How to Sell a $60 Million Penthouse: Don’t Tryby
Sales at newest 57th Street tower won't start for about a year
Developer waits to `strike when people are paying attention'
There’s nothing to stop developer Kevin Maloney from starting sales at 111 W. 57th St., the latest sky-high condo tower rising on midtown Manhattan’s Billionaires’ Row. He has the necessary legal approvals, and an office ready to welcome would-be buyers.
But with luxury-home demand slowing and new condos piling up on the market, he’s waiting about a year before trying to sell units at the project, where the price for a penthouse will approach $60 million.
“If the market were red-hot, people would be buying off plans, throwing checks down, and it’d be great,” said Maloney, principal and founder of Property Markets Group, the skyscraper’s co-developer. “But if you have a market where you think marketing would be ineffective for now, why would you launch and spend the money? Wait.”
Times have changed from just a few years ago, when global investors clamoring to own a piece of New York’s glitziest towers signed condo contracts while the buildings existed only on paper or as a tabletop model in a sales office. Now, some developers are betting that the best sales strategy is to hold off until the projects are closer to completion, rather than releasing their unbuilt units into today’s crowded market.
This year, 5,126 newly built apartments will be offered for sale in Manhattan, the most since 2007, according to Corcoran Sunshine Marketing Group. Of those listings, 63 percent are priced in the “luxury” range, defined by the brokerage as $2,400 a square foot or more.
At the same time, sales of New York’s most expensive homes are stalling as foreign buyers are held back by the stronger U.S. dollar, lower oil prices and economic slowdowns in emerging markets such as China and Brazil. In the first two months of the year, contracts for apartments priced at $4 million or more declined 30 percent from the same period in 2015, to 150 deals, according to a report by Olshan Realty Inc.
Weakening demand for high-end Manhattan homes has prompted some builders to delay construction, reduce prices or, in the case of a Property Markets Group project in SoHo, carve up planned apartments to make them appeal to a broader group of buyers.
“Developers are very lucky when they hit great timing -- and this might not be the time,” said Donna Olshan, president of the brokerage bearing her name and author of a weekly luxury-market report. “Particularly in the Midtown corridor, which is the most worrisome area in New York because you have a lot of luxury product coming out at the same time.”
On Billionaires’ Row, the area fringing Central Park that’s the epicenter of the luxury boom, Maloney plans to delay marketing at 111 W. 57th St. until the 1,427-foot (435-meter) tower reaches at least 800 feet. The project, co-developed with JDS Development Group and expected to be completed in 2018, is now just past its first story.
The skyscraper will have full-floor homes starting on the 25th story, where the apartment will be priced at $15.5 million, according to documents filed with the New York State Attorney General’s office. A four-bedroom duplex penthouse starting on the 74th floor is currently the most expensive unit , priced at $57 million, with about $173,500 in annual common charges. The top two residences, on the 80th and 82nd floors, haven’t yet been priced.
The building will eventually rank among the tallest residential skyscrapers in New York, surpassing One57, the tower just to the west that broke ground in 2009 and kicked off the luxury-development boom. The stature is a selling point that may help draw buyers once they’re able to see that work is well under way, Maloney said.
“People as they walk by -- tourists, foreigners, local people -- they’re going to say, ‘Oh my God, look at that thing! That is so neat, that is so interesting, that is so unusual and beautiful,” Maloney said. “You want to strike when people are paying attention.”
At One57, by contrast, sales began nearly three years before residents started moving in, with buyers putting down deposits based on floor plans and photos showing views at different elevations, snapped by a camera mounted on a drone helicopter. Sales reached $1 billion within six months, and the builder, Extell Development Co., raised prices at least twice.
Downtown, developer Ben Shaoul started sales last month at 100 Avenue A, waiting until the project reached its entire eight-story height.
"You can’t just say, ‘Here’s a floor plan, here’s some renderings, here’s a model that looks like a dollhouse, now give us 10 to 20 percent of your money that’s going to sit in the lowest-interest-bearing account possible, then good luck and Godspeed,”’ said Ryan Serhant, the Nest Seekers International broker who is marketing the East Village property for Shaoul’s Magnum Real Estate Group.
Shaoul said he expects the 33-unit building to be completed by July, allowing him to promise would-be buyers that they can move in this year. More than half of the units -- which start at $1.29 million -- are in contract, he said.
“In this type of a market, it’s counter-intelligent to be out marketing a product that is 24 to 30 months out,” Shaoul said. “Buyers are concerned about interest rates, buyers are concerned about the stock market, buyers are concerned about what happens to their money while they’re waiting for their apartment to get ready.”
Shaoul plans a similar strategy at his next project, at 196 Orchard St., where the foundation is being poured. Marketing won’t start at the Lower East Side building until it reaches its third floor in about four months, he said. He will set prices within the next two weeks, so that he can at least sell to people who have inquired about the property through its website.
There’s always a risk a developer takes when waiting and trying to read the tea leaves, said Joe McMillan, chief executive officer of DDG, a seven-year-old firm with projects in New York and San Francisco.
At its XOCO 325 project, on West Broadway in Soho, DDG waited to begin sales until after the scaffolding was removed to reveal the building’s facade -- a cast-aluminum grid overlaid on a glass curtain wall. It had legal approval to start marketing units in July, but held off until October.
“You always have to balance selling sooner and potentially not maximizing the experience and the value,” he said. “There’s never a perfect time.”