At a time when luxury condominium developments are as rare as celebrity-studded launch parties, a real estate company known for its rental business tweaked its business plan to create one.
Stonehenge Partners, which owns and manages 16 rental buildings in Manhattan, is in the process of converting a 17th rental building into the Merritt House condo, a 10-story red-brick mid-block building at 167 East 82nd Street between Third and Lexington avenues.
The building, which dates to 1929, has 38 units, 25 of which will become, or have become, condos by adding white wood cabinets and Miele refrigerators and losing their maid’s rooms to allow for expansive kitchens.
The other 13 units will remain as rent-stabilized apartments in a building that is also gaining significant new ground-floor common areas, like a party space, fitness room and children’s playroom, from space that once contained maid’s rooms, laundry rooms (each apartment is outfitted with washers and dryers) and a superintendent’s apartment. A formerly paved courtyard is also set to become a 1,000-square-foot landscaped garden.
Construction won’t wrap up until the fall, and the company is still awaiting approval for its offering plan for the Merritt from the attorney general’s office, according to Alan Klein, Stonehenge’s director of acquisitions.
Still, sales are underway at the Merrit with prices from $1.14 to $2.2 million, Klein said, for one- and two-bedrooms ranging in size from 878 square feet to 1,621 square feet. Twelve contracts have been signed since October, or about 50 percent, though closings can’t happen without state approval.
The Merritt, which was named for William Merritt Chase, a 19th century artist whose paintings convey “warmth and luxury,” according to the condo’s brochure, is coming to market after a notably sluggish period for high-end condos.
Stonehenge executives say that while the conversion was conceived a few years ago during the boom, the market’s poised for a turnaround, evidenced by the strong initial interest in the Merritt.
Indeed, despite continuing signs that the rental market might be better off than the sales market, converting the Merritt made financial sense, said Klein, who would not disclose the cost of the project.
“We have very low leverage and are well-capitalized. It was essentially a no-brainer,” said Klein, adding that other condos will follow soon for Stonehenge, though he declined to be specific.
It also will help that the building has co-op flourishes, like fireplaces, but is a condo, said Aidan Sullivan, sales agent for Corcoran Sunshine Group, which is marketing the project.
“The rare thing is that we are a conversion in the heart of the East Side and a condominium” she said.
Boosting Stonehenge’s confidence might be the fact that they could easily rent the Merritt’s units if they don’t sell, said Gary Malin, president of the brokerage Citi Habitats, which isn’t connected with the project.
“They could lease them up rather quickly because they have the leasing infrastructure in place,” said Malin.
Stonehenge’s portfolio includes 2,500 apartments. They are in buildings like Stonehenge Tower at 210 West 89th Street, its first acquisition in 1995, as well as 10 Downing in Greenwich Village, a more recent acquisition, where studios start at $2,895.
Plus, the income from all those units, Malin said, “gives them a sizeable cushion if they’re wrong.”
But there’s a strong chance Stonehenge is right about the health of the Upper East Side’s condo market, which has recently offered huge ground-up luxury projects like the Brompton and the Lucida but few smaller-scale projects, brokers said.
At $1,300 a square foot, the Merritt is “a little pricey for the East Side for a conversion, but you’ve got to start someplace,” said Bob Scaglion, a senior managing director at Rose Associates, a real estate company that rents and sells apartments but has built a few condos, too.
In fact, the Merritt may compete for buyers with one of Rose’s properties, Sheffield57, also a conversion, although it is Midtown on the West Side. Its price per square foot is $1,400, though its amenities — like a 50-foot pool, lounge and sundecks — are more extensive. Of Sheffield’s 540 units, 48 percent are sold, Scaglion said, adding “we would do a condo now if it made economic sense.”