TRD Forum: Despite high prices, luxury developers show restraint

Alexico’s Izak Senbahar: “Pushing prices is a risky game”

From left: Izak Senbahar, Adrienne Albert, Joe Moinian and Ziel Feldman at The Real Deal’s New Development Showcase & Forum (credit: Eileen AJ Connelly)
From left: Izak Senbahar, Adrienne Albert, Joe Moinian and Ziel Feldman at The Real Deal’s New Development Showcase & Forum (credit: Eileen AJ Connelly)

Despite astronomical prices and insatiable demand for luxury real estate in Manhattan, developers Joe Moinian and Ziel Feldman see restraint in the market.

The founders of the Moinian Group and HFZ Capital spoke at The Real Deal’s New Development Showcase & Forum Tuesday, held at the Metropolitan Pavilion, where they were joined by Alexico Group’s Izak Senbahar and the Marketing Directors’ Adrienne Albert. In a wide-ranging discussion, they weighed in on the prices of penthouses; affordable housing; risk and reward; and the mayor’s proposed mansion tax.

Moinian, who is developing Sky, a 1,174-rental building at 605 West 42nd Street on the Far West Side, said the current market is more “disciplined” than previous cycles. “The days of over-borrowing are behind us,” he said. “If there’s another downturn, it’s not because someone miscalculated in borrowing.”

Feldman, too, said the market is “as healthy as it’s ever been.” Where there maybe room for adjustment, he said, is with “overaggressive” prices. “It’s not a God-given gift” for developers to get any price they ask for, he said.

As for the proliferation of high-priced penthouses, Albert said in addition to profit margins, there are psychological aspects to consider. “There are a lot of people who want to be the big dog in the building. … If you can legitimately increase the number of penthouses, you can increase your yield,” she said. And, she added, “The more difference between penthouse and non-penthouse homes, the more likely [developers are] to get more yield.”

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Of course, foreign buyers have made headlines for purchasing big-ticket properties at Extell Development’s One57 and elsewhere. But Feldman noted that foreign buyers represent less than 25 percent of the market. And among New Yorkers, the developers acknowledged the insatiable demand for affordable housing. Moinian said he expects 80,000 applications for Sky’s 235 affordable units.

The panelists didn’t have a lot of love for Mayor Bill de Blasio’s proposed mansion tax. But while Senbahar suggested the tax would chase away potential buyers, Feldman, keeping in line with the theme of restraint, noted: If a developer’s margins are so tight that a sponsor can’t afford a 1.5 percent to 1.75 percent mansion tax, they shouldn’t be in the business.

As for developing in the outer boroughs, Senbahar said he would consider any deal that makes sense while Feldman said the risk-reward spread in Brooklyn is contracting. “Costs are getting a little too close to where the revenues are,” he said.

Reflecting on sales at 56 Leonard, Senbahar said he wouldn’t up prices if he was bringing the condo to market today. The penthouse unit sold for $47 million, a record for a Downtown condo.

“I do think that the market has slowed down a touch. I think pushing the prices is a risky game,” he said. “I think you’re better off leaving some money on the table. It’s always good to leave the table when you’re ahead.”