In hindsight, the unpaid common charges were a red flag.
In December, the condo board at One57
Coupled with a series of unprofitable resales, the impending foreclosure — the second at One57 in as many months — has cast a shadow over the onetime poster child of the luxury residential boom. And it raises further questions about the health of Billionaires’ Row at a time when the tower’s developer, Gary Barnett, is planning an even more ambitious undertaking.
“It’s an isolated incident, but symptomatic of a bigger story,” said Leonard Steinberg, president of Compass. “Foreclosures used to be the domain of people who were barely scraping by. This shows it can apply as equally to the very wealthy.”
And there could be aftershocks.
“On the very high end of the market, where pricing has been knocked up again and again to the extreme, certain people will break,” Steinberg said.
This is particularly bad news for developers hawking new luxury product. That group includes Barnett, whose Extell Development is finalizing funding for Central Park Tower, a $4 billion condo project that seeks to eclipse even One57 in terms of ostentation and price tag. The 179-unit project at 217 West 57th Street, even though Macklowe Properties and CIM Group have had to offer discounts on some pads, total closed sales are approaching $1.8 billion, according to an analysis by the Wall Street Journal. Though even those numbers come with a catch: For the priciest sale at 432 Park, for example, CIM provided the buyer, Saudi retail magnate Fawaz Al Hokair, with a $56 million money mortgage, which means that the developer only received a portion of the sales price at closing.
And Barnett has a history of doubling down when others are fleeing from the market.
In the depth of the recession, he convinced two Abu Dhabi–based government investment funds to put up a majority of the equity he needed to build One57. By the time the tower was ready, Barnett and his partners became among the first to benefit from the rip-roaring market in 2012 and 2013.
Some said Central Park Tower could follow the same arc, particularly if the market rebounds by the time Extell brings the condos to market.
“It’s probably five years out,” said Warburg Realty’s Frederick Peters. “Maybe we’re in a different market at that point. Usually the people who are brave enough when things look bad are the people who cash in when the market turns around.”