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Boosting sales at 550 Vanderbilt condos, a stealth price cut (plus bizarre $1 tax claim)

When MaryAnne Gilmartin, CEO of Forest City New York, in July announced a switch in real estate agents marketing 550 Vanderbilt--the first condo building in Pacific Park, formerly Atlantic Yards--she told The Real Deal prices wouldn't be cut, despite slow sales.

Her publicly stated reasoning: 550 Vanderbilt wasn’t your “standard fare development project.” “We’re building an entire neighborhood,” she told The Real Deal.

But would hiring Million Dollar Listing star Ryan Serhant and his Nest Seekers International team really do the trick? At first glance, yes. A recent Nest Seekers press release, repeated by two real estate publications, says Serhant's team recently "closed 15 new deals."

“My team and I are very aggressive marketers, relentless negotiators, and passionate human beings," Serhant stated. "We love 550 Vanderbilt – that’s what we’re selling – and it’s working."

Perhaps, though it's too soon to tell: most of those units have not yet closed, so we don't know whether buyers got a discount. One that did close, Unit 624, had been listed at $1,075,000 but sold for $1,030,000 (the original offering price), a 4.2% dip.

The stealth price cut

But especially for some units, Serhant has a secret weapon, a stealth effective price cut, with the sticker price steady but less cost to owners, thanks to lowered taxes.

The joint venture Greenland Forest City Partners (owned 70% by Shanghai-based Greenland Holdings) conjured up a way to trade the 15-year tax break, hobbled by an assessed value (AV) cap, for a 25-year tax break, with no AV cap, as explained in my City Limits article.

Overall, the 278-unit building's annual tax bill of $1.2 million, announced in the Offering Plan, was already a 69% discount, thanks to 421-a. Now it would plummet by nearly $1.1 million to less than $123,000, 97% off a $3.88 million tax bill, as detailed in a recent amendment filed with the New York State Attorney General.

The solution was legal but dismayed New York City officials: under the law as of 2015, a market-rate could be linked with an affordable building on the same "zoning lot" and treated as a 20% "affordable project," thus triggering the savings. (Condos in large buildings can no longer get that benefit.)

The switch, which awaits official approval but seems well on its way, would especially benefit 550 Vanderbilt's priciest units, gaining the most from removing the AV cap, which limits tax savings. (For Unit 624, the savings are relatively modest, with annual taxes, already low, dropping from $579 to $364.)

Helping the most expensive

According to the Amendment 12 to the Offering Plan, four quite expensive units have sold, though the closings have not been made public. In all those cases--three units at about $2.9 million, and one at $4.46 million--taxes would plummet. For the most expensive of those units, annual taxes would plunge from the originally projected $32,444  to $1,346.

Collectively, the building's nine most expensive apartments, listed at prices from $3.45 million to $7.715 million, would see their annual taxes shrink from $302,116 (a nearly 25% discount off taxes without 421-a) to $12,445, a 97% discount.

The dramatic increase in annual savings actually undercounts the overall benefit, because the earlier tax exemption would last only 15 years, stepping down over the last four years, while the new version would last 25 years, with a four-year phase out. All told, those nine units should collectively save nearly $8.8 million in taxes over 25 years thanks to the tax break, by my calculation, which is $7.5 million more than in the earlier iteration of 421-a.

According to the amendment, 94 units (plus the resident manager's unit) remained unsold by Sept. 20. Given 278 units total, that suggests 183 sales, or 65.8% percent of the building. (As of July 18, however, The Real Deal was told the building was 65% sold. In other words, they were either fudging, or counting units as sold that hadn't closed.)

Still, when annual taxes for the most expensive apartment, Penthouse South, drop from $47,685 to just $1,819 (out of $57,495, without 421-a), well, the unit looks like a better deal. Annual common charges for that do remain $54,892.

The bizarre $1 tax figure

The now-shrunken expected tax figures, under $100 monthly for nearly all apartments, appear not only in two amendments to the offering plan but also in handouts to visitors at 550 Vanderbilt open houses.

Oddly enough, after the broker switch in July, advertising for units on the three web, new broker Nest Seekers International, and the database StreetEasy--for weeks claimed numerous units would owe just $1 in monthly taxes.

By the second half of September, Nest Seekers' ended that practice, but note this screenshot from September 11 claiming $1 taxes for one unit. On StreetEasy, archived from August 7, several units were listed as having $1 taxes. As of this writing, (also archived from Oct. 23 and reproduced at bottom) still lists numerous units boasting $1 taxes.

Though neither the developer nor the broker responded to queries, those numbers are wrong. That Dollar Meal tax rate, if not a ruse, implies a potential developer's rebate--another discount--over an unspecified time period, which further sweetens the deal.

The Attorney General’s office, after ignoring multiple queries, finally said it “cannot comment on any potential or ongoing investigations.” (Maybe, maybe not.)  But the applicable state law--“All assertions of fact in advertisements must be demonstrably true"--sure seems to justify official attention.