Alchemy Properties Inc.

Some market observers may not think of this as much of a condominium market, but the 21-year-old Alchemy Properties Inc. is continuing to develop condos in the Manhattan market as usual.

New York—This may no longer be the peak of the condominium market, but Alchemy Properties Inc. is continuing to develop condos in Manhattan at pretty much the same pace as it used to.

Alchemy’s most current condominium projects, both of which are in the process of selling out, are Isis Condominium, at 303 East 77th Street, and Griffin Court Condominium, at 95 800 10th Avenue. Another property, Hudson Hill Condominium, at 462 West 58th Street, has sold out.

Ken Horn

Many condo developers have not survived the recession, and that enables old-timers such as Alchemy, which has been in business for 21 years, to operate well in today’s New York City condo market. “There was very little housing starts in 2008-09, so there is not a lot of new condo product on the market today,” says Ken Horn, Alchemy’s president.

Make no mistake, the volume of condo sales is nowhere near where it should be, says Horn. However, the company’s condos are still selling at a clip. Condos at Isis, priced from $1.4 million to $5 million, and at Griffin, priced from $599,000 to $2.5 million, are being acquired by buyers at the rate of five to seven apartments per month, says Horn. In a hot market, the sales rate would be double that, he says. “But people are not coming in and asking for 20 percent discount anymore.” Indeed, Horn estimates that Manhattan condo prices today are only about 5 to 8 percent off peak price tags.

The main reason that there are far fewer condo developers today is simply that financing is difficult to come by. “In 2005 and 2006, anyone with an idea could become a developer because the banks were lending. That is no longer the case, which is great for us,” says Horn.

Horn says there are only four or five banks lending in the New York City market today—“It is very selective lending to a very selective group,” he notes‑and Alchemy is one of the lucky few that can still obtain financing. “These are folks we have been working with for a while…We’re happy to be one of the anointed few that can still obtain financing.”

Alchemy, a fully integrated company that also markets and builds its own projects, has developed about 26 condo properties in its history and sold over $1.3 billion in inventory. One reason Horn believes the company has been able to continue operating through the ups and downs of the economy while other developers have flailed is its consistently cautious and conservative approach to development. For example, Alchemy never bases its projections on possible market improvements that have not yet occurred. “We have not taken risks in great times, and we will certainly not take risks at a time like this,” he says.

Alchemy’s co-venture development partners include AEW Capital Management, Angelo Gordon & Co. and DLJ Real Estate Capital Partners, Horn indicates. And the company typically leverages to a maximum of only 65 percent. “Even in a strong market, we leverage to only 75 percent, and we never take on mezzanine financing.” The company always prices a little off the full market price, and the low leverage levels also affords Alchemy the ability, for example, to leave room to drop the purchase price if necessary.

Alchemy plans to continue developing about two to three for-sale condo projects a year, says Horn. “We do not like to bite off more than we can chew. We realize that development is very challenging.”