What Recession? Condo Prices That Held Up

NY Times July 30, 2010

By JOTHAM SEDERSTROM

ON paper, the condominiums at 180 East 93rd Street in Carnegie Hill were tailor-made for an affluent Upper East Side family when they hit the market in 2008.

The building was to have seven floor-through four-bedroom apartments as well as green features like a garden irrigated with rain water, local and sustainable materials, and even geothermal heating from a private well. The units were priced at $5.4 million apiece, and sales began in August 2008 — just a month before Lehman Brothers collapsed.

And as at hundreds of projects across New York City that hit the market in 2008 and 2009, interest in the East 93rd Street building slowed until the sales office at 1491 Lexington Avenue eventually scaled back hours.

"Boring — it was really boring at the sales office," said Richard Steinberg, an executive managing director at Warburg Realty who is overseeing sales on behalf of the developer, Greystone Property Development. "We got so desperate we were buying 100 balloons at a time and standing by the door, handing them out to families as they walked past the 92nd Street Y. I mean, we were handing out balloons and decorating cupcakes."

Many condo projects are now returning to the market after waiting out the downturn, at greatly reduced prices. But a few, including 180 East 93rd, have not budged from their prerecession prices. Among the developers’ reasons are renewed confidence in the marketplace and a desire not to undercut owners who bought before the slump.

"It’s to the developer’s benefit to keep the price higher and instead offer concessions and incentives," said Vickey Barron, a senior vice president of Prudential Douglas Elliman. "There’s nothing worse than for people to purchase and find out their neighbor purchased it for a lot less."

Greystone’s gamble may have paid off. Mr. Steinberg said interest in the East 93rd Street condos soared in May, when the first model unit opened for showings. Almost at once, two condos went into contract at close to the original asking price of $5.4 million, he said.

"We hid for about a year and a half, but the minute we had this model apartment we tallied two sales," said Mr. Steinberg, who added that by paying off a construction loan early on the developer was able to keep prices the same without pressure from the bank.

At District NY, a condominium on Fulton Street in Lower Manhattan, sleek European design, a spa and rooftop reflecting pools created enough buzz in the summer of 2007 to lure potential buyers into negotiations for 123 of the 163 units there. But some three-dozen units that went into contract in those halcyon days stubbornly failed to close. As a result, the developer, Wonder Works Construction, dimmed the lights at its sales office until July 2009.

Stephen McArdle, a partner at Urban Marketing, the building’s new marketing group, reopened the building’s sales office and hosted parties for friends and family members of existing tenants. More important, common charges were reduced by 6.5 percent.

But there wasn’t a reduction in prices, which range from $525,000 for studios to $3.42 million for penthouses. Since last summer, another 65 units went into contract, Mr. McArdle said.

"What I think we did very well is reposition the building for all the families coming to the area," he said. "We got away from the glitz and glamour of the Calvin Klein commercials."

Henry Justin, the developer of a condo conversion at 211 East 51st Street, took a different approach when his project stalled with about 30 percent of 70 units sold. After briefly cutting prices on some units by 5 percent, Mr. Justin chose instead to re-establish initial pricing and dangle an option to customize space, by combining, for example, a two-bedroom unit with a studio to create a smaller three bedroom. "If I was to drop my price by $100 a square foot I’d be taking a loss of about $5 million," he said, noting that five more units have gone into contract since March.

But with the economy still uncertain, at least one developer who had intended to hold the line has flinched.

Despite clear views of the High Line, not one unit at +aRt, a condominium in Chelsea at 540 West 28th Street referred to as "Plus Art," sold in the fall of 2008, said Stephen Kliegerman, the director of development marketing for Halstead Property. By November of that year, 90 unsold condos ranging from $850,000 to $1.4 million were taken off the market.

After marketing resumed in May, brokers at a grand reopening gala suggested that prices remained too high. Mr. Kliegerman and others involved with the project agreed to keep some units at 2008 levels while reducing prices by 10 percent for a second group of units. Mr. Kliegerman said several units had since gone into contract. "We really wanted the market to speak to us," he said. "In retrospect, if we had a crystal ball and we were able to jump back in time, we probably wouldn’t have done anything differently because you never know until you get to the marketplace where those prices are going to be."