Crains: Condo developer sells new building

Broken link!

August 25. 2008 3:40PM
Condo developer sells new building to Columbia
In a softening real estate market, L&M Equity Partners is unloading the entire 127-unit building to the university rather than trying to sell the apartments individually.

In a sign of the weakening housing market in New York City, a developer has agreed to sell a condominium project in Riverdale to Columbia University rather than try to sell the apartments individually.

Columbia paid $69 million, or roughly $400 a square foot, for the 127-unit building at 3260 Henry Hudson Parkway, which it plans to use to house faculty and graduate students. The developer was selling the individual apartments for roughly $500 a square foot, according to Vincent Carrega, executive managing director, at Grubb & Ellis Co., which represented the seller, L&M Equity Partners.

Mr. Carrega wasn’t sure how many of the units were under contract to be sold, and L&M didn’t return a call for comment. But Mr. Carrega says the deal allowed L&M to make a small profit and avoid the hassle of trying to sell apartments in a softening market. He said the building was completed, and since it wasn’t completely sold, L&M would have had to start paying for the upkeep of the remaining units once residents started to move in.

“Those carrying charges would erode the profits. Now in the boroughs, selling out units can be in excess of a year,” said Mr. Carrega. “The residential market is clearly not as vibrant as it was. This is a win-win situation.”

Mr. Carrega said Columbia, which has been on an expansion binge, wouldn’t have been able to construct the building for $69 million. Columbia had no immediate comment.

Experts expect that other developers will also try to sell their buildings wholesale. Indeed, Mr. Carrega says he is trying to sell a another condo development in downtown Brooklyn.

“This comes up in down markets,” said Jonathan Miller, chief executive of Miller Samuel Real Estate Appraisers. He recalled that at least two east side towers were sold to either universities or hospitals during the real estate downturn in the late eighties and early nineties. “This is likely a precursor to more.”

So what this is saying is that the market is in such trouble that the developer unloaded the entire building at a significant discount.

"Columbia paid $69 million, or roughly $400 a square foot, for the 127-unit building at 3260 Henry Hudson Parkway, which it plans to use to house faculty and graduate students. The developer was selling the individual apartments for roughly $500 a square foot, according to Vincent Carrega, executive managing director, at Grubb & Ellis Co., which represented the seller, L&M Equity Partners"

What is the market rate per square foot in the area. This shows, the developer sold it for roughly $500 sq ft. I'd say that is pretty cheap. My guess would be, the developer thought this would be, the only way to make money. It sounds like this proves, that the market is in terrible shape. If the developer could have gotten $1000/sq ft, do you think he would of excepted $500. I don't see this as a positive, it's actually a very bearish indicator.

The most positive thing, is that it will keep another 127 units off the market. However, it may as well have also eliminated potential buyers, by providing them with a nice subsidized apartment.

I don't know if its bearish or bullish but either way you should try reading it again. The article says the developer was charging 500 a foot for individual apts and sold to Columbia for 400 a foot. So sure they took a 20% discount but of course they get the money in one lump sum up front instead of going through the hassle and cost (and risk) of selling the apts one by one. I don't know enough about the economics of development to know if thats an act of desperation or just a reasonable business decision (or both).

On a rare occasion, I agree with ccdevi - paying 20% lower for wholesale vs going retail is not big news. plus it's riverdale - who cares?

Well if there's a two-bedroom unit in the building with a thousand square feet, the developer originally expected to sell that unit for $500k, and now he's sold it to Columbia for $400k.

It's near 235 Street, so it's central Riverdale.

I'd be surprised if other Riverdale apartments have fallen in value by 20 percent since this developer got his financing in place, which probably occuured a couple of years ago, maybe in 2006.

I'm sure they've fallen, but I would have guessed at a slower rate, maybe by 10 percent or so.

This might put some downward pressure on Riverdale real estate values. It's new construction too, and probably has a higher-grade of finishes than most other Riverdale properties.

Graffiti: By removing a lot of supply from the market in a single stroke, this transaction might actually RELIEVE some of the downward pressure on Riverdale apartment values. It sure won't help land values, though.

DCO That is the dumbest comment yet on this site, you don't even know what the square foot price is in Riverdale but you say that proves my point that the market is in terrible shape. You say 500.00 per foot is pretty cheap yet you have no idea what the average price per square foot is in that area, its so like you to say such dribble, comments that make blanket statements about things you know nothing about. IT IS PATHETIC!!!! The developer got out with a profit and not a bad one at that in a soft market no more no less

Anything you post on this board, dco will say it is a sign of a crashing market and the end of the world.

zorter- You should read it again, I said I had no idea what the price was. I said, I find it hard to believe if the developer could have gotten more, he wouldn't have.

"What is the market rate per square foot in the area. This shows, the developer sold it for roughly $500 sq ft. I'd say that is pretty cheap. My guess would be, the developer thought this would be, the only way to make money. It sounds like this proves, that the market is in terrible shape. If the developer could have gotten $1000/sq ft, do you think he would of excepted $500."

Perhaps next time you shouldn't approach a post with such bias.

LICComment- Where have you been my friend? I was looking for your insight, over the last week. Someone was posting, that the Powerhouse was going to file for bankruptcy very soon. And no it wasn't me. I figured if anyone knew you would. Any word?

The sale of this building in Riverdale only relieves pressure in the very expensive apartment range. One that it seems did not have a lot of demand in the first place (so the developers learned). This building and the Solaria and a couple of others were built to try and sell new Manhattan-style luxury apartments at $1 MM or more and there just isn't a demand for that. Apartments in Riverdale can go for that amount, but they usually need a killer view, which is abundant in Riverdale but lacking in these buildings.

Im am not an investor but from the looks of it this was poor investing decision.
$400 per sq. to sell at $500 per sq foot what kind of person would be willing to put all that work in for such a small return. They must have made more money on the sale of the whole building then what they would have made hence the onwer sold ever unit.
Hurm...

Hey dco. I've been commenting here and there. I saw the Powerhouse thing but it just looked like a propaganda post. Who knows what to believe? If something concrete comes out about it I'll read it. Have you been to any of the new restaurants in LIC lately?

LICComment- NO I haven't been there for a few months. Did you see the new websites, L haus and The View. They have a few floor plans, but no prices.

You have a good point, west81.