The air in the upper stories of Manhattan’s most expensive apartment buildings has always been a bit thin. But the real-estate brokers who sell apartments to the super-rich were thankful when Lily Safra, widow of the late banking tycoon Edmond Safra, finally reduced the asking price on her Fifth Avenue apartment from $30 million to $24.5 million-a markdown of almost 20 percent.
“Thank God,” one luxury broker said. “It’s about time.”
Since the spring of 2002-when, according to the Corcoran Group, Manhattan saw the average trading price for a Manhattan cooperative apartment push above $1 million-brokers have been pulling out the crushed velvet and smelling salts to bring Manhattan’s richest property owners out of the swoon that had them listing apartments for tens of millions of dollars, sometimes 50 to 75 percent “above market.”
And even though more and more New Yorkers these days are slashing their properties’ asking prices, others are holding firm, refusing to acknowledge that the frenzied Manhattan real-estate world of spring 2002 is now a memory.
Most brokers point to Dustin Hoffman’s co-op at the San Remo on Central Park West as a prime offender. Mr. Hoffman is asking $25 million for his spread. True, it’s got a great name attached to it, and true, it’s a triplex, but it also lacks one main feature that you’d expect to find in a Central Park West apartment for that price: direct park views. Mr. Hoffman’s co-op is a back apartment, meaning that it faces the Hudson River. No brokers would go on the record about their feelings, but most surveyed thought Mr. Hoffman would be lucky to get $15 million for his apartment.
Of course, Manhattan will never lack for property buyers whose egos are inflated by paying a high premium to live in an apartment with pedigree, park views or private pools. Actress Renée Zellweger probably has some cash to burn, and is reportedly out looking for a place now, as is actress Jennifer Connelly. Star couple Antonio Banderas and wife Melanie Griffith had a look at a $4 million apartment at Trump’s Columbus Circle condo building (with Jean-Georges Vongerichten’s restaurant at the bottom). Pubescent pop star Lance Bass seems to have a pretty big allowance, too: He’s been looking at apartments in the super-expensive AOL Time Warner Center, still under construction. Apartments there range in price from $2,050,000 for 1,283 square feet to $30 million for 8,332 square feet. That’s a lot of milk money.
But these are not average buyers, and brokers say that sellers would do well to remember that-for everyone’s sake. The vanity and fiscal myopia of the elite, as the country has recently learned, often have a trickle-down effect, and many real-estate experts say the high-end fantasia of the Manhattan real-estate market hurts everyone else’s ability to sell in a flattening market. While people like Edgar Bronfman Jr. and Alec Wildenstein perpetuate the myth of the spring of 2002-by pricing their neighboring townhouses on East 64th Street at $40 million and $35 million, respectively-other sellers, at lower price points, take notice and put similarly outrageous price tags on their properties.
And these days-with the economy at a standstill, war jitters breeding tremendous uncertainty, and a huge spike in inventory that’s discouraging impulse buying-most of those overpriced properties are just sitting on the market, getting little to no action at all.
Though the trend is most pronounced on the highest end, deluded expectations are in evidence in every price bracket.
“It’s like a conspiracy between the overpricing broker and the overgreedy seller, and it’s making the entire market look much worse than it is” when apartments asking stratospheric prices sit on the market forever or trade far lower than the asking price, said luxury broker Michele Kleier, president of Gumley Haft Kleier.
And while it might make you feel more important to have a ridiculously expensive apartment to sell, it will likely end up biting you in the asking price.
“If a new property comes on the market that’s priced very well, every broker jumps on it, and it creates a sense of urgency. Sometimes they’ll even bid it up into a bidding war,” Pam Liebman, chief executive of the Corcoran Group, said. “When a property comes on that’s overpriced, it creates the opposite kind of business. You lose the momentum of ‘new and exciting,’ and brokers will tell [prospective buyers], ‘Don’t worry, this thing isn’t going anywhere.'”
Perhaps more than any seller in New York, Bob Guccione has learned this lesson the hard way. When the cash-strapped Penthouse publisher first put his double-wide townhouse at 14-16 East 67th Street on the market last year, he priced it at $40 million. It drew so little real attention at that price that Mr. Guccione resorted to putting it up for auction with a company that usually disposes of financially unstable commercial properties. But by the time it became clear that that route wasn’t going to fetch him anywhere near what he was asking, it was too late: Mr. Guccione was already in default on several loans against his property, and his creditors-who had already obtained a $16 million foreclosure judgment against him-decided to do the auctioning themselves. Indeed, they were set to auction off the property two weeks ago, but Mr. Guccione delayed that humiliating end-game by making a small 11th-hour payment. That bought him some time, but unless he can refinance or sell the property himself within the next few weeks, it goes up for auction again.
Many of Manhattan’s richest families are being forced to accept offers far below their initial expectations. On the ninth floor of Ms. Safra’s building, the executors of the estate of Stavros Niarchos have recently signed a $15 million contract for the late shipping magnate’s apartment. That’s a 40 percent discount from the original asking price of $25 million. Or, to put it another way, it’s like accepting $1.5 million for a property that originally asked $2.5 million. Other cases of heavily discounted sales abound. Two of the Lycée Francais’ mansions on East 72nd Street, which originally asked a combined $51 million, sold last year for a reported sum in excess of $26 million. In August, Sale Johnson, ex-wife of New York Jets owner Woody Johnson, picked up the condo belonging to the estate of pediatrician and philanthropist Anne Dyson for $9.5 million, down from an asking price of $14.5 million. On East 85th Street, Tyco’s indicted former chief financial officer, Mark Swartz, recently sold his penthouse condo to music-industry powerhouse Tommy Mottola for $9.25 million, almost $6 million less than Mr. Swartz’s $15.9 million asking price. In October, embattled telecom chief Larry Zimmerman accepted $15 million for his condo at 515 Park Avenue, which had originally asked $26 million. One of the building’s residents recently filed a major lawsuit against the building, charging that shoddy construction had led to mold-related damages, but it’s not clear whether Mr. Zimmerman’s exodus had anything to do with it.
Of course, people who just have to liquidate properties, like Messrs. Zimmerman and Swartz, have been chastened by other, larger forces. But the trend is evident even among people who still seem to be riding high. Mr. Mottola, for example, will now take $27 million for his townhouse condo on East 64th Street. He originally put it on at $45 million. On Central Park West, real-estate titan Edward Milstein now asks $14.9 million for his apartment, down from a high of $18 million.
On the same street, hotelier Ian Schrager’s Philippe Starck–designed spread is now down to $16.9 million, from $22 million. According to his broker, William B. May senior managing director Roger Erickson, it now looks like his client won’t even be making a profit on his purchase-something virtually unheard of in the usually lucrative world of high-end real estate.
“We brought it down from the seller’s ideal price to a price that was less than the actual cost he had invested in the apartment,” said Mr. Erickson.
Rocker Lenny Kravitz originally put his condo at 30 Crosby Street on the market in July of 2002 for $17 million, but he chopped the price down to $14.9 million a few weeks ago.
Even talk-show titan Rosie O’Donnell has knocked $1.1 million off the original $6.9 million asking price on her five-story Upper West Side townhouse.
Of course, the value of an apartment is whatever someone is willing to pay for it. That’s why the megacondo spreads that characterized many of Manhattan’s glitziest new developments tempted fate, pushing asking prices over $45 million-and prompting, in a flattening market, the question whether there can be such thing as an apartment worth $45 million, however extravagant. Now, apartments that once sprawled over multiple high floors are being carved up into more modest proportions. At Trump World Tower, after a U.S. court seized several properties belonging to Turkish telecom mogul Cem Uzan, his 89th-and-90th-floor duplex unit has now been partitioned into four separate apartments. Restaurateur Warner LeRoy’s multiple-unit condo spread at 3 Lincoln Center is also being marketed as two separate apartments. And at the AOL Time Warner Center, several full-floor penthouse units are being diced into smaller apartments.
The characters who are sticking to their guns, of course, are the ones you’d expect to be. Besides Mr. Bronfman and Mr. Wildenstein, whose East 64th Street townhouses are the two most expensive properties on the Manhattan market, there are plenty of white elephants in the urban jungle.
There’s David Geffen’s $20 million bachelor pad at the Parc V-it’s a one-bedroom-and Mohamed al-Fayed’s $25 million apartment at the Pierre.
Of course, the longer these properties sit on the market, the more dust they gather. “One of the first questions any buyer asks is, ‘How long has this been on the market?'” said the Corcoran Group’s Ms. Liebman. “And the longer it sits, the more people think there’s something wrong with it.”
“There are different types of sellers,” said Ms. Liebman. “Some are realistic, but others don’t care if they sell. They just throw it on the market and say, ‘If someone pays me this, I’ll sell; otherwise, I’m keeping it.”
According to Fred Peters, president of Ashforth Warburg, a boutique real-estate firm specializing in luxury properties, those kind of sellers are often more trouble than they’re worth.
“There are sellers who only want to hear what they want to hear,” he said. “You can’t treat those people as serious sellers.”
At Manhattan’s most exclusive co-op buildings, Ms. Liebman said that sellers sometimes prey upon New Yorkers’ fears of those snobby boards-and their instinct that money will talk loudest when everything else seems to fall on deaf ears.
“If a buyer feels like they are unlikely to pass a co-op board, sometimes they’re under the mistaken impression that if they pay an exorbitant price for the apartment, the board will let them in,” she said. “But this is not usually the case, and that sometimes puts an unrealistic price into the seller’s head.”
And sometimes the broker would rather land a sale that is still likely to earn them a fat commission when it finally does trade-even if the price is outlandish. According to Mr. Peters, brokers, in their quest to land a huge, juicy exclusive, will often promise to take a property on the market for far more than they know it is worth.
“It wouldn’t be accurate to say that the only time competitive bidding takes place is when several buyers are trying to buy something,” he said. “It also takes place when brokers are trying to list it.”
This happens for two reasons, he explained. First, brokers believe it’s simply prestigious to hold an exclusive listing for one of New York’s most revered addresses. And second, all brokers have had the experience of starting unrealistically high with a property and then selling it after dropping the price. But you’ve got to keep things in perspective, Mr. Peters cautioned.
“If a property is 5, 10 or maybe even 20 percent above market, you have some hope of selling it,” he said. “But if it’s 50 or 75 percent above, you know you’re not selling it even in two years.”