It’s the beginning to a Bible parable about big-city indulgence and ambition: Two brothers, liquor heirs Matthew and Edgar Bronfman Jr., both sold their Upper East Side townhouses this summer for about 11 times what they paid for each in 1994. Edgar’s place, the bigger mansion, will reportedly go for around $51 million.
Meanwhile, the housing market everywhere else in the country is morbid, Wall Street is skittish and even Mayor Bloomberg says pricing here should be coming down. “You might think we were being set up for some major reversal,” said Prudential Douglas Elliman senior vice president George W. van der Ploeg.
But New York is unfallen: This autumn’s new batch of listings will trek onward and upward.
According to two sources, Roger Barnett (CEO of natural products company Shaklee) and his wife Sloan (cellphone billionaire George Lindemann’s daughter) have begun to quietly ask around $62 million for their 125-year-old neo-Georgian town house. The 33-foot-wide mansion at 16 East 69th Street, designed by Peter Marino, was bought less than seven years ago for $11.5 million.
The place hasn’t officially been listed, though the family is consulting with brokers. One source said the sellers have had an offer in the mid-$50 million range. That wasn’t enough.
“Money just doesn’t mean anything,” Stribling executive vice president Kirk Henckels said.
Call it gigantism: Massive numbers are getting more massive. Before Matthew Bronfman’s $33 million sale last month, no 25-foot-wide townhouse had ever closed above the $30 million mark. “If he waited six more months, I swear to god he would have had $40 million,” said listing broker Sami Hassoumi, a Brown Harris Stevens managing director, “because there is nothing, nothing for sale at superb condition.”
No townhouse in New York City has ever been officially listed for more than the Barnett place. Likewise, no apartment had sold for $50 million before two spreads in the newly made-over Plaza broke that sacred ceiling this summer.
Our city knows its real estate is monstrous and anarchic, and that the sales price of an average apartment has tripled over the past decade. But that stat is trivial compared to the high-end’s dazzling rise. There are more big-ticket buyers around who are willing to spend their money on “fine art” real estate, even if prices are so much vaster than last decade’s.
“The disparity between the rich and the superrich is becoming ever greater,” Mr. Henckels said, “and until that reverses itself, the prices at the very high end are safe.”
Downtown is getting in on the superrich action too. Venture capitalist Fred Wilson sold his family’s West 10th Street townhouse this March for $33.15 million, though he reportedly paid $7.35 million in 2000. And a full-floor penthouse at 200 11th Avenue, with an en-suite car garage space, will go on the market this September for around $18 million, which listing broker Leonard Steinberg at Douglas Elliman said will be the biggest Chelsea listing ever.
In an e-mail, Mr. Steinberg cited demand from “the NOUVEAU nouveau riche”—homegrown but especially foreign.
“Everyone with euros or pounds,” said Kathy Sloane, the Clinton family broker and another Brown Harris director, “thinks we’re giving real estate away.” She said she’s broken records at every building she’s sold in this year.
Mayor Bloomberg doesn’t think our market should be so bubbly. His 2008 preliminary budget presentation this January shouted, “Home Prices and Sales Volume in the City Are Expected to Decline”—citing numbers from the Department of Finance and his own office to forecast a dip this year and next. And that wouldn’t be such a bad thing.
The maestro of our boiling market is billionaire J. Christopher Flowers, who set the townhouse record in October 2006 when he paid $53 million for the Harkness Mansion off Fifth Avenue. He paid $17 million in November for a second townhouse nearby, and sold it for $6 million more within six months.
“I said, ‘The price will be $23’” Mr. Hassoumi, his broker, said. “My seller would say, ‘Are you sure?’ I would say, ‘Absolutely.’”
EVEN IF BUYERS ULTIMATELY ESTABLISH real estate prices, it’s the soothsaying brokers who know what they’ll pay and who can advise sellers accordingly. So take heed when Paula Del Nunzio, the record-setting Harkness listing broker, says, “I do think that the $100 million house is next.”
It’s called the art of pricing. While conventional appraisers use pragmatic facts like square footage and comparable past sales to decide real estate value, brokers eye assets like social cachet, provenance, tenant list, scale and upcoming rival deals. “A seller at a higher end has to be working with a broker for an appraisal,” Ms. Sloane said, “because they’re familiar with everything that’s going on.”
“No, no, no, no” is what Corcoran Group salesperson of the year Carrie Chiang said when asked if she ever uses a calculator to price her real estate. “We know what’s out there; we know what’s going on.”
So, especially at the fanciest buildings, where street-address status can matter more than objective facts like square footage, there simply aren’t rational explanations for 2007’s prices. “They just aren’t commodities,” Mr. Henckels said about tip-top co-ops. “There are just too many social, financial and architectural subjective issues.”
New York’s climb into this unknown real estate territory feels almost arbitrary, even to brokers. “When money is meaningless it’s hard to price something,” Mr. Henckels said. He brought up Charles Schwab’s purchase at the regal 834 Fifth co-op (where Rupert Murdoch has the triplex). Though the deal hasn’t closed yet, Mr. Schwab is said to have paid as much as $11 million over the $16.5 million asking price.
“So does somebody else in that line suddenly think theirs is worth $27 million? When you have things like that,” Mr. Henckels said, “it makes things very difficult.” But, of course, there are other scenarios that would make business harder for Manhattan brokers: “If the whole hedge fund industry collapses, then, you know, yeah, it’s going to knock the hell out of the high end.”
Will Wall Street have an epic tumble this year before a $100 million house has a chance to hit the market? Either way, it doesn’t seem feasible that the Bronfman brothers’ buyers could ever flip their townhouses at 11 times the purchase price.
“If you look at history, every period like this eventually came to end,” the Elliman broker Mr. van der Ploeg said. “The Gilded Age eventually came to an end. It’s true it will come to an end. But it doesn’t look, it doesn’t feel, like it’s going to be tomorrow.”
“These are unbelievable, unprecedented times we’re living in,” his colleague Mr. Steinberg said. “Sooner or later, a reality check has to set in when things calm back down to normal.”