New York City’s priciest condominium project is proving to be a lot less expensive than advertised.
Since closings began at Gary Barnett’s Central Park Tower in February, sales have hit public records for 33 units, most boasting prized park views. But per square foot, the high-flying developer is getting 25 percent below what he was aiming for, according to an analysis by The Real Deal.
The average sale price per square foot was $5,063, compared to the $6,768 that Barnett’s Extell Development targeted in its offering plan. On a per-unit basis, the average discount was 16 percent. (See chart below.)
Should the pattern continue, the project, at 217 West 57th Street, could gross up to $1 billion less than its $4 billion projected sellout. The 33 deals represent nearly a fifth of the building’s 179 apartments.
Public disclosures of some sales have led to eye-catching headlines. Three of the 20 full-floor units have sold for more than 35 percent less than their offering-plan prices, including one listed at $95 million that sold for $50 million.
Timing helps explain the discounts. The condo’s offering plan was filed in 2017, when Manhattan’s luxury condo market was at or just past its peak, and three years before Covid sent wealthy New Yorkers fleeing and froze out foreign buyers. Yet the offering plan prices haven’t budged. (Though online asking prices have been lowered in some cases, 125 of the units have never been listed publicly.)
But the main factor is the project’s $900 million construction loan, which matures in December. Barnett said he’s “within striking distance” of paying it off and is willing to cut deals to get there.
“We decided to go for sales velocity rather than maximum pricing,” he said. “I don’t see any downside. People know the market has tightened, so they go, ‘Let me see if there’s still a deal.’”
The construction loan was extended in 2018 by a consortium of lenders led by JPMorgan Chase. Though Extell could extend the financing for another year under certain undisclosed conditions, Barnett said he aims to repay the debt as soon as possible, then focus on getting higher prices.
“Once we have it paid off, the logic is prices will go up,” said the developer.
The original terms of Central Park Tower’s construction loan called for Extell to have $500 million worth of apartments in contract by December 2020, a requirement that was reportedly modified when Extell landed a $380 million mezzanine loan in January. That also matures at the end of the year, though the developer has an option to extend it by 18 months. Mezz loans typically come with higher interest rates than senior loans.
The combined value of the 33 closed sales at the tower is $489.5 million. Barnett said Extell has met the $500 million target. Contract signings at the project have never been disclosed.
The developer’s strategy at Central Park Tower is being greeted by the industry with a mix of appreciation and skepticism.
“These are incredible numbers at any time period,” said Kael Goodman, CEO and founder of Marketproof, a data firm that tracks new development sales in the city. He said most of the prices in offering plans are “aspirational” and called the stream of deals at Central Park Tower “amazing.”
“To me, the headline here is this might actually be a good time for investors and high-net-worth buyers to be looking at buildings like this because they could potentially get a good deal,” he said. “Later, when the borders are opening up more, that’ll be when they’ll raise the prices.”
President Joe Biden signed an order Monday lifting severe travel restrictions on China, India and much of Europe effective Nov. 8, Reuters reported.
Donna Olshan of Olshan Realty, who tracks Manhattan’s luxury market, described Extell’s pricing strategy as commonplace.
“The conventional wisdom is to start on the lower end, and be realistic,” she said. “Once you get that, you can raise your price.”
But some agents who specialize in new development sales say offering major discounts early on can cause problems later.
“It is a slippery slope,” said Vickey Barron, a Compass broker who handled sales at Walker Tower in Chelsea. The strategy there was no discounts, she recalled, but she agreed that developers often prioritize pace of sales over pricing. The key to transitioning between the two is having “consistency” and “logic” to explain to potential buyers why past discounts are no longer available, she said.
“It’s like the day after Black Friday. You don’t want to pay 25 percent more because you were there a day after Black Friday,” said Barron. “They need a good strategy to be able to figure that out. Otherwise it’s going to be hard to climb back up the mountain.”
Extell’s in-house team and Corcoran Sunshine Marketing Group are handling sales at the tower. Corcoran Sunshine did not respond to a request for comment.
Barnett called it “a basic fallacy” to describe the difference between sale prices and offering prices as a discount.
“The market knows that everything is fluid,” he said.