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With sales of new condos sputtering, New York City developers have been offering an array of incentives to woo buyers. Mortgage payment deals and buyback guarantees are among the plans builders have floated in recent months, “with little indication of success,” the Real Deal reports.
However, a Manhattan firm is pitching a scheme to developers, which will offer buyers a new twist.
The company, Sirius Value Protection, is essentially proposing a price protection plan to buyers. In exchange for 20 percent of the sales price, which will be placed in a trust, Sirius says it will guarantee to buy back the unit at its original price after a set period of time.
Although the time frame is not easily found in Sirius’ promotional materials, the buy back will only be available on the 10th anniversary of the purchase, co-managing director Andrew Herzberg told Real Deal. In the first six years, real estate buyers will also have the option of opting out of the program in exchange for a cash bonus.
Credit Suisse Securities will oversee and manage the asset pool, while Wells Fargo Delaware Trust Company will act as custodial agent, Sirius said in a press release.
“The short-term fear that we are addressing is the guy who wants to buy a piece of real estate but he does not know if he is buying it for a million bucks, [whether] that is the bottom,” Herzberg told Real Deal. “I believe that we are giving the consumer ample reason to get back into this market.”
Sirius says the deal will give developers a “competitive advantage” in the market, while giving buyers an extra measure of confidence in an “unsettled market.”
“In fact, market participants should be doing whatever possible to increase consumer confidence and lender participation,” Herzberg said in a statement. “Our program, while not a panacea, could be an important catalyst to help banks get off the sidelines and begin to lend again.”
Real Deal received “mixed reactions” on the scheme when it polled industry experts. Many noted that 20 percent might be too much for margin-strapped developers to give up, while the 10-year time frame might be too long to sway buyers.
But others believe it might resonate with developers looking for anything to help pre-sell units.
“It is a wonderful marketing gimmick," Eric Zipkowitz of the law firm Tarter Krinsky & Drogin told Real Deal. “I think there will be success from sponsors with lots of units to move and really under pressure to move them.”
He doubts the plan will captivate many New York City buyers, who typically hold a property for five or six years. But it might play a role with foreign buyers, who tend to hold a property for the long haul, he said.
