m127 (127 Madison)

I want the PH for 1.3M
could I ask everyone else to please not bid.

There is a reason why these didn't sell for the "Previous Prices". They are probably only worth $900/ft, look at listings at 14 E 33rd, and 13 E. 30th. It is interesting though.

Saw open house today. Lots of people looking and some actually were interested enough to buy the auction book. Will be interesting to see what the prices finally settle at.

Has anybody looked at the auction book? It's not straightforward.

What I hate with these type units is the stairs and elevator eat up 1/3rd of the space.

has anyone bought the auction book yet? interested to hear about if/why it's not straightforward.i'm headed to look this weekend.

the developer ain't too great...their cashflow sucks. but the architect is top notch and their work is high-quality. project didn't sell because of high prices for awk layouts in a poorly planned infill project. i'd never touch it for over 1mm, but if it stays under seven figures? giddy up.

By studying the offering plan, financial statements, contract and piece in the Wall Street Journal, I found 13 things that the I suspect the developer would rather keep secret.

Would you be able to share this with us?

There's an interesting post by Malcom Carter.

I am concerned about Malcolm's 13 secret items. As a broker, I still can bring in my several sets of buyers for as long as I disclose these items. I wonder if the suggested minimum bid will hold. Given the situation, below suggested may work. Comments anyone?

There is no way going below the suggested bid will work unless those 13 secret items are a big problem. I would buy a few for myself at the opening bid.

Bring your lawyer. In looking into this, the sponsor is being foreclosed upon. They do not have the lender's consent to sell the units at absolute pricing (auction). You may bid and give your 75k and still not get your unit. A sham in the making.

CynicalSkeptic -- can you cite some sources?

Anyone else have any experience with this place?

Malcolm, are you not going to elaborate on your comment, "By studying the offering plan, financial statements, contract and piece in the Wall Street Journal, I found 13 things that the I suspect the developer would rather keep secret."

Info: from here: http://malcolmcarter.wordpress.com/2010/06/07/what-dont-you-know-about-the-m127-auction/

The sale is to be all cash within 30 days of the contract’s execution;
If the purchaser is not ready to close by that deadline, that bidder loses the 10 percent deposit;
If the seller is not ready, there is no penalty;
In other words, only the purchaser is bound by a “time is of the essence” clause, meaning that the purchaser has to meet contractual deadlines even if the seller must not;
The purchaser may not market the apartment prior to closing or assign the contract to another buyer;
The seller is obligated to satisfy all mortgages or obtain release of any lien related to them;
If the seller is unable to deliver clear title, the purchaser has a choice of accepting the apartment with encumbered title and no change in the price or of walking away with the deposit in hand;
The seller doesn’t have to spend a nickle to obtain good title but may postpone the closing to cure any title defects;
The seller has 30 days to sign the contract and, failing to do so, thereby nullify the contract, which doesn’t sound so absolute to me and appears to contradict the 10th amendment to the offering plan: “The Sponsor shall sell all of the unsold Residential Units except for Unit PH-B, ‘without reserve,’ which means that the Sponsor is obligated to sell these Units to the highest bidder, regardless of the price;”
The developer has the right to sell any of the units prior to the auction;
The building’s current operating budget of $145,580 shows a deficit of $20,756;
I find no evidence of a reserve fund or any allocation to such a fund in the operating budget.

Sorry, folks, but I didn't have a chance to check back until now. But thanks to NYCAptHunter for quoting me. A while back, when I published my blog link, a couple of commenters complained that it was wrong to do so on another blog. So, I have refrained from doing so until asked. My mistake for having failed to see whether anyone asked, for which I am grateful. I am,, btw, planning to attend the auction and report back by the following day.

Malcolm -- given the items you mention in your blog, where do you see these apts ending up at (price)?

I see these apartments coming in at about $1.1 if they were to sell at all. Now that may be the "reserve" price.

Buy the units in a foreclosure auction, when prices can be much cheaper and liens are discharged.

NYCAptHunter. It's impossible to predict with any confidence what the selling prices might be if only because auction fever can produce high temperatures--or not. If I were forced to guess, I'd say winning bids would be about 20% below the asking prices--not the reserves. What I can tell you is that an unusual number of readers have demonstrated serious interest--including four phone calls to me.

Interest is intense for Sunday's auction, though problems remain: http://malcolmcarter.wordpress.com/2010/06/24/interest-is-heated-for-absolute-auction-of-condos/

i seem to have misplaced the auction package. does anyone know who the certified checks need to be made out to in order to bid at the auction?

Mark, I've emailed you the info.

At the eleventh hour, foreclosure is averted and auction terms are modified: http://malcolmcarter.wordpress.com/2010/06/25/terms-of-condos-at-m127-are-changed/

Is anyone else concerned that the buyer waives its rights to a lead based paint inspection? The original building is old, but they've completely redone the place.

any record of asbestos?

Big big big 'marketing' gimmick. There is foreclosure marketing, then there IS court approved foreclosure. If you can't the court to uphold the 'foreclosure' than what is this thing really?

Just another borker trick to get the lemmings in. Flmao

Here it is in simple SE lingo. There is NO foreclosure. Sorry falco, better to stop wasting your time on this one. Waiting for iPhone 4.0 much much better waste of time. At least apple won't say after 5 hours of waiting, psyche! There is no new iPhone!

bump

Here are today's auction results: http://malcolmcarter.wordpress.com/2010/06/27/m127-auction-enjoys-brisk-bidding-decent-prices/

Great report Malcolm. It is a testament to the power of auctions that the price averaged $1306 psf. Particularly since that area is rather bleak --especially at night. The amenities are sparse and though there are great lunch spots due to all the offices in the area, the search for decent produce is a challenge worthy of a reality show. I feel great sympathy for the poor schmo who bought PHA and just watched $1.2 million carved out of the value of his apt.

Malcom, I think your ppsf calculation is way off. Can you confirm?

You're right. I've made some significant corrections.

Ino: Malcolm's updated report gives average at $821 psf. Most expensive bid was for # 8 which went for $911 psf but I am not sure that included buyer's premium. Big difference.

excuse me, that does include buyers premium

In tomorrow's WSJ, on Curbed and elsewhere, I guarantee you'll find prices all over the lot--some of us (me) excluded the penthouse in most of the calculations because it's subject to seller's conformation. Others may have used prices without the 5% buyer's premium (thereby not reflecting the price on the contract's bottom line. And still others (me) undoubtedly made mathematical errors.

Malcolm: give the average ppsf, do you think the seller would be wise to accept the penthouse sale? what do you think are the chances?

From today's Wall Street Journal

By JOSH BARBANEL
A Madison Avenue condominium that struggled through the downturn and had been facing the risk of foreclosure sold out its last six apartments in just more than an hour in heavy bidding on Sunday, in what real-estate brokers say may be a harbinger for condo auctions in Manhattan.

Misha Haghani of Paramount Realty USA, who auctioned the property, said that while individuals and banks had auctioned off apartments in the past, this was the first successful auction by a Manhattan developer in more than two decades.

The developers of the narrow, 12-story building at 127 Madison Ave., known as m127, put the apartments up for auction, including five without any reserve or contingencies, after failing to sell the deep full-floor units as well as a penthouse with a terrace for several years.

The auction attracted more than 100 registered bidders to the Roosevelt Hotel, and the winners took apartments at an average of $840 per square foot, a steep discount from original asking prices. A 1,577-square-foot fifth-floor apartment sold for $1.24 million, including a 5% auction premium, 25% less than a similar apartment sold for in the spring of 2008, when apartment prices were near a peak.

Malcolm Carter, a broker and blogger who closely follows auctions in New York City, said the m127 auction appeared more successful than some auctions in other boroughs, but said the final sale price was disappointing.

"I think the auction was successful in bringing people in the door and successful in providing an unwelcome sense of reality," he said.

The threat of foreclosure had placed a cloud over the auction, but late Friday afternoon the developer announced that their lender, the Bank of Smithtown, "had been satisfied in full."

Within hours of the auction, the developer, Cardinal Investment, signed contracts to sell five full-floor units to the buyers. Kyle Ransford, a principal of Cardinal Investment, said the auction "gave us an opportunity for some recovery."

David Nguyen offered the winning bid of $2.05 million for a penthouse apartment that he hopes to live in someday.

When the developer offered the penthouse, it reserved the right to reject the bid, and Mr. Nguyen said he is now worried that he may not be able to buy it. "Its just a gamble that we are taking," he said. "I work in finance and it is just another trade for me."

25% off. So much for the bounce.

hat was the order of the auction?
highest floor first then lowest?

I found the $840 per square foot price for new construction particularly interesting.

Why doesn't anyone (including you Malcolm) put real emphasis on the factor that made it succesful....NO RESERVE.

And why is the final sale price "dissapointing" and to whom?

Apt23, wise is only in the head of the developer. A 40% discount is a lot to stomach. I'm guessing he'll try to market the penthouse in the hope of receiving a better price until he has to sign the contract at the end of 30 days.

bigmoviebuff, the auction began with the penthouse. Then, winning bidders could choose whichever unit they wanted. Predictably, they chose from top to bottom.

truthskr10, I think if you read my various posts on the auction, you'll see that I placed a great deal of emphasis on the fact that five of the six condos were sold without a reserve.

Regarding the prices, a source who asked not to be identified conceded that they were "a little light." In condensing my comments, Josh Barbanel did not quite capture my meaning, i.e. that the developer had to be disappointed that prices didn't move much closer to his previous asking amounts. I, for one, have no concern about the prices one way or the other. Thanks for asking.

$840 psf. Definitely. Also really challenges those who think $800 psf in LIC or WB makes sense... because its new construction.

If you can barely get that in Manhattan...

Well, it's a bit hard to compare ppsf as apples-to-apples here considering all the additional risk for the buyer here that you wouldn't find in most sales (see list earlier in the thread - it's a bit nuts!) and the fact that it's got to be all cash.

"...in what real-estate brokers say may be a harbinger for condo auctions in Manhattan."

Let's hope so. I think there are a lot of Streeteasy folks out there ready, willing, and able to buy - at the right price. Just waiting for a return to sane pricing and reasonable "implied" cap rates.

Developers and banks now have some insight as to what the clearing price is for new developments. They may continue to "extend and pretend" for a while longer. But the bank regulators are starting to breath down their necks and want to see them clean up their balance sheets.

Could be the start of something wonderful!

Prices realized in selling six condos in 20 minutes are not as high as selling six condos in a year and a half. I attended NYC's first auction in a generation in November 2009. I predicted this auction would generate a minimum price of $1.2m--guess I was damn close. Is it crazy that generic condos in Manhattan are asking $1,000 psf? Absolutely not. We are in an era of near zero interest rates. I think that only distressed sellers are tempted by serious price discounts. However, we will see a lot more distressed sellers at some point, so things should get interesting.

PMG - PSF in 2003 was like $400 - $600 for doorman full service buildings and that was considered high by most people - including Goldman Sachs. Yes rates are at all time lows but that means when they go higher prices will likely go down. I agree that getting anything for under $1,000 has been tough but prices are trending lower. Eventually (though who knows when - just ask Japan) rates will go higher. Prices in Japan have trended lower for 20 yrs. So if you assume little to no appreciate you evaluate this on a price vs rent calculation and at $1.2m the numbers really don't work in favor of buying...

BJW wrote;
"Well, it's a bit hard to compare ppsf as apples-to-apples here considering all the additional risk for the buyer here that you wouldn't find in most sales (see list earlier in the thread - it's a bit nuts!) and the fact that it's got to be all cash."

Exactly.....25% is disappointing? As a businessman Ive seen varied and various forms of auctions and distressed sales. How long does inventory sit on the market these days? 4 months? 6 months? 1 year? He sold them all in one day.....isnt't that worth something too?

Considering this project was on the verge of bankruptcy, this keeps the developer in good standing. And if this developer wants to spend 10/20/40 more years in development, you better believe it counts to future endevours and financers to show you went out of your way to not go the bankruptcy route.

$840 a foot, with units that have staircases and elevator eat up at least 20% of the space. Isn't the new development Setai Downtown firesaling at $800/900 psqft? Granted it's in Fidi but where is the risk there compared to here?

It's very easy to jusat judge this on paper but once you've physically been involved on either side of an auction coin, you realize and accept it's true nature and prescribe a fair value to it's gamble.

paul, these are new condos, real property. I suspect if you want to look at generic condo prices psf in 2003 (why do you think 2003 is significant?), then 700s or 800s for good renovations, or even more for new is probably closer to the truth. Don't confuse overall market stats which include poor renovation quality and coops in the mix. Are you forgetting that in 2008, generic new condos were at $1250 to $1700 psf?

I use 2003 time frame because that is when no doc no down loans came into play. Those loans drove real estate MUCH higher. My PPSF numbers were for white glove doorman buildings - co-ops were usually 15% lower. While new construction is great you don't always know the quality of it. And again these units are in an OK area and no service building. As for 2008 prices they are meaningless in my opinion. Affordability is all that truly matters.

Now if you adjust for some appreciation we may well get to a number around $700-$900 a square foot. If you account for inflation I think you can definitely get to those numbers. The problem will come when you try to sell, if rates are higher prices will be lower. Exactly like what Japan experienced.

Overall I think at $1.2m the buyers of the 2 bedrooms overpaid. If they like the places and live there than it likely won't hurt them - their opportunity costs shouldn't be so high and cost to rent (if you include their tax savings) would come close. I just don't think they got a deal and I am PERSONALLY not in love with the area or the true size of the units.

Paul, a well renovated prewar condo on the FIRST FLOOR in the WEST 90s recently sold for $823 psf after an extended marketing period. I hear what you are saying about new construction. Some of it is complete crap; the square footage is exaggerated, and the taxes after abatements are higher. But the market has ALWAYS ascribed a premium for new construction, and for condos (relative to co-ops), and sometimes for good reason--easier to buy, quality construction, light, views, central air, modern layouts, full amenities. Your point about going back to a period pre-no doc loans is an interesting one. Another consideration is that people anchor to market highs, looking for discounts of 25 or 30 percent initially (eg to wipe out recent buyers' equity). Ultimately, affordability and rents drive transactions values, so in the long run, prices may continue to drift lower, or even suffer sharp corrections. Could we see generic condos with list prices of $800s psf soon? If sales slow dramatically, we can.

1st "real" auction, and it hits $800(ish)psf, and ya think we aint' going down with 2.5K open houses every weekend? This is a "new development" and I'd hate to be a 2003-2010 buyer in the outer burbs at $900psf.... .good luckz to ya...

Penthouse bid just rejected: http://malcolmcarter.wordpress.com/2010/06/28/seller-rejects-2-million-bid-for-m127-penthouse/

Did Paramount indicate what their plans are for the penthouse? Are they planning on remarketing it immediately or are they going to wait to see if the market will improve?

The auction might attract higher after-auction bids. Aside from that possibility, Paramount, that conducted the auction is highly unlikely to be marketing the penthouse. The developer will just list the place.

$400 - $600 ppsf in 2003? Huh? According to Miller Samuel data, ppsf in 2003 for downtown condos was around $800. I remember that I bought in Midtown that year -- paying right around $600 psf -- because I couldn't "afford" to be further downtown.

ali r.
DG Neary Realty

Why would you buy that penthouse when a room full of buyers would not buy it for more the 2 mil.? Doesn't that give you an indication of your resale price? Unless you just desire to be in a neighborhood where there is no transportation, no produce but does have easy access to the museum of sex.

I think the developer may have to let the PH sale go through. The consolidated indebtness is $8,350,000 on those remaining units which pretty much covers all the bids. And that doesn't account for all those lovely fees the banks like to pile on when your not paying by a swiss watch.

It's possible that the developer may think he can squeeze out more from the penthouse and buy some time with the bank now that he may have 75% of that debt paid off and reject the bid and continue gambling.
But I don't think they're that dumb.

THe smart move is to make an arrangement with the bank(a short sale agreement if you will) to accept all the bids for all the units as payment in full and move on to greener...or browner....or just plain "other" pastures.

the developer might reject and and then just renegotiate with buyer. Even just to get a bit more. Winner can't pretend they weren't interested.

If the developer rejected the offer he had to return the down payment as per terms of the auction contract. Why would the successful bidder negotiate higher with the seller. I would walk way and let the seller carry it for a few more months.

Also I cannot imagine the bank would agree to a short sale for less than the auction results - the bank would be stupid to do that.

Forget all that, the auctioneer's fine print has plenty of fine print for that.....not an option.

Well "short sale" was just a term I prescribed to the situation and it is not a standard short sale.
I never said anything about accepting less than the auction results either.
I don't see how you read that.....
All I was stating was.....the developer seemed to have gotten rid of all the units for near what is owed for the face amount of the loan. I could easily see both sides...a) the bank getting it's money back and walking on the late/penalty fees to be done with it and retrieving near face amount of what they lent without going to court a single more day. b) the developer getting out of it's liability in tact without going to court a single more day.....that's all.

Prior to the auction, they announced that the developer satisfied the Smithtown mortgage in full, so supposedly they were able to pay off the bank already. Therefore, it's possible that the developer doesn't need to sell that PH right now. I'm not exactly sure how they were able to pay off Smithtown, but I heard that a group of investors were involved. Anyone know what kind of a deal they reached?

Well that's just it...innit? What kind of an auction can you have (or what price can you get) when buyers know your about to be foreclosed.
It's possible the developer got a new partner with a mezzanine loan to stave off B of Smithtown.
It's also possible they got a stay of execution from BoS to get higher bids in the auction.
With nothing (too early for any formal posting) on Acris to confirm what arrangement or satisfaction BoS got, it's all speculation as the exact claim was/is;
"According to an announcement by Paramount Realty, which is conducting the auction, “as of Friday, June 25, 2010, Bank of Smithtown has been satisfied in full.” "
I would assume or hope or think any buyer wanted to see that confirmed from Bank of Smithtown in some form of paper before bidding.
And who is Paramount? The parent company of the developer? the auctioneer?

Paramount was the company hired by the developer to handle the auction. I was interested in bidding, so I actually requested from Paramount to see if they could show me some documentation from Smithtown, but they didn't have anything. So I doubt any of the purchasers saw anything from Smithtown. I was also concerned about the possibility that this new set of investors received a lien on the property as part of the new deal they struck. Even though the developer is suppose to clear title before closing, there wasn't any time limit on how long they could take. It looks like the developer already signed the purchase agreement, so may be it's confident it can deliver the title free and clear.

m127 penthouse is finally under contract: http://malcolmcarter.wordpress.com/2010/08/20/unsold-at-auct…se-finds-buyer/

oops. try this link instead: http://wp.me/puZRS-1u7

Penthouse at #m127 condo closed at $2.18 million, says the Real Deal: http://ow.ly/2VO6t That's exactly what I predicted: http://ow.ly/2VO30