TCOs Issued for W Residences Amid Changing Manhattan Condo Market

New York–The residential portion of the mixed-use W New York-Downtown Hotel & Residences takes a step forward in the Manhattan condominium market with the issuance of temporary certificates of occupancy (TCOs). Developed by New York City-based The Moinian Group, W New York-Downtown offers an aggregate 223 full-ownership residences.

Carrying the address of 123 Washington St. in the city’s financial district, W New York-Downtown sits one block from the site of the new Freedom Tower in Lower Manhattan. The 58-story tower, designed by Gwathmey Siegel Architects, offers 159 unfurnished units and 64 furnished units, along with 217 hotel guestrooms. The 400,000-square-foot property also features a fitness center and a restaurant.

Indeed, general condominium sales, after plummeting as a result of the financial crisis and credit crunch, are slowly but surely picking up in Manhattan. After a staggering decline following a mid-2007 peak, sales have been on the rise for the last three quarters, according to statistics from real estate appraisal and consultant firm Miller Samuel Inc. From the fourth quarter of 2009 to the second quarter of 2010, the number of closed transactions increased from a respective 1,209 to 1,237 to 1,553. However, the news isn’t all good. Numbers in the new development segment of the general condo market tell a different story. New development closings represented 22.6 percent of total condo sales during the second quarter. “We’re seeing activity fall in new development,” Jonathan J. Miller, President and CEO of Miller Samuel, tells MHN.

Manhattan’s shadow inventory phenomenon is an issue in the market, according to Miller. Shadow inventory is created when a developer puts, say, 50 of 200 units on the market to create the appearance of a constrained supply. As sales come in and they run low on units, the developer dips into the inventory, but if the first 50 don’t sell, that leaves 150 in limbo and the developer can’t rent them out because they don’t want to write down the value of the asset. “It’s the ‘pretend and extend’ phenomenon; both developers and lenders are holding out until things turn around,” he says. “You delay as long as you can, until you’re pressed to make a decision. It’s also called ‘pray and delay’ and I’ve also heard ‘a rolling loan gathers no loss.’ ”

With the credit crunch still in play, it appears it will be a while before new-development condo sales catch up to condo resale transactions. “Part of the problem is pricing; overpriced units weed out the buyer, but even if a unit is priced correctly and the buyer wants it, the buyer can’t get a mortgage,” Miller notes. “Until there’s a secondary market established for jumbo mortgages and a modest easing of underwriting in general for new development, it’s going to be a long road to recovery for new development.”