The Perfect Loft Eludes Developers Who Try to Sell Almost Nothing

It seemed, at first, to happen as an afterthought. Trouble with contractors–and lawyers–kept developer Alfred Taubman from delivering apartments in the converted office building at 838 Fifth Avenue on schedule. And those who had bought the apartments–including Charles Bronfman, the chief executive at Seagram’s, who’d plunked down $18 million for a 5,500-square-foot duplex in October of 1999–didn’t seem upset that the construction was taking longer than expected. In fact, Mr. Bronfman told the developers not to finish his apartment at all. Without any refund for the work or materials, he would bring in his own people and finish the apartment to his own specifications.

He wasn’t alone. Last fall, when Mr. Taubman’s firm declared the building finished, sources say, not a single apartment had a light fixture or a toilet.

Located in a building on the corner of East 65th Street, and with 50 feet of frontage on Central Park, these 10 apartments are not the kind of “raw loft spaces” that have been making headlines in Tribeca or Soho. In fact, say brokers, the whole idea of building raw space to sell is a very uptown idea–one that only the very rich would consider nowadays.

There are different levels of “raw.” There’s the totally raw space, where windows, perhaps floors and maybe even electricity, water and gas lines are brought in. (Brokers prefer to call these “white boxes”: a fresh coat of paint makes them more presentable to buyers.) Then there are “semi-finished” spaces: They may have kitchens and bathrooms with high-end finishes, or they may have only stand-ins, built to bring a new space up to code before sale, but with the understanding that the fixtures will be ripped out and replaced by the new owners.

The market for the rawest of these spaces–apartments without even a kitchen sink–is getting narrow enough that some brokerages won’t go near them, and so developers are restrategizing in order to sell them.

For instance, at the Atalanta in Tribeca, the developers are marketing medium-sized raw spaces for buyers in the $1.5 million to $7 million range. But it seems that at the lower end of that range, there aren’t buyers–or not nearly enough of them. For a buyer in that range, marketers and developers are learning, finishing the space themselves is too expensive. “What we’re really talking about here is price sensitivity,” said Deborah Beck, executive vice president of the Real Estate Board of New York, the trade organization for the industry. “People who are price-sensitive are looking for certainty, and they probably are less attracted to something open-ended.”

The “white box” seems to have passed through its moment of giddy popularity, and sober reflections on the vagaries of selling raw space to all but the super-rich are more the norm among brokers now. With all the questions lately about where consumer confidence is going, several brokers said, it can be hard to say whether a raw-delivery strategy will work for a given development. Could the fix-‘er-up tolerance of buyers have gone out the window with the value of tech stocks? “Right now we’re at a funny point economically, and there’s been a little pullback,” said Ms. Beck. “For the vast majority of people buying apartments and even townhouses, they’re looking for something that’s maybe a paint job or a floor scraping, but that they can move into.”

The “white box” buyer, brokers say, may be someone who’s already built a home in the Hamptons, Colorado or Tuscany; they know what they want, what they’re getting into–and they will pay any price for it, often upwards of $1,000 a square foot. “There’s a limit to the amount of people that are willing to undergo that,” the broker said. “So it’s incredibly important for developers to select the right project [for raw delivery].”

Some other brokers are taking an even harder line. At the Corcoran Group, which has represented several such developments, chief executive Pam Liebman said the firm is not representing any new raw developments. “We tend to advise the developers that there’s more bang for the buck if they build out,” she said, referring to an apartment that has, at a minimum, a kitchen and bathrooms. “As markets get tougher, ‘white boxes’ will get more difficult to sell.”

At 30 Crosby Street, Corcoran tried to split the difference between the raw and the finished. “It was semi-finished, with floors, a kitchen and bath,” said Ms. Liebman. “What we tried to do is take away the rough stuff, so the person was able to come in and do their own build-out of fixtures and drywalling.” All but one of the 13 apartments at the Crosby were spoken for in eight months.

The verdict from brokers about selling raw space is mixed. But all agree on one thing: It is a risk that can be taken only at the highest-end developments–and then only with caution. Jan Hashey, a broker for Douglas Elliman who is now marketing raw space at City Prairie, a development at 17th Street and Seventh Avenue, has been pitching raw space in rehabbed buildings for more than 10 years. One of the things that attracted her to City Prairie, she said, was the rare L-shape of the property, which provides multiple exposures even on the lower floors, where prices are traditionally lower. That, she said, has allowed her to generate interest for lower-floor lofts without having to build them out.

But though City Prairie rates as a development that can be marketed raw, Ms. Hashey cautioned, it is increasingly rare that a building can pull that off, except with its most exceptional apartments.

The Atalanta, at 25 N. Moore Street, has become the canary in the gold mine for brokers who are advising developers of converted space downtown whether to include raw space in their business plans. The building came on the market last May, when no fewer than 12 developments were going up simultaneously in Tribeca. Per square foot, prices in the building range from $550 to more than $1,100. For the $550 per square foot, a buyer gets high-end finishes, a kitchen and bathroom; for the $1,100, the buyer gets gas spigots and plumbing set-ups in three locations “so that tenants have flexibility on where to locate kitchens and bathrooms.”

Broker Helene Luchnick said the developers decided to do more work on the lower floors–where the apartments are smaller and get significantly less light. “Basically, the windows on the north side of the building do not start until the fourth floor,” she said. “So we made the decision that on two, three and four it would be harder [to sell them] if they weren’t built out.”

Ms. Luchnick said she thinks it will cost owners in the Atalanta about $200 a square foot to build out the space–half again the price per square foot in the lower-end units. That could put them out of reach for a segment of the market that would otherwise snatch them up at the competitive price per square foot. So far, only 23 of the 41 units are sold, though Ms. Luchnick remains sanguine about her success rate in the building. With the number of contracts signed, she said, the building will be completely sold by the summertime–a year after it went on the market.

But to some brokers considering whether raw lofts are a raw deal, that’s too slow. “That’s not good,” said one broker. Said another, an executive at a brokerage that has handled comparable properties: “I would say that’s probably longer than one expected, especially probably the developer. But that’s the risk you take with a ‘white box': most people want to walk in and see finishings that are going to be super-luxury.”

The fact that finishes on apartments have improved drastically since the 1980’s, when developers sought to cut corners on things like floors, kitchens and bathrooms, has impressed some but not others. At 285 Lafayette Street, a development by downtown real estate honcho Eric Hadar, the plans allowed for some of the highest-class finishes in recent memory, according to Ms. Luchnick, who marketed the building. But Mr. Hadar was reportedly surprised to find that the more famous the buyer–whether David Bowie and Iman, Lachlan Murdoch or Eric Nederlander–the more reluctant they were when they heard about his plans for the interiors. They wanted the space to come raw–and so it did.

And that’s an amenity, it seems, that only the super-rich will buy.

UPPER WEST SIDE

A ROCKEFELLER MOVES TO THE WEST SIDE (GASP!) The 36-year-old son of the late Vice President Nelson Rockefeller is going to live in a seven-room condo at 279 Central Park West.

In January, Mr. Rockefeller paid $2.3 million for a 2,200-square-foot condo in the building, near West 88th Street. The ninth-floor apartment has three bedrooms and four bathrooms. Brokers said the apartment had been on the market for four years and shuffled between numerous realty firms. Part of the problem was that a tenant was renting it for $9,000 a month, making it hard to show to potential buyers. The other problem, to some, is that it is not on the Upper East Side. “I can’t believe a Rockefeller is living in a condo all the way up there,” said one East Side broker. Completed in 1990, the building features 38 apartments on 23 floors and is noteworthy for its curved-glass corner windows and asymmetrical architecture.

Besides being heir to an oil fortune, Mr. Rockefeller is a trustee of the State University of New York and the chairman of Hacienda Campo Alegre Management Inc., a cattle and non-native wildlife business. He graduated from Deerfield Academy, Dartmouth College and Columbia Business School. A spokesman at his office at–where else?–Rockefeller Plaza said that Mr. Rockefeller wouldn’t comment on the deal.

UPPER EAST SIDE

AT PETER GUBER’S OLD ADDRESS, 14 ROOMS GO FOR $12.6 MILLION Barbara Walters has a new neighbor at 944 Fifth Avenue. In mid-February, a contract was signed to sell the building’s fourth floor for close to its asking price of $12.6 million. The deal was made by the estate of Rubelle Schafler, the widow of Norman Schafler, former chairman of Condec Corporation, a robot manufacturer. The deal was brokered by Cindy Kurtin of Stribling & Associates.

Mrs. Schafler, who died on Dec. 24, was a lifelong philanthropist who funded a gallery at the Pratt Institute and was also a supporter of Jewish organizations and programs for people with disabilities. Julie Schafler Dale, her daughter, owns a clothing store called Julie: Artisans Gallery on Madison Avenue and is married to actor Jim Dale, who won the 1980 Tony Award for his portrayal of Phineas T. Barnum in the Broadway musical Barnum . Ms. Schafler Dale didn’t return calls.

Brokers said the 14-room, 5,200-square-foot apartment went on the market on Jan. 16 and features four bedrooms and six bathrooms. (Maintenance is $6,850.) “All the major rooms are facing west,” said a broker, who called the apartment “dark.” “You walk into each bedroom and you see a brick wall.”

Another broker who had shown the apartment called the experience of being in the space “like walking back in time.” Said the broker: “It was a mint renovation. It had the most beautiful hardware.”

The 1925 building has 14 stories, a detailed limestone façade and 15 apartments. It was designed by Nathan Korn in an Italian Renaissance palazzo style. Peter Guber and Robert Steinberg are also former residents.

169 East 69th Street

Two-bed, two-and-a-half-bath, 1,450-square-foot co-op.

Asking: $825,000. Selling: $800,000.

Charges: $1,542; 48 percent tax deductible.

Time on the market: three weeks.

WHEN RENOVATING BECOMES A REFLEX This 1,450-square-foot apartment on a high floor of a postwar, full-service building is a duplex. The two-bedroom apartment has a living room, a separate dining room and a powder room on the first floor. Upstairs, where the ceilings are higher, there are two bedrooms and two bathrooms. The buyers, a couple with a child, had been looking for a place in the neighborhood, where they had been living for several years. What they did not want was “just a cookie-cutter apartment,” said Daniela Kunen of Douglas Elliman, the exclusive broker on this sale. “It really feels like a house.” The sellers were relocating out of town for business. The buyers will update the kitchen, a renovation which Ms. Kunen said is not necessary. “Most people would have considered [the apartment] in move-in condition,” she said, “but the buyers wanted to make their own statement.”

137 East 66th Street

Two-bed, one-bath, 1,200-square-foot co-op.

Asking: $550,000. Selling: $475,000.

Charges: $1,683; 46 percent tax deductible.

Time on the market: one day.

NEIGHBORS SPLIT THE DIFFERENCE A designer-architect signed a contract last fall to buy this two-bedroom apartment in need of a complete renovation for $420,000. But after trying repeatedly to come up with a way to renovate the place to his liking, he got fed up. The apartment was too small for his big plans, and so he put it back on the market the following week, this time with an ambitious price tag–over $100,000 more than he had paid. A family in the building wanted it for one of their relatives, and they gave the seller about half the profit he was looking for. But it’s not like the new owners didn’t know they were overpaying–they were the back-up bidders last fall. According to the designer’s broker, Richard Steinberg of Ashforth Warburg Associates, the family will have to put in a new kitchen and bath, redo the floors and put in new windows.

GREENWICH VILLAGE

42 West 13th Street

One-bed, one-bath, 600-square-foot co-op.

Asking: $315,000. Selling: $303,000.

Charges: $482; 46 percent tax deductible.

Time on market: three weeks.

WHY THE VILLAGE IS COOKING This prewar co-op building that once served as a bakery is on the same leafy block as the New School and the Quad Cinema, which must be why it’s attractive to young buyers. Broker Mary Anne Cotter, with the Corcoran Group, said that her firm has brokered apartments in this building before and that they’re popular starters for young people, given the location, the low maintenance, the reasonable prices and the loft-like, bohemian feel of living in an old bakery. Another one-bedroom apartment sold recently for about $300,000. Both have 11-foot-high ceilings, hardwood floors and new kitchens.