Luxury NYC Condo Project Battles Market Realities

Designed by the Pritzker Prize winning French architect Jean Nouvel, the 23-story building at 100 Eleventh Avenue in Manhattan has the vision to become one of the hottest addresses in New York.  Unfortunately, where a few years ago the same project may have sprung up effortlessly, the 100 Eleventh building sits nearly a year behind schedule and some $50 million over budget, a half-finished testament to the struggles in the market today.

Developers Craig Wood and Curtis Bashaw know that their company, Cape Advisors Inc., is under the gun to refinance its construction loan in the midst of pouring concrete, or it will risk the possibility of having to halt work next month according to several people familiar with the project.  A Cape spokeswoman says that there is "huge interest" from potential investors. The developers could strike a deal with new investors as early as Friday, according to two people familiar with the deal. But that unnamed capital source is expected to get a 25% return, slashing into profits Cape hoped to see from the project, these people say.

Internal project documents reviewed by The Wall Street Journal paint a troubled picture. Cape Advisors, like many real-estate developers, failed to keep costs down amid construction problems and sprung for even more lavish fixtures and finishing touches midway through development.  As costs mounted, Cape Advisors tried to raise money by replacing its $110 million construction loan from iStar Financial with a $126 million loan from condo specialist lender Corus Bank. But the Corus deal didn't gel, forcing Cape to look for more equity from outside investors. Cape has put in $19 million in cash as equity in the project, according to documents. Representatives for Corus declined to comment.

Making matters worse: the Manhattan real-estate market has begun to shown signs of weakness, according to Miller Samuel Inc., a market-research firm.  Inventory of condos and co-ops are up 37% in July from the year before, and Jonathan Miller, Miller Samuel's chief executive, says market prices are "moving sideways," and he is concerned about how the market will perform in 2009.

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