At the View at EastCoast, in Long Island City, just across the East River from Manhattan, Rockrose is offering — at least to the next batch of buyers who step up to sign contracts — a promise to buy back apartments in five years at 110 percent of the sales price.
“I believe in the product, I believe in the marketplace, I believe that value will increase and I am willing to put my money where my opinions are,” said Kevin P. Singleton, a senior vice president at Rockrose.
The View at EastCoast, an 18-story glass condominium tower at 4630 Center Boulevard, is the third of seven Rockrose apartment towers planned along the river in what used to be a 22-acre industrial area of Long Island City near the well-known Pepsi-Cola sign facing Manhattan.
The first two towers were rentals, and after apartments at the View went on the market last summer, 18 out of 184 went into contract. But then in the faltering economy sales stalled, despite the Manhattan skyline views, the 30,000-square-foot terrace and pool, the high ceilings, the white oak floors, and the quick commute on the No. 7 line.
Now, with the building just about finished, an amendment approved by the state attorney general last month offers a five-year “buyback guarantee” to buyers who sign contracts before the sponsors declare the condominium plan effective (after at least 15 percent of apartments go into contract to residential buyers).
Under the guarantee, on the fifth anniversary of the closing, buyers will have 90 days to return their apartments to Rockrose for 110 percent of the purchase price. However, the buyers will have to pay all closing costs, including transfer taxes and the sponsor’s legal fees.
The amendment also introduces other concessions to buyers, including a mortgage contingency clause, and the possibility of five years of sponsor financing for purchase. In addition, buyers who sign up before the plan becomes effective are entitled to a free parking space for the next five years in a lot built by Rockrose just across the street.
Once the plan is effective, and buyers begin to move in, the sponsor could continue to offer the buyback guarantee, or rent some units and gradually sell them off as the market improves.
There is a catch: "Buyers are warned under the amendment that 'no bond or other security' has been furnished to make sure the developers honor the pledge."
Seems like Rockrose is betting pretty confidently that, 5 years out, the NYC real estate market will show at least a 10% gain on current prices. This seems likely based on the history of real estate prices in Manhattan in particular, and could be a good strategy to counteract the collective anxiety that is now permeating all markets. At the same time, and this is possibly informed only by the current collective anxiety, I am wondering whether this real estate bust seems different than others - given that its precursor was a housing bubble hoisted by real estate loans themselves. Given Rockrose's experience in real estate development, the vote of confidence does counteract some of the anxiety. But the promise also seems like a 110% guarantee of a lawsuit in 5 years.
[Meredith R. Miller]