57th Street —while the median price fell 12 percent from March.
The Rowan, a foliage-filled development by RockFarmer Properties in Astoria, was home to the priciest unit sold, a penthouse last asking $2.2 million.

With rising interest rates, high construction costs, and an uncertain future for the city’s most popular multifamily development tax break, the new development scene faces headwinds of a magnitude it hasn’t felt for some time. But how they’ll weigh on development remains uncertain.

“These shockwaves are still rolling through the system,” Goodman said, “and how it plays out is TBD.”
Opendoor stock soars on first profitable quarter
 

David Goldsmith

All Powerful Moderator
Staff member
Big jump from last week.

This week's New Development Report from Sotheby's Kevin Brown Team.
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David Goldsmith

All Powerful Moderator
Staff member

Fortis’ Olympia Dumbo on track to be Brooklyn’s most expensive building​

Units in contract were asking $400 more per square foot than the borough’s next priciest development​

Pound for pound, Fortis Property Group’s 76-unit condo project in Dumbo is shaping up to be Brooklyn’s most expensive real estate.
Since January, 18 units at 30 Front Street, dubbed Olympia Dumbo, have gone into contract with an average asking price of $2,458 per square foot, about $400 more than condos in the borough’s second-priciest building, Quay Tower in Brooklyn Heights, according to data from Marketproof.

A freight elevator scaled the sail-shaped, 33-story building’s precast exterior on a recent afternoon, carrying workers to place the finishing touches on its top floors. Douglas Elliman’s Eklund-Gomes and Novo teams, along with Sotheby’s International Realty’s Heyman team, are marketing the building as the latest momentous event in a neighborhood that has seen Revolutionary War battles, the city’s inaugural steamship ferry service and the construction of the Brooklyn Bridge, whose iron and steel deck stretches feet from the entrance to Olympia Dumbo’s sales gallery.

Closings won’t begin until later this year, so it’s unclear exactly how much Fortis has gotten per unit. But the asking prices for those 18 units would combine for $121 million, or about 32 percent of the building’s projected $375 million sellout, according to StreetEasy and Compass’ weekly report tracking signed contracts for Brooklyn luxury homes. Those don’t include either of its full-floor penthouses, which are reportedly seeking over $15 million, or over $3,000 per square foot.

Unit 29A, the most expensive in contract with an asking price of $12.9 million, spans 4,565 square feet and has floor-to-ceiling windows, a primary suite with ensuite bathroom and two walk-in closets.

Sales in the building could face headwinds in the coming months. Signed contracts for new development condos in Brooklyn tumbled 25 percent from March to April, according to a report by Marketproof, which noted that buyers in Brooklyn tend to be more sensitive to rising interest rates than those in Manhattan.
Fortis’ success at 30 Front Street stands in contrast to its troubled development at One Seaport, which has been beset by cash-flow and construction problems that have chased off nearly all prospective buyers.
Fortis bought the triangular site on which Olympia Dumbo is rising from the Jehovah’s Witnesses in 2018 for $91 million with help from Madison Realty Capital, which provided the developer with initial financing and later a $163 million construction loan.

Fortis declined to comment.
 
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