NYC’s $45 Billion Luxury-Condo Glut Set to Start Easing Soon
Bloomberg 3/9/2021 Oshrat Carmiel
(Bloomberg) Manhattan’s glut of luxury condos has been nearly a decade in the making. This could be the year the logjam starts to break.
Professional deal-seekers are amassing investment funds, ready to pounce at the chance to purchase unsold apartments in bulk. And developers with towers that started sales years ago are finally dropping unit prices to levels ordinary buyers are willing to pay.
At the same time, lenders are getting more aggressive, moving in to foreclose on long-lingering projects whose builders have fallen into delinquency. Those actions could potentially spill more deeply discounted homes onto the market.
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Charlie West at 505 West 43rd Street, Elad’s Yitzhak Tshuva and Tishman Realty’s Daniel Tishman (Photos via StreetEasy, Charlie West, Getty, Elad)
In a sign of the increasing pressure faced by Manhattan’s condo developers, the Elad Group is selling a large block of the remaining units at its Hell’s Kitchen new development for roughly $90 million.
It’s believed to be one of the first big new-development bulk condo deals of the cycle, and could foreshadow more deals of its kind as sponsors look to move on from challenged projects.
Elad, headed by Israeli businessman Yitzhak Tshuva, is in contract to sell 70 units at its Charlie West tower to Tishman Realty for $87.37 million, sources familiar with the agreement told
Seth Weissman’s Urban Standard Capital (USC) has launched a
$100 million investment platform to buy condo units from developers who need to
hit the 15 percent sales threshold to effectuate condo conversions.
Initially targeted at
the New York City market, the fund would buy enough units at a market discount
to enable the sponsor to turn the remaining units into rentals until the market
recovers.
The platform plays to the New York State condo conversion
laws where, in order to convert an occupied rental into a condo, a developer
needs 51 percent of the current occupants to buy their apartments.
“This change makes converting an occupied rental practically impossible,” said Weissman. “Our platform provides a solution to sponsors who need to generate cash flow today and want to maintain optionality to sell units at higher prices in the future.”
Urban Standard Capital president Seth Weissman
One unintended consequence of New York’s 2019 rent law overhaul is that developers who want to switch new condo projects to rentals as a Plan B are required to sell the majority of those units to their tenants if the market improves in order to revert the project to condos.
Many developers say that makes those conversions virtually impossible, but one investor sees an emerging market in buying enough unsold units at a nice discount so developers can avoid falling under that new requirement.
“We’re telling a developer, what this does is it buys you time and it buys you optionality,” said Urban Standard Capital president Seth Weissman.
Urban Standard Capital has provided a $20 million refinance loan to
Meyer Equities, the longtime owner of 265 West 37th Street, to facilitate a partner buyout and pay for tenant improvements and leasing costs at the 23-story Midtown building.
The loan will allow Meyer Equities to buy out their long-term partner and take advantage of favorable tax benefits ending in 2020 on the 263,349 s/f building on Eighth Avenue in the Garment District.
Meyer Equities has owned the building for over 30 years and plans to use the funds to re-stabilize the asset with new tenants and extensions on existing tenants, according to
Urban Standard Capital’s Charlie Brosens