Are developers playing "chicken" with the market?

David Goldsmith

All Powerful Moderator
Staff member
What losing at the game of Chicken looks like:
Vanderbilt mansion condo conversion in foreclosure
Developers haven’t put any units at the UES townhouse under contract

Gloria Vanderbilt’s former Upper East Side mansion could be headed for the auction block.
The developers who purchased the heiress and fashion icon’s former home with plans to convert it to high-end condos have defaulted on their construction loan, court documents show. And now their lender is trying to foreclose on the property.

Ilan Bracha and Haim Binstock’s B+B Capital teamed up with Daniel Minkowitz’s Mink Development to buy the landmarked home for $19 million in 2014. The seller of the townhouse at 39 East 72nd Street was the Mangold family, which had owned the property since the 1960s. It was Vanderbilt’s childhood home. She died in June 2019 at age 95.

The partners secured a nearly $17 million construction loan from Madison Realty Capital to convert the home into three luxury condominiums. The state Attorney General’s Office approved their condo offering plan in 2018 with a projected sellout of $50 million.

But the developers haven’t put any units under contract, and they defaulted on their construction loan in late January when they failed to repay the balance of the mortgage, according to Madison Realty Capital’s lawsuit.

The lender filed to foreclose on the property in late March, just before the coronavirus pandemic shut down state courts and halted all foreclosure proceedings.
Bracha, Binstock and Minkowitz could not be immediately reached for comment. A representative for Madison Realty Capital declined to comment.

The project’s most-expensive unit is a 10-room, 5,700-square-foot penthouse with an asking price of $25 million according to the listing on StreetEasy.
Bracha and Binstock had founded the residential brokerage Keller Williams NYC, which they sold earlier this year after struggling financially.
 

John Walkup

Talking Manhattan on UrbanDigs.com
If you're ultra-wealthy and interested in having a place in NYC would you rather buy this stand-alone mansion from the bank at $14M or a crazy decked out penthouse in a building that other people use (even if you never see them)? This could be a new golden era for townhomes, especially trophy ones.
 

David Goldsmith

All Powerful Moderator
Staff member

What the Coronavirus Has Done to New Development
The pandemic paused residential construction and stalled sales. Now developers in Long Island City and Greenpoint are scrambling to bounce back.

The New York Times
By Stefanos Chen and David W. Chen
July 3, 2020

It is the tallest building in the borough; the most ambitious, with sales projected to exceed $1 billion; and in February the developers claimed that it was the fastest selling, with contracts signed on a quarter of its 802 units, a massive supply for a single building.

It represents the pinnacle of construction near Newtown Creek, a grimy tributary of the East River that connects the neighborhoods of Long Island City and Greenpoint, Brooklyn, two of the busiest real estate markets outside of Manhattan. Together, they have over 10,300 apartments in the works, almost 3,000 more than the mega-development Hudson Yards, according to Nancy Packes Data Services, a real estate consultancy and database provider. .

But even before the coronavirus gripped New York in March, the condo market there and across the city was softening. And as the sales and rental markets cautiously reopen, many of the surefire bets that fueled the last cycle of development are being thrown into question.

Will buyers still pay top dollar for proximity to Manhattan offices they rarely use? Can developers sell tiny units in big buildings, many without outdoor space, now that building amenities are closed? With so many options on the market, what will a shrinking pool of qualified buyers and renters choose?

There may be no better proving ground for which projects will succeed or fail in a post-Covid world than what is being built in these once largely industrial neighborhoods off Newtown Creek.

The quarantine in March knocked marketing and construction timelines off track, imperiling some builders’ plans and forcing others to rethink their projects on the fly. Some builders are changing apartment floor plans to make way for home offices and decontamination rooms, and rethinking amenities that no longer make sense in close quarters. To spur sales, new discounts and promotions, like rent-to-own programs more commonly seen after the 2008 recession, are now cropping up.

And after a months long reprieve from endless construction, the pause has also given new life to community concerns about what should be built, and for whom, considering not only the new economic reality, but also climate change concerns around the vulnerable coastline.

After rezonings in the 2000s that enabled taller and denser residential buildings, both Greenpoint and Long Island City have seen a rush of development spurred by climbing land prices in Manhattan.

“In 2016 to ’17, they were humming,” said Kael Goodman, the chief executive of Marketproof, a real estate data and analytics company, about the prevalence of pricey new apartments to hit the Brooklyn and Queens markets.

But, as in Manhattan, a number of factors, including changing tax incentives and the retreat of foreign buyers, have slowed sales just as many new projects have been coming online. In Long Island City, out of 1,945 condo units completed since 2018, nearly 60 percent remain unsold, he said.

“If you’re a shoemaker, and 60 percent of your shoes haven’t sold, you’ve either made the wrong shoes, or you’ve made too many,” he said.

The problem is not necessarily too much building — there is huge demand for affordable housing in the city. It’s a matter of what was built, agents said.

“There is simply no demand for two-bedroom apartments that are 950 square feet and go for $1.5 million,” said Patrick W. Smith, an agent with Corcoran who specializes in Long Island City, referring to the recent trend toward apartments with less square footage but higher-end finishes. The average size of a two-bedroom apartment in Manhattan is 1,344 square feet, according to Jonathan J. Miller, the president of Miller Samuel Real Estate Appraisers & Consultants.

Mr. Smith considers himself lucky that his upcoming projects are still in the planning stages, which means the developers still have time to change their layouts to react to the coronavirus. At one upcoming project, the ubiquitous open floor plan has been modified to create an old-fashioned foyer — a decontamination area of sorts before entering the living room. At another, some kitchens will shrink to make way for offices, now that so many people are working from home.

“There’s a fine line between making design changes that will add value, and gimmicks,” he said, but some builders are already thinking about the permanent changes the pandemic will have on buyer preferences.

Adrian Lupu, an agent with Nest Seekers International, said an upcoming 70-unit project in the Dutch Kills area of Long Island City was originally slated to have a movie theater theme, to capitalize on the nearby Kaufman Astoria film studios. Instead, they will rebrand the building as a “sanctuary,” with air purifiers and an emphasis on wellness.

At Townhouse on the Park, an upcoming 75-unit project where rents range from $7,200 to $8,250 a month, almost all the apartments will have private outdoor space — a feature the developer, GDC Properties, will be sure to emphasize, now that so many are stuck at home.

Much of the new development in Long Island City is rising on and around Jackson Avenue, which agents for years have marketed as an extension of the nearby Midtown Manhattan market.

The bigger challenge for many developers will be competition, both from completed buildings and upcoming projects. There are roughly 1,500 new apartments available for sale in Long Island City, including units not yet being marketed, according to Marketproof.

And there were already signs of a slowdown in the borough’s condo market before Covid-19. On average, 367 condos were sold per quarter in the last two years in Queens, down almost 14 percent from two years earlier, according to Mr. Miller, the real estate appraiser.

Several developers had also been emboldened in 2019 by the prospect of Amazon bringing a second headquarters — and a presumed wave of high-income residents — to the area, but community pushback and concern over gentrification ended those plans.

“The ultimate question is: ‘At what point does the job market recover?’” said Nancy Packes, the principal of Nancy Packes Data Services, a real estate consultancy and database provider. If not for the pandemic, the new condos in Long Island City would have sold in due time, she said, while a number of slow-selling condos could potentially be listed as rentals, since the apartments there are generally smaller and less expensive than the ones in Manhattan. Despite unemployment numbers soaring, the buyers and renters targeted in these new developments tend to have more job security, she said.

Market observers are looking for answers at the 802-unit Skyline Tower, which has more than four times as many condos as the next largest building in the neighborhood. Since the quarantine began in March, there have been just six new contracts signed, for a total of about 30 percent of units sold, said Eric Benaim, the chief executive of Modern Spaces, which is leading sales at the project. But he says there is pent-up demand, much of it from local buyers, who have been waiting for a chance to see the sales gallery in person.

Prices at the tower range from about $680,000 for studios as small as 450 square feet to $4 million for a high-floor three-bedroom; the penthouse prices have not been revealed. More than half of the units are two-bedrooms or larger. Occupancy was going to begin around October, but may now be pushed to January.

Stella Liu, the head of sales and marketing for Risland U.S. Holdings, one of the Skyline developers, said the prices were warranted because of the unmatched views of Manhattan, subway access, and amenities, including a 75-foot indoor pool. But use of the shared amenities will depend on state guidance for at least the next several months, if not longer.

The lasting impact of Covid-19 is not lost on buyers. Gary Hirshfield, a 58-year-old ophthalmologist who works in Queens, moved with his wife, Stacey Kruger, also an ophthalmologist, into a three-bedroom penthouse at Galerie, a nearby condo project, at the end of 2019. Now he is having second thoughts.

“Today, if I could get my money out, I’d consider it,” Mr. Hirshfield said. For the cost of his 1,690-square-foot apartment, he said he could have bought a 5,000-square-foot house with some land in the suburbs. But Long Island City appealed to him because of the restaurant scene, its proximity to Manhattan, and the high-end fitness center in the building (now closed to residents). He still believes in the value of the project, but doesn’t know when he’ll feel safe enough to use the gym again.

Some buildings are already sweetening the pot to entice new buyers. At the Neighborly, where prices range from $585,000 for a roughly 440-square-foot studio to $2 million for a three-bedroom penthouse, the developer, New Empire Corp., is offering to pay residents’ taxes and common charges for the first full year, almost $10,000 for a one-bedroom. Another project, Corte, offered a number of “rent-to-own” plans, in which a renter would pay toward ownership — a tactic more commonly seen during the last recession.

It’s possible that bulk sales, the discounting of a large offering of units to investors, could be in the offing for some developers, but so far there have not been signs of distress in the market, said Mr. Goodman, the chief executive of Marketproof.

And there may soon come another wave of development to the area. Four developers are proposing a project, called YourLIC, on a 28-acre site that includes what would have been the Amazon headquarters, as well as adjacent properties. The development could be as large as 12 million square feet, half of which could be residential, a spokeswoman said.

One potential exit strategy for developers is to convert a number of units into rentals, but they may face stiff competition in that market as well. At the site of the former 5Pointz graffiti murals, the developer, Jerry Wolkoff, has nearly completed two rental towers with more than 1,100 apartments, most of which are market rate, ranging in price from about $2,500 to over $6,000 a month, not including prime penthouses.

Mr. Wolkoff could start leasing now, he said, but might wait several months before giving the go-ahead. “Nobody is going to go in, looking at apartments with masks on,” he said.

One of the most ambitious projects in Greenpoint, Brooklyn is Greenpoint Landing, a 22-acre mixed-use megaproject now under construction along the industrial waterfront.
One of the most ambitious projects in Greenpoint, Brooklyn is Greenpoint Landing, a 22-acre mixed-use megaproject now under construction along the industrial waterfront.

One of the most ambitious projects, Greenpoint Landing, is a 22-acre mixed-use mega-project now under construction along the industrial waterfront. When the first phase is finished in 2022, it will include five towers soaring as high as 40 stories, four low-rise buildings and a waterfront esplanade with views of Manhattan. A pre-K through 8 public school is also planned.

Early projects have already proven successful. The tower 1 Blue Slip, a 30-story building with 359 market-rate units overlooking the East River and Manhattan skyline, opened in 2018, according to the developers, Brookfield Properties and Park Tower Group. Prices ranged from $3,000 to $6,000 a month, and there are currently just a handful of vacancies.

“It was a bit of an unproven leasing market, but it was very strong,” said Kevin Davenport, a vice president with Brookfield.

One current Blue Slip tenant is Lia Araujo, 39, a television producer and writer. She had lived in Greenpoint for a few years in a classic railroad apartment, but decided to look for safer quarters when she and her neighbors began having trouble with an erratic neighbor.

She settled into a one-bedroom apartment, with a monthly rent of $3,200. She has since become fond of not just the co-working spaces and modern amenities and open space, but also the neighbors and staff.

“Having seen the other luxury buildings along the waterfront, Blue Slip somehow manages a personal vibe that I didn’t find anywhere else,” she said.

About a quarter of the 5,500 units planned throughout Greenpoint Landing, which includes three low-rise buildings developed by Park Tower and L & M Development Partners, will be reserved for residents who make between 30 to 130 percent of the area median income, which is $102,400 for a family of three. Rents for studios in those units start at $393, and are in high demand: There have been three vacancies the entire year in the affordable units, and each unit was filled within a month, according to the developers.

The next luxury tower, 2 Blue Slip, had just begun leasing its 421 units, 30 percent of which will be affordable, in February when the pandemic struck. About 20 deals were signed, but leasing essentially shut down in March, despite virtual tours. The least expensive market-rate studio is asking almost $3,100 a month, and a larger two-bedroom is seeking nearly $6,000 a month.

It’s unclear how well the units will be received in this new climate, but early data suggests hurdles ahead. Nearly a quarter of New York City rentals were discounted in May, up from 15 percent in the same period last year. And the discounting was most pronounced in buildings with more than 50 units, where the median discount was 9.3 percent below the original asking price, according to Nancy Wu, an economist with the real estate listings site StreetEasy. She calls that discount the “social distancing premium,” because the data suggests renter wariness with more crowded buildings.

Mr. Davenport, one of the developers, was hopeful that Manhattan residents would show interest in the Greenpoint offering, but said it will take a few months to “figure out where the demand is in the market.”

The condo market in Greenpoint, though less crowded than Long Island City, may also face headwinds. The property at 44 Box Street, a former parking lot leased by a plumbing company, was sold in 2014 for $1.875 million, then again in 2018 for $4.15 million. Plans were filed for a six-story condo with about 15 units that would cater to tech-forward millennials, said Jay Batra, founder and chief executive of Batra Group Real Estate, who does a lot of work in the neighborhood.

But phone and email messages left with the developer, M Development, were not returned. Mr. Batra has also had no luck connecting with the developer, and says that the status of the project appears to be unclear.

The wave of mostly luxury development in Greenpoint has rankled some longtime community activists who say that the landscape has drifted far from the city’s original rezoning plans, which they believe could have included more moderate-income housing and resiliency measures in flood-prone areas.

Ronald Shiffman, professor emeritus at the Pratt Graduate Center for Planning and the Environment, says there should be a moratorium on all waterfront development until there’s a comprehensive plan for addressing the city’s industrial land in the context of climate change.

“We’re rezoning all of this area out of existence and we don’t know what the manufacturing needs will be in the future,” he said, citing the shortage of face masks and testing equipment during the pandemic.

Jane Pool, a longtime community activist in Greenpoint, said that “it appears that our rezoning was all about building towers, and infrastructure has been an afterthought.”

But if there is anything positive to come from the pandemic, it may be that the quarantine has given New Yorkers some time to reflect on the city being built up around them.

“We’re in an environment where we can make the pandemic pause an opportunity to solve problems and make a healthier community,” she said. “That would be amazing.”
 

David Goldsmith

All Powerful Moderator
Staff member
The Kevin Brown Team at Sotheby's International Realty has been publishing a Manhattan "New Development" Weekly Contracts Signed Report.

This week's report shows 3 signed contracts, down from 7 the week before. More shockingly down from 21 for the same period in 2019 - that's a YOY decrease of almost 86%.
 

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David Goldsmith

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Huge price cuts on largely unsold Getty Condos Highline.
The Getty condo chops prices up to 53%
Boutique building developed by Victor Group and Michael Shvo looks to spur sales

The developers of the Getty condominium are slashing prices in an effort to sell out the remaining third of the building.
The cuts on four unsold residential units, which come just two years after a penthouse at the project fetched a record $59 million, range from 42 percent to 53 percent, according to a release from Victor Group, which co-developed the West Chelsea building along with Michael Shvo as a minority investor.

Ran Korolik, Victor partner and executive vice president, said the reductions “reflect today’s environment.”

“We are taking a proactive approach,” he said in a statement. “We hope this bold move sends a strong signal to the market that we have priced the residences to sell, and we are looking to transact.”
Manhattan’s luxury home values peaked at about the time the Getty was approved by the state attorney general in 2016. The market ebbed for several years and was moribund when the pandemic hit in March, slowing new sales to a crawl. In-person showings have since resumed, which along with price cuts have brought some life back to the market.

The Getty’s three-floor penthouse sold for $59 million in 2018, which at the time was Manhattan’s most expensive sale ever downtown. The buyer was later identified as private equity executive Robert F. Smith.
The Peter Marino–designed building at 503 West 24th Street also contains two commercial condos. One was sold to art gallery Lehmann Maupin for $27 million and the other to Blackstone Group billionaire and art collector Tom Hill, who paid $29 million last year.

The unsold residences occupy four full floors of the 12-story building. Three of the units have outdoor space. The adjusted asking prices now range from $13.8 million for a three-bedroom unit on the eighth floor to $9.4 million for a three-bedroom on the sixth floor with no balcony. The prices work out to between $2,838 and $3,616 per square foot.

Shlomi Reuveni of Reuveni Real Estate is handling the marketing and sales of the units. He described the “aggressive price reductions” as an “unprecedented and unique opportunity for highly selective buyers.”
Victor Group landed a $30 million condo inventory loan for the project last year from Paragon Outcomes Management and Axos Bank.
 

David Goldsmith

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I guess they had originally expected to sell out by now. Something tells me they haven't.
https://therealdeal.com/2020/08/26/hfz-sued-for-not-vacating-xi-sales-gallery-and-stiffing-ny-times/
HFZ sued for not vacating XI sales gallery and stiffing NY Times
Lux condo developer squatting in Meatpacking District, landlord’s lawsuit claims

Ziel Feldman and his firm, HFZ Capital, are being sued for not vacating the sales gallery for the XI condominium complex when the lease expired in June.
Greenway Mews Realty filed the lawsuit Monday against its tenant, 76 Eleventh Avenue Property Owner, a limited liability company that leased the lower-level space at 25-27 Little West 12th Street.
HFZ is behind the tenant entity and has been using the Meatpacking District space to showcase its XI development, a luxury condominium complex designed by Bjarke Ingels. The XI is under construction near the High Line.

Naming HFZ and Feldman, its chairman, as defendants, the lawsuit alleges that the sales gallery remains in place with no rent being paid since the three-year lease ended.

HFZ did not return phone and email messages seeking comment. Greenway Mews did not return a request for comment left with a person who answered a company phone.
According to the lawsuit, the tenant defaulted on the lease by failing to pay the $152,235 monthly rent from April to June. The landlord then withdrew nearly $627,000 from the tenant’s $836,000 line of credit to satisfy the rent, the court papers said.

Greenway Mews is seeking to take back the space and collect $1.1 million to cover additional rent, the cost to restore the property, and legal fees.
The condo complex offers 236 units along with a Six Senses Hotel. Sales have been ongoing, with buyers include Graeme Hart, a New Zealand billionaire businessman, who signed a contract for a $34 million penthouse.

In a separate complaint filed Tuesday, HFZ also sued by the New York Times for not paying for about $121,600 in advertising. The Times is seeking to recoup the fees with interest. HFZ did not initially respond to a request for comment. William McDermott, a lawyer representing the Times, said he would not comment on a pending litigation involving his client.

After publication of this story, an HFZ representative emailed information indicating that the litigation with the New York Times had been resolved Wednesday afternoon, as McDermott filed a court document to discontinue the matter. The document did not spell out what the resolution was.
 

David Goldsmith

All Powerful Moderator
Staff member
This week's New Development Report from Sotheby's Kevin Brown Team. Odds are this is an outlier week, but only 2 sales is a major disappointment going into the Fall selling season.
 

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David Goldsmith

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New York City Developers seem to be in denial - not so much in Miami:
“Anything and everything is negotiable”: Incentives for condo buyers mount in Miami
Offers include furniture, parking, HOA fees, leaseback programs and interest on deposits

In early March, Residences by Armani/Casa’s developers hosted a blowout opening party, featuring a Giorgio Armani fashion show, a performance by Pitbull, and a fireworks display over the beachfront pool deck of the high-rise condo.
Agents offered tours of the Sunny Isles Beach tower’s units and amenity spaces. Some attendees wore ball gowns, and the drinks flowed. Miami was back.

But then, coronavirus hit, shutting down sales galleries, along with restaurants, hotels, non-essential retail, offices and large gatherings. Already saddled with supply, developers of new condo projects in South Florida were again forced to offer buyers incentives.

Over the past six months, offers include furniture packages, homeowners associations fees for a year or two, free parking, and even reimbursement for the cost of a flight to Miami to visit a project – if the prospects end up buying. Unlike earlier on in this cycle, the offers are made public and the developers are competing with resale units in their own buildings.

Before the pandemic, some submarkets had more than six years of luxury condo inventory, including Sunny Isles Beach, Edgewater and parts of Miami Beach, according to Multiple Listing Service data from Analytics Miami.

“It was going on before Covid, just because of the oversupply. What makes it sort of unique is that the developers are openly marketing it,” said Peter Zalewski, principal at Condo Vultures Realty. “What are the developers willing to offer when you go in and start a deal? If they really think you’re a live buyer, they’ll go over the top.”

The offers
Three months after the Related Group and Dezer Development hosted their opening party at Armani/Casa, the developers launched a lease-to-own program for prospective buyers. Rentals typically range from $15,000 to $25,000 a month, and up to 25 units are eligible for the program.

The incentive gives buyers “the flexibility to not have to make a concrete decision right now, and if they decide to buy, they receive full credit for the rental payments,” said Gil Dezer, president of Dezer Development, via email.
At another Related project, Hyde Beach House in Hollywood, the developer is offering buyers two years of homeowners association fees, according to an email obtained by The Real Deal. Related declined to comment.

Developers are “trying to catch a falling knife,” said Ana Bozovic, founder of Analytics Miami. Condo sales in Miami-Dade County fell 49 percent in the second quarter, to 2,233 closed deals, according to the MLS.

“Developers are offering incentives because they have to. They feel the drop in transaction volume and are reacting,” she said. “But as with most reactions, it is too little, too late.”
Dezer and other high-end residential developers in South Florida are hoping to capitalize on an influx of buyers and renters from densely populated, high-tax states such as New York – a trend that existed pre-Covid.

But the majority of new buyers and renters are going for luxury single-family homes, priced at $1 million and up and asking tens of thousands of dollars a month in rent. Bozovic said “condos are not so lucky.”
At condo project Merrick Manor, developer Henry Torres is offering one year of homeowners association fees, and in some cases, free parking or furniture packages from interior designer Steven G. Torres said he’s offered buyers credits they can use at closing, as well as smaller “sweeteners,” including gift cards or discount cards to retailers in the building.

The Coral Gables building near the Shops at Merrick Park has studios starting at $399,000; two-bedrooms starting at nearly $600,000; and four-bedrooms starting at $2.2 million.
The project is also offering buyers packages of five to 10 units, with the developer covering the HOA fees and taxes for one year, plus a year of rent.

“We’re basically doing whatever we need to make a sale,” Torres said.
Metropica developer Joseph Kavana has three offers for prospective buyers at One Metropica Residences in Sunrise, a 28-story, 263-unit building that was delivered in June. It’s the first condo tower at the sprawling 65-acre, $1.5 billion master-planned development.

The first 10 executed contracts by Sept. 30 can choose one of these offers: a closing credit equal to 2.5 percent, plus six months of HOA fees paid by the developer; a second parking spot, which the developer said is a $35,000 value; or a closing credit of 2.5 percent, plus a storage unit valued at $15,000.

The developer also has a leaseback program, separate from the above offers.
Bozovic said one- and two-year leasebacks can be appealing, “but who knows what the market will look like in two years. Will the buyer be able to rent the unit at an open-market rate that pays a similar return? I don’t think anyone can answer that with confidence,” she added.

Kavana declined to provide a figure for the inventory of remaining units, but said it is “quite low” and that he is working on selling out the building to then launch sales of the second tower.

“Once we’re out of the special situation created by the pandemic, things will go back to normal,” Kavana said.
At Natiivo Miami, a mixed-use residential, hotel, short-term rental, and office condo project, the developer is offering interest on deposits, honoring pre-Covid foreign exchange rates, and offering to cover the cost of travel if a prospective buyer makes a purchase. Natiivo will pay up to 5 percent interest on up to 50 percent of buyers’ deposits, depending on the unit size. The developer is also offering to cover up to $1,500 in travel costs if buyers make a purchase after visiting the sales center.

Keith Menin, leading Sixth Street Miami Partners, an entity of the Galbut family office, is developing the project. Natiivo will have 448 units for sale starting in the mid $300,000s and 240 hotel units in downtown Miami. Cervera Real Estate is handling sales of the residential component. It’s more than 50 percent sold, said Jesse Ottley, president of development sales for Cervera.

Honoring the pre-pandemic exchange rate helps foreign buyers, a major buyer pool in South Florida, to “get over that mental hurdle,” and demonstrates that the developer is willing to talk, said Alicia Cervera Lamadrid, managing partner and principal of Cervera.

The discount can amount to about 5 percent off the total purchase price. The exchange rate offer is applied only to the initial deposit. Ottley said it’s particularly appealing to buyers in Mexico and Colombia.
Ottley acknowledged that the impact of coronavirus “has been disastrous.”

“We’re trying to give buyers that sense of certainty,” he said. “We see that there’s still demand. As bad as things are perceived to be here, they’re much worse in their own markets.”
Zalewski said that buyers should consider the offers as starting points. “Until there’s a vaccine, it’s a buyer’s market and will continue to be one,” he added. “Anything and everything is negotiable.”

Broker commissions
Some developers are upping their offers to agents with commissions as high as 10 percent, hoping they’ll bring clients to their projects.

At Aurora in Sunny Isles Beach, developer Verzasca Group is offering brokers a 7 percent commission, sales director John Warsing confirmed. Most commissions are generally 5 percent to 6 percent. The 61-unit, 17-story building on the west side of Collins Avenue, is 65 percent sold, he said.

The developer started offering the higher commission a few months ago, and extended it with no definitive end date, Warsing said. Brokers have generated about 90 percent of business at Aurora, and traffic and interest in the project has picked up in July and August, he added.
Though Verzasca is not offering any buyer incentives since the project won’t be completed until the third quarter of 2021, Warsing said price reductions are on the table.
“Everyone at this point is open to discounting,” he added.
 

David Goldsmith

All Powerful Moderator
Staff member
Four of HFZ’s condo loans being shopped in foreclosure sale
Newmark marketing CIM's junior mezz on 88-90 Lexington, the Astor and 301 W 53rd St.

Junior mezzanine positions on four of HFZ Capital’s New York condominium projects are being marketed through a foreclosure sale, The Real Deal has learned, a possible sign of the distressed deals that investors have been anticipating.
Marketing materials from Newmark Knight Frank reviewed by TRD show that four junior mezzanine loans are being offered for a combined $89.5 million through a UCC foreclosure sale. The loans are tied to four of HFZ’s luxury condo properties in Manhattan: 88-90 Lexington Avenue, The Astor at 235 West 75th Street, and Fifty Third and Eighth at 301 West 53rd Street.

CIM Group holds the mezzanine loans, sources familiar with the properties said. The company, led by Shaul Kuba, Avi Shemesh and Richard Ressler, is an active developer and lender in New York and Los Angeles, with controlling interests in several major condo projects.

The auction would give the winning bidder an “indirect interest” in the four properties, according to the materials. Sources close to the deal confirmed the auction is scheduled but declined to comment further.
Representatives for NKF declined comment. HFZ representatives couldn’t be reached for comment.

The junior mezzanine balance for the properties totals $89.5 million. The total capital stack is $258.8 million, the materials show.
Mezzanine loans take a junior position to senior loans in the capital stack, and usually carry higher interest rates. JPMorgan and Oaktree Capital led a $500 million refinancing of the four buildings in 2016. The loans replaced financing from Deutsche Bank in 2013.

In July 2013, HFZ, led by Ziel Feldman and Nir Meir, paid Westbrook Partners $610 million for the four properties, teaming up with Fortress Investment Group on the buy. The portfolio consisted of 743 rental units, and the partners began the process of converting the buildings into residential condos.

HFZ’s other major projects include the XI, a mixed-use condo and hotel project near the High Line, and the Belnord, a storied Upper West Side rental that the developer converted to a 95-unit condo project.
 

David Goldsmith

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What happens when you lose at chicken.
Condo Conversion Project Sells for $51M via Bankruptcy Auction
A stalled Upper East Side condo conversion project led by developer Mitchell Marks has sold to Jason Carter of Carter Management Corp., sources told Commercial Observer.

The property, at 305 East 61st Street, was sold via bankruptcy auction for $51 million.
Greg Corbin and The Corbin Group at Rosewood Realty and Richard Maltz of Maltz Auctions led the sale.

“The developers did a stunning job with the conversion up until the time th e project stalled,” Corbin told CO. “The build out and finishes were extremely high end, and when the project is completed I foresee strong demand for the units if priced right.”
The asset comprises 65,000 square feet and includes 14 residential units as well as 14,800 square feet of commercial space. Formally an art storage facility, the stalled redevelopment site is substantially complete.
The building’s commercial space was under construction as a new AIRE Ancient Baths location. The luxury brand invested a substantial amount of money in the build out, per an offering memorandum shared with CO, with its 15-year lease pending execution. Whether AIRE is continuing with the space could not immediately be ascertained prior to publication.

Marks —along with other deal partners— acquired the asset in 2016 for $40 million in an all-cash transaction from EMS Capital, who had purchased it for $28 million in 2012. At the time, Marks targeted a $105 million sell out for the property, according to an article by The Real Deal.
However, sources familiar with the deal said there was “infighting” and lawsuits among the development partners, who had fallen into arrears and were unable to make debt service payments. Ultimately, the partnership declared bankruptcy, allowing Carter to purchase the property.

Corbin’s group specializes in bankruptcies — as well as restructurings, foreclosures, stalled construction projects and loan sales — and said we’re only at the tip of the iceberg when it comes to market distress.
“I think when it comes to distress we may not even be in the first inning yet, we might still be in the batter’s box,” he said.

Jason Carter did not respond to a request for comment by press time.
 

David Goldsmith

All Powerful Moderator
Staff member
2 years on the market, 16% sold.
HFZ’s Chelsea condo now effective, with 16% of units sold
Latest amendment to condo’s offering plan offers rare insight into sales at the XI in Chelsea

HFZ Capital Group has long been quiet about sales at the XI, its High Line-adjacent condominium.
But a new amendment to the condo offering plan has offered rare insight into the number of contracts signed at the project’s twisting towers since sales launched in 2018.
According to the amendment, which was filed with the attorney general’s office and made public this week, 38 units have gone into contract as of this April. That represents 16 percent of the total 236 condos.

The milestone, which was previously reported by The Real Deal but has now been put in writing by the developer, means the offering plan is “effective” and buyers can begin to close their deals.
HFZ Capital did not respond to a request for comment.

The developer has been under pressure of late. Last week, TRD reported that junior mezzanine positions on four of HFZ’s New York condo projects — not including the XI — are being marketed through a foreclosure sale. Such a sale would afford the bidder “indirect interest” in the properties, according to marketing materials from Newmark Knight Frank.

The Bjarke Ingels-designed XI has also faced challenges: It launched sales after the high point of the luxury condo boom, when deals slowed across the high-end market and inventory began piling up. That trend only intensified this year after the state stopped in-person home showings in March, though market interest and activity in Manhattan has begun to slowly pick up again.

HFZ paid $870 million, or roughly $1,100 per square foot, for the site in 2015, making it one of the priciest land deals in New York City history. The project, which will include a hotel, was funded with a $1.25 billion construction loan from the Children’s Investment Fund in 2017.

Units at the building range from a one-bedroom measuring 878 square feet, asking $2.6 million, to a $75 million penthouse with 6,925 square feet of interior space and 4,963 square feet of exterior space, according to the latest amendment. The buyer of another penthouse, priced at $34 million, was identified last year as New Zealand billionaire Graeme Hart.

The latest records also offer insight into some of the changes planned for the building. The buyer of unit 6E and 6F has requested that the units be combined, for example; and the buyer of 24A in the west tower has requested that their property and neighboring 24D be reconfigured and a portion of the hallway merged into their units. The changes are still subject to approval from the Department of Buildings.
 

David Goldsmith

All Powerful Moderator
Staff member
New development sales continue to escalate even though overall sales are down. We won't know for a few months till these deals close but I have to think a decent amount of this has to be the child of reduced prices.
This week's New Development Report from Sotheby's Kevin Brown Team.
 

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Noah Rosenblatt

Talking Manhattan on UrbanDigs.com

21 of them are 130 William St and 3 are 565 Broome - 130 William def looks like a bulk deal of some sort? Would love to follow up on these later on and see what discount was achieved, although that wont include other concessions included
 
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