The Real Deal New York

NYC’s tallest rental tower sees low profits amid big concessions

Brookfield’s Eugene is 74% leased, but concessions hurt bottom line
By Konrad Putzier | February 08, 2018 01:32PM

Manhattan West development (Credit: Brookfield)

 

UPDATED, Feb. 8, 3:28 p.m.: Leasing at the Eugene, the first completed ground-up tower at Brookfield Property Partners and Qatar Investment Authority’s Manhattan West megaproject, launched to great fanfare in March. But almost a year later, the $800 million, 844-unit building’s revenues are off to a slow start.

The rental tower at 435 West 31st Street contributed just $1 million in funds from operations — a common measure of real estate investment trust earnings — in the fourth quarter, Brookfield’s real estate CFO Brian Davis said during an earnings call Thursday. That’s a far cry from the $10 million Brookfield expects the tower to make annually once stabilized.

“Proceeds from operations are of course less than when fully stabilized and they are in line with projections (unlike leasing, which is ahead of projections),” a company spokesperson told TRD.

Seventy-four percent of the tower’s market-rate units are leased, according to a Brookfield spokesperson, up from over 60 percent in October. During the earnings call, Brookfield said the tower was 65 percent leased, but the spokesperson subsequently told The Real Deal that the number referred to the entire building, including affordable units.

According to StreetEasy, units at the Eugene are no-fee and come with two months free rent on a 14-month lease and three months free rent on a 27-month lease. A surge of new supply over the past two years has pushed rents down and concessions up across the city. Landlord concessions, which often come in the form of free rent, reached a new record for the fourth consecutive month in January, according to a new report by appraisal firm Miller Samuel released Thursday. On average, Manhattan landlords in January offered 1.4 months of free rent, according to the report.

The 62-unit tower is the city’s tallest rental-only apartment building. Brookfield funded the tower, which is 20 percent affordable, with $479 million in bonds backed by the New York State Housing Finance Agency.

Australian coffee shop Bluestone Lane occupies the building’s retail space. It was closed for about a week in late November because the wrong address was filled in on the certificate of occupancy application.

Correction: The article has been updated to clarify that 74 percent of market-rate units have been leased.