Some Condo Developments Are
Less Than Half Sold After a Year
By Sarah Ryley
Brooklyn Daily Eagle
DOWNTOWN — Construction of market-rate condominiums and below-market apartments has fallen far short of earlier predictions.
The Eagle researched progress on the 58 projects in some stage of development listed with the Downtown Brooklyn Partnership, which total an impressive $9.6 billion investment from the mouth of the Manhattan Bridge to the intersection of Atlantic and Flatbush avenues, where Atlantic Yards promises to add an arena and 16 high-rises.
Of the 5,285 market-rate condominiums planned, roughly 1,400 have come on the market, including buildings completed during the peak of the boom years. Based on various real estate databases, half are still for sale.
While some projects like 110 Livingston fared well, others like the Oro Condominium and Belltel Lofts are less than half sold after over a year on the market. This causes some developers to take pause.
“The challenge with residential today is not only related to the credit market,” said Downtown Brooklyn Partnership President Joe Chan. “I think there’s also an increasing mindfulness to the total amount of product on the market right now, particularly on the condominium side.” Hotels and retail are the best performing sectors downtown, he said.
But Downtown Brooklyn construction, a constant backdrop to Chan’s high-rise office in MetroTech, isn’t necessarily grinding to a halt, said Chan. While he acknowledged the struggling economy and rising construction cost have made it harder to start building, he said many developers are switching up the mix in their projects, converting space once envisioned as condos into retail, rental or hotels.
Other projects listed with the Partnership are stalled, like John Catsimatidis’ Myrtle Avenue project with 360 condos; were killed, like Forest City Ratner’s City Tech tower with 150 condos; or are a mystery, like The Dermot Company’s 29 Flatbush tower, which would have had 172 condos had the application been approved two years ago. Calls to Dermot were not returned.
“Unfortunately, the banks are out of business,” and not just for developers, said Catsimatidis. “Six months ago a person could walk into a bank and put a $50,000 down payment [on a $800,000 condo] and get the mortgage.
“Now the banks are strictly following the old rules of [20 percent down],” he said. “Brooklyn buyers don’t necessarily have $160,000 to put down.”
Still, Catsimatidis said he would start building one of his four planned towers along Myrtle Avenue, which would only have market-rate condos because the city doesn’t have any affordable housing bonds left right now. “Worse comes to worse, we’ll do a rental,” he said.
Either way, that could be good news for people living in that retail-starved corner of downtown, who saw basic amenities cleared away for construction. Catsimatidis said his first tower would have a drugstore and supermarket, and Halstead Property Director of Marketing William Ross said Don Capoccia’s nearby tower at Flatbush and Myrtle avenues would also have “positive retail.”
Councilwoman Fears
Affordable Housing Forgotten
City Councilwoman Letitia James said she’s concerned below-market housing has been forgotten in Downtown Brooklyn while luxury hotels and condos move forward.
The Eagle found 339 of the planned 3,000 affordable apartments listed with the Partnership are completed or under construction. More than 10,000 people applied for 42 of those apartments within Capoccia’s tower, The New York Times recently reported.
“The indigenous community has not benefited from either the affordable housing or the commercial redevelopment promised with the Downtown Brooklyn rezoning,” said James. “But I am committed to ensuring that the affordable housing is built, and we’ll work with the Partnership and the [Bloomberg] Administration to realize those benefits.”
She said she’s pushing to increase the number of affordable housing in a number of projects just starting construction.
James makes an exception for Ratner’s Atlantic Yards, a project she vocally opposes that, as planned, would contain a bulk of the Partnership’s promised housing: 1,930 market-rate condos, 2,250 market-rate apartments, and 2,250 below-market apartments. That project is in legal purgatory awaiting appeals on two cases (company spokesman Loren Reigelhaupt points out all decisions so far have been in the company’s favor).
‘Quality Will Sell’
Ratner’s financial projections for Atlantic Yards estimate market-rate condominiums in each tower would sell out in three to seven months, with construction phased over seven years. Miss Brooklyn’s 335 condos would sell in six months; the towers in the second phase, each with roughly 200 condos, would sell in three months, according to projections.
Ratner doesn’t have a crystal ball to predict market conditions over a decade, and Reigelhaupt cities MetroTech and other large projects as proof of his company’s staying power. “Forest City has been in Brooklyn for over 20 years and developed through all sorts of business cycles,” he said.
But William Ross said those projections seem optimistic even during boom years. He predicts towers with hundreds of condos will sell out in two or three years. “I think the timeline is going to stretch,” he said. “If too much comes on the market too quickly, it’s actually not healthy for the market.”
That doesn’t spell doom for all developers, said Ross. “With 800 units coming on the market probably within the next year, I think buyers are going to be really fussy,” said Ross. “Quality will tell the story, and the quality projects will sell while the lesser quality projects won’t.”
Brad Lander, director of the Pratt Center for Community Development, said the slowdown in construction “does enable the borough to take a breath and figure out how we put the infrastructure in place [such as schools and roads] that will enable us to grow.”
Lander, like every other real estate and development professional interviewed for this story, said he believes the market will eventually pick right back up again.
© Brooklyn Daily Eagle 2008
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