Skip to main content

Featured Post

Atlantic Yards/Pacific Park graphic: what's built/what's coming + FAQ (pinned post)

The real strategy behind broker Ryan Serhant's 550 Vanderbilt "takeover": a stealth cut in buyer costs

The Real Deal 5/22/18 published How to conduct a new development “takeover”, hailing super-broker Ryan Serhant of Nest Seekers International and his team's ability to get 550 Vanderbilt, the only condo building in Pacific Park (formerly Atlantic Yards), from 65 percent to 80 percent sold.

The article suggests that the Nest Seekers team's secret sauce, after taking over from Corcoran Sunshine Marketing Group, might have been organizing "a community smorgasbord" with vendors from nearby restaurants and relying on, as the reality TV show star put it, "pure hard work and mass exposure.”

This omits two major factors. The first tranche of units at 550 Vanderbilt went to buyers in China, who signed on even before the official launch, thanks to Shanghai-based Greenland's connections there, as noted in Real Deal coverage.

Many of them are presumably less price sensitive than domestic buyers, as they want a piece of real estate in New York and also to get their money out of China.

The stealth price cut

More importantly, Serhant's takeover coincided with a significant cut in the effective cost of the condos, though in most cases not the sticker price, as I wrote last October in City Limits.

Thanks to a maneuver that allowed the developers--the joint venture Greenland Forest City Partners--to link the 550 Vanderbilt condo building with the "100% affordable" 535 Carlton building down the block in a newly created "zoning lot," the condo units were able to take advantage of a 25-year 421-a tax break, not a 15-year one, and without a cap on the tax break.

Bottom line: the previous 421-a tax abatement meant an overall yearly tax bill of $1.2 million for the building, while the new version means owners at the 278-unit luxury building would collectively pay less than $123,000, a 97 percent discount.

So owners could save a cumulative $86.5 million over the life of the tax benefit, $50 million more than in the earlier projection.

Some of the tax cuts were enormous. For example, the four-bedroom, 4.5-bath Penthouse West, priced at $6.86 million, was formerly projected to require annual taxes of $42,711 (already a 20 percent discount off taxes without 421-a). Now, annual taxes would be just $1,665 (see below).

Also, a few units had their sticker prices cut. For example, Unit 1101, as I reported, It was cut $125,000, or 6%, from $2,100,000 to $1,975,000, after being officially put on the market last July 18, the date Greenland Forest City announced a broker shift in a Real Deal article. 

The original 421-a tax break (June 2015 Offering Plan) lowered monthly taxes to $707, but that was reduced to $51 thanks to the revised 421-a provision.

Commenters on the Real Deal "takeover" article were scathing. "This sounds like a paid article by Ryan," one wrote.

Leonard Steinberg suggested that the article "omits a few minor inconvenient details," adding:
1. Selling a staged, completed apartment makes a big difference.
2. Taking over a building and lowering prices (often dramatically) makes an even bigger difference.
3. Taking over a building and becoming receptive to offers in a down market makes even more of a difference.
Alternative Facts were invented by the Real Estate Industry: maybe we can also end this dishonesty or 'selective' fact-telling practice?

Comments