Some brokers (over) confident about high-end market

Dec.December 16, 2008 02:44 PM

Recession or not, this is still New York City. Lest we forget that fact, there are several eye-poppingly expensive homes for sale that show no signs of reducing their prices, despite months of sitting on the market. A few have even increased their prices.

The former home of the Salander-O’Reilly Galleries, the 21,000-square-foot limestone Italian Renaissance mansion at 22 East 71st Street, has been on the market for $75 million, or $3,571 per square foot, since April. If it sells for that amount, it will be the most ever paid for a Manhattan mansion. The current record-holder is the $53 million paid in 2006 for the Harkness Mansion at 4 East 75th Street.

The listing agents for the property, Sotheby’s International senior vice presidents Meredyth Smith and Serena Boardman, also have a $35 million listing for 740 Park Avenue #4/5C, a four-bedroom apartment in one of the city’s most exclusive co-ops. Formerly owned by Randolph Speight, it has been on the market since August.

Smith would not comment on whether there have been offers on either property or whether price cuts will soon be in order. But when asked if the properties will ultimately receive the 20 to 25 percent mark-off from last year’s prices that many properties are receiving, she said, “absolutely not.”

“The top quality items are always rare and very scarce,” she said. “That holds true whether it’s a bull market, or a market that’s uncertain like the one we’re entering now.”

After this fall’s once-in-a-lifetime events, from the collapse of Lehman Brothers to the Fannie and Freddie bailout, everything changed. “Prior to that point there was a general feeling that the top 5 percent was insulated [from the downturn],” said Jonathan Miller, president of real estate appraisal firm Miller Samuel. “But the thinking now is that the external factor of credit is impacting every market segment.”

One thing that has certainly changed in recent months, Smith said, is that deals are going forward with less fanfare in the midst of the recession and Wall Street meltdown.

“Clearly there’s financial distress in the marketplace, but there are plenty of people who are extremely well-funded, who are discreetly looking for properties,” she said. “There are sensitivities in the marketplace that weren’t there six or eight months ago.”

Michael Pellegrino, also of Sotheby’s, has a $75 million listing for a seven-floor townhouse at 1016 Madison Avenue, between 78th and 79th streets. The building is currently home to a branch of the Arader Gallery and a residence of the proprietor, W. Graham Arader III, a prominent dealer of antique prints, maps and books. The listing first went on the market in March 2006 at a price of $39 million. The 10-bedroom home failed to sell, but the price was gradually increased to $58 million, and then pulled from the market last fall, according to Streeteasy. In October of this year, it was put back on the market at $75 million.

“It is a little pricey, but we’ve gotten offers in the low $60s, so it’s not that outrageous,” Pellegrino said.

Arader, who bought the townhouse 12 years ago for $5.5 million, said he’s continually made improvements to the building to justify its high price. A high profile neighbor is Mayor Michael Bloomberg, who owns a townhouse at 17 East 79th Street.

“It’s the only pristine Beaux-Arts Mansion Left On Madison Avenue, and it’s in triple-mint condition,” Pellegrino said. “It’s a lot of money, but if you want the best, this is it.”

He added that the building has recently received strong interest from foreign buyers, many of them Russian, and that he expects to sell it quickly. “I would be very surprised if I had it in six months,” he said.

Miller said that the strategy of taking a listing off the market, then putting it on at a higher price, has worked in the past because when the property is brought back on the market, there may not be as much competing inventory. Still, the technique may be no match for the unique characteristics of the current market.

“I’ve seen that happen, where properties are taken off the market, then come back on at a higher price point and sell,” Miller said. “I don’t know if that strategy is applicable in today’s market. I’m not saying it wouldn’t work, but I would be skeptical.”

The mansion is unique in that it’s zoned for both residential and commercial uses, Pellegrino said, so most of the lookers have been interested in commercial space. Some interested parties, in addition to foreign investors, have included major retail and small banks.

He acknowledged that in the current market, buyers are looking for discounts. But in this case, the owner is willing to wait for the right price. “He’s not one of those people who has to sell today,” Pellegrino said. “Our gut feeling is that the market will be back in the next eight to 14 months.”

Some brokers know that in this market, sellers have to be flexible.

If they are serious about selling right away, they will have to discount their properties, even at the very high end, said Carrie Chiang, a senior vice president and associate broker at the Corcoran Group. Among Chiang’s listings is 4-8 East 94th Street, the former home of Spence-Chapin Adoption Agency, which was recently reduced to $49.95 million from $59 million.

There are certainly strong buyers on the market, Chiang said, but they, like everyone else, expect to get a deal in the current market. “A correction of 20 to 25 percent is expected,” she said, adding that prices have now reverted back to 2002 or 2003 levels.

“There are still some buyers around, but strong buyers are not stupid,” she said. “They expect a good, significant discount.”

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