Big-ticket residential conversion projects test developers’ mettle
Given the shortage of new residential development sites in Manhattan, major real estate players such as Gary Barnett’s Extell Development have had to master the intricate art of conversion projects, which come with more than their share of challenges, the New York Times reported.
Barnett, currently Manhattan’s most prolific developer, likes to carefully run the numbers before taking a gamble with a conversion project such as the Helmsley Carlton House, he told the Times.
Barnett paid $164 million for the site, located on Madison Avenue at 61st Street, in 2010, and is in the process of converting the hotel into luxury condominiums. Extell and its hedge fun partner Angelo Gordon & Company are shrinking the ground-floor retail space and adding two floors on the roof to create a duplex penthouse, which was recently listed for $65 million. The developers will also restore the façade and invest in structural improvements.
“We had to be really careful stabilizing the building to do all this,” Barnett told the Times. “Thank God we are past the danger stage with all this.”
In a conversion, Barnett told the Times, every decision carries more pressure. He was investing over $350 million in the project, and said “it is actually more expensive than if we tore the damn building down and built it again. It is just so complex.”
Other big players who have invested in conversion projects in response to the lack of viable new development sites have also faced challenges. Harry Macklowe, for example, is converting two prewar buildings, 150 East 72nd Street and 737 Park Avenue, into white-glove condos, but has faced resistance from the community as well as legal headaches considerable headache and legal battles. [NYT] –Hiten Samtani