The Daily Dirt: New condo sales strong, yet developers struggle

TRD weighs in on an apparent paradox in the new condo sales market

The Daily Dirt digs into the strange market for new condo sales
Harry Macklowe, 1 Wall Street and 100 East 53rd Street (Macklowe, Hines)

New condo sales have been a relative bright spot in New York’s residential market. But two luxury developments made headlines this week thanks in part to their struggles with selling units. 

First, there was news that Harry Macklowe received a $300 million inventory loan at his 1 Wall Street office-to-residential conversion. The loan was part of a larger $665 million refinancing, but it’s also meant to buy some time as the building looks to move the unsold units.

In East Midtown, developer Vanke brought on Corcoran Sunshine to handle sales at 100 East 53rd Street. The brokerage will be the third firm to get the job since sales launched in 2019. 

The two stories highlight a paradox in the market: new development sales may be relatively strong, but that doesn’t mean everything is peachy for developers, especially those overseeing large projects.

Homeowners locked in at low mortgage rates have little incentive to sell. With resale transactions low, new condo sales took up a bigger portion of the market by default. 

But many developers, drowning beneath increased debt costs, have been driven to make those deals, sometimes in the form of concessions on monthly fees or taxes.

After sluggish sales and a fight with Aby Rosen’s RFR, Vanke slashed prices across the board at its property last year. The asking price for the building’s penthouse was cut to $35 million, down from $65 million. A “garden mansion” got a $10 million reduction to $20 million. 

Macklowe has remained steadfast, refusing to cut prices. That’s because high costs have scared developers off from comparable projects, meaning there’s been little new inventory to compete with the ultra-luxury project. 

The result is something of a standoff. Cash buyers are looking for big discounts. Developers are staying put, but some may be forced to cut prices if sales start to taper off.

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What we’re thinking about: RXR and SL Green saw a $940 million loan on a Midtown office tower get watchlisted this week. The tower has healthy cash flow, but a major tenant’s lease is set to expire next year, with no chance of renewal. The clock is ticking, but there is still time to find a new tenant. Will the office market rebound in time to save the property? Send a note to david.westenhaver@therealdeal.com.

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Closing Time

Residential: The priciest residential closing Friday was $26.5 million for a townhouse at 129 East 73rd. The home was featured in “The Devil Wears Prada.”

Commercial: The most expensive commercial closing of the day was $3.4 million for an eight-unit building at 464 Prospect Place in the Crown Heights neighborhood of Brooklyn.

New to the Market 

The priciest residence to hit the market Friday was a townhouse at 135 East 19th Street in Gramercy Park asking $14 million. Compass has the listing.

A thing we’ve learned: Friday’s jobs report revealed a gain of 336,000 new jobs (seasonally adjusted), almost double what economists expected. The increase shined a light on the altogether weird position of the US economy, where job growth has trudged along despite long-lasting forecasts of an economic downturn. Some onlookers have speculated that the increase, paired with stead but modest wage gains, could spark further interest rate increases.

Elsewhere in New York

— A notorious judge in the Bronx, Supreme Court Justice Ralph Fabrizio, is facing calls for resignation following a string of outbursts and public confrontations. The City writes that the most recent blowup came after an attorney sought a standard scheduling change, which prompted Fabrizio to scream at her and threaten to have her removed from the case. 

— The country’s largest public radio group got a bit smaller this week. Gothamist reports New York Public Radio cut 6 percent of its staff Thursday, and axed two podcasts, “More Perfect” and “La Brega,” as part of an ongoing cost-cutting effort.