Ryan Serhant on new development deals for buyers

Host Emily Myers (00:01): This is the Brick Underground podcast. I'm Emily Myers bringing you everything you need to know about New York city real estate. Whether you have a question about co-ops or condos renting or buying, selling, or moving, or even renovating, we aim to have you covered. And if you head to our website,, we have lots of advice, explainers and analysis on the New York City real estate landscape. In this episode, we're going to take a look at new development. It's been an ongoing narrative that the city has a glut of brand new luxury condos and the pandemic has actually compounded that problem, especially as high rise apartment buildings with shared amenities lost their appeal early on in the public health crisis, and buyers were prizing privacy and outdoor space over swanky amenities. So what happens now? Some developers, those who were early on in their construction schedule managed to tweak their designs to appeal to a post COVID or perhaps mid COVID buyer. But for others, it's not so easy. I'm joined by broker, Ryan Serhant, also the CEO and founder of the real estate brokerage, SERHANT and known for his TV appearances on Bravo. Hi.

Ryan Serhant (01:09): Hi, thanks for having me.

Emily Myers (01:10): It's great to have you. So we hear a lot about high-end luxury apartments, not selling, although lower priced to new development is moving a bit faster, but even so it's going to take many months, even years for all that inventory to sell. So what's your advice to buyers who want to get a deal on new development at the moment?

Ryan Serhant (01:30): This is probably the single greatest buyer's market that I've experienced in my career. And I started in the depths of the Great Recession. I think this is a better buyer's market than 2008, 2009, because you can actually buy—it's a big difference. I had lots of buyers in 2008, 2009 and 10 when I first started, and the problem was, it was very hard to get a loan. People were afraid that they were going to lose their job. Now prices have been halved, in some instances. We are doing some new construction deals at 30% off, some at 40% off. And, you know, I think that now, because you have access to credit, that's really, really cheap. You can get a great loan from any bank if you're qualified. And because this isn't a financial crisis, right? This is a virus that has put a spike through the heart of consumer confidence, that fear is in sellers and as buyers, that's what you want. And soon, I think sooner than a lot of people realize it's going to turn around and buyers are not going to like it.

Emily Myers (02:43): So what you're saying is it's a good time to buy. I mean, obviously you have to be qualified. I mean, the borrowing is more affordable, but in fact lending has got tighter. So let's think about negotiability. It looks to me like there's more negotiability, obviously the more you're planning to spend. So sales are slower if you're spending above 2 million, is that right? But under sort of under 2 million or between 500,000 and 2 million, it is actually pretty competitive.

Ryan Serhant (03:15): Yeah. The buyer demand for what you'd call the quote unquote regular worker apartments, from somebody who lives in New York City, who's looking to buy a home and, or an investor—which is that let's say 500,000 to 1.5, $2 million price point, has never really changed. It was still even active during quarantine. And you can still get good discounts, but they're relative, right. A 10% discount off of $800,000 is a lot of money for that purchaser as a 10% discount off of $10 million.

Emily Myers (03:53): Sure. So, you know, where are the better deals then? Are they in particular neighborhoods? I mean, is Manhattan is it is now the time to get into Manhattan?

Ryan Serhant (04:00): I, I mean, we're doing deals in Manhattan that I never thought I would be able to do. There's especially in new construction. And, you know, I, want to be careful because it's, it's a big part of my business and I represent developers, but I tell every developer I work with—even the ones I'm pitching right now, as I say this, you know, I tell them—I don't work for you. I don't work for your lender, I also don't work for the buyer. I work for the deal. And if you're hiring me, you're hiring me because you want to sell homes and I'm here to sell homes and you might not like some of the deals, but we are going to sell homes. We're going to get you to a percent sold that satisfies your lender to a certain percentage, and we're going to get this project sold. Or you could sit on the market. And, you know, a lot of instances, some of these developers could lose their projects. So I think there are amazing opportunities in Manhattan right now especially at the luxury market, right? The, at the high end. There's, there's such incredible deals. What people learn, as buyers though, you just have to make offers. There's something about new Yorkers—and I don't know what it is—maybe it's because they're all too high and mighty or stubborn, I really don't know. They'll go and shop for apartments left and right, left and right, and they just won't make offers because they'll think the price is too high. Like as if they're too nervous or they just feel like, well, I wouldn't want to insult—like you, like, we're doing, you know, deals that are huge discounts off of list prices, which are hugely discounted from original pricing. You just have to make that offer. Like, you just have to go out there and make...Like my best advice to any buyers right now is if you see something you like, if you think it's still priced too high for what you want, or if you just can't afford it, who cares? Make an offer! It's New York, the best part about New York and—not a cut you off is—New York is still this weird wild, wild west place where you can show up and you can make an offer by email. See what they say, why not? There's so much inventory in new construction out there right now. You can still make good deals and you should never feel like you're going to insult a developer. It's it's all numbers to them.

Emily Myers (06:08): Yeah.

Ryan Serhant (06:08): They have no personal connection to apartment 14a. It doesn't mean anything, right? They just want to sell apartments. We get insulting offers all the time and I wish we got more. Offers to a developer are good. Right? It also helps them. Not that you would care as a buyer, but from a developer's point of view or their sales team, it's good market data for them to know that, "Hey, we haven't gotten deals done on this line in the building. And this is where all the offers are coming in. We need to adjust." And then finally, the lender or the equity partners decide, okay, fine, let's adjust—you go back to all those people. And maybe those deals are still there.

Emily Myers (06:42): So what is the standard sort of incentive package that they're offering at the moment to bring buyers to the table?

Ryan Serhant (06:48): They'll pay your transfer taxes—so that's New York state, New York city, which is on a graduated scale. So they pay your transfer tax. They can also pay your mansion tax if you ask for it. If there's parking and they're asking a price for it, you can get parking included. If there's storage, you can get storage included. You can oftentimes get a certain amount of time of your common charges paid for. So you could do a deal where they'll pay your transfer taxes, your mansion tax, and they'll pay one year of common charges. At the end of the day, it's all a net number. So you have to remember, it's not like the developer's going to pay your bills for you every month. They're not logging into your account to pay your bills. They're just going to take that number—if your common charges are $2,000—they're going to take that number $24,000 and they're going to reduce it from your purchase price. So you still have to pay the bill, but in total, you're not really paying it. Okay? But if you're borrowing the money, like you're going to have to look at the math. But those are the, those are the main ones.

Emily Myers (07:47): This time last year, we did see some extreme incentives—developers who were looking to spur luxury condo sales at the end of the year with lavish perks, including the common charges, transfer tax, mansion tax, but also there were, as I recall, gym memberships perhaps don't have quite the appeal right now, but you know, gift cards of $5,000 at Saks, is that something we're seeing this year? Or less so—buyers can see through it?

Ryan Serhant (08:13): Yeah. Buyers, see through it. But also a lot of those things don't work anymore. What we find that works best is incentivizing salespeople, right? I want agents to be excited to bring their buyers to our buildings. So let's incentivize the salespeople. So I think you'll see a little bit more of that going forward into the new year. But you're also a lot's happened this year. And so I think you're also seeing a lot more sensitivity to price adjustments from sponsors. So you're seeing more prices come down. You're seeing more leniency. You're seeing more developers who just want to get deals done—more so than ever. And so buyers should really take advantage it. Is there

Emily Myers (08:56): A COVID discount? I mean, can we put a, put a number on the percentage of, of discount we can get, buyers can get?

Ryan Serhant (09:02): Yeah, I would say a safe number is 10% depending on the project, but some projects are more and some projects are less, you know, they're like, look at the Benson on the Upper East Side on Madison. The Neftali projectlike barely even on the market—full ask, nothing, huge numbers, $35 million for a penthouse. That's not even done. Like it's like 2006 up there. So, you know, every building is a little bit different.

Emily Myers (09:33): Interesting. Yeah. And are you seeing closing credits is that's something that's being offered? This is when the seller sort of pays the buyer back in some way, or would you say that is sort of bound up in the other incentives?

Ryan Serhant (09:49): Yeah, we don't really in New York, we don't really do cash closing credits like you would in other states. Yeah. W w we'll wrap it up into closing concessions. Because closing costs here are so high it's, it makes more sense just to cover different costs than it would just to give someone money back.

Emily Myers (10:07): Okay. And actually just going back to that project, you're talking about, so who who's buying right now?

Ryan Serhant (10:12): New Yorkers. A lot of our buyers are local at all price points. They're very local people. They're local rentersand they're local or tri-state owners who see that New York is on sale, you know, especially at the luxury market. And we have a lot of renters, right? I think the 500,000 to 2 million price point is a lot of renters who decided to stay in New York, who see how great interest rates are, who've maybe made money in the market this year. They have job security. And they're saying, right, "Well, if I'm gonna stay in New York for the next five years, why am I still renting? This Is a pretty soft market. I don't think it's going to get much softer than this. Things are pretty tough here right now. Let me go take advantage." And those are a lot of our two, three and four bedroom buyers. You know, a lot of sellers are learning right now that they might not get the price they want and they're being educated. And so you see a lot of sellers on the resale side anyway, who are converting to rental, you know, who are deciding to rent out their apartments.

Emily Myers (11:08): Yeah. So if you're thinking of selling, what timeline should you be thinking about? I mean, you've mentioned that if you, if you want to sell, just get on with it and price your apartment correctly, but you know, what would be your listing goal? Are the traditional calendars still relevant, or should you be trying to coincide with a vaccine rollout? What, what, how do you, how do you guide sellers who want to move their property?

Ryan Serhant (11:33): I think more often than not a sellers are still going to wait until spring, because there's just what they're comfortable with. Right? The weather starts to get better. It's spring. That's when people are happier, but I don't think that matters anymore, especially right now. Right. You used to wait till spring because people would go away and they wouldn't be focused over the holidays. People either can't leave this year or they're away and not coming back. So anyone who's here, they're going to be here for the holidays, having Christmas, Hanukkah, new years in their apartments, and it's going to be cramped. And they're going to say, you know what enough of it let's go online and let's look at some listings, let's call up our broker, find a broker and let's go out and look at stuff. Let's see what's on the market. And if you're not on the market now, why, why wait 'til March, if you're ready to go, like it's, doesn't, you know, it's just, you're you're you should go find buyers today. They're out there, right. They're out there. And they're being aggressive because they're excited. I don't know what the market's going to be like in March. They talk about these vaccines. Sure. What if they don't work? You know, they could, hopefully they do. I don't want to be released if they didn't, but who knows? You know, who knows what could happen in the world? Things move so fast right now. I think if you're an active seller, you go to market now. Take advantage of the buyers that are out there this weekend.

Emily Myers (12:52): Sure. I should point out that we have articles on much of what we're talking about at, including the questions you need to ask when you're buying new development, comprehensive guides to closing costs, as well as information about various taxes we've mentioned. And we also have lots of information about renting and we love answering your questions. So please do get in touch either via the website or @BrickU on Twitter. I'm talking to broker Ryan Serhant or who's also the founder of his own brokerage firm. Ryan, the Democrats have the supermajority in Albany. I'm going to turn to politics now. And that is making some of the real estate community, quite jumpy. Presumably you're in conversation with developers, you know, what are they saying? What are their thoughts on the political landscape in the coming years? And how, how do you think that's going to play out?

Ryan Serhant (13:45): Yeah. Ha. Obviously the real estate business is not pleased when there's the news that Albany is getting together to create new taxes that will hurt the real estate business, right? We should not be disincentivizing people to come to New York city and spend money. And that's exactly what's happening. Especially foreigners. When foreigners come here, they pay all these closing costs, whether the developer's paying it or not, someone is paying the transfer taxes and the mansion tax, you know, the mortgage recording tax. I mean, everything is taxed on real estate. Someone's paying those monthly real estate taxes. And if we're telling those people, you shouldn't come here because we're going to tax you just for being here, you lousy part-time owner, like they're not going to come here. Then they'll come to hotels. Like they're going to, they don't need to be here. And, you know, what's the value of the investment. Then if you're just going to tax them for owning it and not even using it, it's craziness, you know, there's politicians who are saying you know, we should give New York back to the new Yorkers. We have clients moving to Wyoming where there's almost like no tax—it's craziness,

Emily Myers (14:59): But we, you know, New York has services that, that require funding.

Ryan Serhant (15:04): Sure.

New Speaker (15:05): So how does, I mean, it's a difficult and there's going to be no answers here, but you know, it is something that has to be balanced and you know, the politicians are going to go for, I guess they're going to go for real estate taxes, but, but what are you hearing from developers? I mean, are they, how are they going to they're obviously going to lobby hard against any pied-a-terre tax, but, but there's also potential for a sort of Renaissance here in New York city with people coming back. So how, how are they approaching it, do you think?

Ryan Serhant (15:38): There's lobbying against it—clearly. And they are just going to have to adapt, you know, if something like that happens, someone has to pay the tax and it's not going to be the buyer. Right. It's going to be the seller. I mean, the same way that when the mansion tax was increased, we're doing deals, but that tax was factored into the deal, factored into the price and it hurt the sellers, you know? So that increased tax, it's just, it's hurting the New Yorkers. Someone's got to pay it, I guess. And then we'll just see what happens to volume and transaction.

Emily Myers (16:08): Jonathan Miller, the appraiser from Miller Samuel says we are going to see an "unwinding" was his word? An "unwinding" when it comes to new development for the next few years. I'm assuming from that, that term that he's talking about, developers leaving the stage and reducing their footprint and adjusting to a new reality post COVID. What's your take on that?

Ryan Serhant (16:31): Yeah, I think there's always a changing of the guard. I think certain developers will unwind and not do more condo projects. They might transition to rental projects or office, or what have you, or low income or homeless shelters, you know, or leave New York city and go and build elsewhere. You know, they're developers or fund managers, they're just deal junkies. They they'll go where the deals are. But as that happens, more people come in, you know, we're, we're having pitches and conversations with people right now that have never developed in New York city ever before, but they can get good deals. And so I don't think it will be an "unwinding". I think it will be a changing of the guard, but in that change, there'll be a slow period of development. And what that'll do is it'll shrink the inventory and it'll create new demand. So I think any developer getting into it now, either in construction or buying a site and planning, they're going to be the people that were doing that in 2011 and 2012, who delivered between 2012 and 2016. Those projects sold incredibly well.

Emily Myers (17:35): So I mean but there are developers that are getting into trouble. What does that mean for buyers?

Ryan Serhant (17:43): It depends on what stage the development is in. You know, you always want to be careful and it's buyer beware New York City. So you want to do your due diligence. If you think you're purchasing into a project where you think the developer might be in trouble, where they've been selling for a while and the building hasn't sold that much, you want to really have your attorney do due diligence and look into the financials, look into the financials of the building and look into what the fail stops are. What happens if the developer can't sell another unit after you close? Like, are you going to be comfortable living in a building that gets converted to 50% rental? Most offering plans allow for that, right. They only have to sell up to 50%. Does that make you comfortable? Does that make you okay? You know, but are you getting a good enough deal where maybe it just doesn't matter? You know, it's, it's, it really, really depends. And is it a great product for you? And I think you have to think about too, how long you're going to live there. And a lot of people are like, you know, they think so short term, but I think most people should buy for 10 years. Buy and be prepared that you may or may not be there for the next 10 years if you're buying for the next year or two, it's a, it's a tricky prospect because we don't know what life is going to be like for any of us in the next year or two. But if you could be comfortable there for up to 10 when I think that the average buyer, most likely purchases and then sales within five then you should be okay, you know, a lot can happen in 10 years.

Emily Myers (19:09): Yeah. I know that getting some independent control of the board is an important step in a condo building, sort of structural and financial health health. And when the developer is very much still involved that can be a bit of a problem long-term but are there buyers, so you mentioned there are buyers who are buying in apartment buildings that are pre-construction where buildings haven't been finished.

Ryan Serhant (19:36): Yep. Yep.

Emily Myers (19:38): That's a bold move then?

Ryan Serhant (19:40): Yeah, it depends. Again, it depends on the building. Okay. It depends on the building. It depends on the developer. Do your due diligence. Research who the developer is and see what projects they've worked on. If this is their first project ever, maybe there's some trepidation there, because you just don't know because they don't have a track record. If this is their 10th building you can feel a lot better, because you know that they have the history, they have the experience and they know what they're doing. And if it's a product that you just can't find, then, you know, sometimes it's worth it, you know, to get in early, and to have the ability to possibly customize and to be the first person. That what's exciting about new construction. No one's ever touched it before. Everything's brand new, you get warranties, you get a punch list, you get to put blue tape over everything. It's a brand new car. It's a pretty cool experience to buy something brand new, that is legally brand new and we'll stay brand new for the next 12 months.

Emily Myers (20:36): Yeah. What are some of the biggest sort of misconceptions about new development that you've come across from buyers?

Ryan Serhant (20:44): I think a lot of people think that in new construction is, can be cheap, right? You are overpaying for something that has a lot of developer finish. And while I find that to be in part true in some instances, again, everything is relative. A developer can spend a significant amount of money to create quality product because they want to sell it, for as much as possible. So I think the construction quality in a lot of these buildings is really, really, really, really good. I think the other misconceptions of new construction, you know, in New York city,uare, I don't know, let me think about that one what are misconceptions? I think there might be the misconception that,uevery new construction apartment,uwill sell at a massive discount. Because that's just not true. Udon't believe everything you read. Right. And just because one apartment sells for a big discount doesn't mean all the apartments will sell for big discounts. Again, it's, it's all, it's all relative.

Emily Myers (21:45): I mentioned earlier that some developers who were early on in their construction in the spring were able to pivot what do you think the new developments that are on the drawing board at the moment will look like, and, and how will they differ from what's on the market now, bearing in mind the coronavirus, are we going to see more outdoor space, more balconies? You know, how, how is that going to trickle down?

Ryan Serhant (22:09): Yeah, I mean the hot topics right now, as we design the buildings we're working onreally come down to cleanliness and breathability, right? So and the ability to work or go to school from home. So you're seeing a lot of like infrared scanners in mail rooms, disinfectants in mail rooms that are being installed. You're finding a lot of different screens and protective layers, and front doors and freight elevator entrances. You're seeing buildings become very, very aware. So that it's really, it comes down to marketing, right? You're seeing a lot of outdoor space, so buildings that otherwise might not have balconies —there are more balconies are being added because that's a big selling point going forward. And it's also nice to have. Really activating a lot of the amenities. You know, if there's another quarantine, you know, you want to be able to work out, go to the library, get a meal, you know, everything full service goes a long, long way if you're stuck at home in an apartments you know. We're doing buildings that have gyms on roofs again—we haven't done that in a long time because why would you give roof space or the penthouse floor to an amenity?

Emily Myers (23:23): This is an open open-air gym? You mean? Or..

Ryan Serhant (23:25): Both, we're doing projects that have open air gyms as well as putting gyms on the top floor again pools on the top floor again, because it's, it's a nice amenity to have most people have fitness centers and everything in the basement these days in Manhattan. And so the ability to not work out in a dark room, but to be able to go up and get light and air is, is really, really, really nice. Uh and then apartments are being designed to also include areas to do virtual learning and areas to work from home. We've been having incentive actually one of our projects, one 45 Central Park North they'll install a built-in home office for you when you tell them where you want it. And they'll like custom design, a whole built-in desk set-up just for you. People have really responded to that, like more than anything incentive that we've done recently, because people are really spending a lot of time working or going to school from home.

Emily Myers (24:20): Wow. So it's kind of, You've perhaps answered my question, but which of New York City's sort of newest developments do you think looks most exciting or might represent New York City's renaissance after COVID? Something with a gym on the roof?

Ryan Serhant (24:35): Yeah. You know, there's a bunch of projects we're doing in Brooklyn that I can't really speak about just yet with lots of activated amenity space where you'd actually want to be quarantined in these buildings. And things that are are selling right now...we have a project that people are very excited about, and it's not on the market yet at 101 West 14th street, it's designed by ODA it's right on the corner of 6th and 14th. And you can see it from the street, which is why I think people are so excited. You know, a lot of the rooms have 20 foot ceilings. And if you're quarantined at school or working from home, you know, in an eight foot ceiling or nine foot ceiling—your room starts to feel kind of tight, but if you have a 20 foot ceiling, all of a sudden that volumemetric square footage becomes incredibly valuable, you know and the ability to have separation is really, really nice.

Emily Myers (25:28): So you mentioned Brooklyn. I mean, going forward can new development in perhaps long Island, city and Brooklyn hold its own against falling prices in Manhattan?

Ryan Serhant (25:37): Brooklyn and long Island city have stayed pretty strong. The buyer base has not waned as much as it has in Manhattan. Our, our most active market throughout quarantine from March to June was in long Island city, our projects there at Hero and at The Prime, which is the Trader Joe's building, where Trader Joe's is going very active.

Emily Myers (25:59): Is that because it was cheaper?

Ryan Serhant (26:02): Yeah. But long Island city is cheaper. It's in part price point in part access to outdoor space, air. In both of those buildings, you have great private and common outdoor space, roof decks, cabanas, balconies, everywhere, left, and right. It's, you know, not as enclosed as, you know, a building would be in Manhattan, let's say they have good view exposures, good access to light and air. So strange. I, when I first started the sales that I was doing in 2009 because it was so hard to sell in Manhattan all my sales were in we're in long Island city, it was the place where buyers went to first. And it's kind of like that's what we saw in the spring, you know, Long Island City kind of came back first, then it trickled down into Brooklyn and then Manhattan is slowly now coming back around.

Emily Myers (26:50): Amazing. Okay. So just to end then what's your forecast for 2021 for buyers and sellers?

Ryan Serhant (26:57): I 2021, I think we will—and I don't think I'm the only one who thinks this— I think there's very, very, very large pent up demand for housing in New York City. I think a lot of people who left are gonna come back and they're not to want to rent. Right? They're gonna want to take advantage of what they think is probably still a soft market. What that's going to do is that's going to soak up a lot of inventory. And I think that we're going to go back to having the lines outside. And we're going to go back to having bidding wars. I'll tell you, I, for the first time in like five years we're in the middle of three bidding wars right now. I know we had to, I had to dig in through my files to figure out how do I even call for a best and final. I haven't done that in such a long time.

Emily Myers (27:42): Is this under 2 million though? Or, or, or were you talking about over $2 million?

Ryan Serhant (27:48): One is under $2 million. The others are over—one is $2.5 million. One is $1.5 million. One is $4 million and it's, it's pretty wild. Take advantage of the market right now because you will regret it if you miss it,

Emily Myers (28:04): How long have they got? So I'd say, I don't know, probably four months.

Emily Myers (28:11): All right. On that note, we'll leave it. Ryan, thank you very much.

Ryan Serhant (28:14): Thanks for having me.

Emily Myers (28:16): That's Ryan Serhant, broker and founder of the brokerage, Serhant. I'm Emily Myers. The Brick Underground Podcast is produced by myself and Jenny Falcon. Terry Rogers is our executive producer. Thank you for listening.