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Mentioned in this Article:
Stephen G. Kliegerman

Stephen G. Kliegerman
President of Development Marketing

Wall Street Journal

Condo Project Comes Full Circle After The Bust

By Josh Barbanel

The Chelsea Enclave on the grounds of the General Theological Seminary in Chelsea.
.On the morning that investment bank Lehman Brothers Holdings Inc. collapsed in September 2008, James Lansill kicked off the sales drive to find buyers for the Chelsea Enclave, a new 53-unit condominium opening on Ninth Avenue in Chelsea.

Now, after significant cuts in prices, the last of the units in the luxurious red-brick and glass-walled building has gone into contract. It was a two-bedroom apartment listed at $3.9 million.

The Chelsea Enclave has become the first large Manhattan condo of the post-Lehman era to completely sell out, according to Mr. Lansill, a senior managing director at Corcoran Sunshine Marketing, and other brokers.

"It ended up being a fairly successful outcome under difficult circumstances," Mr. Lansill said. "It kind of closes a chapter that was very traumatic in our real-estate history."

The sellout at the Chelsea Enclave and strong sales posted at some other notable properties show how some of the stronger—and perhaps luckier—developers were able to navigate the financial downturn, while others stumbled into foreclosures or had to convert properties to rental buildings.

After Lehman filed for bankruptcy protection on Sept. 15, 2008, the condominium market went into a freeze for many months. Since then, the Manhattan market has recovered faster than the rest of the country, and has seen strong pickup in contract activity in the past few months.

Mr. Lansill said the Chelsea project survived by being among the first to announce broad price cuts to reflect the new market reality and attract a new round of buyers.

The "for sale" sign on the project was taken down after the most expensive apartment in the building, a duplex penthouse, closed for $9.4 million two weeks ago. The deed was filed Friday. The original asking price was $11 million.

When the building went on the market, the developer was asking an average of $2,035 a square foot. In the end, Chelsea Enclave, located on the grounds of the General Theological Seminary, sold out for $1,650 a square foot, a discount of 19%, Mr. Lansill said.

Daniel Brodksy, a managing partner of the Brodsky Organization, which was the developer for the project, said the project was able to survive the downturn because of strong capitalization and good reputation and relationships with lenders.

Asked if the developer had made money on the project, Mr. Brodsky said: "We actually did quite well but not as well as we thought we would when we started."

During the condominium downturn, the 50-story One Madison Park, on East 22nd Street stalled and went into foreclosure and then bankruptcy, amid a dispute between the developers and their lender.

Another condo, William Beaver House, a 47-story tower on William Street in the Financial District, was converted to a rental building after sales stalled. Other buildings held up by the downturn are hoping to relaunch sales this spring.

But other projects held on and sold well, though few have completely sold their last units.

Stephen Kliegerman, director of Development Marketing at Halstead, said successful projects had finance partners that "never slowed down the financing," as well as high-quality development, with "the right product with its location."

Suddenly buyers wanted to see finished projects before they would sign a contract. "People went from speculative buying to need-driven buying," he said.

Related Cos. was marketing three marquee projects during the financial crisis, all of them launched in 2007, and all are now nearly sold out.

At the Brompton on East 95th Street there were three units left, along with one at the Harrison on West 76th Street, and two townhouse units left at Superior Ink on West 12th Street in the West Village.

Susan de Franca, president of Related Sales, said sales were well along when the financial downturn hit, and the company's reputation for design and management helped sell the projects in a difficult environment.

At the Chelsea Enclave, an unusual location with many condos facing out on a huge interior garden, the developer expected a rush of buyers when its sales office opened. It never happened.

"People came by," Mr. Brodsky said, "but everybody was frightened to death about buying anything. They were sure all real-estate transactions would collapse."

Many projects were unable to lower their prices because of agreements with lenders that set minimum prices.

But the Enclave had only a single lender. The developer provided the rest of the cash for construction, and was able to negotiate an agreement to cut prices on some units, while raising them others.

They cut asking prices on many apartments by 7% in the spring of 2009, and made deals that in many cases came in a bit lower. Some buyers, Mr. Brodsky said, came back to look at the sales office week after week, but didn't make offers on units until months later.

On the first day the Chelsea Enclave's sales office opened in 2008, one potential buyer showed up, accompanied by his father, Mr. Lansill said, and spent hours going over the details of the project.

That buyer finally signed a contract in late January for a large two-bedroom apartment on the fifth floor, with windows from the 26-foot-wide living room and both bedrooms looking out on the seminary gardens.

It was the building's last unit to go into contract.

Tuesday, February 15, 2011