Some condo projects are better than others. After reading a story in the New York Times, I can safely say that the worst condo project in the country is not in Austin.
For the bargain price of $1,300 per square foot, you could own a piece of the Sheffield57, a 50-story condo conversion project on the west side of manhattan. At more than $400m, the original building purchase (prior to conversion) is supposedly the most expensive residential building sale ever. With the completion partially complete, you could own a $7M unit with $6,000 in monthly taxes and fees in what may be the worst condo project in the country.
How bad can a condo project be? Here are some facts about the project:
– One of the developers is accused of siphoning off $50m in development funds for personal use
– In retaliation, another developer hit the first developer in the head with a metal ice bucket during “a rather intense business meeting”. He was arrested and charged for harassment and pleaded guilty. He was sentenced to community service.
– After 2 years of marketing, only 40% of it’s 597 units have been sold
– The condo owners are suing the developers
– Rental tenants (who have lived in the building since before it was converted) are suing claiming improper eviction and failure to maintain the building
– The developers are suing each other
– Unpaid contractors have placed liens against the individual units.
– The State Attorney General has halted future sales in the building
– The developers are in default on $100 million in loans
– The lenders are preparing to foreclose on the developers
– The developers failed to pay $5.4 million in common charges for the hundreds of units that they still own
– Tenants have reported severe structural defects including collapsed ceilings, extensive water leaks and damage, and asbestos contamination
While no project is perfect, Sheffield57 offers an important lesson to condo buyers. Condo projects are not always completed as marketed. The track record of the developers, their ability to meet their commitments, and the ability to deliver a quality product will determine the final value of a condo unit. While most projects turn out well, it’s important to complete due diligence on the developers and commercial lenders. However, like any other speculative project, condo developments come with speculative risks that are difficult to completely eliminate.