The name of the high-end game: extreme apartment price cuts
What goes up must come down. Sellers who once jockeyed for the highest sales prices are now struggling to outdo each other with massive price cuts.
Early last month, a seventh-floor, four-bedroom spread at 15 Central Park West listed with Nancy Candib of Brown Harris Stevens saw its price slashed by $5 million to $25 million. Guy Wildenstein, the president of Wildenstein Galleries, also chopped the asking price of his sprawling 8,000-square-foot home at the Plaza by more than $4.1 million to $42.4 million. And the price of a four-bedroom condo at 47 East 91st Street fell $2 million recently to $17.85 million.
Candib, a senior vice president at Brown Harris Stevens, said deep price cuts are key to winning a buyer’s attention in the current market.
“Price does sell, and value sells,” she said, adding that the price cut on her 15 Central Park West listing has already prompted several phone calls from buyers.
The owner, Ravi Singh, paid $15.87 million for four-bedroom unit 7A in the storied limestone condominium on March 20, according to city data. He originally sought to double his investment, putting the unit on the market Sept. 17 for $32 million.
Other sellers at 15 Central Park West had received double the price they paid for units in the building, Candib said, so at the time, the price seemed reasonable. But since the market has turned, sellers like Singh have had to accept the fact that such astronomical profits are no longer possible, even in sought-after buildings such as 15 Central Park West.
“This is not the frenzied market of a year ago,” Candib said. “He’s lowered his expectations.”
In October, Candib slashed the price to $30 million. But offers still came in far below the asking price and showings were slowing down, so Candib felt it was time for a large cut to reignite interest in the property. She purposely priced the unit at $25 million, significantly less than a recent comparable unit in the building. Unit 38A, a higher-floor apartment with a terrace, sold Dec. 12 for $27 million.
“I felt that we should put the carrot out there,” she said. “This is a very good bargain.”
Roger Erickson, a senior managing director at Sotheby’s International Realty, estimated that many buyers now expect a discount of 20 to 30 percent, depending on the unit’s original price.
He’s listing a unit at the Plaza for $38 million, down from the original price (listed in September with another broker) of $55 million. Another one of his listings, a two-bedroom at 812 Fifth Avenue, is now on the market for $3.65 million, down from $4.95 million a year ago after a co-op board rejection, Erickson said.
“Buyers certainly are looking for discounts,” Erickson said. “If it started high and then has gone through a rather substantial cut, that seems to be appealing to buyers in this market.” By Candace Taylor
Co-op seller gets to keep dead buyer’s down payment
In a recently settled lawsuit, the seller of an Upper East Side cooperative unit got to keep a down payment from a buyer who died before the closing.
Glen Altman was in contract to buy a co-op for $2.3 million at 1150 Park Avenue, between 91st and 92nd streets, and paid a $230,000 down payment. She was approved by the board, but before closing on the unit, she passed away.
Altman’s estate wanted the down payment to be returned, but the Manhattan Supreme Court ruled that the seller could keep the money.
Ira Matetsky, an attorney at the law firm Gafner & Shore, who was not involved with the lawsuit but wrote about it in his firm’s newsletter, said the seller won the suit because there was no provision in the contract stating that if the buyer died, the contract could be broken.
“In some situations, a contract contains a standard provision that if a purchaser should pass away before the closing, the contract is null and void,” Matetsky said. “This case arose, and the contract didn’t say one way or the other.”
Altman, who passed away in 2005 at age 74, was survived by her daughter, Tracy Altman Warner. Warner, a Corcoran Group agent, and her attorney were not immediately available for comment. Altman and her husband, Edwin, who passed away in 2003, ran a wholesale diamond company called M.B. Altman Sons. The lawsuit was settled in October.
According to the lawsuit, the estate argued they were not obligated to go forward with the purchase because the contract called for occupancy by Altman only. However, there was no provision in the contract to cancel the deal.
JoAnn Schwimmer, an associate broker at DJK Residential, said she had never heard of a situation like that before. “It seems immoral,” Schwimmer said of the seller keeping the down payment.
Roberta Axelrod, director of residential sales and rentals at Time Equities, said that in a few of her deals, lawyers have requested that a provision be put into a contract that would cancel the deal if the purchaser passed away.
“None of my purchasers have ever died,” Axelrod said, “but the way it technically works is that unless you put it in the contract that you have the right to cancel it, the estate is bound to [the purchaser's] obligation.”
If a purchaser buying a condo passed away, the estate would have to buy the unit if there wasn’t a provision in the contract canceling it. In the case of a co-op, however, the estate has to be approved by the board.
The co-op board president at 1150 Park Avenue, Herbert Appel, testified that the estate did not submit an application to go forward with the sale, and if the estate had wanted to purchase the unit, its application would have been considered by the board, although an estate has never bought a unit in the building.
Matetsky the attorney said, however, that typically a co-op board — which has stringent requirements for approval — would not allow an estate to buy a unit as it wouldn’t know who from the estate would move in.
And in a case where an estate is required to go forward with the sale, Time Equities’ Axelrod said, the seller can still decide to cancel the contract and return the money. By Jovana Rizzo
Louis Dubin leaves Athena Group, real estate company he founded
The founder and former president and CEO of the Athena Group, Louis Dubin, left the privately held real estate investment, operating and development company late last year, and has been replaced by one of Athena’s principal outside advisors.
Attorney Dan Rabinowitz is Athena’s new president and CEO. According to his Athena biography, prior to his selection, Rabinowitz “maintained an office in New York engaged in the advisory practice of law.” Athena did not return numerous phone calls requesting comment on the change in executives.
A source at Athena, who asked not to be identified, said that Dubin left “to form his own company.” Details about Dubin’s stake in the company and the terms of his departure were not immediately available.
In 1993, Dubin founded the Athena Group, a residential real estate investment and development fund with about 4,500 residential units, primarily in new and converted multifamily projects from New York to Los Angeles. The company, which has about 40 employees, develops a handful of new projects per year.
Athena has completed or developed roughly $2.5 billion in assets. Recent New York development projects include 111 Central Park North. Athena has also developed 110 First Street, 111 First Street and A Condominiums in Jersey City.
Prior to forming Athena, Dubin was creator and director of the $1.7 billion National Land Fund for the Resolution Trust Corporation.
Rabinowitz was a partner at McCarter & English from 1982 to 1989, and Shearman & Sterling from 1989 to 1995. From 1999 to the present, he has served as director of the Lehman Brothers Bank, FSB. He serves on the finance and audit committees of the board, and chairs its nominating and corporate governance committees. By Alison Gregor
IStar offering Drake loan at steep discount
In a clear sign that the value of development properties has fallen from the highs of 2006, the publicly traded lender iStar Financial is considering offers of about $160 million for its first position note on the Drake Hotel site, which spans Park Avenue from 56th to 57th streets, sources said.
That represents a reduction of about a quarter for the $224 million note on the site owned by Harry Macklowe, who planned to build a mixed-use development on the large parcel. The note is being marketed by Cushman & Wakefield, but a spokesperson said she could not comment on the site.
Macklowe Properties took out a mortgage from Deutsche Bank, and iStar bought a senior position, the most secure position in the hierarchy of debt on a property, within that loan. Any buyer of the debt would still have to wrestle with Macklowe Properties for control of the assembled parcel, real estate insiders said. Deutsche Bank, which structured the mortgage for the development of the site, sued Macklowe in August to foreclose on the $482 million in principal that was outstanding on its loan.
The approximately half-dozen bidders for the iStar note have been offering prices about 20 percent below the firm’s approximately $160 million asking price, one of the sources said. The lowest offer was about $100 million.
“The seller is holding firm. Someone may step up. It remains to be seen,” the insider said. The source would not say whether the note, which is part of the Deutsche Bank loan, controls the entire Deutsche Bank mortgage. A representative from Deutsche Bank did not immediately respond to a request for comment.
Andrew Backman, the senior vice president for investor relations and marketing at iStar, said the company does not comment on ongoing negotiations.
“We’ve received many unsolicited inquiries from interested parties on this world-class property … Any discussion of specific offers would be premature as we continue to negotiate with a number of interested parties,” he said in an e-mail.
A spokesman for Macklowe Properties would only say, in an e-mail, “Macklowe has no opinion on who owns the senior note.”
In November, the Observer reported the note was being marketed, and later that month the Post quoted sources saying a deal was likely by Thanksgiving with a closing before the end of the year. By Adam Pincus
Lender alleges Swig defaulted on loan, inflated Sheffield stake
A Manhattan-based private equity firm filed suit against developer Kent Swig in late December alleging he defaulted on more than $39 million in loans and inflated his stake in the Sheffield57 condominium.
In a suit filed in New York State Supreme Court, Square Mile Capital Management claimed that in March 2007 it loaned $18.4 million to 25 Broad Mezz Preferred, a Swig Equities subsidiary that invested in Swig’s failed conversion of 25 Broad Street, a luxury rental building in the Financial District. Square Mile claimed that the 25 Broad Street conversion began to run into financial difficulties in the summer of 2007, and that both loans were restructured at Swig’s request.
Swig personally guaranteed the loan, and agreed that instead of paying the loan back in cash, the loan would be converted into an equity stake in 25 Broad Street, according to the suit. The 25 Broad loan was converted into a $21.35 million stake in the project, with a 21 percent preferred rate of return.
In July 2007, Square Mile alleged the company made a separate, personal loan to Swig for $21.15 million, which could be converted into an equity stake in the conversion of Sheffield57, a luxury tower at 322 West 57th Street. The loan has been amended four times and restructured twice since then and has a current balance of $28.38 million, including interest and penalties.
Square Mile claimed that under the restructured deal, Swig agreed to repay the 25 Broad Street loan with future proceeds from the Sheffield or his Upper West Side tenement project at 201 West 92nd Street, which was sold in July 2008 after iStar Financial filed suit to foreclose on the building.
Swig, according to the allegations, told Square Mile that he owned 99.98 percent of a firm called SE West 57 Capital, which owned 29.99 percent of the Sheffield.
However, Square Mile charged in the suit that Swig owned just 30 percent of SE West 37 Capital, meaning he controlled just 9 percent of the Sheffield. Square Mile alleged that a firm called Shefa 57, a firm unaffiliated with Swig, controlled 70 percent of SE West 57 Capital. State records list Shefa 57 LLC at the law firm of Fishbach Hertan, but officials at Shefa were not immediately available.
“Upon information and belief, Swig knowingly concealed Shefa 57 LLC’s interest from [Square Mile] because he knew if SM were aware of the truth, it would not agree to the equity conversion and to release Swig from his personal guarantee,” Square Mile wrote in the complaint.
Swig Equities denies the charges, alleging that Square Mile is trying to force a resolution through the courts. “In the wake of unprecedented economic dislocation in the capital and credit markets, Square Mile Capital has taken unwarranted legal actions in a misguided attempt to improve its position vis-a-vis the owners and developers of these properties, and to pressure a resolution of this complicated legal and financial situation,” a Swig Equities spokesperson, who asked not to be identified, said. “We will be answering the claims brought by Square Mile Capital in their complaints. We also are evaluating our defenses to these claims as well as our counterclaims. We are confident that our positions will prevail with the court.” By David Jones