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This week's New Development Report from Sotheby's Kevin Brown Team.
I wonder what they are hoping to receive in the end. Cash? Control? I don't know a lot about the inner workings of this world but would love to learn.The lender is also seeking accrued interest and other fees in addition to the $43.6 million principal. In total, W Financial REIT aims to collect about $48.6 million.
yep, Carol Staab emailed me about this as well. Very interesting. I asked her to start a separate thread on this so we can openly discussUrban Standard Capital wants to buy 15% of the units necessary to get a condo building’s offering plan ruled effective by New York state.therealdeal.com
Investor eyes condo projects struggling to hit key sales threshold
Urban Standard Capital wants to buy 15% of units needed to make offering plans effective
One unintended consequence of New York’s 2019 rent law overhaul is that developers who want to switch new condo projects to rentals as a Plan B are required to sell the majority of those units to their tenants if the market improves in order to revert the project to condos.
Many developers say that makes those conversions virtually impossible, but one investor sees an emerging market in buying enough unsold units — at a nice discount — so developers can avoid falling under that new requirement.
“We’re telling a developer, what this does is it buys you time and it buys you optionality,” said Urban Standard Capital president Seth Weissman.
Weissman’s company has a new $100 million investment platform for bulk-buying residential condominiums at projects where developers are struggling to hit the threshold of units in contract — 15 percent — to have their offering plans deemed effective.
Once the plans are deemed effective, the developer and Weissman can rent the unsold units out and wait for the condo market to rebound before putting those units up for sale.
That had long been the playbook for developers when sales markets were bottoming out, but things changed when New York state made sweeping revisions to the rent law in 2019. One element of the overhaul required developers who are converting rental apartments into condos to sell 51 percent of those units to tenants.
Real estate experts believe the intent of the law was to discourage predatory landlords who would buy buildings and drive out rent-regulated tenants in order to convert apartments to more profitable condos. But they say lawmakers overlooked the impact on condo projects that had been approved prior to the law and now want to fall back as rentals.
Once a condo developer starts renting out units instead of doing sales, Weissman said, it voids the project’s offering plan. If the developer decides that in two or three years they want to return to the sales plan, they have to file for a new offering plan, which will be subject to the 51 percent rules.
Urban Standard’s platform is designed to help developers avoid that situation by buying enough units to hit the 15 percent sales threshold necessary to get the original plan deemed effective.
Weissman said there are some 300 condo projects across the city that are still trying to get to the 15 percent threshold to get their plans deemed effective. The company is targeting projects where it can buy blocks of up to 50 units roughly in the $2 million to $3 million price range, and will look to buy at a discount of 25-30 percent from pre-Covid prices.
The platform is backed by family offices and foundations, Weissman said, groups that have a longer-term timeline than other types of investors seeking quick, high returns.
Although Weissman touts the platform is a win-win for his investors and condo developers, there is one ripple. Once Urban Standard owns a block of 15 percent of a condo project’s units, it essentially becomes a competitor to the developer — and one with a lower cost basis who can undercut the sponsor.
Weissman said part of his agreements with sponsors include a timeline for when he can release his units, and it’s a deal he feels many will be willing to make.
“Most developers we speak with aren’t in the business of trying to make a profit at this point,” he said. “They’re trying to recover as much capital as possible and move onto the next thing.”
“has worked with investors who have offered as much as 35% off the asking price for dozens of new development condominiums “Manhattan's condo market has been oversupplied for several yearsInvestors have put in offers with as much as 35% off the asking price in exchange for buying condos in bulk.www.bisnow.com
Investors are on the hunt for big discounts in Manhattan, hoping developers of luxury condominiums desperate to unload units will sell at bargain prices.
The buyers are looking to purchase between three and 100 units at one time, in exchange for a significant reduction in the asking price, The Wall Street Journal reports. Most recently, Elad Group agreed to sell 70 units at its Charlie West tower in Hell’s Kitchen to Tishman Realty for $87.4M, The Real Deal reported.
Bulk condo sales can be attractive to developers with scores of product to move and who have faced an oversupplied luxury residential market for years — and that was before an exodus of wealthy Manhattanites spurred by the coronavirus pandemic.
Douglas Elliman Real Estate broker AnneMarie Alexander told the WSJ she has worked with investors who have offered as much as 35% off the asking price for dozens of new development condominiums.
“They might not admit it and it’s all very sort of confidential and behind the scenes, but almost every [developer] is trying to do the same thing right now. And that’s to do bulk transactions,” she said.
Developers go to great lengths to keep the bulk sales under wraps, as it signals to buyers they are willing to sell units for far less than list price. But news of some of these deals has come out. In addition to the Tishman acquisition, Tremada Properties bought 36 units for $11.5M units at a building on East 48th Street, per the WSJ.
James Nelson, Avison Young's head of Tri-State investment sales, has formed a partnership with property investment platform Republic Real Estate to raise $50M to find bulk sales of units between $1M and $3M. Avison Young is not involved in the venture, Nelson told Bisnow Tuesday.
Still, while the option may seem attractive to sponsors with lingering apartments, these types of deals are not widespread in the city just yet because many of the developers have arrangements with banks that don't allow them to reduce unit prices below a certain level.
The condo market in the city, particularly at the high end, has faced a major oversupply for several years now. The impact of the virus, as well as the mansion tax that was introduced last year and the looming pied-à-terre tax, are all said to be depressing pricing and activity.