Been hearing a lot about the NYC Luxury condo market, new articles saying there is currently a 6 year supply if they stopped building today. Just wondering if any of you guys worked on these deals, or know who is funding them and how they are doing.
I have seen some crazy plans here in LA for condos getting approved like This one, and it feels like a lot of these developers should be getting wrecked. Pretty curious about whats going to happen, seems like a lot of Luxury Class A apartments are trending the same way, like the $10-25K per month apartments that keep getting built.
On my end I have worked for companies that own a few ultra luxury buildings, and also some that are just like really nice think $6-9k mo/rent. These "lower end" Luxury buildings have had pricing that is just through the roof in BOVs and Lender Valuations but no real distributions outside of Capital events. The Ultra Luxury seems to meet DS but thats about it, with business plans to improve, and mainly capital calls trying to get out from a sinking ship, with weird accounting practices to help get more loan proceeds/Cash in Refis.
Wonder if anyone has seen any interesting solutions in the market for these buildings. I have a feeling this one of those things where the writing is on the wall but until there is a slow down we wont really see how badly these guys are hurting.
+1, also curious / following.
Recent articles on what the larger players are trying to do (not sure how the smaller shops will deal):
https://therealdeal.com/issues_articles/loan-wolves/
> Many developers are resorting to short-term, high-interest inventory loans in the hope of waiting out the slump, sources say. But the oversupply of high-end units, new state taxes, a drop in overseas buyers and renewed fears of a pied-à-terre tax suggest that debt collectors may come calling before new buyers do.
> “What we are hearing is that developers are trying to hold the line at 10 percent to 12 percent off their current ask,” the lender said. “Everybody is trying to avoid the impression of desperation and a fire sale.”
https://therealdeal.com/2020/01/10/quantifying-the-rise-and-fall-of-nyc…
> nearly half of new condo units in Manhattan that came to market after 2015 remain unsold — 3,695 out of 7,727
This is awesome
I wonder how long until blood starts flowing in the streets
Still plenty of capital for these projects surprisingly. The banks have pretty much stopped placing new construction loans but almost immediately after they stopped debt funds have come into the space with low rates for a market most see a lot of headwinds (think 300 + L) and good terms.
Prices on these units have dropped significantly over the last 5 years but the building is not stopping. Everyone thought with the bank pull back it was going to be over but the aggressiveness of the debt funds is impressive.
I get that unique financing options are available to developers, but to what end? Many act like the $3000+ / sf market went away and will come back, when in reality we're seeing that it was never really there.
"Normal" people want to pay $1200-1600 / sf for a decent home with good schools nearby, and UHNWIs are willing to pay $7000-10000 / sf for a trophy home. Who's going to buy all the unremarkable stuff in between?
I think Extell's One Manhattan Square is a good example--421a until 2039, but $2500 / sf to live in a food desert? 815 units, 20% sold (as of Aug so perhaps more like 25-30% now), and they're trying a rent-to-own option where if you purchase your unit within the lease term the credit your paid rent toward the purchase. Clever, but how do less sophisticated developers justify doing anything nowadays?
https://streeteasy.com/building/one-manhattan-square
https://ny.curbed.com/2019/9/26/20884997/extell-one-manhattan-square-sa…
If you're asking who's buying this stuff theres plenty of info on that, its not like this is a new market. By now you should kno people don't "live" in these buildings, if you're buying at 157 its probably you probably have 6 other "homes"
But to nit pick your numbers are a bit off. 1,200 PSF are 2br/1ba 1960's coops you can buy for 1.2MM-1.5MM, a couple making 300K a year can afford that. Those are "middle class" (in terms of manhattan) homes. Theres plenty of space 2,500 psf + in my opinion, you think greenwich lane condo's are "unremarkable"?
I digress as OP wasn't asking about the 3K psf units but the ultra luxury going up on billionaires row and why people are still building them. We know that space is depressed on the buy side but as long as developers still raise equity and can find decent construction loans they are still going to go up.
You missed my point, or rather you made my point. We are in agreement that the middle class purchase the 2BR as you mentioned, and the ultra wealthy purchase at Greenwich Lane. My point was that the unsold inventory is actually in the middle ($1600-7000 / sf) and that is the unremarkable stock asking a premium price.
This is what I'm curious about. Why? (Not directing that at you). Indeed this is a developer's raison d'être and they all have their profitability models, but at some point the supply will topple over on itself, no?
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