Who earned and who got burned in luxe real estate

A look at the business moguls and celebs that made out big — and stomached the worst losses 

TRD New York /
Sep.September 11, 2017 12:22 PM

Jets owner Woody Johnson’s apartment at 834 Fifth Avenue


When Jets owner Woody Johnson accepted a $77.5 million offer for his Upper East Side apartment in October 2014, he hit a euphoric moment in the New York City real estate market. The Johnson & Johnson heir’s apartment at 834 Fifth Avenue was one of three sales that broke the co-op price record that year.

Just three years later, however, his sister Libet’s estate is trying to sell her Upper East Side townhouse and contending with a much different climate.

Following the socialite’s June death, her estate slashed the price of the property to $45 million — despite the fact that she paid $3 million more than that in 2011 and that the 12,000-square-foot home was initially listed in 2016 for $55 million.

The very different trajectories of those two listings offer a window into Manhattan’s luxury market, reflecting the seismic shift the sector has experienced in the past few years. The listings also speak to the art of timing the market: Real estate fortunes have been made — and lost — by speculators trying to predict the very moment the market will turn.

And this past cycle was no exception, as some savvy investors paid pennies on the dollar for valuable properties, while others stomached ugly losses.

“Timing is real estate’s best friend and worst enemy,” said Compass President Leonard Steinberg.

As the market slide continues, The Real Deal traced the arc of the Manhattan luxury market, analyzing nearly 900 resale transactions between January 2007 and June 2017.

TRD zeroed in on condos south of 96th Street that sold and then resold for $4 million or higher to pinpoint the best times to buy and sell during that decade-long stretch — and to determine who timed the market best and who got burned.

TRD discovered that the absolute best time to sell (and worst time to buy) was 2015’s first quarter — when prices were peaking. Of the 44 luxury deals that closed during that period, owners sold for an average gain of $1.7 million, or about 44 percent more than they paid.

On the flip side, the worst time to sell (and best time to buy) was 2009’s fourth quarter — when prices had bottomed out. Of the 61 deals that closed during that period, owners sold for an average loss of roughly $665,000, or about 10 percent less than they paid.

TRD also learned that some buildings (such as 15 Central Park West) held their value well, giving buyers millions of dollars of upside. Others (like the Plaza), however, often drained investors’ bank accounts.

Not surprisingly, high-profile players — from business titans to Hollywood celebrities — ended up in both the black and the red.

Former Citigroup Chairman Sandy Weill was one of those who made out like a bandit. His name didn’t just appear in headlines about his record-breaking $88 million 15 CPW penthouse sale in 2013; he also pocketed more cold, hard cash than any other Manhattan seller in the past decade.

But actor Leonardo DiCaprio and comedian Mike Myers, along with billionaire art dealer Guy Wildenstein, were among the large group of sellers who lost money.

Market analyst Jonathan Miller, president of real estate appraisal firm Miller Samuel, said that at the market’s pinnacle, investors viewed real estate transactions in the same way they thought about stocks.

“Real estate was perceived as a highly liquid asset — something you could jump in and out of and make money,” Miller said.

That was, and still is, especially true among the 1 percent who — unlike New Yorkers in the sub-$1 million market — often purchase a condo only to turn around and sell it a few years later.

Interestingly, the vast majority of resales over the past decade were profitable for investors. Of the 871 deals that TRD analyzed, 737 generated $1.6 billion in profits for buyers. While investors only lost a combined $153 million on 129 deals, those losses undoubtedly stung. (Four investors broke even.)

Not surprisingly, Manhattan’s biggest gains and losses have been in the new-development sector, which has seen a major increase in prices since the last recession.

The casualties

As Sir Isaac Newton famously said, “What goes up must come down.” But for several years, that adage didn’t seem to apply to New York real estate.

In March 2015, billionaire Len Blavatnik broke New York’s priciest co-op record when he forked over $77.5 million for Johnson’s duplex. The next month, hedge fund mogul Bill Ackman and a group of buddies pooled together an astounding $91.5 million for an investment apartment at One57 in the priciest sale of the year. And two months later, in June, Russian financier Andrey Vavilov sold a full-floor penthouse in the Time Warner Center for $51 million to an anonymous buyer after paying $37.5 million for it in 2009.

But now, just two years later, many of the buyers who shelled out during those frenzied days are facing headwinds.

For the time being, the buyers of those three apartments are hanging tight, perhaps trying to avoid selling into a soft market and waiting for the right time to flip.

“For a while, if you bought something, you could turn around in two years and absolutely make money on it,” said Shaun Osher, CEO of the Manhattan boutique brokerage CORE. “That [was] a guarantee for the last eight years, but that’s not a normal market. The days of getting a 30 to 50 percent appreciation year over year … are gone.”

A large part of the problem for sellers today is the flood of new inventory.

Egged on by the strong post-recession recovery, developers began feverishly building condos all over Manhattan.

In 2013, for instance, 2,384 Manhattan condos came to market — just seven units shy of the total from the three previous years combined, according to figures compiled by Corcoran Sunshine Marketing Group.

Douglas Elliman broker Jacky Teplitzky said this “new generation of buildings is having a tougher time.”

“Whatever was finished in 2015 and 2016, people thought they could flip and make a lot of money,” said Teplitzky, who’s brokered deals at some of New York’s priciest condo towers. “We’re not seeing that now. Once upon a time, when a high-end building was being built, you only had that one tower. Now, there are a lot more options for buyers in that very, very high price range.”

For some who’ve opted to sell, the results have been grim — particularly in buildings that debuted at the top of the cycle.

Most famously, the art world’s Wildenstein — who was cleared of tax-fraud allegations this year by a French court — sold his Plaza unit for $13 million in 2010. That was about 40 percent less than the $21.9 million he paid in 2008 and gave him the unlucky distinction of losing more money than any other investor in Manhattan in the past decade, according to TRD’s analysis. Wildenstein also sold another condo at the Plaza for a $3.8 million loss in 2009. Attempts to track down Wildenstein were unsuccessful.

An investor under the name “Escape from New York LLC,” who ate more than $8 million after selling his 62nd-floor pad at One57 for $23.5 million, lost the second most in Manhattan during that stretch.

Financial losses have spanned the borough and have spared few. DiCaprio, for example, paid $10 million in 2014 for a unit in Delos at 66 East 11th Street — a green condo with “wellness” amenities like purified air, posture-supportive flooring and vitamin C-infused showers — only to resell it for $8 million late last year.

Myers, of “Austin Powers” fame, meanwhile, sold at the Tribeca condo conversion 443 Greenwich Street for $14 million — $675,000 below the amount he paid less than a year earlier and a discount from his $15 million listing price. And at 150 Charles Street — the record-setting condo developed by the Witkoff Group in the West Village — the buyer of a maisonette swallowed a $400,000-plus loss on one of the first resales in January.

And the list goes on.

Two owners at One57 — Nigerian oil magnate Kola Aluko and business executive Sheri Izadpanah — are facing foreclosure.

Even 15 CPW, the so-called “Limestone Jesus,” which has been largely immune from losses, hasn’t emerged completely unscathed. Late last year, an owner who bought a three-bedroom under the name Westside RE Properties LLC sold for $20.6 million, about $3 million less than the 2012 purchase price.

The bandits

Overall, owners at 15 CPW amassed profits far more often than their counterparts at any other Manhattan building over the past decade, TRD data show. In fact, the 29 most profitable resales of the past decade were at all at 15 CPW.

While Weill was the biggest winner, selling to Ekaterina Rybolovleva — the daughter of Russian business mogul Dmitry Rybolovlev — in 2012 for $44.3 million more than he paid in 2007, he wasn’t the only one who made out handsomely. Developer William Lie Zeckendorf, whose firm built the tower, took in the second most of any Manhattan seller during the 10-year stretch when he nearly quadrupled his money on his personal penthouse at the Robert A.M. Stern-designed tower.

Zeckendorf bought the unit for $10.9 million in 2008 and then flipped it for $40 million to Min Kao, co-founder of the tech company Garmin, in 2011.

The estate of pharmaceutical mogul Richard Ullman was next on the 15 CPW gravy train, making it the third-highest overall return in Manhattan during the past decade. The condo sold for $48 million in 2014, earning a massive $24.1 million on Ullman’s $23.9 million purchase in 2008. (However, the next owner, an LLC linked to a Thai company, took a $3 million loss on its 2015 sale.)

Some brokers pointed out that in addition to making a premium on their raw purchase prices, some foreign buyers are also benefiting from favorable exchange rates — even on lower-end, less-flashy deals.

Platinum Properties CEO Khashy Eyn, for example, said he worked with a European investor who bought a 15 William Street penthouse in the Financial District for $2.8 million in 2009 and sold it for $4.5 million in 2016.

Related Companies’ Superior Ink — one of the first new condos in the West Village when the building debuted in 2009 —has seen average sale prices skyrocket to $4,858 per square foot over the past year alone. That’s up from $2,956 per foot in December 2012, according to CityRealty data.

“There was no real competition at the time [it launched],” said Elliman’s Leslie Wilson, who worked for Related at the time. “We were on the river in the West Village. We knew people had a lot of money and they wanted services, and there were no buildings that really had that.”

The building was sold off of floor plans, and a number of buyers bought multiple units, which they then combined.

One of the early buyers was Houston Rockets owner Leslie Alexander, who paid $25.5 million for a penthouse in 2009 — only to sell the unit a year later to the aptly named space tourist Mark Shuttleworth for $31.5 million. Alexander, who never lived there, walked away with $6 million.

More recently, in July 2016, high-profile Connecticut attorney James Early sold his penthouse in the building for $9.5 million to Jordan Roth — the son of Vornado CEO Steven Roth and the owner of an adjacent unit. That price more than doubled the $4.3 million Early paid in 2009. —Research by Yoryi DeLaRosa

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