Condo inventory loans: Extell, Hines, Ceruzzi took them, who might follow

By Atticus O’Brien-Pappalardo

A handful of the city’s high-profile developers such as Extell Development, Hines, Ceruzzi Properties and others have opted for condominium inventory loans over the past two years, a move which can increase liquidity during a period of slow apartment absorption.

Today, as condo sales remain tepid, PincusCo analyzed dozens of other new development projects to identify those that have not taken out a condo inventory loan yet, but might.

We looked for projects that shared characteristics with the ones that have in the recent past obtained condo inventory loans. Following the analysis, we found 12 projects from developers such as Related Companies, GID and JDS Development that had similar characteristics to those that took out the condo inventory loans, but had not taken one.

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While it’s impossible from the outside to predict what a developer will do, PincusCo is seeking to get a sense of potential demand in the market for this kind of financing. We defined a condo inventory loan as any refinancing of unsold units following the issuance of the buildings initial temporary certificate of occupancy.

The condo market was booming in 2015, thereafter it began to slow down. As it cooled, firms turned to condo inventory loans to extend the time for them to sell product.

First, we identified 10 projects that took on inventory loans since January 1, 2018. They were all less than 50 percent sold out when they took the loan. The average time between the initial temporary certificate of occupancy and the inventory loan was just over nine months.

Then, to find similar projects, we looked at condo developments that had received an initial temporary certificate of occupancy since January 1, 2018, that were less than 50 percent sold out and that had not yet been given an inventory loan.

We found 12 projects that fit those criteria. We reached out to the developers for comment.

But first for a closer look at some projects that received their condo loans.

Extell filed plans calling for One Manhattan Square on April 24, 2014. The plans called for over 1.1 million square feet of construction and 815 total units at 250 South Street in the Lower East Side. The development received its initial TCO on November 27, 2018. Less than a year later, in a deal closed on August 28, 2019 and was recorded on October 9, 2019, Extell signed a condominium inventory loan agreement with lender Blackstone valued at $515.5 million for 635 parcels at the building.

Hines filed plans on January 3, 2013 for a 562,949-square-foot condo with 180 units at 53 West 53rd Street in the Plaza District. The building received its initial TCO on July 5, 2019. About one year later, Hines, Goldman Sachs and Singapore-based Pontiac Land Group signed a loan agreement with lender United Overseas Bank for $77.5 million in new debt secured by 127 parcels at the development. The deal, which closed on July 9, 2020 and was recorded on July 17, 2020, was composed of a $42 million “additional project loan” and a $35.5 million “additional building loan”.

Ceruzzi Properties filed plans for their condo, Centrale, on June 16, 2014. The 216,171-square-foot building with 124-units received its initial TCO on January 10, 2019. The following year the developer signed a condominium inventory loan with Industrial Bank of Korea and PIA Investment Management valued at $240 million.

While the average time between the initial temporary certificate of occupancy and the inventory loan was nine and a half months for the projects we identified, there is of course no strict timeline.

The shortest period of time was Aiyun Chen’s Rego Parc condo at 62-96 Woodhaven Boulevard. The developer took a $20.5 million condo inventory loan from CTBC Bank for 54 condominium units in the development on February 12, 2020, 71 days after the 81,589-square-foot development received its initial TCO. The 92-unit building is 47 percent sold out with a sellout price of $73.6 million with the AG.

The longest period of time was Alpha Investment Partners’ $204 million condo inventory loan for the 68-unit development at 200 East 59th Street in Midtown East. The loan came one year and four months after the initial TCO was issued. The project is currently 10 percent sold out and has a sellout of $331.6 million.

The 12 that have not refinanced include Related Companies 870,266-square-foot condo at 560 West 33rd Street, known as 35 Hudson Yards. The development received its initial TCO on July 15, 2019, but is only currently 6 percent sold out. Also GID Development’s One Waterline Square and Two Waterline Square, located at 10 Riverside Boulevard and 400 West 61st Street, respectively. One Waterline Square, the smaller of the two buildings, is made up of 414,013-square-feet and 56 units, which are 46 percent sold out. Two Waterline Square is a 878,798-square-foot building with 160 units, which are currently 43 percent sold out. Both developments received their initial TCOs on August 8, 2019. Also JDS Development’s Fitzroy at 514 West 24th Street. The 46,793-square-foot condo received its TCO on February 7, 2020. The development’s 14 units are currently 36 percent sold out.

Others include Wonder Works’ “affordable luxury” condominium at 302 East 96th Street in the Upper East Side. The project was refinanced, obtaining a $43 million two-year condominium inventory loan on the building from Deutsche Bank, in February 2019, just before it received its initial TCO the following month. Eric Brody, Wonder Works’ principal, pre-filed the plans calling for a 69,924-square-foot building with 48-units on April 29, 2015. Even with the loan providing the developer some cushion, the project known as the Vitre, has experienced difficulties since receiving its TCO, including the financial strains of the pandemic.

Prior to the start of the pandemic, the developers reportedly tried to attract investors with bulk-buy opportunities, a tactic used to sell multiple units for discounted prices. The development has a total sellout price of $91 million, with the last sale recorded in early June for $1.7 million. It is currently 38 percent sold out, according to PincusCo figures.

Recently reports circulated that the development was facing Uniform Commercial Code (UCC) foreclosure. The report indicated that mezzanine lender Nahla Capital had retained a group of brokers to shop the mezzanine loan, although the amount was not disclosed.

George Xu’s Century Development Group, which filed plans on September 13, 2013 calling for a 201,840-square-foot luxury condominium with 100-units at 134-37 35th Avenue in Flushing, has also experienced slow sales. The Farrington, which had a target sellout price of $106 million, launched sales in mid October of 2018, after the condominium plan was accepted by the NYS AG on October 12, 2018. The initial TCO was issued nearly 10 months ago, on December 30, 2019. The building is only 18 percent sold out.

Some condominium developments are yet to record a single sale, despite reaching all of the necessary checkmarks to close sales.

Levi Balkany’s 40,573-square-foot, 46-unit condo at 308 West 133rd Street in Central Harlem and the 50,225-square-foot, 35-unit condo, Dongan Tower, at 81-05 Queens Boulevard in Elmhurst, both received their initial TCOs within one day of one another, over a year and three months ago in July of 2019, yet neither development has recorded a sale.

Balkany filed plans for the 110-foot tall, 11-story building on December 1, 2015, about a month before the developer’s $4 million purchase of the development site was recorded. The development has a current sellout price of $41.7 million, but as mentioned above, has not recorded a sale.

The Dongan Tower was issued its initial TCO 11 years after plans were filed by the developer Bo Jin Zhu in June of 2008. The development has a current sellout of $41.4 million and zero recorded sales. The new sponsor, following the sale of the development in 2018, was Tu Kang Yang.

There are other projects, such as Cape Advisors’ 30 Warren Street, that despite a slow start closing sales in a slumping market remain optimistic. Cape Advisors founder and CEO Craig Wood pre-filed plans for the 23-unit, 50,408-square-foot condominium building on September 14, 2014, and received the initial TCO for the project on August 20. The developer secured financing for the project, which has a current sellout price of $92.8 million with the AG, in 2016 in the form of a $64.8 million loan from the Bank of the Ozarks and a $19.1 million mezzanine loan from Terra Capital Partners.

Sales officially launched at the 12-story condo in June of 2016 and the development had its condominium declaration recorded in November of 2019. Since reaching all of the necessary checkmarks to close sales, the building has closed on three units.

The closings came recently, as a PincusCo analysis in August identified the development as one of 10 projects that had not recorded any closed sales through July even as the developer had recorded the condo declaration between July 1, 2018 and January 1, 2020.

Wood recently said in an interview that despite a “really challenging market right now, we were pretty measured in the product we were delivering”, and that while it might take a couple years, he believes “Manhattan will come back and do very well.”