Shanghai Municipal Investment (SMI), the state-run infrastructure firm best known for developing China’s tallest building, has confirmed a $3 billion joint venture with New York’s Extell Development to build a 95-storey tower on Manhattan’s Billionaire’s Row.
In a joint announcement on Thursday, SMI and Extell revealed plans to build the 1,550 foot (472 metre) Central Park Tower, a mixed residential and commercial project at 225 West 57th Street, fronting on New York’s Central Park, in one of New York’s most exclusive neighborhoods.
The project, which SMI is making through its American subsidiary SMI USA, is the third major investment in the New York market for the Chinese firm behind the Shanghai Tower, and comes at a time when other projects on Billionaire’s Row have faced slowing sales. Mingtiandi covered reports of the partnership one week ago.
SMI and Extell to Build New York’s Tallest Tower
Despite the tightening market SMI is teaming up with Extell to build what the partners say will be the second-tallest building in New York and the highest residences in the western hemisphere, once Central Park Tower tops out. “We are excited to be able to participate in the development of the tallest residential tower in New York City, on a conservative high return basis,” said Tom Tao, President of SMI USA.
Scheduled for completion in 2019, the supertall tower would be an encore for Extell, which kicked off a new era of excess on Billionaire’s Row when it began sales of condos at its high-end One57 in 2011. Among the New York developer’s biggest customers at One57 were mainland tycoons, including Chen Guoqing, the brother of HNA chairman Chen Feng, who spent nearly $100 million buying two units in the luxury tower.
“This strategic alliance with SMI brings together two international industry leaders with a track record of creating iconic global skyscrapers. SMI has developed the tallest building in Shanghai and we look forward to our partnership as we jointly develop the tallest building in New York City,” said Gary Barnett, founder and CEO of Extell. SMI’s 128-storey Shanghai Tower officially opened last year, but has yet to be formally approved for occupation due to safety concerns.
“We believe the superb location, views, design and quality of Central Park Tower will make it the most important residential building ever to be built in New York City and expect it to be a great success for Extell and SMI,” Barnett added. In the joint statement, the two companies indicated that SMI had invested on preferred basis and was expected “to receive a return of 20 percent to 30 percent per annum over the course of the project.” The amount that SMI is investing was not revealed.
The partnership is employing international architecture firm Adrian Smith + Gordon Gill Architecture, whose credits include the world’s current tallest building, the Burj Khalifa in Dubai, as well as the future tallest building – the Kingdom Tower in Saudi Arabia – to design Central Park Tower. Under plans approved earlier, the 95-storey tower was to include seven storeys of retail, anchored by a Nordstrom’s department store, as well as four floors devoted to a hotel. The remaining floors of the supertall would provide 182 condo units.
Slowing High End Sales Could Challenge Central Park Tower
Extell and SMI plan to launch sales of condos in their new supertall, superexclusive project later this year, but could find the market challenging.
Although early sales at One57 were brisk, recently things have slowed down, with Extell still struggling early this year to sell off the last 22 units in the building. The developer went so far as to spend $1 million to fit out a single unit in the hopes of enticing a buyer, according to a report in the Wall Street Journal. Barnett’s company also signed up brokerages Douglas Elliman and Sotheby’s to help sell the upscale condos after several years of in-house marketing.
While partnering with SMI, which is also the parent firm of Shanghai-based development giant Greenland Group, could help put the project on the radar of mainland buyers, the potential for pumping up sales via a China connection may also be waning.
Sales of US homes to Chinese buyers (including residents of China, Hong Kong and Taiwan) dropped to $27.3 billion in the 12 months ending March 30th this year, down from $28.6 billion in the previous period, and the first time that the figure had moved downward since 2011, according to data from the National Association of Realtors (NAR)
And while state-run giants such as SMI should have no problem funding overseas projects, a range of informal capital controls imposed by jittery mainland authorities could make it tough for wealthy individuals in China to buy luxury flats in New York. Although concerns over China’s declining yuan have made dollar denominated assets more attractive than ever, difficulties in moving money out of the country helped to reduce the number of US homes sold to Chinese buyers from 34,327 in the 12 months that ended to March 31st, 2015, to just 29,195 in the period ending March 31st of this year.