While New York City real estate has seen better days, it would be foolish to lose heart.
Case in point is one of our main stories in this issue, “Who Earned and Who Got Burned,” which looks at how Manhattan’s luxury buyers fared over the last decade. Our study — which should be required reading to understand the market in broad strokes throughout the last boom, bust and subsequent boom — includes every apartment below 96th Street that sold for $4 million or more from January 2007 to June 2017.
The good news: Of the 871 deals that The Real Deal analyzed, 737 were sold at a profit. Altogether, they made their sellers a combined $1.6 billion. Only 129 deals during that time period lost money (and a few investors broke even). That’s a pretty solid endorsement for buying at the high end, as long as your money is patient.
The best time to sell was 2015’s first quarter, and the best time to buy was 2009’s fourth quarter. Meanwhile, 15 Central Park West turned out to be the best new development investment, perhaps unsurprisingly, while the Plaza condo conversion did the worst. Check out the story by E.B. Solomont and Katherine Clarke.
Of course, all that might be cold comfort to NYC developers today, with many condo projects burdened by unsold units amid slower sales. In our cover story, we explore what sponsors are doing to figure out the “profit puzzle,” including cutting prices, dangling concessions, selling blocks of unsold units and seeking inventory loans. The heat is being turned up by lenders — not just banks, but private equity funds that have strict timelines that cannot be extended. “There’s a real sense of urgency to move product,” according to one top broker. But many developers are still trying their best to hold out for higher prices to maximize profits, at least for as long as they can fend off lenders.
And there could be good opportunities for investors if sponsors continue to lower prices. “If the developer doesn’t come down to meet the buyer, there is no sale,” appraiser Jonathan Miller told TRD. According to Miller, some buyers who signed contracts in 2014 or 2015 are now sitting on units that are worth 20 to 25 percent less than the prices they agreed to pay. Nabbing a unit for that kind of discount last happened during the downturn of 2009, so savvy investors should pay attention.
Meanwhile, the city’s commercial market has also been cooling, and our profile of Wendy Silverstein finds the recently appointed CEO of New York REIT in an unusual position as a result. The former Vornado veteran has been charged with dismantling the troubled real estate trust’s 4.4 million-square-foot portfolio rather than growing it. But as Silverstein unloads billions of dollars worth of buildings, she is facing sliding property values and unhappy shareholders.
Elsewhere in the issue, we take a deep dive into global real estate scams, which are proliferating in number. Bad actors on the internet (including hackers from Russia) have affected our entire political system and our news media, so why not real estate as well?
Our reporter Konrad Putzier has been dogged in tracking down one alleged scam in particular: the case of Bar Works, a bizarre co-working space-combined-with-a-bar concept where investors would fork over money to buy desks in Manhattan and other cities and then rent them out. Putzier has been on the trail of Bar Works founder Renwick Robert Haddow for months, writing a series of investigative stories, and Haddow — who operates under a variety of aliases — was finally arrested in Morocco last month.
Unfortunately, most perpetrators in these kinds of scams get away. And the opportunities to find gullible marks abound, thanks to the surge in the number of people on the internet and social media platforms. Facebook usage, for example, has tripled worldwide since 2010, rising to 1.8 billion people.
Finally, for a fun end-of-summer break, we look at the toys of real estate titans, from $500 million yachts to $1 billion art collections. There is enough money to go around for such luxuries — the net worth of the world’s 30 richest real estate investors is $240 billion (that’s $8 billion a head). So maybe it makes sense to have fun with a billion or two, since it would be hard to hide all that money under a mattress.
Enjoy the issue.