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Price drops at On Prospect Park provide another reason to doubt KPMG report on housing market

New information gives even more reason to question the KPMG report for the Empire State Development Corporation (ESDC) on the housing market in Brooklyn, a report that asserted that there was sufficient demand for the planned Atlantic Yards luxury condos for the entire project to be completed in the announced decade.

So far, judges have deferred to the ESDC's "experts," but the expert is not very reliable.

Remember, KPMG last August 31 claimed that Richard Meier's On Prospect Park was 75% sold; however, the New York Times quoted the developers as saying half the units have been sold and that StreetEasy.com documented only 25% the units as sales.

Now, the developer counts 54 units sold, with--after the consolidation of some units to make larger apartments--42 yet unsold, according to a New York Times Real Estate section article headlined Larger Units for a Richard Meier Condo.

That's still way under 75%. (StreetEasy counts 38 recorded sales.)

Prices going down

Moreover, the prices for On Prospect Park are likely much lower than assumed in the KPMG report. The Times reports:
To get the building’s original buyers — some of whom had put down deposits in early 2008 — to close on their apartments, Mr. [Louis] Greco [of developer SDS Procida] said, he had to deduct 15 or 20 percent from the agreed-upon prices...

Mr. Greco said that 42 apartments remained to be sold, at prices starting from about $680,000 to $5 million; per square foot, the prices are about 28 percent lower than in 2008.
Price per square foot

Even though the average high sales price in the three surrounding neighborhoods is $970/sf, the KPMG market study stated that only a "modest inflation factor" would allow the expected prices to be reached:
Mindful that these prices are based on transactions that have occurred over the past 12 months during a severe recession, the value ranges for Fort Greene ($480 - $720), Park Slope ($500 - $950) and Prospect Heights ($470 - $1,225) lend support for the FCRC’s projected sale prices when a modest inflation factor is applied given these future sales prices.
Those very high numbers in Prospect Heights surely relate to the Meier building, which, as Michael D.D. White pointed out, offers proximity to a park, not an arena.

Looking at the numbers

But On Prospect Park is actually nowhere near $1,225 per square foot. StreetEasy cites 23 active sales listings, with a median price of $910 per square foot, and 76 previous sales listings, with a median price of $1,015 psf. Previous sales, however, average $821 psf.

Given that the first number represents only a ten percent discount from the previous listings, some of the latter must have incorporated a discount already.

A boom in five years?

According to the KPMG report, Forest City Ratner is counting on condo sales prices at Atlantic Yards of $1217/sf in 2015 up to $1369/sf in 2019.

Keep in mind that the Kahr report commissioned by the Council of Brooklyn Neighborhoods was skeptical of even the $850/sf (in 2006 dollars) assumed in a 2006 KPMG report.

If the KPMG report is to be believed, condo prices around the arena will accelerate by one-third from the current prices at On Prospect Park. Anyone want to bet?

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