When the blue chips are down

Upper East Side listings not exempt from sales stagnation and price cuts
By Gabby Warshawer | April 30, 2009 06:49PM

Go to: Upper East Side’s 10 biggest price drops

As the saying goes, the rich are different from you and me — though perhaps not so very different when it comes to real estate downturns.

Most of the highest of high-end listings and sales in Manhattan are still concentrated on the Upper East Side, and several brokers who traffic in such properties say the neighborhood’s luxury market has taken a beating since fall.

They note that sales of blue-chip co-ops and townhouses have been practically nonexistent since last September, and that price cuts for some of the city’s most rarified addresses have become the norm.

In other words, the Upper East Side’s posh status has not made it exempt from the sales stagnation and price drops seen throughout Manhattan in recent months.

Nevertheless, some brokers reported an increase in buyer interest and open-house attendance — which they hope will translate into sales — in the first two weeks of last month. Optimists also point to a couple of recent eye-popping Upper East Side sales — such as the $29 million purchase of a Fifth Avenue co-op by Loews’ heir Laurie Tisch and Madonna’s reported $40 million purchase of an East 81st Street townhouse — as signs that the Upper East Side continues to have some heat.

Data compiled by StreetEasy, a real estate data site, show that there were 168 properties on the Upper East Side priced at more than $10 million early last month, compared to 134 listings in that category at the same time last year — a significant increase in inventory.

Meanwhile, data compiled by The Real Deal for its March issue showed only two resales recorded in January and February of this year for more than $10 million on the Upper East Side.

Experts also say that in the neighborhood, running from 59th to 96th streets from the East River to Fifth Avenue, it has become extremely difficult to price properties, and that there is much more high-end inventory on the market in general than in recent years.

And while closings at new development condos such as the Brompton at 205 East 86th Street as well as at 255 East 74th Street made the Upper East Side the only Manhattan neighborhood to show a rise in overall median price in first-quarter 2009, the high-end resale market has had less momentum.

Phones aren’t ringing

Although some brokers have cited an increase in open-house traffic recently, Jed Garfield, a broker with Leslie J. Garfield & Co., is not one of them.

“The phones aren’t ringing, and not a lot of people are shopping,” he says. “It doesn’t seem to be as much an issue of price as of confidence.”

Garfield had four listings priced at more than $10 million on the Upper East Side as of the middle of last month, including a $16 million townhouse at 112 East 73rd Street and a 10,000-square-foot townhouse at 18 East 82nd Street asking $21.9 million.

Garfield contends that price reductions aren’t having a great effect in today’s market.

Other brokers, however, say the fact that many multimillion-dollar properties have seen deep price reductions have made them attractive to those seeking “value.”

One of the highest-priced listings currently on the market, the Henry T. Sloane mansion at 18 East 68th Street, had a very public price drop, down to $54 million, after coming on the market in early 2008 at $64 million.

The broker on that property, Paula Del Nunzio of Brown Harris Stevens, is also looking to sell the Rothschild mansion at 41 East 70th Street, which is listed at $29.995 million after coming on the market at $35 million in mid-2007.

“These properties are unique and cannot be replaced,” says Del Nunzio. “They will always be in demand, and they will sell when a buyer arrives who truly appreciates their features.”

Jonathan Miller, president of appraisal firm Miller Samuel, however, says it’s unlikely there will be a rash of trophy-property sales, as there were a few years ago.

“You’ll see a burst of trophy sales in a robust market that feed off each other,” he says, adding: “When you’ve had such a long run, many of them have sold,” and are thus unlikely to change hands again soon.

Pricing in flux

Jacky Teplitzky, a managing director at Prudential Douglas Elliman, recently listed a co-op at 1045 Park Avenue for $9 million. Teplitzky says a year ago the unit was appraised at $10 million, and the decision to price it $1 million less than that had to do with a host of factors, including the increase in luxury inventory on the Upper East Side now.

“Classic 10s, 11s, and 12s are usually a rarity and they’re not anymore, so people know they can negotiate,” she says.

Teplitzky says pricing for luxury homes on the Upper East Side is extraordinarily difficult to determine nowadays.

“In that area of the city you have a lot of old-guard brokers, and many of them are saying they have never seen such a market,” she says. “Even the very savvy senior brokers don’t know how to determine prices.

“There is no method to the madness of how you price right now; it’s really much more [dependent on] circumstances like how motivated the seller is.”

She and other brokers say today’s prices are around 25 percent off the market peak of a couple of years ago.

And some brokers are trying to rent properties as an alternative to selling.

Victoria Shtainer, a senior vice president with Prudential Douglas Elliman, has a listing for a $51 million duplex penthouse at 502 Park Avenue, the Trump Park Avenue condo, that she said is being eyed more by prospective renters than buyers.

In addition to being up for sale, the 6,200-square-foot unit is being offered for rent for $200,000 a month. “I’ve been seeing a lot more rental people than buyers,” she said.

Shtainer said she approached the Trump Organization about reducing the unit’s asking price, but it declined, telling her that cutting the condo’s price would not help sell it. Instead, the company said the right buyer would help sell it. “I agree with that now,” she said.

Betting on townhouses

Richard Steinberg, an executive managing director at Warburg Realty, said he believes the uniqueness of many high-end Upper East Side properties means that they will eventually find buyers.

“Townhouses on the Upper East Side are like oceanfront property,” said Steinberg. “You can’t rebuild them because it would cost too much.”

Steinberg noted that “good stuff still sells,” pointing to the New York Post’s report of Madonna’s $40 million 152 East 81st Street purchase and Tisch’s buy.

Philippa Ward, a Stribling broker who works with the firm’s executive vice president Kirk Henckels and has several Upper East Side listings topping $10 million, said she believes the townhouse market will rebound more quickly than the co-op market.

“A lot of those deals we know will be all-cash,” said Ward, “and there are always families looking for more space.”

One of Ward’s listings, a townhouse at 136 East 80th Street, initially hit the market at $12 million last summer. The asking price has been reduced several times since then — it’s now on the market for $8.95 million — “and we’re having tons of showings,” she said.

Miller, though, said he thinks the first sign of a rebounding market on the Upper East Side will come from the lower-priced properties in the neighborhood.

“When you think of the Upper East Side, you think of Park, Fifth Avenue, but there’s a tremendous amount of housing stock and a tremendous concentration of entry-level units,” he said.

“You’re going to see areas that will perform better than others in the neighborhood, like east of Lexington. The first sign of an improved market is one where there’s an increase in first-time buyers and sub-million purchases,” he said.