On Sept. 19, marketing agents for the new Richard Meier–designed glass buildings on Perry Street along the Hudson River threw a quiet open-house party to announce that Martha Stewart’s duplex unit was on the market for $8 million. A few naked light bulbs set off the bleak, gray cement floors in a raw space that still hungered for the domestic goddess’ touch.
Though the ImClone insider-trading scandal was undoubtedly on most people’s minds, it wasn’t on anyone’s lips. Instead, as they sipped champagne and wandered around the dusty space, they wondered aloud whether they’d be able to find another $8 million buyer in the current, colder climate.
The gathering presented a sharp contrast to the wild party of November 2000, when Mr. Meier invited a throng to gather at chef Jean Georges Vongerichten’s eponymous restaurant to celebrate the building’s groundbreaking.The celebrity wattage seemed to refract off the glass models of Mr. Meier’s plannedtowers:Mr. Vongerichten had already reserved a unit for himself, as had Calvin Klein, to be followed later by Nicole Kidman, hotelier Ian Schrager’s ex-wife Rita, and, of course, Ms. Stewart.
But Ms. Stewart’s exit from the Perry Street condo mirrors that of many beleaguered tycoons who find themselves listing and leaving their flashy, tabloid-fodder digs for more modest accommodations. Ms. Stewart’s friend Sam Waksal, who sold her on all that ImClone stock, sold his Sagaponack home for $3.125 million in July, and his Wainscott house is on the market for $4.9 million.
Sinking Penthouse publisher Bob Guccione’s double-wide mansion on East 67th Street is to be auctioned on Nov. 15. It was originally asking $40 million.SeagramheirEdgar Bronfman Jr., whose company has been the big loser in its merger with Vivendi, has put his double-wide mansion on East 64th Street on the market for $40 million.Meanwhile,Vivendi Universal is looking to sell the apartment the company bought for former chief executive Jean-Marie Messier at 515 Park Avenue for upwards of $20 million. Cash-strapped Telecom chief Laurence Zimmerman is selling his apartment in the same building for $26 million.
Ex–Tyco chief Dennis Kozlowski’s apartment at 950 Fifth Avenue will hit the market as soon as it’s clear who’s selling. The troubled company has said it plans to seize the $18 million property and pocket proceeds from the sale. Meanwhile, Tyco’s ex–chief financial officer, Mark Swartz, sold his apartment at 30 East 85th Street to Sony Music chief Tommy Mottola. It listed at $15.9 million; it’s still unclear who will take Mr. Mottola’s check, with the Manhattan District Attorney’s office looking to freeze the assets from the sale, and Tyco claiming that since the company owns the apartment, the D.A. is powerless. (City records list Mr. Swartz as the owner.)
Chris Whittle, the foundering Edison Schools founder, is trying to sell his Georgica Pond estate for $46 million.
Franceso Galesi, the embattled WorldCom director, is trying to sell his estate, called Elysium, for $30 million. And while Apple Computer is probably here to stay, Steve Jobs recently put his apartment at the Upper West Side’s San Remo on the market for $14.5 million, just before a dismal third-quarter earnings report for the computer giant.
And so the brokers who showed up at the open house on Perry Street are not alone in wondering who, in the current economy, could possibly take the place of the celebrity chief executives who had supported the luxury housing market from the late 1990’s through the December 2001 collapse of Enron.
In light of corporate scandals that have sent investor and consumer confidence into a tailspin, the massive sell-off of multimillion-dollar properties by shamefaced chief executives marks a turning point for corporate America. For the moment, anyway, a disillusioned public no longer regards C.E.O.’s as celebrities. With their retirement-savings accounts showing massive losses and unemployment on the rise, American workers are not inclined to read about lavish parties in the well-appointed homes of a possibly corrupt management. For Manhattan’s high-end real-estate market-which poured millions into developing new and glitzier Manhattan condominiums for star C.E.O.’s-this change in attitudes could be a disaster.
Richard Steinberg, a broker for Ashforth Warburg and Associates who has sold apartments to more than his share of celebrities, said that some of those selling their trophy properties are not high-profile executives. Many, he said, are the young turks of Wall Street, whose names you wouldn’t recognize-and their absence will soon be felt.
“Had we not had the C.E.O. scandals, we probably wouldn’t have had the price drop,” Mr. Steinberg said. “But the lavish spending was not unique to the C.E.O.’s in the past five years.”
Change of Lifestyle
The concept of where, and how, a New York City executive lives has changed radically in the last 20 years. In the 1987 film Wall Street , stock-broker Bud Fox, flush with cash from deals with high-flying corporate raider Gordon Gekko, blows the lot on a giant penthouse. Gekko obliges him by sending his art-dealer girlfriend over to decorate with trendy downtown paintings, bachelorish checkerboards and faux finishes.
Before long, a new corporate milieu had taken shape in New York. Real-estate companies that for years had been channeling old-money clients into dowager co-op buildings on Central Park West and Fifth and Park Avenues found a new client base, and eagerly courted the new wave of Bud Foxes that dominated the city through the 1990’s by aggressively selling them on quickly constructed condominium buildings with hotel-style amenities and a contemporary glitz absent from both the Chippendale and chintz-studded co-op buildings and the Connecticut colonial.
But it wasn’t just the real-estate industry, or the declining ethics in Wall Street boardrooms, that created this new breed of executive that sought celebrity status in Manhattan. The larger popular culture played a role, too. Leslie Gaines-Ross, a chief researcher for the public-relations firm Burson-Marsteller, who examines C.E.O. reputations and their relationship to corporate reputations, cited a study her firm first conducted in 1997, which showed that the reputation of a company depended on the reputation and name recognition of its chief executives.
“By 2001, it was 48 percent-and this is among influential audiences,” Ms. Ross said. “We keep coming back to about half of the company’s reputation being tied to the C.E.O.”
And when it came to reputation and name recognition, Ms. Ross has found, investors and consumers were as much moved by the chief’s lifestyle as by his or her delivery on the balance sheet. These glittering milieux -lavish corporate apartments, extravagant dinners and benefit parties-generated confidence and pride among shareholders. In short, just as many New Yorkers became stock-traders in the 1990’s, they also became participants in the lavish expectations and lifestyles of corporate America’s leading lights. Or so they thought.
“I think people used to look at it and think, ‘Of course Jean-Marie Messier needs to have that apartment, because he needs to do a lot of entertaining, and entertains important figures, and you need to have those kinds of connections,'” Ms. Ross said. “All of those accessories to C.E.O.-dom are questionable today, whether it’s a boat or an airplane or an apartment in Boca Raton; any of the trappings are suspect.”
What a sea change from the 1990’s, when countless publications carried photo spreads detailing the construction, redesign or decoration of the homes of America’s top chiefs.
In 1999, when the impending Seagram partnership with Vivendi seemed like it would be a giant boon to the Bronfman family, Seagram’s P.R. machine decided it would be a good idea to showcase Edgar Bronfman Jr.’s newly renovated trophy property on the Upper East Side. In a September New York Times House & Home cover story that year, Mr. Bronfman and his wife led a reporter on a guided tour of their extravagant townhouse on East 64th Street. The Times gushed over the building’s two-and-a-half-story sky-lit atrium and its ingenious complex of hidden upstairs bedrooms.
Now, however, these homes are on the market, a relic of a bygone era. To the real-estate industry, of course, the sales of these homes mean high commissions. But it’s their symbolic weight that has brokers’ and developers’ shoulders drooping.
The Stygian pit that was once the Alexander’s store at 59th Street and Lexington Avenue has finally been transformed into a tower housing the headquarters for Bloomberg L.P. and about 100 luxury condominiums. But timing, like location, is everything in real estate, and the building is coming online just as massive layoffs, relocations and bankruptcies are rocking the industry that employed its most likely apartment buyers. Likewise, the Delmonico, one block west of the former Alexander’s site, has been reconfigured as a luxury condo development by Donald Trump at roughly the same difficult time in the financial-services industry.
Previously, when financial services experienced a downturn, the Manhattan housing market was protected by the relatively large number of affluent executives who earned their paychecks in other industries. But over the last 10 years, the financial-services industry has come to dominate Manhattan’s economy as never before.
“This has always been the sector that outearned all the other sectors,” said Rae Rosen, a senior economist at the Federal Reserve Bank of New York. “The average wage [in financial services] runs three to five times the average range in all other sectors in the city. And that’s the average, not throwing in the bonus income-you’ve got enormously wealthy people.”
According to Ms. Rosen, in the 10 years from 1990 to 2000, the financial-services industry grew from producing 20 percent of the gross revenue in the city to producing 32 percent. But in the last year alone, 32,000 jobs were lost in that sector. And layoffs are expected to continue into the near future.
Luxury developments, however, just keep coming, especially star-powered condominiums with signature designers like the Perry Street buildings. The construction boom that began in 1998 and peaked in 2001 is only slowly abating. In 1998, the Department of Buildings issued permits for 147 new construction projects, the most it had granted since 1989-right before the last great real-estate depression. Roughly 80 percent of them were for apartmentbuildings,mostly condominiums. Between the new residential towers and the conversion of aging commercial buildings into upscale dwellings in neighborhoods like Tribeca and the financial district, the construction boom has resulted in a real-estate executive’s nightmare: a market glut. According to the Real Estate Board of New York, from the beginning of 2001 through the end of last month, 3,329 condominium units-27 new buildings-began construction. Many of those new units have not come on the market yet, and that number doesn’t include conversions like those in Tribeca or Mr. Trump’s condominium conversion at the old Delmonico Hotel. Developers from Stephen Ross, Leonard Litwin and the Zeckendorfs to Harry Macklowe, Daniel Brodsky and the Resnick clan were in on the rush to provide the next must-have address for big-shot Wall Streeters.
Between the beginning of 1999 and the middle of 2000, the Upper East Side alone was brimming with 2,200 new apartments, built on vacant land from the northeast corner of 94th Street and First Avenue-the site of a 208-unit rental building called the Chesapeake-to 515 Park Avenue, where the Zeckendorfs built the condo units that Vivendi and Mr. Zimmerman are now trying to sell.
On the West Side, Mr. Trump’s condominium plantation, Riverside Boulevard at Trump Place, and a Tishman-Speyer rental project at 101 West End Avenue together added more than 1,000 new apartments to the neighborhood’s market by 2000.
Even for those who are plugging through the recession with their salaries intact, Manhattan real-estate prices seem likely to become even harder to bear. With the prospect of property taxes going up 10 to 12 percent in the coming weeks, and perhaps another 10 to 12 percent at the end of the fiscal year in June, carrying costs for condominiums will make them even pricier. As recently as Nov. 11, the darker prognostications suggested more layoffs for the foreseeable future, with an overall “correction” in the housing market as the inevitable result.
“Many of the builders and the banks remember the 1980’s, when we overbuilt the commercial real-estate market,” said Ms. Rosen. “This is a new battlefield.