Who's at the Table?

Many things about the real estate development business don't make sense to me. But one of the most puzzling things I see is the buildings that should have never been built, or the projects should have become something else. The buildings who become a blight on our landscape.?

Getting a building up in New York City takes a lot of work. Land has to be bought, and then the project needs to be financed, designed, approved, built, and finally sold to buyers. One would think that before embarking on such a long and expensive road, a developer would assemble a sound business model (and team).?

Walking around Manhattan, you can see a graveyard of projects that managed to get through the beginning phase but never successfully made it to the finish line. A "successful" project should take about seven years from inception to completion. A year or two to design. Two years to get out of the ground. And three years to sell.?

Every failed, stalled, or underperforming project is a result of either...?

a) too expensive

b) poor planning

c) both a and b?

It's that simple. ??

Fixing a) is easy. If it's too expensive, a developer will know this because they will get lower offers from the market. The real estate market is self-correcting. At that point, they need to lower prices to meet the market, and the project will sell.?

Fixing b) is a little more challenging. If the project was planned poorly, it might never sell. Our city is littered with these. Projects that built the wrong thing for the block or neighborhood sit for years, collecting dust.?

The success of a project lies in the planning. If a developer sits at the design table with someone connected to what buyers and who knows what they will want three years in the future, they will succeed. There's a reason why a mid-block project in a slightly worse location is currently selling faster and for $800 PSF more than a project a block away in a better location. It's not luck. It was the planning.?

Ten years ago, a developer and sales team launched what might be one of the whackiest projects in the history of Manhattan Real Estate condos. The design/marketing team and developer thought it would be a good idea to create homes where each apartment had a private swimming pool - in the apartment (adjacent to the living room). It was a building of 31 homes - most with a private indoor/outdoor swimming pool.?

The project understandably got some press when it came to market. Two weeks after launch, the exclusive agent (falsely) announced to his almost 1M followers on his Instagram feed that he had sold the building out in two weeks.?

Eleven years later, only 16 of the 31 units have been sold.

Go figure. People in NYC don't want to have a private swimming pool in their living room. The sad part of this story is that this could have and should have been a successful project. If only the developer had invited someone to sit at the design table with the architect who had actually sold apartments.?

It was reported in The NY Post last week that 45 office buildings in Manhattan have been identified as slated to be converted to residential use. This is the beginning of what I predict will be a very competitive market, and I expect to see the condo pipeline grow. Let's hope it brings many winners to the market where living rooms are bigger, and swimming pools are kept in the basement or roof.?

But it all depends on who's sitting at the table...

Side Bar:

I'm sharing Jesse Itzler's newsletter message this week because...

It's a trick, and it works like magic.

Here it is. "Do something nice for someone, and don't tell a soul about it. Nobody. Not your mom, your boyfriend, your girlfriend, the guy behind you at Starbucks, nobody. You can't tell anyone or the magic doesn't work."

Let's do this!?

Shaun