Macklowe lands $300M inventory loan at 1 Wall Street

Harry Macklowe landed a $300 million inventory loan for the many unsold apartments at his office-to-residential conversion at 1 Wall Street in the Financial District.

The project, long-delayed and slow-selling, will test investor patience as Macklowe hunkers down on the pricing of its larger units and tries to wait out the current down market.

The famously mercurial developer has turned down numerous would-be buyers in the building who recently made all-cash offers, according to people familiar with the project.

“Beginning in about 2017, condo projects have struggled to make money,” said Urban Standard Capital founder Seth Weissman. “The best ones are breaking even.” 

The new inventory loan brings the total cost of 1 Wall Street to around $2.6 billion, adding to the possibility of massive losses at the project, with Macklowe’s ambition to sell an office-to-residential conversion at top dollar unrealized and costs outstripping sales by possibly hundreds of millions of dollars. 

Although that isn’t necessarily the fault of the developer or equity investor, said Weissman, “it is their problem.”

A Newmark team led by Dustin Stolly and Jordan Roeschlaub arranged the debt.

Some 479 of the building’s 566 units remain unsold, according to loan documents. Compass is expected to leave the project soon, although the brokerage did not specify a date for its exit. 

The new cash infusion, which is secured by unsold units in the building, came from the private wealth division of Deutsche Bank. Macklowe’s equity partner on the project is former Qatari prime minister and billionaire Sheikh Hamad Bin Jassim Bin Jaber al-Thani.

The inventory loan was part of a larger, $665 million refinance of the condo building, presaged by construction debt set to mature this year. Deutsche Bank originated the project’s $460 million acquisition loan in 2014 and $450 million for construction in 2018.

The vast majority of buyers at 1 Wall Street have snapped up either studio or one-bedroom apartments for about $1,900 per square foot, in line with the neighborhood’s median sale price, according to data firm Marketproof. But Macklowe is aiming much higher for larger units.

“One challenge at 1 Wall Street was the depth of the units,” said Laura Tomana, who worked for years on the project at Core Real Estate, which Macklowe replaced with Compass in 2020. Tomana is now vice president of research at Brown Harris Stevens Development Marketing.

When condo units become larger due to deeper cores in office buildings, developers can encounter pricing problems. Selling converted space for the same price, or higher, as new ground-up projects is a challenge, while selling below market rate can mar the image of a project.

“The Financial District is one of the most accessible neighborhoods to enter due to its inventory,” Tomana said, which runs counter to Macklowe’s apparent desire to keep prices high. Among new inventory that will compete at a higher price point: 275 condo units are coming to 125 Greenwich Street.

Average asking prices for two-bedroom apartments at 1 Wall Street come to $2,500 per square foot, and grow to at least $3,000 per square foot from there. At its current pace of sales, more than a decade would pass before the building sells out, evidencing the need for an inventory loan. 

New development sales have slowed across the board.  

The number of new development contracts signed in Manhattan last quarter fell 30 percent from the same period last year, according to Brown Harris Stevens Development Marketing. The average unit price this year in the Financial District is  $1.7 million — its lowest level since 2015.

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This article has been updated with additional context on the refinance of the condo building.