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From Realdeal -
A partially built condominium in Manhattan’s Financial District cuts a melancholy figure on an overcast Saturday in August. The front of the building, an exposed checkerboard of unfinished apartments, stretches 912 feet upward into a fog of gray cloud. Two security guards mill about on the deserted pavement opposite.
Construction at [125 Greenwich Street] has been stalled for months, and the developers, a group that includes Davide Bizzi’s Bizzi & Partners and Howard Lorber’s New Valley, are on a mission to see it over the finish line.
That may be tricky: The project is deep in debt, and two foreclosure actions filed before the pandemic hang over it. Sales were expected to begin closing by June 30. When that didn’t happen, Michael Feldman of Romer Debbas said, four of his clients who had bought units in the building took the developers up on an offer to rescind their contracts.
The luxury development, with 273 units priced between $1 million and $6 million, is one of many in Manhattan that launched sales after the heady days of the condo boom passed, adding to [a glut of high-end properties] across the city.
Though Manhattan’s depleted luxury market is beginning to flicker with small bursts of activity, it may not be enough to save some projects from becoming distressed. That’s especially true for projects that struggled before the economic crisis.
When the pandemic froze Manhattan’s luxury market in March, it did not discriminate. Deals for properties priced above $4 million fell across the borough to an average of just four per week, according to Donna Olshan of Olshan Realty, who tracks luxury sales.
After the state allowed brokers to start showing apartments in June, luxury deals picked up to an average of 11 per week — still far from a total recovery and well below the average of 18 in 2019. The total number of luxury contracts signed in Manhattan between January and the first week of October fell 40 percent from the same period last year.
The problems at 125 Greenwich predated the pandemic. Last summer, the developers defaulted on loan payments and construction bills, [triggering a foreclosure action from United Overseas Bank, which subsequently sold the debt to investment firm BH3.
The tower at 125 Greenwich is far from alone in its woes.
Since the pandemic hit, New York state has put restrictions on initiating foreclosures and there have been several complaints filed by debtors facing UCC foreclosure auctions. In one such case, a New York judge delayed an auction from going forward because it would not be “commercially reasonable” to do so.
Still, whether because of pragmatism or bravado, some in the industry insist the crisis has separated the wheat from the chaff: If investors are looking for distressed opportunities, they won’t find those in premium buildings with stable finances, but in developments with too much debt, unrealistic pricing or crummy designs.
“As a developer and as a native New Yorker, it’s tough to see the challenges in the market before coronavirus and now after coronavirus, but in some ways it’s one of those things where the cream rises to the top,” said Evan Stein, president of development firm J.D. Carlisle, which is currently building a 199-unit condo, Madison House, at 15 East 30th Street in NoMad.
To Kliegerman, the situation feels a lot like 2008, when the financial crisis left many developers similarly exposed. “Everyone realized that the emperor didn’t have clothes on in many of these projects,” he said.
Though luxury inventory right now looks similar to what was on the market during the financial crisis — 1,600 listings in the third quarter this year versus 1,623 in the third quarter of 2008 — there is much more high-end “shadow inventory” today. Appraiser Jonathan Miller of Miller Samuel predicts the current crop of unsold new-development units across Manhattan will take 8.7 years to sell, compared to 3.5 years in 2008.
Northwind’s Eliasaf argues that the outlook this time around is more optimistic. During the pandemic, the stock market has performed well, he said, and investors have cash to spend.
“I think it’s going to be very specific,” he said. “You’ll have specific buildings, specific properties, specific owners that will have serious issues, and you’ll have others whose portfolios are more well-balanced that will be okay.”
While many of the condo market’s pain points manifested before the pandemic, what happens going forward will depend on New York City’s broader recovery.
Schools have largely reopened, and some of the wealthy residents who retreated to the suburbs have returned. But unemployment remains twice as high as in the rest of the country, and the vast majority of office workers are still working from home.
In the once-bustling Financial District, 125 Greenwich Street remains in limbo. The building, which topped out last March, was just 68 percent complete as of December, according to a financing prospectus obtained by The Real Deal . No listings are currently on the market.
“I think it was always an ambitious project, both construction-wise and pricing-wise, for that neighborhood,” said Eliasaf.
The condo is now expected to begin its first year of operation in January, according to the latest amendment to its offering plan. Whether that happens, however, is as uncertain as everything else.
In the meantime, there are plenty of investors, both private and institutional, looking for opportunity. The appeal of a distressed condo note is the value investors believe they’re getting, according to Lefkowitz.
But what is value in such a prolonged crisis, with normal life upended and the real estate market likely scrambled for years to come?
“That’s the big question,” he said.
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Have they finished the base, here?
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Work is picking up at this site again, but it is still slow paced. They are finishing building out some of the walls on the mechanical floors, probably to start installing gear like the elevators and HVAC on top floors. Many of the apartments inside are in the process of buildout as well, but again, this is all happening at a leisurely pace. From the back it looks done at least:
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How is this building not finished? This building along with many others topped out in 2019. Two years later and still not finished? This is crazy!
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I know right, so strange. I’m no developer or architect so I have no idea why the process is so slow. One Seaport, 45 Park Place, and now 125 Greenwich Street seem to have the unfinished skyscraper curse 
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all three are in development hell. 125 Greenwich is the least FUBAR of the trio so it should finish first, but who knows when at this point.
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I guess I’m too old to understand this stuff, what does FUBAR stand for?
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F—ked up beyond all recognition
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It’s actually an old-fashioned term, army GI slang from the second World War. Before our times…
But there are in fact workers on site at 125 Greenwich several days of the week. They seem to be doing mostly interior work but the operational tempo is ridiculously slow. 45 PP and Seaport are completely stalled, their developer is nonfunctional.
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I guess I’m still under a rock
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This goes back to a post clipped from Realdeal December of last year -
The problems at 125 Greenwich predated the pandemic. Last summer, the developers defaulted on loan payments and construction bills, triggering a foreclosure action from United Overseas Bank, which subsequently sold the debt to investment firm BH3.
Too much luxury product being constructed with too few buyers.
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there was also a partnership dispute with Michael Shvo who was the face of the project earlier in its development.
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A hot mess!
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