As Buyers Return To The Market, Developers Of 111 West 57th St. Look To Light On The Horizon
The coronavirus pandemic iced the city’s luxury residential market for months on end. But the developers of one of Billionaire's Row's latest offerings say the market is beginning to thaw, though it is still a race to get the years-overdue building totally complete.
The supertall at 111 West 57th St. was started in 2014, when buyers were falling over each other to snap up luxury apartments. Now, the building, said to be one of the tallest and skinniest buildings in the country, is about three years past its original scheduled completion date, still not finished and facing a market that is a world away from when the ambitious project was first planned.
Even before the crisis, the building had fended off foreclosure proceedings, had been hit with lawsuits and rose out of the ground as luxury inventory ballooned. In the past 16 months, a statewide ban on in-person touring meant virtual tours were the only way to show prospective buyers apartments, and a dispute with a contractor made things even harder in an already challenging environment, the developers say.
The final stretch of the 1,428-foot-tall building has been hampered by the fact that hundreds of workers heading up and down the slender building must rely on just two elevators. But one of the developers says there is light on the horizon; contracts are being inked at the building and the lender extended on the loans.
“We'll do fine for what it is, I'm not unhappy … we’ll get our capital back, we'll make a modest return if we finish in 12 months.”
Getting the property wrapped up is where the pressure lies. PMG, in partnership with Michael Stern’s JDS Development, and Spruce Capital are building the supertall, which supersedes the neighboring 432 Park Ave. by about 32 feet, according to David Juracich, who said he is a partner on the building.
The building reached 15% sold, making it an effective condominium, in February 2020, according to a spokesperson for the project. It has seen significant buyer activity in recent months, Maloney said, though he declined to share how many deals have been signed.
Late last year, the penthouse there was reportedly under contract for over $50M. Two other units were snapped up for around $30M each earlier in the year, per The Wall Street Journal, with one buyer said to have made the purchase based entirely on virtual showings. The building has 60 units and reaches 82 stories, according to StreetEasy.
“We are pleased with the strength that 111 West 57th has shown throughout the pandemic with multiple contracts signed at strong prices and traffic increasing as New York City continues to recover and thrive,” Stern said in an email.
Maloney said the upper part of the building is selling for around $7,500 per SF, while units in the middle of the building are going for about $6,500 per SF. The lower units are selling around $5,500 per SF. For the developers to break even, he said, blended sale prices would need to be at $3,500 per SF, and his expectation is that the eventual price point will be much higher than that.
“We’ve still got a lot of runway,” Maloney said, though he agrees it is a race to finish up in the next 12 months. “That’s the problem, we’re still fighting to do it.”
The plan is now to finish the building on each floor as it sells. Built atop the historic former Steinway & Sons piano store, on a small piece of land on the famed Billionaire’s Row, the building topped out in 2019.
In the past six months the crane has been taken down, and the crown has been put on. The most complex, challenging part is done, Maloney said; the steel structure and most of the mechanical work are complete.
“If I can get 10 apartments finished in the next 90 days, then I can get 20 done in the following 90 days,” he said, noting the developers are now working to get the workers on an adjusted schedule to ease congestion at the elevator. “It's just going to be easier and easier.”
The complexities of construction were not the only challenges the building faced. In 2017, the project went into foreclosure when Spruce Capital Partners, a mezzanine lender on the project, initiated proceedings after the loan it held against the property defaulted. Former majority owner AmBase Corp. tried to block the foreclosure, but its attempt was dismissed in January 2018. It tried once again in 2019 to reclaim its stake, but the case was dismissed by a federal appeals court.
JDS Construction Group was hit with a safety violation in November from the Department of Buildings after a spinning crane knocked building debris onto the street below, The New York Times reported. And a month later, JDS sued a contractor at the building, per The Real Deal, claiming the company had not installed the HVAC system properly and water had damaged several floors.
Certainly, Maloney’s expectations of a “modest profit” are a far cry from the luxury market’s peak of 2015, when buyers would buy uber-luxury off the plan. Right now, it would take seven years to sell all the new development condos in Manhattan, per data from appraisal firm Miller Samuel, which analyzes active and shadow inventory in the market. That number is down from a 2020 peak of 8.7 years.
“People want to negotiate over price, but that's just because everyone who's that wealthy wants a discount all the time,” Juracich said in an interview at the building.
“There's way more money and way more people looking now than they were two or three years ago when there really was no one looking for apartments on Billionaire’s Row.”
There has been a spike in activity in buyers signing contracts on homes priced at $4M and above, according to Olshan Realty data. Between June 14 and June 20, 41 contracts on luxury properties were signed in the borough. The brokerage’s Donna Olshan said the market is going “gangbusters.”
“Basically the market is playing catch-up to what was lost last year, so all of the sales that would have happened last year that were wiped out are now happening this year,” she said in an interview. “It’s been 20 straight weeks of a strong robust market. We’ve never seen this.”
She said there has been “some give” in prices in the past eight weeks, and on average prices had to be lowered by 8% before buyers would begin negotiating. While the prices are down from the luxury market’s peak, she said, the sales velocity is back at the same levels of that era. Confidence from the vaccine rollout is the driving factor, and she noted demand is coming from largely domestic buyers.
When it comes to the loan at 111 West 57th St., Maloney said the developers have negotiated an arrangement with the lender, Apollo Global Management.
“They're going to sit and extend, and they're going to let us sell through the building ... They want to see it be successful — They don't want to foreclose it, and they're gonna let us finish it,” he said, noting that lenders in general do not want to become sponsors and take on the demands of selling out a building.
“Even though we went through this very terrible time, and real estate took a big hit, there were very few foreclosures … The lenders felt comfortable and they just extended; they learned from the 2007s and 1991s.”
Even so, PMG’s overall focus will be very different from Billionaire’s Row in the short term. In March, the firm bought a large development site on Gowanus Canal, Commercial Observer reports, and Maloney said the company is planning to build some affordable housing in the area, which is going through rezoning.
Juracich, who said he remains a partner with JDS on the American Copper Building on Manhattan’s East Side and the Fitzroy in Chelsea, is now focusing on data centers and bitcoin mining through his new company, Standard Power.
“Through my residential real estate experience, I've experienced extreme highs and some difficulties and I’m evening out with commercial real estate with brownfield redevelopment,” he said.
Both agreed that the inventory on the market would soon be chewed through, eventually putting price pressure on some of the priciest units in the market.
“Timing is everything,” Maloney said. “It's just about the market, if you can build into a strong market, you're going to do really well.”
CLARIFICATION 2:15 PM E.T: This story has been updated to reflect the building surpassed 15% sold in February 2020.