White Elephants Crash

When Woody Allen put his massive East 92nd Street townhouse on the market for the ungodly sum of $27 million two weeks ago, he was throwing a Hail Mary pass in an arena that hasn’t been particularly kind to trophy properties recently.

In the last two months, Seagram heir Edgar Bronfman Jr. took his $40 million townhouse on East 64th Street off the market, and hotelier Ian Schrager closed the doors to his $15.9 million co-op on Central Park West. In fact, since the beginning of 2003, many of the most conspicuously high-priced homes in the city have been quietly taken off the market. The list includes Dustin Hoffman’s $25 million triplex co-op on Central Park West; the other Seagram heir Matthew Bronfman’s $27 million townhouse on East 67th Street; and art dealer and Bronfman neighbor Guy Wildenstein’s townhouse, which was asking $35 million.

For most of them, it must have been an unpleasant comedown. Because, for a fleeting moment in the spring of 2001, when the New York real-estate market was at its height and one record-breaking sale followed another, it almost didn’t seem crazy to put a $40 million price tag on a five-story house. It was a parade of what in the industry are called “white elephants”-properties that are rare, large, expensive and hard to move. The era of celebrities trading trophy properties back and forth for 30 to 40 percent above their market value seems finally to be over.

“For a time, there was no ceiling on what people would pay for a vanity property,” said JoAnne Kennedy, president of Coldwell Banker Hunt Kennedy. “But those mad, wild days are over for the time being. People just aren’t throwing that kind of money around anymore.”

Just how mad did it get? To put things in perspective, a buyer who decided to pass on Edgar Bronfman’s $40 million townhouse might instead have used the same money to buy a 16-story co-op building in Chelsea with 107 apartment units. (Jerry Bruckheimer paid for and blew up a $40 million Miami mansion for the movie Bad Boys 2 . But that probably wouldn’t happen here-it would be tricky to get a demolition permit for East 64th Street.)

Of course, when you’re talking about the heights of vanity in New York real estate, it is often the exception that proves the rule. This July, for example, the city witnessed the largest residential sale in its history, when London-based financier David Martinez paid a reported $45 million for a two-unit, 12,000-square-foot condo at the Time Warner Center at Columbus Circle. And at ultra-exclusive Upper East Side cooperatives like 720 Park Avenue and 820 Fifth Avenue, a handful of sales this year have crested the $15 million mark, with at least one approaching $20 million. Robert De Niro persuaded the seller of an enormous townhouse on East 69th Street to take $24 million for it. The property had been asking $27 million.

Then again, Mr. De Niro, who owns half of Tribeca, is hardly the typical buyer; whether his purchase is a message to Mr. Allen that townhouses really can sell for $27 million, or that one of the small number willing to pay that much for a house had already put his money elsewhere, remains to be seen.

If Mr. Allen pursues his $27 million dream, he will be in a small company. The fact that more trophy residences are being pulled from the market-as opposed to this time last year, when it was the other way around-signals that, at long last, even the owners of those properties don’t believe their own marketing hype.

“It suggests a recognition of the fact that there is a marketplace, and the simple facts of space, beauty and provenance-which all these properties have-doesn’t mean you can write your own ticket,” said Frederick W. Peters, president of Warburg Realty Partnership.

Michele Kleier, president of Gumley Haft Kleier real estate, said that almost without exception, the high-profile white elephants that have been yanked from the market were overpriced by at least 30 or 40 percent, and that even in the hottest market in New York history, no one wants to get ripped off that badly-even by Dustin Hoffman.

It’s both the owner and the owner’s broker who are to blame for these through-the-roof asking prices, Ms. Kleier said.

“It’s a combination of the vanity of the broker and the vanity of the seller,” she said. “It’s the owner wanting to sell the most expensive house in the city, and it’s the broker who feeds into that vanity because they want to get a high-profile exclusive that everyone is going to be talking about. They don’t actually care if they sell it.”

All of the owners of the properties mentioned in this article declined to comment, so it was difficult to infer much about their sales strategies. But a closer look at their properties points to some similarities. Notably, few budged in any meaningful way from their original asking prices-a surefire sign, brokers say, that the owners are not really motivated to sell.

“Eventually the seller says, ‘This is ridiculous. I’m not getting any interest. People are just coming in and sightseeing.’ And they decide they want to take it off,” Ms. Kleier said.

One of the more glaring manifestations of this trend involved Mr. Hoffman and his apartment at the fabled San Remo on Central Park West. When Mr. Hoffman listed his triplex unit for $25 million in October of 2002, brokers across the city howled in disbelief. Because even though the renowned actor was offering 8,000 square feet at a prestigious Central Park West co-op, his apartment lacked one important feature that tends to matter to people spending $25 million on Central Park West: park views. Mr. Hoffman’s apartment is a back unit, meaning that it only has river views. In July of this year, he took it off the market.

If real-estate watchers were shaking their heads at Mr. Hoffman’s move, they were positively agog at what happened the next month on the East Side. In the same week that November, two neighboring townhouses on East 64th Street hit the market for a total of $75 million. At No. 15 East 64th Street, Seagram heir Edgar Bronfman Jr. listed his mansion for $40 million. And at Nos. 11-13, billionaire art dealer Guy Wildenstein trotted his property out for $35 million. It was the most expensive stoop sale in the city’s history. And although each property was mansion-like in its dimensions and appointments, and although they both sat only feet from Fifth Avenue on one of the most sought-after blocks in the city, most brokers regarded those asking prices as almost comical in their audacity.

And each property, by the way, had a history.

No. 11-13 was the place were, in 1997, Guy Wildenstein’s brother, Alec, allegedly threatened his wife, Jocelyne, with a gun after she found him sharing his bed with another woman. The divorce saga that ensued over the next few years-one in which the townhouse played a starring role-was one of the most sensational the city had ever seen.

The history of the townhouse next-door reads more like a rags-to-riches story. Edgar Bronfman Jr. bought his property for $4.375 million in 1994, then poured untold millions into a major renovation of the property. On move-in day, in September of 1999, Mr. Bronfman threw open the doors of his newly renovated mansion to The New York Times ‘ House and Home section, for an article that detailed extravagances like a sky-lit, two-and-a-half-story atrium court and a complex puzzle of hidden upstairs bedrooms. The day after the Times piece appeared, however, the New York Post reported that the article had angered Seagram shareholders, who watched the value of their stock in the company drop 10 percent while Mr. Bronfman minced about those secret stairways.

Both properties hit the market last November, and both buyers refused to budge on their asking prices. In late April, Edgar Bronfman pulled his townhouse off the market. And just a few weeks ago, Mr. Wildenstein did the same.

Matthew Bronfman’s townhouse on 7 East 67th Street followed a similar trajectory. Like his brother Edgar, Matthew Bronfman bought a five-story mansion just steps from Central Park for a relatively small sum-$3 million in 1994. He then poured a reported $19 million into a complete gut renovation that concluded in 1996. The house hit the market in August of 2002 for $27 million.

Although the mega-renovation undoubtedly added millions to the house’s resale value, it also allegedly badly damaged his neighbor’s house, netting Mr. Bronfman a still-pending multimillion-dollar lawsuit. Real-estate sources tell The Observer that the lawsuit scared away a potential buyer who later bought a townhouse in the same neighborhood. So although Mr. Bronfman came close to bucking the odds, eventually he, too, decided to bow out of the game. In mid-June of 2003, he took his house off the market.

Perhaps the strangest white-elephant story of the last year involves hotelier Ian Schrager-a man, one might think, who would have no trouble pawning off residential space. In 1997, Mr. Schrager, the high-flying owner of the Royalton and Morgan hotels, bought his 11-room, 6,000-square-foot apartment at the ritzy Majestic, located at 115 Central Park West, for $9 million-then a record for that avenue. The splendors of that unit, and the difficulties Mr. Schrager faced in trying to sell it, have been well publicized. In May, The New York Times ‘ House and Home section ran a 1,500-word article on the saga. The story detailed how Mr. Schrager had enlisted Philippe Starck-the architect who had helped his Royalton Hudson and Paramount hotels-to design the apartment’s interior. In the course of that ultra-high-end custom design, Mr. Starck dispatched one of his own architects to Greece in search of a flawless marble boulder that would become Mr. Schrager’s bathtub.

By late 2001, however, Mr. Schrager had soured on the apartment and decided against making it his home. So in March of 2002, without ever having spent a night there, Mr. Schrager listed it on the market for $22 million. In late 2002, he had dropped the price to $18.5 million. By early 2003, it was $15.9 million. And in mid-August, it was off the market. Mr. Schrager’s stuck with the tub, for now. So although he took the road less traveled-i.e., bowing to market pressures and drastically lowering his asking price-the living space he carved out was so idiosyncratically tailored to his tastes that apparently no one else wants it.

Ms. Kleier, the president of Gumley Haft Kleier, cautioned against interpreting this trend of white-elephant properties disappearing from the market as a sign that the real-estate market in general is cooling off. To the contrary, she said, properly priced real estate is still selling briskly, and in most cases, those units are still appreciating in price. The numbers back up Ms. Kleier’s sentiments. According to a recent report by the Real Estate Board of New York, apartment prices in the second quarter of 2003 inched up steadily over the corresponding quarter last year. In postwar condos, the median price per square foot increased by 4 percent, from $624 to $649. In prewar condos, the price per square foot increased 8 percent, from $592 to $640. In the co-op market, studios and one-bedroom units saw their median price per room rise 3 percent, from $111,429 to $114,286. Two-bedroom units saw an increase of 5 percent, from $164,020 to $172,222.

In fact, the only category that saw a decrease in prices was the luxury market, where co-op prices decreased by 9 percent, from $255,001 to $232,051.

And although that slide in the luxury market is one that has been in progress for at least the last year, it’s likely that people like Dustin Hoffman and the Bronfman brothers have stuck by their soaring asking prices because they probably didn’t have much to lose. Relatively speaking, it doesn’t cost very much to put your property on the market, so it’s not like they were even making much of a gamble. Also, hey-this is New York, and you never know.

Perhaps. But Frederick Peters, president of Warburg Realty Partners, said the instances of luxury properties in Manhattan selling for 30 to 40 percent more than they’re worth are so few as to be inconsequential.

“Let’s not forget that it was only a few years ago, at the absolute apex of the market, that the Rockefeller estate at 740 Park [Avenue] sold for [around] $30 million, and that’s arguably the most luxurious apartment in New York,” he said.

Woody Allen is apparently betting against those sentiments. Just two weeks ago, he listed his townhouse on East 92nd Street for $27 million. Is that price “bananas,” as the New York Post suggested in its headline, or might it actually trade for something close to what Mr. Allen is asking? The detractors have already started in on the 67-year-old filmmaker’s building. Twice in the same week, the Post ‘s Page Six has run particularly nasty items about the property; the first slamming his decoration job, and the second suggesting that Mr. Allen might be selling because he can’t afford his monthly mortgage payments.

Will that end up scaring away qualified buyers? Probably not. But that doesn’t necessarily mean Mr. Allen will dodge the purgatory reserved for so many trophy-property owners on the Upper East Side and Central Park West. Here’s the thing about a white elephant: It’s hard to move.

But consider: The five-story limestone mansion is nearly twice as wide as most townhouses in Manhattan, and it’s located on a choice stretch of Carnegie Hill between Park and Madison avenues.

Not long ago, none of that would have been a factor: The house could have sold on its provenance alone, the bragging rights from buying Woody Allen’s place proving irresistible.

In a tightening market for luxury real estate, however, there are no sure bets. “To think that your property is just going to be another $35 million sale-we’re not in that marketplace,” Mr. Peters said.