In a sign of the increasing pressure faced by Manhattan’s condo developers, the Elad Group is selling a large block of the remaining units at its Hell’s Kitchen new development for roughly $90 million.
It’s believed to be one of the first big new-development bulk condo deals of the cycle, and could foreshadow more deals of its kind as sponsors look to move on from challenged projects.
Elad, headed by Israeli businessman Yitzhak Tshuva, is in contract to sell 70 units at its Charlie West tower to Tishman Realty for $87.37 million, sources familiar with the agreement told The Real Deal.
The purchase price works out to about $1,100 per square foot, a significant discount from the listed price for condos in the building. The average price for the 11 units currently in contract at the tower is around $1,850 per square foot, according to StreetEasy.
A spokesperson for Tishman Realty said that Elad and its development partner, Mi & Co, “created the right product for the right neighborhood,” with the potential for growth as New York recovers.
A representatives for the Elad Group could not be immediately reached for comment. Brokers Yoav Oelsner and Glenn Tolchin of Upland Property Advisors negotiated the sale on behalf of Elad. The brokers declined to comment.
Tishman Realty, not to be confused with Tishman Speyer, plans to sell the apartments over time at a discount to the pricing Elad is currently asking. The developer is in the market now with a Newmark team headed by Dustin Stolly and Jordan Roeschlaub seeking a joint-venture partner and debt financing for the purchase. The brokers declined to comment.
Elad developed the 123-unit Charlie West at 505 West 43rd Street in 2019. The project is considered “affordable luxury,” with modestly sized apartments mostly asking less than $2 million.
The developer’s deal with Tishman could be a sign of more to come, as new development sponsors have become increasingly open to selling condos at struggling projects for a discount and moving on.
For sponsors, such moves can often wipe out any remaining equity in the project. But for the bulk buyers, it represents an opportunity to come in at a time when large blocks of apartments can be picked up for a discount, then sold at below-market pricing.
Not only is the number of developers looking to cut bulk deals on the rise, but so is the number of investors looking to make such deals.
Seth Weissman’s Urban Standard Capital recently launched a platform to buy enough unsold condo units at buildings to get sponsors past the key 15-percent sales threshold needed to have their offering plans deemed effective.