4 ★ † FINANCIAL TIMES Thursday9 April 2020
York — whether it’s complete or almost
complete or partly complete — it’s in the
same boat right now: it’s frozen,” said
Kevin Maloney, whose Property Mar-
kets Group is one of 111 West 57th’s
developers.
Mr Maloney, a veteran developer, has
navigated the savings and loan crisis of
the late 1980s and early 1990s, the Sep-
tember 11 terror attacks and the 2008
financial crisis. He believes that buyers,
developers and lenders will eventually
have to find common ground — but only
after the full extent of the crisis has
become clearer.
Just down the street from 111 West
57th is another super tall building
known as Central Park Tower that rep-
resents one of the city’s biggest luxury
property bets.
The tower boasts 179 units, which its
developer, Extell Development, was
struggling to sell even before the crisis,
according to brokers.
Extell declined to comment on the
pace of sales. Last week, it made a subtle
but possibly telling move when it pub-
lished some listings for the building on
its website. Typically, such high-priced
sales are handled privately.
“They’re getting desperate,” a broker
said.braved the market in hopes of nabbing a
bargain, according to Ms Katzen. But
many others stayed away, she acknowl-
edged. “People follow people,” she said,
“and it doesn’t feel good to be spending
money right now.”
For developers, who are typically
highly leveraged, the inability to com-
plete construction or close deals could
spell doom: sales contracts typically
contain clauses that allow buyers to
walk away with their deposits if a build-
ing has not been finished by a certain
deadline. That is known as the “outside
date”, and enforced by the New York
state attorney-general.
Even before coronavirus, several New
York luxury projects were years behind
schedule. Shortages of labour and
equipment created by the building
boom slowed construction, as did the
complexity of erecting the new genera-
tion of “super tall” towers that have
reshaped the Manhattan skyline over
the past decade.
One such project is 111 West 57th,
where prices for the 46 units run from
$17m to more than $50m. Barring an
extension, its outside date is weeks
away, according to people briefed on the
matter.
“Just about any luxury condo in NewBut with March came the lockdown to
curb the spread of the virus, with New
York halting all but essential construc-
tion. It also banned property viewings.
That restriction was subsequently lifted
— although few sales agents or apprais-
ers have shown much inclination to risk
their health in the midst of a pandemic.
If they have the means, many have left
the city for second homes elsewhere.
“You’re not allowed to build andyou’re not allowed to sell... so things
are going great!” one property executive
quipped.
Garrett Derderian, the author of the
Core report, said sentiment was likely to
deteriorate as gross domestic product
and jobless numbers were reported in
April and May. Ultimately, he said, the
duration of the crisis would determine
the extent of the damage. “It’s the mil-
lion-dollar question: How long will this
last?”
A few opportunistic buyers haveo n e N e w Yo r k d e ve l o p e r p re -
dicted. Others remain hopeful the pan-
demic will soon subside and the market
will rebound with pent-up vigour later
in the year.
In the meantime, many typical buyers
of luxury condominiums have them-
selves been hit by the market turmoil.
One prospective buyer of a co-operative
apartment on the Upper East Side had
their offer rejected in recent days,
according to several brokers, after their
finances no longer satisfied the co-op
board’s standards.
The virus struck ust when Newj
York’s luxury market appeared to be
regaining its footing after a years-long
slump brought on by a glut of supply, as
well as the disappearance of Chinese
and Russian buyers due to geopolitical
tensions.
Developers were also grappling with
an increase last year in the city’s so-
called mansion tax, as well as other tax
changes. Several lowered prices in the
fourth quarter by 10 per cent or more
and activity shot up in the new year.
The overall number of sales in Man-
hattan in February was 54 per cent
higher than a year ago, making it the
strongest February since 2010, accord-
ing to Core, a New York realtor.J O S H UA C H A F F I N— NEW YORK
Frances Katzen, one of New York’s top
luxury property brokers, had made a
brisk start to the year. Then, coronavi-
rus struck.
Within weeks, Ms Katzen saw $80m
in sales evaporate as the pandemic put
the city on lockdown. She has since
regained some of those, including a
$20m deal for a downtown penthouse
that closed last week. But most buyers
have fled.
“The sky has fallen,” said Ms Katzen, a
residential broker at real estate agent
Douglas Elliman. “We’re there.”
For New York developers, the dread is
that a prolonged pandemic shutdown
will not only scare away potential buy-
ers but also prompt those who have
already agreed deals — but not yet
closed — to walk away. That, in turn,
could cause lenders to seek recourse as
developers fall behind sales milestones
spelt out in their loan agreements.
“There’s going to be a world of pain,”
L AU R E N F E D O R— WASHINGTON
Bernie Sanders has pulled out of the
Democratic presidential race, paving
the way for Joe Biden to be the party's
nominee to challenge Donald Trump in
November.
Mr Sanders, 78, told staffyesterday he
was suspending hiscampaign, before a
livestreamed address to supporters
explaining his “very difficult and pain-
ful decision”. “If I believed we had a fea-
sible path to the nomination, I would
certainly continue the campaign. But it
is just not there,” he added.
The Vermont senator suggested the
coronavirus crisis ad tipped his hand.h
“As I see the crisis gripping the nation,
exacerbated by a president unwilling or
unable to provide any kind of credible
leadership and the work that needs to be
done to protect people in this most des-
perate hour, I cannot in good conscience
continue to mount a campaign that can-
not win and which would interfere with
the important work required of all of us
in this difficult hour,” he said.
The way is now clear for Mr Biden, 77,
to be the Democratic party’snominee.The former vice-president had a near
insurmountable lead in therace, with
1,217 delegates to Mr Sanders’ 914, after
a series of primaries and caucuses in
February and March.
Mr Biden congratulated his rival yes-
terday, saying he had not “just run a
political campaign; he’s created a move-
ment”. In a direct appeal to Mr Sanders’
supporters, the former vice-president
said: “I see you, I hear you, and I under-
stand the urgency of what it is we have
to get done in this country. I hope you
will join us. You are more than welcome.
You’re needed.”
Mr Biden had parlayed a near-
point victory in the South Carolina pri-mary to sweeping wins on Super Tues-
day on March 3 and subsequent contests
on March 10 and March 17, cementing
his frontrunner status and closing the
door on the possibility of Mr Sanders
facing Mr Trump in November.
Mr Sanders congratulated Mr Biden
yesterday, saying he would work with
the former vice-president “to move our
progressive ideas forward”.
But he stopped short of endorsing Mr
Biden, and said he would stay on the bal-
lot in remaining primaries to amass “as
many delegates as possible at the Demo-
cratic convention” to “exert significant
influence over the party platform”.
Mr Sanders insistedyesterday that hiscampaign had “won the ideological
struggle”. “A majority of the American
people understand that we must raise
the minimum wage to at least $15 an
hour, that we must guarantee health-
care as a right to all of our people, that
we must transform our energy system
away from fossil fuel, and that higher
education must be available to all
regardless of income,” he said.
Mr Trump esponded to Mr Sanders’r
departure from the race on Twitteryes-
terday, saying: “Bernie Sanders is OUT!
Thank you to Elizabeth Warren. If not
for her, Bernie would have won almost
every state on Super Tuesday!”
Janan Ganesh age 17pL AU R E N F E D O R— WASHINGTON
L AU R A N O O N A N— NEW YORKTop Democrats on Capitol Hill have set
out a series of demands for small busi-
nesses, hospitals and state and local
governments, as lawmakers get ready
for a fresh round of negotiations on
how to provide billions of dollars of
stimulus to Americans struggling to
copewiththecoronaviruscrisis.Nancy Pelosi, the Democratic speaker of
the House, and Chuck Schumer, the
Senate’s most senior Democrat, said in a
statement yesterday morning that
Democrats wanted “interim emergency
legislation” to include $250bn in assist-
ance to small businesses, half of which
would be channelled through smaller,
community-based lenders.
Ms Pelosi and Mr Schumer called for
an extra $100bn for hospitals to buy
personal protective equipment and
expand testing capacity, as many have
struggled to source gear for doctors and
nurses dealing with an influx of
Covid-19 patients. They are also seeking
$150bn more for state and local govern-
ments — to help with increased spend-
ingas they try to slow the spread of the
coronavirus, as well as lost revenue —
and a 15 per centrise in food stamp ben-
efits for low-income Americans.
Their list of demands came a day
after Steven Mnuchin, the US Treasury
secretary, said he had spoken to Repub-
lican and Democratic congressional
leaders aboutsecuring $250bn o fundt
loans for small businesses, on top of the
$350bn already allocated in the$2.2tn
economic relief package igned into laws
by US President Donald Trump last
month.
The scheme allows small businesses
to receive loans backed by the Small
Business Administration and keep the
money if they retain the bulk of their
workforce. Since the programme
launched last Friday, however, lenders
and the SBAhave struggled o keep upt
with demand.
Bank of America andJPMorgan Chase
have had requests for more than $40bn
in loans, from a combined 620,
small business customers. Wells Fargo
has shut to new applicants aftergetting
requests or more than $10bn as of Sun-f
day evening. Banks are expecting
another surge of demand later this
week, when independent contractors
and sole traders will also be eligible to
apply for funding.
Mitch McConnell, the Republican
Senate majority leader, did not immedi-
ately respond to the Democrats’
demandsyesterday. But Republicans
are likely to take issue with the Demo-
crats’ calls for extra funding outside the
scope of the existing SBA scheme.
On Tuesday, Mr McConnell said Con-
gress “needs to act with speed and total
focus to provide more money for this
uncontroversial bipartisan pro-
gramme”.
He said he wanted further funding to
be approved by unanimous consent or
voice votetoday.
Lawmakers are already talking about
a fourth bill that would provide more
money toUS businesses and families,
beyond the interim funding being
debated this week.A N D R E W E N G L A N D— LONDON
H E BA SA L E H— CAIRO
Fewcountriesactedfasterormorerad-
ically to contain the coronavirus out-
breakthanJordan.
National defence laws typically
reserved for times of war were invoked.
Soldiers were dispatched to main high-
ways, a curfew was imposed and all but
essential travel was banned between the
Arab state’s 12 governorates. All this
took place when the kingdom had
reported fewer than 70 confirmed cases
of Covid-19 and had suffered no deaths.
The draconian measures were wel-
comed, analysts said, by an anxious
population worried by the spread of the
virus — the number of confirmed cases
in the country of 10m people stood at
349 yesterday.
But now, with the curfew extended
indefinitely and people allowed to leave
their homes only on foot to buy essential
goods, some are starting to worry about
what comes next in a country that is
already grappling with debts approach-
ing 100 per cent of gross domestic prod-
uct, widespread joblessness and limited
financial firepower to help cushion the
economic shock.
“I’m not sure how we are going to get
through this after this virus is contained
— we will wake up to some harsh eco-
nomic reality,” said Ibrahim Saif, a
former minister and chief executive of
the Jordan Strategy Forum, a think-
tank.
“The lives of people are the most
important thing, but you cannot let
your economy freeze like other coun-
tries are managing to do... we cannot
afford to freeze the whole economy.”
It is a dilemma that middle-income
nations across the Arab world face in a
region already blighted by the planet’s
highest youth unemployment. All coun-
tries have introduced varying degrees of
lockdown, but while Saudi Arabia and
the United Arab Emirates, the region’s
big oil exporters, have unveiledsupport
packages worth tens of billions of dol-
lars, countries such as Jordan, Morocco,
Tunisia and Egypt have been able to
offer only minimal relief to businesses.
The result is that much of the Middle
East is likely to become more dependent
on international support.
Jordan last month secured a $1.3bn
loan from the IMF, part of a package
negotiated before the outbreak but
which was adjusted to help it deal with
the pandemic. Tunisia has also
requested IMF assistance, while thefund is making a “liquidity line” of up to
$3bn available to Morocco. Algeria, Iraq
and Lebanon, which was grappling with
its worst economic crisis even before the
outbreak, are also “exploring” assist-
ance from the fund, Jihad Azour, the
IMF’s top official for the Middle East,
told the Financial Times.
“We are in one of the most challenging
crises historically, in terms of magni-
tude and complexity. This time, our
region is unfortunately at the forefront,”
said Mr Azour.
The collapse in tourism alone is likely
to reduce GDP this year by 2 per cent to 3
per cent in Jordan, Egypt, Morocco and
Tunisia, according to Capital Econom-
ics, an independent research group.Remittancesfrom the oil-rich Gulf and
Europe, another vital source of foreign
currency, are also expected to plunge.
“Is what the fund and the [World]
Bank and other institutions are going to
offer going to be enough? Maybe not,”
said Mr Azour. “This is where the inter-
national community needs to step up.”
In Egypt, which has been the Middle
East’s best-performing economy since
the government introduced eformsr
tied to a $12bn IMF loan in 2016, inves-
tors have withdrawn between $7bn and
$9bn from the country’s debt and equity
markets since the start of the coronavi-
rus crisis, a senior banker said.
The Egyptian authorities are among
those in the region that have sought to
achieve a balance between early action
to contain the spread of Covid-19 and
avoiding freezing economic activity in a
nation of 100m people where many
have no savings and survive day to day.
Even as he admonished citizens to
observe social distancing and stay at
home during a night-time curfew, Egyp-
tian prime minister Mostafa Madbouli
said construction on state mega-
projects would continue at full steam.
Prominent Egyptian businessmen
have riticised the partial lockdown,c
warning of the mpact on the economy.iUS politics
Sanders suspends presidential campaign
Move opens way for Biden
to be Democratic nominee
to challenge Trump
Emergency aid
Democrats
demand
further
funding for
small business
Property. xury apartmentsLu
New York developers braced for ‘world of pain’
Fears that prolonged outbreak
will scare buyers away and
prompt banks to call in loans
High life: ‘super tall’
towers dominate the
skyline of Manhattan
Gary Hershorn/Getty Images‘Whether a project’s
complete or almostcomplete or partly
complete — it’s inthe same boat right
now: it’s frozen’Economic damage
Middle-income Arab nations challenged by difficult choices
S I M E O N K E R R— DUBAIParents of children in private schools
inDubaiarecallingforschoolfeestobe
slashedastheystrugglewithhighliving
costs and cuts to their salaries imposed
asaresultofthepandemic.In a rare show of dissent against the sta-
tus quo, more than 13,900 people have
signed a petition urging Gems Educa-
tion, the world’s largest private educa-
tion provider, to cut fees by 30 per cent
for the summer term.
Dubai, the Gulf’s trade, transport and
tourism hub, has introduced highly
restrictive measures to battle Covid-19,
including closing its airport, the world’s
busiest, and requiring residents to apply
for a permit if they want to leave their
homes during a 24-hour hour curfew.
School lessons are conducted remotely.
Major employers, such as Emirates
airline and developer Emaar, have fur-
loughed staff and imposed up to 50 per
cent pay cuts. Yet rents and school fees
have remained unchanged.
Gems Education, part owned by pri-
vate equity firm CVC, has offered defer-
ments and discounts to parents who canprove their economic circumstances
have been affected by the risis.c
But many parents dismissed the edu-
cation provider’s response, which some
called “tin eared”, despite broadly wel-
coming the tough measures introduced
by the government.
“My husband works in events. With
all the cancellations this year, we have
overnight been reduced to a single
income family,” said Shalaka Paradkar,
one Gems parent.
“This has been the case for most peo-
ple in our social circle. We have over-
night lost businesses, projects, been put
on unpaid leave or are facing salary
cuts.”
Parents argue that school operators,
while paying teachers struggling with
the stress of remote learning, are none-
theless benefiting from lower costs at
closed facilities and are not providing a
full service. Families, meanwhile, are
acting as teaching assistants while
simultaneously working from home.
“We are also conscious of the eco-
nomic and financial impact that the glo-
bal shutdown has caused on so many,
including our own families,” Gems said.Education
Dubai expats demand school
fee cut after salaries reduced
‘People follow
people anditdoesn’t feel good
to be spendingmoney right now’
01 %
Cut in unit prices
offered by some
developers in the
fourth quarter45 %
Rise in number of
sales in February
in Manhattan,
according to CoreJordan: the nation already has debts
approaching 100 per cent of GDPCORONAVIRUS
APRIL 9 2020 Section:World Time: 8/4/2020- 18:40 User:joe.russ Page Name:WORLD3 USA, Part,Page,Edition:USA, 4, 1