Panic on the Park

When Tyco’s indicted former chief financial officer, Mark Swartz, finally unloaded his East 85th Street condo in November to Sony’s then–music chief Tommy Mottola, he had to do it at a steep discount: $9.25 million, or 42 percent off the asking price of $15.9 million.

It might not just have been his haste to improve his troubled finances that motivated him to bargain so low: In fact, many high-end apartments in Manhattan’s otherwise fairly healthy real-estate market suffered steep declines in sales price in the last quarter of 2002. The trend, confirmed yesterday by the release of a major fourth-quarter market report, is for Manhattan’s priciest apartments to go for less than they used to-and a lot less than sellers want.

According to that report, luxury real estate-properties whose sales prices were among the top 10 percent of the market-continued its downward slide in the last quarter of 2002, with average sales prices decreasing 13.3 percent from the previous quarter. Not only that, but property is taking longer to sell than it has in the last five years, and price negotiability has risen to 9.4 percent, compared to 3.4 percent last quarter.

The report was prepared for Insignia Douglas Elliman by Jonathan Miller, president of Miller Samuel Inc., a real-estate consulting firm.

“All market indicators in the luxury category weakened this quarter,” Mr. Miller concluded in his report. “This segment has been the hardest hit by weak local and national economic conditions that have proliferated over the last 18 months.”

Mr. Miller’s conclusion squares with both anecdotal evidence from luxury brokers and other recently released market reports. According to the Corcoran Group’s year-end report-which encompassed the entire year, as opposed to Douglas Elliman’s, which focused on the last quarter-prices for luxury co-ops fell 7 percent and prices for high-end condos fell 5 percent.

Average sales price dropped 13.3 percent over the previous quarter to $2,713,761, and the average price per square foot declined 4.2 percent to $1,123 from $1,172 in the prior quarter. In addition, the average time it took to sell a luxury apartment rose to 185 days, up 24.2 percent over the last month.

Of course, market reports normally make comparisons to the data of the same quarter of the prior year, but that was largely impossible this year, given the skewing effects of Sept. 11. Excluding the fourth quarter of 2001, the last quarter’s average sales price is 17.3 percent below the average seen in the first three quarters of 2001.

“A lot of my clients are calling and saying they think the market has softened, and they’re ready to start looking again,” said Michele Kleier, who often traffics in luxury real estate as the president of Gumley Haft Kleier. “A little air was taken out of the bubble. There’s been a deflation, but I don’t think it’s burst.”

Overall, housing is regarded as one of the healthier segments of the economy. Figures for “housing starts” released at the beginning of trading on Jan. 21 were expected to bolster a tough week at the exchanges. Indeed, even in Mr. Miller’s and other reports, it’s Manhattan’s wealthiest that are feeling the pinch.

“There’s no doubt that there’s been downward pressure on price on the [luxury] market in the fourth quarter,” said Pam Leibman, chief executive of the Corcoran Group. “But it’s not an across-the-board phenomenon; the lower-end markets remain strong.”

Brokers pointed to several factors in explaining the decline of the luxury market relative to the rest of the market.

“With equity markets low, those that have [money] lose more than those who don’t have,” said JoAnne Kennedy, president of Coldwell Banker Hunt Kennedy. “Also, those with the greatest wealth are often in the driver’s seat of many corporations, and they have a clear view of the future that may not trickle down to everyone else-so they’re more cautious.”

While Manhattan’s elite may be feeling the pinch of the luxury-housing rout, there’s reason to believe the damage to the market will level off soon. Last year looked bad, with more and more apartments coming on the market and being built in the luxury end, a trend that appears to have tapered off: Each of the last four months have seen a smaller increase in the number of apartments coming on the market. December, in fact, saw a 5.4 percent decrease in inventory, the first time in 2002 that inventory actually declined from the prior month. Mr. Miller found the trend reassuring.

“If there had been a steady growth, there would have been a greater likelihood of falling prices,” he said. “But now we have a change in that pattern, which may be a possible early sign of stabilization.”

According to Mr. Miller, historically low interest rates are undoubtedly a key contributor to the health of the non-luxury markets.

“The lower-end market demographic is much more tied to fluctuation in interest rates, and so interest rates have been the primary catalyst for the entry-level market,” he said. “That is what has kept things going.”


124 East 91st Street

Two-and-a-half-bedroom, two-bathroom co-op.

Asking: $650,000. Selling: $650,000.

Maintenance: $1,212; 61 percent tax-deductible.

Time on the market: three months.

AN ANIMATED EXCHANGE Almost as soon as the last owners of this co-op bought the place, they had to relocate to Key Biscayne, Fla. But rather than flipping the apartment immediately, they decided to rent it out until they were sure that they wouldn’t be returning to New York. After two years, the husband’s Florida job at an animation studio looked solid, so the family made an arrangement with their renters to sell this apartment to them. Before the sale was complete, though, that solid job abruptly disappeared-and the sellers wanted to scratch the deal and take their apartment back. “The entire transaction took on a bad feel,” said the broker on the deal, Tania Arias of the Corcoran Group. “The sellers were grumbling that they should have asked for $100,000 more, and the buyers felt they should have been paying $100,000 less …. There wasn’t much good will.” In the end, the sellers relented and sold the place for the $650,000 asking price and moved to Hastings-on-Hudson. “They both thought they had gotten a raw deal,” said Ms. Arias, “when, in fact, I think they both got a good deal in the end.”

936 Fifth Avenue

Two-bedroom, two-bathroom co-op.

Asking: $1.95 million. Selling: $1.9 million.

Maintenance: $2,440; 38 percent tax-deductible.

Time on the market: one month.

PINING FOR PARK AVENUE Weary of the daily commute, and finding themselves socializing more and more in New York, a husband and wife from Greenwich, Conn., decided to move closer to the action. He’s a surgeon, she’s a self-employed publicist, and they just had to find a place on Park Avenue. The thing is, they just had to have a few more things, too, including a “classic six” layout, park views and 2,000 square feet-all for under $2 million. Whew! Even in a cooling market, that proved an impossible order to fill. So their broker, Terri Stone, a senior broker at Charles H. Greenthal & Co., suggested a lateral tack: an estate-condition apartment two blocks to the west. “They had to be on Park Avenue,” said Ms. Stone, “but they wound up on Fifth-and found everything they wanted in this apartment that they couldn’t find on Park.” Of course, the place needed “everything,” which is the only way they could land on Fifth and tick off every item on their checklist for under $2 million. “If you’re willing to do work and take on a project,” said Ms. Stone, “then, at the end of the day, you’ve got a very valuable property whose value is more than the sum of its parts.”


90 Prince Street

Two-bedroom, two-and-a-half-bathroom condo.

Asking: $1.495 million. Selling: $1.31 million.

Charges: $415; taxes: $403

Time on the market: one year.

GREENHOUSE EFFECT A European businessman had been dangling this triplex Soho loft on the market for the last five years at a price of $1.65 million. His broker through the whole process-Michel Madie, the president of Michel Madie Real Estate-thought it was about $150,000 overpriced, but the seller stood firm. After all, it was just his pied-à-terre ; he could afford to wait around for that miracle buyer. Then, all of a sudden, he couldn’t. “He was squeezed for cash and wasn’t able to pay his common charges and taxes,” said Mr. Madie. “So he called and said, ‘I’ll go to $1.5 million.'” As soon as they dropped the price, Mr. Madie called up a long-time client he knew would love place-and the new price. Of course, there was a hitch: The loft’s private roof had an old greenhouse that was in violation of zoning codes. Over the past five years, several deals on the apartment had fallen through because buyers got cold feet at the prospect of repairing it. But Mr. Madie’s client-hot for the 2,100-square-foot property-decided to tear the greenhouse down. “Who cares about the greenhouse?” Mr. Madie remembers his client saying. “Instead of a 700-square-foot terrace, I’ll get a 1,000-square-foot terrace.”


So Graham Norton: British Talk King in Sniffen-Courtly $3 M. Townhouse Deal

Graham Norton, the most popular talk-show host in British television, has purchased a $3 million townhouse in Murray Hill. The 39-year-old native of Ireland closed on the three-story building in late September, when he was in town to perform his stand-up comedy act, which had a two-week run at St. Clement’s Theatre. Mr. Norton’s new home is located on Sniffen Court, a small enclave of carriage houses on East 36th Street between Third and Lexington avenues.

Though Mr. Norton is the Jay Leno/David Letterman/Conan O’Brien of the United Kingdom, he’s just beginning to gain a cult following in the United States. His irreverent talk show, So Graham Norton , has been airing weeknights on BBC America since July. The program is heavily dependent on celebrity interviews, but Mr. Norton largely eschews the plug-the-movie-and-run format, instead pelting his guests and audience members with risqué questions and involving them in bizarre pranks.

When Mr. Norton had Dolly Parton on the show, for example, he called Dolly Parton and Kenny Rogers impersonators in the United States and had the real Ms. Parton sing telephone duets with them.

Mr. Norton could not be reached for comment by press time. Panic on the Park