The slick sales office for 111 West 57th Street could be lying idle for quite a while.
JDS Development Group and Property Markets Group will wait about a year before launching sales at their Billionaires’ Row skyscraper, with PMG’s Kevin Maloney acknowledging that the current environment isn’t friendly to ultra-high-end projects.
“If the market were red-hot, people would be buying off plans, throwing checks down, and it’d be great,” Maloney told Bloomberg on Thursday. “But if you have a market where you think marketing would be ineffective for now, why would you launch and spend the money? Wait.”
The project had been widely expected to launch sales imminently. The glitzy sales office is already completed.
Market insiders told The Real Deal that they weren’t surprised by the developers’ decision to delay a sales push, given the concern of oversupply in the ultra-high-end condo market and the fact that they don’t yet have a product to flaunt. Construction on the 60-unit building is ongoing, with the superstructure well underway, sources said.
“This should not come as a shock,” said Andy Singer, CEO of the Singer & Bassuk Organization [TRData], who isn’t involved with 111 West 57th Street. “There is a pause in the market whether developers like it or not. It seems pretty clear that there are more units on the market than there appear to be prospective buyers.”
There are currently several developments along Billionaires’ Row wooing the same set of buyers that 111 West 57th Street would cater to, including Vornado Realty Trust’s 220 Central Park South and CIM Group and Macklowe Group’s 432 Park Avenue. Extell Development is also trying to sell the remaining units at One57, at 157 West 57th Street, and is looking for capital partners for Central Park Tower, another ultra-luxury project at 217 West 57th Street.
A spokesperson for JDS Development Group and Property Markets Group said only that it’s “an exceptional property, still in early stages of its development. It will be actively marketed when the time is right.”
JDS and PMG likely want to see sentiment in the luxury market improve and eventually entice buyers with apartments that have more immediate move-in dates. Buyers in choppy markets often don’t want to bet on projects that won’t be delivered for several years, said Jacqueline Urgo, president of new development marketing firm, the Marketing Directors.
The project won’t be delivered until early 2018.
“I would think that 12 to 15 months in advance of delivery is actually the appropriate lead time for marketing when the market is unsure,” Urgo said. “That way, you make sure you’re not leaving money on the table. The closer you get to delivery time, the stronger your sales are likely to be.”
Still, there’s no guarantee for JDS and PMG that the market will look much better in a year’s time, especially since the levels of high-end inventory in the market continue to rise. Roughly 14,500 units are expected to hit the market between 2015 and 2017, according to a recent analysis by Miller Samuel for The Real Deal. Assuming the current rate of sales, Manhattan will have 5 years of excess inventory by the end of 2017, according to the analysis.
“I’m not optimistic about sales,” Singer said. “So much inventory has been has already been created and we’re going to see a lot of product that does not sell over the next year.”
A spokesperson for AIG, the first mortgage lender to the tune of $400 million on the $1.45 billion project, was not immediately available for comment. Apollo Global Management, which provided the $325 million in mezzanine financing, declined to comment.
But Apollo previously defended its position in the project in response to questions from an analyst during a February earnings call for its mortgage REIT, Apollo Commercial Real Estate Finance.
“I think they and we still feel very comfortable with the basis,” said Scott Weiner, the head of Apollo’s commercial real estate debt business. “There’s obviously plenty of sales that are in the press and other that are well in excess of certainly our basis and also the sponsors’ basis,” he responded. “I can’t speak to their strategy in terms of how they want to approach presales, but there’s certainly no — they don’t have to sell anything right now. If they choose to sell, they can.”