With first of three penthouses sold, at ≈15% discount off initial price, 550 Vanderbilt approaches sell-through; building's huge 421-a discount could save owners $50M

Well, 550 Vanderbilt--the only condo building in Atlantic Yards/Pacific Park--is getting closer to a sell-through, with a $5.85 million sale of its second most expensive unit, the first of three penthouses to find a buyer. 

That leaves two more penthouses, plus another large apartment, to sell out the 278-unit building, which began sales in 2015 and opened two years later.

While PHW may seem to have sold for just 2.4% off the $5.995 million listing price, as suggested in the screenshot from StreetEasy, a look at the most recent amendment to the offering plan (below right), shows that the original offering price was $6.86 million.

So the sale price represents a 14.7% discount.

Other units

Note that PHS was once listed at $7.715 million, the offering price, but has been more recently been put up for rent.

PHE was once listed at $5 million, a 13.9% discount off the $5.805 million offering price, but has more recently been put up for rent.

As shown in the screenshot, the 19th Amendment to the offering plan stated that there were six Unsold Residential Units owned by Sponsor as of 9/8/21.

However, the condo's Board of Managers has purchased Unit 101, the superintendent's unit.

Besides PHW, Unit 1608 has also sold. The sale price of $2,125,000 may seem just 5.6% off the $2,250,000 listing price, as suggested on StreetEasy.

  
But the the original offering price was $2,667,700. So the sale price represents a 20.3% discount.

All told, the two unsold penthouses, plus the one unsold two-bedroom (1601) represent a cumulative offering price of $15,850,000 million. They represent 4.1% of the initially forecast $388,659,550 sell-through, though they're barely 1.1% of the unit count.

The biggest discount: a tax break

It's worth noting that the biggest discount on the units comes from the 421-a tax break, which was expanded for this building thanks to a questionable, if legal, maneuver.

According to the excerpt below from the Offering Plan, owners of PHW--second in the list of three penthouses--would have had to pay $4,464.32/month and $53,571.79/year without the initial 15-year tax abatement, as shown in the red column.

Instead, the abatement lowered taxes to $3,559.21/month and $42,710.57/year, as shown in the pink column. That's a 20.3% annual discount.

2015 Offering Plan

However, as I reported in 2017 for City Limits, the developers were somehow able to pair this building with the distant--separated by two parcels--535 Carlton "100% affordable" building into a single affordable project, thus gaining a more significant 25-year tax break.

As shown in the excerpt below from the September 2021 document, PHW was estimated to pay just $120.24/month and $1,442.84/year with the abatement. That's an enormous discount: 97.3% off the estimated annual $53,571.79/year without any abatement, and 96.6% off the initial abatement of $42,710.57/year. That significantly lowers the cost of ownership.

September 2021 estimate

Note: those numbers probably should be adjusted slightly. Nest Seekers International's ad for PHW estimated monthly taxes at $127, as did a notice on the 550 Vanderbilt web site.

(Interestingly, the 2017 estimate was slightly more: $138.79/month.)

All told, by my 2017 calculations, owners could save a cumulative $86.5 million over the life of the tax benefit. (Those calculations were neither confirmed nor challenged by the city or developer.) That would be $50 million more than in the earlier projection.