Goodbye all-cash, hello financing

<i>Like neighbors, 14 West 14th Street condo is revived as market turns on busy thoroughfare</i>

Prudential Douglas Elliman executive vice president Rob Gross, who has been working on 14 West 14th Street for two years.
Prudential Douglas Elliman executive vice president Rob Gross, who has been working on 14 West 14th Street for two years.

You can file the bizarre sales situation at 14 West 14th Street under “thanks to the economy.”

Rather than sell all their units at post-meltdown discounts, the sponsors of the building decided to sell just one-third of the units. Read: Roughly 20 of the 30 condos will remain in the developer’s hands and be rented out.

Because most banks won’t finance buyers in a building where only 33 percent of the units are being sold, the developers, Albert and Robert Dweck, originally said they would sell only to all-cash buyers. Sales started in September.

“It’s presented a unique financing situation,” said Prudential Douglas Elliman executive vice president Rob Gross, who has been working on the project for two years.

That strategy, not surprisingly, didn’t bear much fruit. No buyers plunked down cash for their apartments out of the gate. But then, after a couple of months, the team finally found a bank, NJ Lenders Corp., willing to finance buyers at the building.

“[NJ Lenders] specializes in working with developers and they saw this project in a different way,” said Gross. “The owners are solvent; we don’t have a construction loan but a line of credit from Bank of America. There is very little debt in [the developers’] lives, which is atypical for most developers in that they don’t leverage or use other people’s money.”

This ability to get financing for buyers, Gross said, has raised interest markedly. In fact, in the past three months Gross has negotiated eight contracts, three of which happened to be all-cash.

“When I opened it up to financing and when the building was closer to being finished, the people started coming,” said Gross. He needs 15 percent of the 30 units in contract in order to be declared effective by the attorney general.

“I’m extremely confident that we will have enough in contract by April,” Gross said.

But there are other challenges facing 14 West 14th Street, where prices range from $520,000 up to $1.6 million, including whether potential buyers will be willing to live in a building filled with renters. (The rentals are not on the market yet.)

“People don’t want to go into a building and pay $1 million and then have the rest of it rented. People are nervous about condos anyway — ‘zombie condos,'” said Joél Moss, associate broker at Warburg Realty, referring to buildings where a majority of the units have been bought by investors and thus remain half-empty.

Sign Up for the undefined Newsletter

“If they knew that that’s what was happening [at 14 West 14th], it might make them think twice,” she said. Moss has tried to show 14 West 14th to a couple of her clients, but so far no one has been interested, mostly because of the location on such a busy street.

Residential development on 14th Street as a whole has struggled since the market started its tumble. “Fourteenth Street definitely got stymied by the economy,” said Darren Sukenik, managing director at Elliman.

It took three years and four exclusive sales teams — Dwelling Quest, Brown Harris Stevens, Elliman, and R.P. Miller and Associates — to sell out the Prime, a nine-unit condo on 14th Street between Eighth and Ninth avenues.

It wasn’t until R.P. Miller took over in late 2008 that units started to move. Though prices were lowered by about 25 percent, Reba Miller, president of the firm, attributes the sales less to pricing and more to new flooring and a revamping of the marketing strategy. “I changed the light wood [flooring] to a very dark wood, almost black,” said Miller. She also brought in all-new furniture and redesigned the Web site using new photographs of the units. “And then we adjusted pricing. I didn’t think [pricing] was the key, though it helped.”

She pointed out that the pricing, when it was originally set at around $1,600 a foot back in 2006, was actually in line with the market at the time. “We just adjusted it to the new market,” she said of lowering the price per square foot to about $1,000. “This was not a moneymaker for the investors, but at least they didn’t give it back to the bank.”

Loft 14, another boutique project on 14th Street, this one between Sixth and Seventh avenues, has a similar story.

Elliman’s Bracha Group took over sales there last April. At the time, the nine-unit project had been on the market for a couple of years and had sold exactly zero units. After lowering prices significantly, Bracha Group unloaded eight of the two-bedroom, two-bathroom condos in less than a year.

“[Lowering prices] was the first thing we did,” said GieFaan Kim, an agent with the Bracha Group, which decreased the asking price per square foot from around $1,400 to around $1,100. “The model apartment [becoming] ready is another thing that helped the sales.”

At 14 West 14th Street, the units have 10-foot-tall windows, Italian Aster Cucine cabinets and Bosch dishwashers in the kitchens; bathrooms have Thaso stone countertops and Hansgrohe rain showerheads.

“It shows really well,” said Gross. “If it was built or designed as a rental, the finishes wouldn’t be as pretty as they are. We wanted [the developers] to invest in real oak floors and HVAC and real stoves.”

Studios from 525 square feet to two-bedrooms over 1,000 square feet all fall around $1,000 a foot, which is attractive to buyers and could draw them to a less-than-desirable 14th Street.

“I think 14th Street is a difficult sell. You don’t have a lot of curb appeal. There are still several dollar stores,” said Warburg’s Moss. “But $1,000 a foot is what people have been waiting for since the crash.”