Developers Turning Unsold Condos Into Rentals

Faced with a sluggish sales market in which high-priced apartments can linger unsold for months or even years, an increasing number of New York City condo developers are switching hats and becoming landlords. They view rental income as a lifeline to cover a project’s debt and other costs, such as property taxes. Renting, they tell Crain’s, will keep them afloat financially in the near term so they can sell the apartments when the market improves. 

Case in point: The Residences at Prince, the former convent at the corner of Prince and Mott streets in Nolita that was converted into seven ultra-luxury condo apartments by Time Equities. The company sold five of the seven units at prices ranging from $6 million to $12 million. But when the last two failed to sell, the company rented them – for $25,000 and $35,000 a month. 

“I guess I was surprised because that’s a lot of rent,” says Francis Greenburger of Time Equities. “We weren’t even offering them for rent, but we had a lot of people show up and make rental inquiries.” 

Meanwhile, the Magnum Real Estate Group is employing a similar strategy at 100 Barclay St., the former Verizon-owned telecommunications building that the developer converted into 156 ultra-pricey condos. Magnum said that 31 unsold units – almost 20 percent of the building – are being marketed through a rent-to-own program. Those who choose to buy after six months can credit 75 percent of the rent they paid toward the purchase, or 50 percent of the rent from a yearlong lease. Magnum has been asking as much as $24,000 a month for a three-bedroom, four-bathroom unit, according to listings on StreetEasy. 

“There’s two different ways of looking at it,” says Jordan Brill, a managing partner at Magnum. “There’s ‘Oh my God, you can’t sell and now you have to rent.’ And the other is, ‘Look, the market is in a state of paralysis, and if you have a good product that can hold its value long-term, you can take the risk and do this.’”