More choice, not a bubble bursting, prompts slower sales in New York
Sales at One57, the ultra-luxury Manhattan condominium tower that set off a high-end residential construction boom, have slowed to a trickle amid competition from newer properties reaching the market.
Only two units at Extell Development Co.'s Midtown property went under contract this year through June 30, according to filings on the Tel Aviv Stock Exchange, where the company sells debt to investors. There were no sales in the final three months of 2013 at the building, which had earlier found buyers for two penthouses at more than $90m each. About 25 of the 94 units on the market were unsold as of June 30, the filings show.
"This is not a normal pace," Jonathan Miller, president of New York-based appraiser Miller Samuel , said in an interview. "This building had many price increases when it was the only building out there, so maybe they overdid it. In other words, the sky is not the limit."
The slowdown at One57, the 1,004-foot (306-metre) tower piercing the sky near the southern end of Central Park, indicates buyers are pulling back on deals at buildings already on the market in anticipation of more choices for new super-luxury homes. At least six residential properties aimed at multimillionaires, including Zeckendorf Development's 520 Park Ave. and Vornado Realty Trust's 220 Central Park South, are under construction in or near Midtown, with plans to begin sales in the coming year.
Contracts for newly built Manhattan apartments priced at $10m or more declined 18pc in the first half of the year from the same period in 2013, data from brokerage Corcoran Sunshine Marketing Group show. The number of available units jumped 74pc to 129.
What's offered for sale is also getting more expensive. For listings of at least $10m in new developments, the median asking price climbed 3pc from a year earlier to $16.5m, the brokerage said.
"People are feeling that, at that kind of price, when they know and read about more new development coming, they're slower to do a deal," said Ryan Schleis, vice president of research and analytics at Corcoran Sunshine. "They want to see what the other options are."
Across Manhattan and in all price ranges, 13,000 more new-development units will be brought to market from the third quarter through the end of 2016, according to the brokerage.
At One57, where sales began in 2011, the units that have been slow to find buyers are those adjacent to the construction crane, Extell filings on the Tel Aviv exchange show.
Crews working on the 90-storey skyscraper used those units to house building materials, making it difficult for potential buyers to view them.
The tower's condos sit atop a 25-floor Park Hyatt hotel, which opened in August and may become Manhattan's first five-star lodging property in more than a decade.
"Certainly there is more competition at the very high end," Jeff Dvorett, Extell's vice president of development, said. The range of choices is affecting all ultra-luxury developments, not just One57, he said.
Deals will pick up once clients can enter the completed building and see actual homes rather than make decisions based on floor plans, he said.
Extell was a pioneer when it broke ground on One57 in 2009, after the bankruptcy of Lehman Brothers ushered in the real estate rout. The building, planned as Manhattan's tallest residential tower, reached $1bn in sales after six months.
Extell raised prices at One57 at least twice. A 6,200 sq ft apartment on the 88th floor, for example, was initially marketed for sale in June 2011 at $52.5m. By September 2012, it was listed at $67m. At the end of 2012, 53 of the building's for-sale homes, or about 56pc, were under contract.
"When you're the only one offering apartments in this segment, then you have much more control over pricing," said Miller. "When other choices start appearing, there's not the same urgency."
The building's West 57th Street neighbourhood, fringing Central Park, has emerged as a billionaires district, where developers are racing to build skyscrapers of record-setting heights aimed at buyers seeking an investment haven. Macklowe Properties and CIM Group's 432 Park Ave. has surpassed One57 in height and is slated to reach 1,397 feet when completed. A penthouse there is under contract for $95m.
The high-end construction boom has spread south. Adjacent to the Museum of Modern Art on 53rd Street and Sixth Avenue, Singapore-based Pontiac Land Group is joining Goldman Sachs and Hines to build a 1,050-foot condo tower with 145 apartments. Sales are starting in the first quarter.
"In New York, a new club lasts like five seconds and then there is something new," said Jacky Teplitzky, a luxury broker with Douglas Elliman Real Estate. "And then the old club, which is not really old, becomes old."
Prospective buyers considering One57 or 432 Park Ave. increasingly are asking about pricing at Vornado's 220 Central Park South, which broke ground this year, Teplitzky said. Ninety apartments are planned for that tower, according to the attorney general's office. Sales haven't started yet.
The dual-tower project has drawn interest because it will be located at the southern border of Central Park, compared with several blocks west of the park, where One57 and the other towers are.
Cash-rich investors also are searching for properties beyond Midtown. The same would-be buyers who are interested in towers along the park are inquiring about Silverstein Properties' 30 Park Place in lower Manhattan, where 157 condos are being built atop a Four Seasons hotel.
"People are taking a bit longer to to pull the trigger," Teplitzky said. "Whoever is buying 15, 20, 30 million-dollar apartments, they want to make sure they're buying the best of the best."
Other condo projects in the Midtown area include JDS Development Group and Property Markets Group's planned 1,400-foot tower at 111 W. 57th St., half a block from One57, where sales of the 60 units will start in the second quarter of next year; and Zeckendorf's 520 Park Ave, with sales beginning in early 2015. A triplex penthouse there will be offered for $130 million, Arthur Zeckendorf said in an interview yesterday, making it New York's most expensive listing.
All those developments will be pricing units at more than $5,000 a square foot, putting them in competition for the same pool of ultra-wealthy buyers, said Donna Olshan, president of Olshan Realty and author of a weekly newsletter on the New York luxury market.
"There is a lot of building that is proposed for the Midtown corridor, and the question is how many units can be sold for north of $10m at the same time?" Olshan said.
Extell expects the unsold units at One57 to find buyers by the end of the year. In the meantime, the developer refinanced its debt on the site, taking out a $337m mortgage with Deutsche Bank in July.
Extell also sold its stake in the 210-room Park Hyatt to Hyatt Hotels, rather than keeping a 33.33pc interest as initially planned, filings show. Hyatt acquired the entire hotel for about $390m.
Extell declined to comment on the sale of the hotel stake to Hyatt.
The Park Hyatt's opening may be the marketing jolt that helps Extell sell the remaining apartments above it, according to Olshan.
"If you're really rich, you're thinking, 'This is a good place to park my money and I don't have to wait around for the other stuff to be built,'" Olshan said. "It's new, and it's done." (Bloomberg)