For what it’s Woolworth: Concerns remain even as project rolls out $100M-plus penthouse

“There will be naysayers."

New York /
Oct.October 02, 2017 07:30 AM

At a VIP cocktail party in Las Vegas last week, Ken Horn and Sotheby’s International Realty brokers stood around a 7-foot-tall ice sculpture of the Woolworth building, the landmarked Cass Gilbert-designed building Horn’s Alchemy Properties is turning into luxury condominiums.

The occasion: The unveiling of “the Pinnacle,” the 9,710-square-foot penthouse atop the tower hitting the market for an astounding $110 million. If it were to sell for even remotely close to ask, it would smash the Downtown record now held by the $50.9 million sale at Walker Tower, as well as the potentially new benchmark set by a penthouse at 70 Vestry.

“We have more than 100 inquiries since the penthouse was listed,” said Sotheby’s Stan Ponte, who’s leading sales at the Woolworth along with colleague Joshua Judge. A gaggle of billionaires from across the globe have already reached out, he said, adding that “we are extremely confident about the building, we are glad nothing has been rushed and no corners have been cut.”

It’s clear that the five-story penthouse, with its historical pedigree, its 24-foot ceilings, an open observatory and panoramic views of the city, is a unique offering, even in a city full of show-stopping residences. But the price it hopes to fetch, at north of $11,300 a foot, is not grounded in reality, several industry players told The Real Deal.

“A $110 million penthouse Downtown is beyond a heavy lift,” said Douglas Elliman’s Bruce Ehrmann. “Which is not to say it won’t be sold, but it’s somewhere between aspirational and impossible.”

And sources said the project’s challenges go well beyond the pricey penthouse.

Several brokers active in the area said there’s been very little buzz about sales at the project – usually an indication, they said, that they’ve been slow. Only a few brokers that TRD spoke to had taken a buyer there, and none of them have done a deal in the building. Alchemy refused to reveal how many of the 33 units are spoken for, and just five out of the 12 available on StreetEasy are in contract. It’s possible, of course, that deals are happening in stealth mode, but it’s highly unusual: Developers usually play up sales when they’re brisk, and plead the fifth only when things are quiet.

“At $2,000 to $3,000 a foot, we are taking buyers to 50 West Street, 5 Beekman Street and 30 Park Place,” said Jeffrey Carlson, the sales manager at Town Residential’s Downtown office.

“Their lenders must be screaming,” another source said.

Horn did tell the Wall Street Journal late last month that sales activity had picked up since the spring, but didn’t specify how many units are in contract.

But Ponte denied that it is quiet at the building, and said the developer has chosen to keep deals under wraps.

“There is a lot of excitement and buzz around the building,” he said. “We are actively selling and we are actively getting deals done. If anyone is saying there’s no buzz, they are obviously not reading the real estate press or the public press.”

“There will be naysayers,” he added. “When there is excitement there will be people who are on the other side of that.”

Teething troubles

Alchemy bought the upper portion of the 58-story building from Steve Wikoff and Ruby Schron for $68 million in 2012, and has funneled many millions more into the conversion. Preserving its exterior terracotta alone is said to have cost $22 million, and last year, Alchemy borrowed $220 million from United Overseas Bank to fund the project.  When TRD examined the offering plan in August 2014, the total projected sellout was $443.7 million. But prices have likely shifted since then.

Excluding the penthouse, prices start at $4.6 million and go up to $26.4 million for a full-floor apartment, according to the project website. Price per foot, according to the 2014 AG filing, ranges from the high-$2000s to the mid-$4000s.

Some said the initial interiors and design — which people had described as too masculine and unappealing to a wide range of buyers — put a damper on the project. The Corcoran Group’s Vickey Barron took a buyer to see the project when it first launched, but said the original interiors threw them off.

“I have recently brought a buyer to see a large unit and the penthouse, and with the new interiors, it was a breath of fresh air,” she said, though she expects her client to ultimately choose another project.

Others believe the initial marketing, which was handled in-house by former Corcoran Sunshine veteran JP Forbes, was poorly executed. Forbes left the project a little over a year later amid rumblings of slow sales, and Sotheby’s came on board in April 2016.

“It’s suffering a personality conflict,” said one source of the building. “It’s a gorgeous, iconic building, but the message is not getting across.”

Nine-figure conversation starter

Some sources suggested Alchemy is using the penthouse’s $110 million price tag as a publicity stunt, and doesn’t need or expect to score that figure. Nine-figure pricing can generate, as it did in this case, a slew of press in local and international media, providing the word-of-mouth factor that top-tier projects crave. Sotheby’s Ponte, however, maintained that the ask is reasonable, and pointed to the many $100 million-plus properties for sale around the world.

Alchemy wouldn’t be the first to use a dramatic price point to attract attention. In 2014, Magnum Real Estate Group’s Ben Shaoul reportedly threw out the $100 million figure at his condo conversion at 100 Barclay, telling Crain’s he would offer a “football field-sized” penthouse.. That didn’t end up happening.

“Some sellers are attracted to fantasy pricing,” said Donna Olshan of Olshan Realty. “A huge price makes them feel good, but the truth is that nothing Downtown has ever come close to this price.”

There’s not been a closed condo sale north of $100 million in the city since the record set at Extell Development’s One57 in 2015. But there have been reports of several megadeals; Vornado Realty Trust is said to be in contract to sell a palatial spread at 220 Central Park South to hedge fund billionaire Ken Griffin for north of $200 million, and there’s been talk of another Middle Eastern buyer interested in an even bigger, pricier apartment at the tower.

Zeckendorf is offering a $130 million penthouse at 520 Park, and Extell’s Central Park Tower has a pad priced at $95 million.

“[Alchemy] must be more optimistic about the market or the presentation of the unit to price it at that same price of the peak of the new development luxury boom,” said Jonathan Miller, the CEO of appraisal firm Miller Samuel. On average, prices at the high end of the market are down between 15 and 20 percent from the market peak, Miller said, a trend exhibited by a number of unprofitable resales at uber-luxury developments like One57.

“Buyers are there,” Miller said. “They are just looking for pricing that reflects the current market conditions.”

But the buyers around may not be the sort of buyers the Woolworth building needs.
“Personally, I have no $100 million buyers anymore,” said Douglas Elliman’s Richard Steinberg, who is marketing a penthouse at Macklowe Properties and CIM Group’s 432 Park Avenue for $82 million. “I haven’t seen them for a while — my top buyers are around $50 million.”

A sense of place

While everyone interviewed for this story agreed the Woolworth is a spectacular building, some suggested the location isn’t exactly a magnet for big-money buyers.

“I work with a lot of foreigners, they’re not into that Downtown area,” said Rutenberg’s Anjollie Feradov. “They want the big names, so they can go back home and say ‘I Bought On Park Avenue.’”

Elliman’s Kirk Rundhaug said some buyers can perceive the Woolworth Building’s location at 2 Park Place — which is Tribeca or the Financial District, depending on whom you ask — as too far south.

“Most of my big buyers just think it’s too far from where they want to be,” said Rundhaug, who’s working on Ian Schrager’s Herzog & De Meuron-designed 160 Leroy Street. “They really are still looking in Nolita and the West Village.”

The other issue is that buyers who want to buy in Lower Manhattan, sources said, are spoilt for choice. Some said Silverstein Properties’ 30 Park Place, a Robert A.M. Stern-designed new building with Four Seasons branding, is hard to compete with.

“I say to my buyers, ‘wouldn’t you rather be in a new construction under the Four Seasons name, looking out at the Woolworth, rather than inside it?’” said one top broker, who asked not to be named.

Sources said the building is still under construction, and therefore not “showing well.” Others said it is so unusual it can’t really be compared to other trophy properties around the city.

“It’s difficult to lump it into all the new development — I try not to create a direct comparison,” said Corcoran’s Tara King Brown, who has not brought a buyer to the building. “It’s such a special property I truly believe if they are patient they will get the number they are satisfied with.”

Others agreed, and said that while the penthouse may not fetch its lofty ask, it could still set a record.

“Do I think that the penthouse will sell for $110 million? Personally — no,” said Corcoran’s Barron, who was the broker on the Walker Tower deal holds the current Downtown record. “But I hope it does.”

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