The demand was there, the zoning allowed for it, and developers saw the lucrative opportunity to build out and market high-end residential projects in Downtown Brooklyn — perhaps too many developers. As of the end of last year, more than 14,000 new residential units were either in the pipeline or already under construction in the booming neighborhood.
But as the last units of the neighborhood’s first wave of new condos look for buyers, buildings are having a tougher time selling. And with plans killed for developer Bruce Ratner’s City Tech Tower, which could have been Brooklyn’s tallest building and the city’s tallest residential tower, and other residential projects seeing delays or no activity after being approved, late bloomers may not stand a chance in a market where the appetite for condos could already be satiated.
In addition to canceling the 600-unit City Tech Tower, Ratner has delayed plans to build parts of his nearby Atlantic Yards project, which called for 1,000 residential units in three towers in its first phase, followed by 5,000 units in 11 towers; it would be Brooklyn’s largest mixed-use development ever.
It is clear that buyers were drawn to the area at one point. In the first half of 2007, when major developments began to introduce a large supply of units, they were met with overwhelming success. At 110 Livingston, 300 condo units sold out in just over 13 months.
“You’re seeing an area that is kind of a teenager, and it is growing up now, showing a need for new development,” said Asher Abehsera, director of sales for Two Trees, developer and marketer for 110 Livingston.
But 110 Livingston benefited from getting ahead of the pack, starting sales in 2006, just before a handful of condos that opened sales at the end of 2006 or the beginning of 2007. And although they are almost all more than 50 percent sold, selling well in the first half of 2007, other projects see units languishing.
The prewar office-to-condo conversion Belltel Lofts at 101 Willoughby, a 219-unit project, still has 55 homes on the market and 23 in contract after 17 months of sales, according to the real estate research Web site StreetEasy.com. The project’s remaining units are priced from just over $500,000 to around $1.9 million, at an average of $700 per square foot.
J.J. Bistricer, a spokesperson for Belltel’s developer, MetroTech, cited the waning availability of home loans as a major culprit in the building’s sales slump. “You just have to be patient as a developer,” he said. “You see the trends, see that things are starting to settle; people are sitting back for a few moments … but soon they will come back.”
At 189 Bridge Street, 17 of the 58 units remain on the market after 15 months of sales, and four listings are in contract. Some apartments have seen price reductions, according to StreetEasy, and the remaining studio to two-bedroom apartments range from $500,000 to just over $1 million, or around $850 per square foot.
“The absorption rate just can’t withstand that much inventory within a quarter-mile radius,” said Kim Soule, vice president at the Corcoran Group. Soule also said that the overall housing market’s slowdown has added to the area’s problems. “We’re not seeing the frenetic new condo launches we did, where everybody rushes to buy.”
Oro Condos tower at 306 Gold Street, which dominates the view of the Flatbush corridor from the Manhattan Bridge, still has 18 units on the market after 13 months of sales, according to StreetEasy, as well as 92 listings in contract. The apartments, which haven’t seen any price drops, sell for an average of $750 per square foot.
The project’s developer, United Homes, owns another site across the street, at 313 Gold Street, where plans for a 35-story residential high-rise had been described to The Real Deal in spring of 2006. Plans for this second tower have not materialized, and United Homes did not return phone calls by press time.
But given the pace of the projects that have hit the market, experts are questioning whether developers who arrived late to the party are going to stay at all.
On Myrtle Avenue, on three blocks between Flatbush Avenue and Ashland Place, a massive mixed-use development planned by Gristedes supermarket chain owner John Catsimatidis has been delayed.
Originally slated for groundbreaking this spring, now only construction on the first of three phases, to include about 100 of the project’s 700 or 800 condos, will begin this year. Completion for that phase is expected in 24 months from its start date.
Catsimatidis maintained that the project’s slowdown is a result of a lack of financing in general, and unrelated to the condo supply nearby, or any other problem specific to the area.
“If you could name me which bank will give me $500 million, I’ll go there right now,” Catsimatidis said.
“And prices will soften on the other side of the fence too,” he said, referring to a possible slowdown in unit sales. “The banks are no longer lending [buyers] 95 percent of sales prices.”
Original plans for the project, which may have been changed with the delays, called for 552 market-rate units and 215 below-market-rate units.
The landmarked condo conversion One Hanson Place, developed by the Dermot Company, still has 20 of its 179 units on the market, according to StreetEasy, and one listing in contract since the first listings came on the market 22 months ago. The remaining units in Brooklyn’s tallest building are priced around $960 per square foot.
Brenda Vemich, vice president of Stribling Marketing and director of sales for One Hanson, claimed that sales have not slowed, but that the project sold gradually because units could only be shown as they were built out. She is bullish on the pace of sales for the remaining units, saying that the goal is to sell out by the projected completion date, at the end of summer.
A boutique development at 96 Rockwell Place, a prewar conversion, exemplifies the area’s fall-off in pace of sales. After selling half of its 36 market-rate units in the first four months, the project is still hanging on the market a year later, with eight remaining units and 21 apartments in contract. Marco Auteri, sales manager for Halstead Property, who is marketing the project, said he is confident the homes will sell out by the time the conversion is completed at the end of summer.
Some have attributed the slowdown in the last few months to a seasonal decrease in sales seen during the winter. Auteri said he has seen a noticeable increase in buyers’ interest since the end of February; three deals have been signed at 96 Rockwell since then.
Some experts said that new rental developments are a safer bet for the area. Lalezarian Developers, planning a four-story, mixed-use retail and rental apartment project at 235 Gold Street, a block north of Tillary Street, is doing just that. When completed in two years, the project will have 512 luxury rentals, retail space and parking.
While the firm has always built rentals, and so has not steered away from building condos in the area, it acknowledged that the condo oversupply in the area and the increasing difficulty for buyers to obtain a mortgage is good news for 235 Gold’s prospects. “I think a lot of potential residents in the area are now looking at rentals where they were looking at condos [before],” said Kevin Lalezarian, a principal of the company.
Lalezarian is also optimistic that having received financing for the project early on, it stands to do better than other rentals that may be coming into the area a little behind it. He said the project cost around $200 million, with $130 million in financing.
Abehsera of Two Trees cited sales at 110 Livingston as a testament to the neighborhood’s demand for homes.
He asserted that Two Trees benefited from having a “fan base” in the area, whereas an unknown entity there is likely to have a harder time selling. “There are a lot of products [from] a guy who owns a series of dry cleaners and convenience stores and is now a developer — and that’s not going to fly here anymore,” he said.
He also thinks that with standards set high in the first round of new condos and conversions in the neighborhood, future developers will have to try harder.
“If you’re not going to mirror the finishes of the previous builders and compete with your predecessors in the area, you’re not going to see buyers flocking to the product,” Abehsera said.