Developer Matt Lee’s decision to auction off a condo unit online later this month recalls another dire time in New York City’s new development market.
In 2010, in the aftermath of the Great Recession, Paramount Realty USA held an auction of six unsold condos at a Madison Avenue development known as m127.
The unusual move by developer Cardinal Real Estate Investments garnered widespread media attention and massive interest from bidders. The nine-unit project had been on the market since 2007 and, facing the threat of foreclosure with only three sales in as many years, Cardinal decided a very public fire sale was the best option.
The developer set deeply discounted reserve pricing, with bidding starting at up to 68 percent off the units’ original asking prices. Buyers came out en masse to vie for the apartments and the auction was dubbed “a rare success” by observers at the time.
Now, as the pandemic rages and billions of dollars worth of new condos languish on the market, the same auctioneer is trying to repeat that success at Lee’s Alphabet City condo, Houston House.
“What we’re doing now is very reminiscent of that 2010 first developer auction,” said Paramount principal Misha Haghani, pointing to the vast quantity of unsold condo units and developers’ looming obligations to their lenders. “Not only is it a sign of the times on a micro level, I think it’s a much bigger sign of what’s to come.”
At Houston House, located at 298 East 2nd Street, Paramount will auction a two-bedroom unit spanning about 1,840 square feet. The price the developer wanted to sell it for is just over $3.4 million, but bidding will start at about half that — $1.75 million.
Sales at the seven-unit project launched a year ago, with prices ranging from $3.4 million to $4.5 million. The developer was aiming for a total sell out of around $27 million. The condo offering plan was declared effective in November after two units went into contract on the fourth and fifth floors.
Lee bought the property for $7 million in 2015 and financed the project with $14 million in loans now held by Maxim Capital Group, property records show. The developer did not address whether his relationship with his lender had any influence on his decision to move forward with the auction.
“Given the current climate, we thought we’d try something fun with one of the units here,” Lee said in a statement.
Haghani said that initially there were discussions about auctioning more of the units at Houston House, but the team settled on just one “to limit the opportunity for buyers.”
The firm is teaming up with celebrity broker Ryan Serhant and his former firm Nest Seekers International on the auction. The brokers will show the unit to interested bidders ahead of the auction, which is scheduled to start on March 23. They’ll also handle marketing and sales of the four remaining units.
Serhant said he believed Houston House was “an ideal candidate” for an auction and would “generate additional momentum for the remaining handful of units at the development” in a statement.
Paramount will conduct the auction process online over 48 hours. To participate, bidders must provide proof of at least $175,000 in liquid assets and a valid credit card.