Monday, March 12, 2012

Report on Meier's On Prospect Park condo building again confirms KPMG lies in Atlantic Yards market study

A New York Times Real Estate section article yesterday, Boldface Buildings in the Cold Light of Now describes sales at what they call Richard Meier's "1 Grand Army Plaza" but was once marketed as "On Prospect Park" and is marketed now as "Richard Meier on Prospect Park.":
Brown Harris has lowered prices on many units, and the glass tower is now nearly 80 percent sold, with an average sale price of about $900 per square foot, respectable for Prospect Heights. “It’s not as successful as originally planned,” Mr. [Stephen] Kliegerman [of Terra Development Marketing] said. “But that might have been overzealous.”
(The website, btw, says "over 80% sold.")

The KPMG report

Why is this all important? Because the KPMG Atlantic Yards Market study done for Empire State Development, some 2.5 years old, claimed that the building was already 75% sold. Actually, as I reported, the figure was somewhere between 25% and 50%.

The report, suggesting a robust market for luxury condos, was key to the state agency concluding that Atlantic Yards could be built in a decade--now highly unlikely.

Though the average high sales price in the three surrounding neighborhoods was $970/sf, the KPMG report suggested that only a "modest inflation factor" would allow Forest City to reach its 2015 target of $1217/sf:
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.
None of the condominiums were expected to be built in the first phase--the arena block--but rather east of it. (It's also possible that condos could be included in Building 1, the speculative office building.)

The impact of modular

The $900/sf sales price for the Meier building makes it highly unlike Forest City's projected sale price would be met, even though that top price of $1225 listed in the KPMG report almost surely related to some sales in that building.

Then again, if Forest City builds using modular construction, the cost would be significantly lower, and thus the price target would be lower.

But that sets out its own challenges. Modular construction at that height is new to the market, and thus potentially risky--which would have to be factored into the price.

Perhaps successful modular rental buildings would tamp down that challenge. As of now, however, several question marks must be attached to the condo plans.

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