To spur sales amid a tough market, Extell Development said it will waive common charges for up to a decade at One Manhattan Square, an 815-unit tower on the Lower East Side. Yes, 10 years.
The unprecedented incentive is just the latest sign of how hard it’s become to sell new development condos in Manhattan, where inventory has been piling up amid weaker demand.
“I’ve seen some pretty insane incentives before but that tops it by far,” said real estate attorney Petro Zinkovetsky, founder of the Zinkovetsky Law Firm. “Those incentives are going to cost them money; someone has to cover the operations of the building.”
According to an email publicizing the offer, buyers who close by July 4 will not pay common charges for five years on one-bedroom units; seven years on two bedrooms; or 10 years on three bedrooms. The building also has a 20-year tax abatement, meaning buyers can expect to save between $12,720 and $31,150 in annual taxes, according to the email.
Compass’ Leonard Steinberg said any developer with a 20-year tax abatement “can easily offer some very attractive incentives…..and afford to do so.” He speculated the incentive would be particularly popular with investors watching their bottom line.
It’s unclear how many units remain at the 815-unit tower, where Extell launched sales in late 2016. Prices run from $1.2 million for one-bedroom units to $3.5 million and up for three beds. According to the offering plan, projected monthly common charges are $746 for a one-bedroom unit; $1,452 for a low-floor two-bedroom and between $2,300 and $3,300 for three beds, depending on the floor.
Zinkovetsky speculated that because it is such a large project, Extell is “just actively trying to sell off” units now that closings have started last month.
In an email Friday, Extell’s senior vice president of development Raizy Haas confirmed the “Live for Free” initiative, which is similar to a promotion the developer offered last year. For several weeks in November and December, Extell waived carrying charges for up to five years.
Even developers who’ve embraced incentives have been pummeled by a slower market.
During the first quarter of 2019, there were just 157 sales in new development buildings, down a massive 39.4 percent year over year, according to data from appraisal firm Miller Samuel. The figure also represented the lowest market-share in four-and-a-half years.
To entice buyers, the average listing discount for new development sales was 8.8 percent, compared to 2.1 percent during 2018’s first quarter. Sources said it’s now common for sponsors to pick up all or part of the transfer tax and attorney fees — something that rarely happened two years ago.
Developers are sweetening deals in other ways, too.
Last month, the developer behind the townhouses at King & Sullivan in Red Hook said the first buyer to close would receive a free MINI (MSRP of $46,500). Of 22 townhouses (each with their own driveway), 18 have sold since sales launched in 2015. One is being rented and three are for sale, starting at $2.495 million.
And earlier this year at the Baltic, JDS Development Group offered increased broker commissions for a limited time; it also struck a deal with Restoration Hardware to design the model penthouse. Some buyers were offered $2,000 interior design credits.
Extell is one of the most active developers in the city, with a pipeline has around 1,500 residential units, according to an analysis of building permits by The Real Deal last year. In January, Extell founder Gary Barnett hired Sush Torgalkar to help lead the firm as CEO. Torgalkar was formerly COO of Westbrook Partners.
OMS has 100,000 square feet of indoor and outdoor amenities, including a multi-level fitness center, bowling alley, full-size basketball court, gold simulator, spa, cinema and performance space, adult tree house and observatory.