AvalonBay considering $150M condo play at Columbus Circle rental tower
Company could launch sales at 15 West 61st Street in March or April
In a sign of the challenges New York City’s rental market is facing, apartment REIT AvalonBay Communities is considering switching tack at its Columbus Circle development.
“Our allocation to the greater New York region is a big higher than we’d like,” Matt Birenbaum said on the company’s third-quarter earnings call Tuesday morning. “While the Manhattan condo market has softened somewhat over the past year, our building offers some compelling advantages.”
In order to reduce its exposure to the New York City market, AvalonBay earlier this month signed a contract to sell an 80-percent stake in a portfolio of five Manhattan apartment buildings to Invesco in a $760 million deal. And now, the Virginia-based real estate investment trust is weighing whether or not to switch from rentals to condos at its 172-unit 15 West 61st Street.
Company executives said they always considered a potential condo play at the property. Unit sizes average 1,100 square feet, which is somewhat bigger than the average rental, though smaller than the average condo. And AvalonBay is making some “modest” upgrades to finishes in the building.
The REIT is looking to start the pre-marketing process in the next month or two to see what kind of contract activity it can get before pulling the trigger.
Company CEO Tim Naughton said the company could always cancel deals and plow ahead with leasing the building.
“Renting is our base business,” he said. “The fact that this building is going to be ready for occupancy sometime next year, it is a unique advantage that we have.”
It’s not that the for-sale market isn’t facing headwinds, either. According to figures from Corcoran Sunshine cited by AvalonBay, contracts are down 10 percent year over year, while new development inventory is up 12 percent. Pricing is up 5 percent, but concessions are climbing higher.
Naughton said the condo plan could have a pre-tax value of $150 million, which would be 50 percent higher than a rental value.
The company just announced it signed a 35,000-square-foot lease with Target at the retail portion of the building, which has an address of 1865 Broadway.
AvalonBay purchased the property, previously the home of the American Bible Society, for $300 million in 2015.