Buyers at Witkoff’s 150 Charles flipping condos

Developer to collect 10% of profits through exceedingly rare practice

New York /
Jul.July 01, 2015 06:04 PM

It took just 12 weeks for developer Steve Witkoff to sell out 150 Charles when the 91-unit West Village condominium building launched in 2013. Two years later, a handful of units are back on the market after the developer offered buyers the rare option of flipping their contracts, The Real Deal has learned.

Under the terms offered, the buyers will pay Witkoff 10 percent of their profits – a potentially sweet sum considering how high Manhattan prices have climbed since the project debuted.

At least five condos were relisted June 24, according to StreetEasy, with prices ranging from $6.7 million to $24 million. That’s roughly 21 percent to 45 percent higher than their original asking prices.

Several New York closing attorneys said flipping contracts is exceedingly rare.

“The reason [developers] don’t do it usually is because they don’t want you competing with them. If they have a B line for sale, they don’t want you selling their B line,” said Bruce Cohen, an attorney with Cohen & Frankel LLP.

For that reason, most condo offering plans stipulate that buyers cannot sell their condo until a year after closing. Some sponsors allow flips before the one-year mark if the buyer shares 50 percent of the profit.

For buyers, however, there is a tax benefit to flipping contracts. In this case, even after paying 10 percent to the developer, the flipper will come out ahead, Cohen said. Meanwhile, he said, “The sponsor is able to get a little more money out of the unit.”

The Witkoff Group said it has not permitted the reassigning of contracts previously.

“This is a testament to the success of the building,” Witkoff said in a statement.

The developer acquired the property, a former warehouse, for $85 million in 2005. Defying community opposition, sales launched in February 2013 and within three months, the building was sold out, including a penthouse that was asking $35 million, or $7,592 per square foot.

Current units for sale include:

  • Unit 8AS, with 3,629 square feet, is asking $24 million, up 45.5 percent from $16.5 million in 2013.
  • Unit 12A, with 3,008 square feet, is asking $18.5 million, up 27.58 percent from $14.5 million in 2013.
  • Unit M10, with 5,612 square feet, is asking $16.85 million, up 34.8 percent from $12.5 million in 2013.
  • Unit 5CN, with 2,241 square feet, is asking $8.9 million, up 42.4 percent from $6.25 million in 2013.
  • Unit 7CN, with 1,561 square feet, is asking $6.7 million, up 20.9 percent from $5.55 million in 2013.

Douglas Elliman’s original sales team at 150 Charles is marketing the listings. The team includes Madeline Hult Elghanayan, Peter Zaitzeff, Raphael De Niro and Darren Sukenik. Compass President Leonard Steinberg, who left Elliman last year, is no longer involved. “The building looks beautiful,” Steinberg said in an email. “Even better than I thought it would.”

Steven Wagner, a closing attorney at Wagner Berkow, said by allowing buyers to flip contracts, Witkoff is able to follow the market’s ascent. “Original buyers in expensive buildings, where they were asking $2,000 or $2,500 per square foot, it almost seems quaint a year later when buildings are asking for $8,000 per square foot,” said Wagner.

In fact, the median sales price in new development is $1.87 million, up nearly 34 percent over a two-year period, according to appraisal firm Miller Samuel. The average sales price for new development units was $4.2 million during the second quarter, a whopping 97.4 percent increase from just over $2 million in 2013.

There are some 6,500 new condos set to hit the market this year, a significant increase from the 2,500 that launched last year.

Cohen said the influx of new units is another reason Witkoff may have decided to allow flipping. “There are going to be a lot of other projects coming online,” he said. They may be “trying to beat those projects before they come out.”

 
 

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