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In software, there’s a phrase: we eat our own dog food.

It means the company actually uses its own product — lives inside it — to find flaws, refine it, and push it to its highest potential, ensuring that end users experience the software as intended.

Real estate developers are not the same.

I don’t know what the equivalent phrase would be: We sleep in our projects? We lie in our excavations? Maybe one doesn’t exist.

I won’t speculate as to whether and how well developers know the neighborhoods they choose — beyond the macro factors and egos driving particular business cases. I think it’s safe to say, though, that most don’t live in the buildings they build, as it would mean one less unit sold at market rate.

With that blanket assumption in place — and to my developer friends reading, please speak out if I’m wrong — let’s return to 265 East Houston to make a final point — not necessarily about this building, but about how this building is emblematic of a broader issue on the Lower East Side… and potentially everywhere.

As we illustrated in Part 2 of this series, most units in 265 East Houston have struggled to exceed or even match their original sponsor pricing. Only in isolated cases have resales demonstrated nominal gains, while the inflation-adjusted math tells a far less impressive story.

Is 265 East Houston a bad investment?

Yes, if resale is our criteria. But, that’s not the point I want to make. What I want to focus on is the asymmetry of risk.

By the time the first buyer closes, the cost pendulum has favorably swung back to benefit the developer. Construction risk has been priced in, capital has been returned, and exposure to future market performance is minimal. If the units fail to appreciate, or worse, trade down over time, that outcome is borne almost entirely by the owners, i.e., the “first buyers” — not by the sponsor who set the initial pricing. From the developer’s perspective, the project is functionally complete.

The kicker is that when ambitious (or arrogant) pricing collides with market reality, the consequences are unevenly distributed. Buyers who miscalculated or stretched to enter a new building may find themselves holding assets that stagnate or decline, while the developer has already exited with profits intact. Meanwhile, for neighbors and prospective buyers, the presence of repeatedly overpriced or underperforming units can distort perception and tarnish a neighborhood.

While brokers will come in to assist owners on a resale, telling a positive tale to generate prospects’ interest, the damage has already been done.

With 265 East Houston — a boutique condominium with seven units — the scale, and impact, are small. But, with larger, more ambitious projects, where sponsor units remain — the situation is different. Big, bold bets — like One Manhattan Square – are different.

Perhaps, as is evident there, where the developer has not achieved its objectives and sold all units, they are forced to incentivize and liquidate. How do I know?

Visit the site and you’ll immediately see an offer on the table:

“For a limited time, the sponsor will pay 4 years of chargers and real estate taxes as a credit against the purchase price.”