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Freebies not enough to clear Manhattan's luxury condo inventory

Developers recognise it's a buyers' market and are offering incentives and negotiable prices

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Developers built several pricey condos across Manhattan, all aimed at the world's wealthiest investors, resulting in an oversupply of lavish properties at a time when those buyers were disappearing.

New York

NEW York-based real estate developer Extell Development gave Israeli investors a peek into how well its condos are selling in New York, and the takeaway from that was clear: When trying to offload luxury apartments, throwing in concessions helps, but it's not enough to clear inventory in a market full of high-priced competition.

At The Kent, an Upper East Side building where Extell offered to pay up to five years of buyers' common charges, five apartments sold or went under contract in the third quarter, going by a filing on the Tel Aviv Stock Exchange, where the developer sells debt.

That was the most for a three-month period since the corresponding quarter last year, when seven homes at The Kent found buyers.

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The deals left 51 condo units up for grabs at the 83-unit building on 95th Street and Third Avenue, where sales began in 2016.

Current listings at The Kent range from US$4.3 million for a three-bedroom unit with 1,959 sq ft of space, to a 3,115 sq ft penthouse seeking US$11.9 million.

The market has changed since 2012, when Extell's One57 tower in Midtown reached over US$1 billion in purchases in six months, touching off the city's luxury construction boom.

Extell followed that Billionaires' Row success with more pricey condo projects across Manhattan, all aimed at the world's wealthiest investors.

Other developers had the same idea, resulting in an oversupply of lavish properties at a time when those buyers had all but disappeared.

Even Extell's lower-priced luxury offerings are struggling to find an audience. At One Manhattan Square on the Lower East Side, just 202 of the project's 815 units were spoken for as of the end of September, the filing shows. Sales started four years ago.

In that building, Manhattan's largest new condo tower, Extell has tried several experiments to lure buyers, including allowing them to rent a unit while having their monthly payments go toward an eventual purchase.

Another programme allows takers to put down a 10 per cent deposit and live in their apartments for free - not including utilities - on condition that they take ownership within a year or forfeit their money.

Extell had also offered to waive buyers' common charges at the property for up to 10 years. That programme ended in July, around the same time The Kent ended its common-charges perk, the company said.

At One Manhattan Square, 75 units sold or went under contract in the third quarter, the filing showed.

Extell CEO Sush Torgalkar said: "We recognise that it is a buyer's market, so we have been responsive by offering incentives and some price negotiability.

"As a result, buyers are taking advantage, and we have seen sales velocity increase across all of our properties."

At One57, Extell is still selling units, offering discounts as it competes with some former buyers who are listing their apartments for resale.

The developer sold four homes in the building in the first quarter and had 27 remaining as of Sept 30, according to the Tel Aviv filing. There were two additional sales so far in the fourth quarter, said StreetEasy. BLOOMBERG