For more than 10 years, Korman Communities has operated five extended-stay hotels in New York City under its AKA brand. Now, the Korman family wants guests to stay longer – indefinitely, even.
The homebuilder and extended stay hotelier is getting into the lucrative New York City condominium business.
Korman is selling furnished condos at two properties – “AKA United Nations” at 234 East 46th Street and “AKA Sutton Place” at 330 East 56th Street. Prices range from $1.2 million to $1.5 million at the U.N. property, which has 95 one-bedrooms, and slightly more at Sutton Place, which has 76 one- and two-bedroom units asking $1.5 million to $2.5 million. At Sutton Place, Korman is also offering a 2,000-square-foot penthouse that will ask $10 million.
Pennsylvania-based Korman is looking to tap into Manhattan’s red-hot condo market, where the average sales price hit $1.8 million during the second quarter. Co-CEO Larry Korman – who is also president of the company’s extended-stay division, known as AKA – said the offering is also a way for the firm to take its business “to the next level.” In addition to the condo sales, AKA will continue to operate its extended-stay business; in fact, buyers will have the option of renting out their condos through AKA.
“Not only are they going to have the equity side of their apartment, they’re getting income to cover the condo’s annual costs,” he said. At AKA UN, the monthly carrying charge for a 628-square-foot condo is nearly $3,900, according to the condo’s offering plan. “It’s a unique partnership, unlike a traditional condo investment.”
By selling condos, Korman can also justify building upgrades. The company owns a minority stake in its properties; it has a 10 percent stake in AKA United Nations, where crowd-funding platform Prodigy Network acquired a large stake last year from investment manager BlackRock.
“If we’re going to spend $10 to $20 million on the property, [institutional partners] want to see the return on investment,” Korman said. “There’s a ceiling you can charge for the rental rate yourself.”
In the past, Korman has spent between $2 million and $4 million a year on building upgrades at its properties. This past year, it spent another $16 million at both AKA Sutton Place and AKA United Nations to update the facilities’ pools, fitness centers and wine lockers. “We completely gutted all [of the] residences,” Korman said, describing kitchen upgrades, marble bathrooms and new furnishings. At AKA Sutton Place, the developer installed a private cinema.
In addition to a $10 million penthouse at AKA Sutton Place, Korman said the building will have a “reverse penthouse” on lower floors, meaning condos with high ceilings and the “same décor and vernacular” as the penthouse level. Those units will be priced at $2 million to $3 million.
Currently, 15 percent of the units in each building are for sale. A second batch will be released in December or January. “We want to gauge the response,” Korman said.
Brown Harris Stevens is handling sales at AKA Sutton Place and Prodigy is marketing AKA United Nations.
Korman said the company will retain its core, extended-stay models at three other New York City locations: AKA Times Square, AKA Central Park and AKA Wall Street, a $120 million joint venture with Prodigy that will have 142 units and is set to open in February.