The Real Deal New York

Italian giant aims smaller with Soho condo project

First NY condo from skyscraper-acquirer Sorgente Group due this summer

March 31, 2009
By Steve Cutler

Normally the cash-rich Italian real estate giant Sorgente Group follows a simple investment strategy: It buys and patiently holds and manages iconic skyscrapers in major cities around the world, including the Flatiron Building, which it acquired in January.

“Our plans have a life of over 20 years,” said Veronica Mainetti, daughter of Sorgente CEO Valter Mainetti and head of its New York-based U.S. office. “We’re not going to start with the conversion of Flatiron today — maybe 10 years from now.”

Meanwhile, the company will rent the Flatiron to existing tenants and watch the recession come and (it hopes) go.

But Sorgente’s new venture in New York City, a luxury for-sale condominium development company operating within a severely stepped-up timeframe — not 20 years but 18 months — is being forced to respond to here-and-now market conditions.

With condominium sales nearly frozen and prices down some 20 percent and falling in Manhattan, Sorgente remains committed to historic properties, for their preciousness, but has radically downscaled the company’s usual investment strategy.

Its first condominium, due for completion this summer, is 34 Greene Street, a combination of two five-story cast-iron landmarks built in 1873 containing just seven floor-through loft apartments, starting at $3.8 million.

Starting small poses less of a challenge to selling in today’s market.

“We only have seven units to sell,” said Jason Karadus, Prudential Douglas Elliman vice president and sales director for the project, “and the majority of the inventory right now in Soho is glass new construction,” such as the Jean Nouvel-designed 40 Mercer, which is visible from the windows at the rear of 34 Greene.

“Even if we are in an unstable market,” added Mainetti, “we believe there could be a buyer for these kinds of spaces” — large, modern, Italian-design lofts in a landmark building in the heart of Soho.

“Historic buildings preserve their value more than other buildings when the market is going down,” said Mainetti.

Sorgente bought the two buildings from David Slavin’s Red Brick Properties for $14.8 million in 2007. “The problem was the two tenants who were still in the building,” said Mainetti. “[Red Brick] didn’t want to deal with that.” Sorgente did.

The next challenge was working with the Landmarks Preservation Commission to obtain permits for the removal of the fire escapes, a six-month process that entailed proving, said Mainetti, “that the fire escapes were not born with the building in 1873, but probably put up in the 1950s, and were doing nothing but obscuring the façade.”

Sorgente inherited the plans for the conversion, most of which were already approved by the Buildings Department, in the purchase from Red Brick. But then Mainetti, an interior designer, worked with the original architect, Thomas McKay, for half a year to customize the building.

Some changes were made after the property was gutted. The original plans called for two 2,000-square-foot floor-through loft apartments per floor, said Mainetti, but when she saw the vast expanse of the floors with the walls removed, she couldn’t resist turning the whole top floor into a 5,000-square-foot penthouse, to which a glass-enclosed 900-square-foot rooftop pavilion will be added. The addition will be obscured from public view to satisfy the Landmarks Commission and surrounded by a wraparound terrace. The unit will be listed for $12.5 million.

The lofts feature 12- to 14-foot ceilings, wide plank solid white oak floors, fireplaces, master baths with cast iron soaking tubs, travertine floors and walls, and kitchens by Schiffini, the high-end Italian kitchen designer. Each unit has direct keyed access from the elevator, which opens on two sides. The lobby contains volcanic cobblestone and Osso travertine walls meant to evoke the feeling of an Italian village piazza.

Mainetti said she has been approached by several European design companies who wanted to buy the building’s large retail storefront on the ground floor, but Sorgente prefers to keep the space for rental. It is in talks with a few Italian showrooms, which are ubiquitous on Greene Street.

Meanwhile, the euro-rich company is shopping for deals in New York City. “With everything slowing down,” said Mainetti, “we know there is a lot of opportunity in the next six months. It’s a good time for investors, a buyer’s market. We believe that by the beginning of 2010 things will start getting better. And we have the capital to go through a struggling market.”

But for residential development, said Mainetti, “We’ll stay with boutique buildings. We want to concentrate on restoring historic properties — in Soho and Tribeca. There are no huge buildings here.”

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