August 21, 2008

CUE THE MADNESS Downtown’s priciest neighborhood gets even more expensive

In terms of the relative maturity of Manhattan residential neighborhoods, the area surrounding Madison Square Park has been something of a late bloomer. Despite its seemingly obvious residential potential - its wealth of grand Art Deco architecture, its central location, its subway access, its proximity to shopping, its

park - the area was largely neglected throughout the past half-century. "Ten years ago, I used to get calls all the time from people who said, 'I want to live on Madison Square Park,'" says Leonard Steinberg, an executive vice president at Prudential Douglas Elliman. "But there was nothing to live in." It wasn't until the late '90s that developers realized that this area, at the time full of office buildings, might be attractive to homebuyers. And it took until just a few years ago for residential projects to start actually cropping up. But forget swan: The ugly duckling has become a goose with golden eggs - the area is on its way to having not one, but two penthouse condos that could become downtown's first $50 million apartments. Though it's been a long time coming, the neighborhood's upswing has been swift. When 15 Madison Square North started sales in June 2006, its 73 apartments (including seven maid's units) averaged $1,200 to $1,300 per square foot. Today, they're over $1,800 per square foot, and on the higher floors, they've hit more than $2,000. Just south of the park, 141 Fifth Ave., which opened for sales last year, consistently sees numbers above $2,000 per square foot. And One Madison Park, the 60-story glass tower growing on the south side of the park, sold all of its 68 units (this includes five combinations) - except for a $45 million penthouse - in less than a year. According to Wilbur Gonzalez, managing partner of Brown Harris Stevens' ID Marketing Group, which is selling the building, sales there have broken the $3,000-per-square-foot mark. But two condo projects set to start sales this fall are expected to top everything that came before them, sealing Madison Square Park as downtown's priciest residential area. The first development is the renovation of the area's storied Clock Tower building (also known as 5 Madison Ave.) into 55 Versace-designed residences. The full-floor and duplex condos, with 13-foot-plus arched ceilings, could fetch $3,500-plus per square foot. There are plans for a six-floor, 12,000-square-foot penthouse with a glass elevator designed by Donatella Versace herself that could be priced around $50 million. "The rumor that $3,500 a foot is the average is not unreasonable," says Rotem Rosen, CEO of Clock Tower developer Africa Israel's US arm. The second project, the Rem Koolhaas-designed 23 E. 22nd St., a cantilevered sibling to One Madison Park, should hit the market at similarly eye-popping prices. "We expect to start at the very least at $3,000 a foot, and we're looking to hit $4,000," says Gonzalez, who is selling the 22-story building's full-floor units, some of which will have glass floors and 20-foot ceilings.

"The smallest unit is about 2,000 square feet," he adds, "and prices start at $8 million and go up to the penthouse, which will be priced at $50 million." In addition to sky-high prices, the area has some serious star power. Buyers at One Madison Park include Tim Robbins and Susan Sarandon, as well as Liev Schreiber and Naomi Watts. And Africa Israel connected with Versace through Guy Oseary, the talent manager whose clients include Madonna and Alex Rodriguez. If any of this sounds familiar - a park, the price points, the very important people - it should. It's not unlike what made the intersection of 15 Central Park West, the Time Warner Center and Trump International Hotel & Tower the reigning king of Manhattan residential real estate. Of course, Central Park West is much more established (and much pricier, as high as $6,000-plus per square foot), but Madison Square Park's transformation is still in progress. Rosen doesn't think it's outlandish to directly compare the two areas, despite the price differential. "[Madison Square Park] will surpass Central Park West," Rosen insists. "When you're buying $6,000 and $7,000 [per square foot] uptown, I don't see an upside with respect to resale, but in the Clock Tower, when you're talking about the prices right now, I think there is a place for doubling." The conversion of the landmark Clock Tower, built in 1909, will include a Versace-designed restaurant and club, a Turkish hammam (steam bath) and other amenities that are no doubt largely designed to appeal to foreign buyers. Africa Israel is owned by Soviet-born real estate mogul Lev Leviev, and Rosen anticipates many Russian buyers. Gonzalez is similarly bullish about 23 E. 22nd St., which shares all of One Madison Park's amenities but also happens to be a boutique building - albeit one with its own CAA screening room - from a European starchitect. "Everyone talks about the top of the market floating by the economic wave, and [23 E. 22nd St.] will prove it," says Gonzalez. "The Clock Tower is an iconic building," says Shaun Osher, CEO of Core Group Marketing, which is selling 141 Fifth Ave. "And when you hire someone like Rem Koolhaas, you're making a modern-day version of the Clock Tower." But despite such optimism, and no matter how storied or original the buildings are, this year is not last year. For one thing, we've collectively admitted that New York is not immune to the rest of the country's real estate woes. Says Gonzalez of One Madison Park: "We had already done most of our deals; we had so much traction, it was a race to the end. I'm not sure if it was timing, but we certainly missed [any economic downturn]."

And even if the top of the market has been the least affected, buyers are savvier now than ever before. "I haven't seen the [Koolhaas] building, but if they don't deliver extraordinary at those prices, they shouldn't bother, because the market can't be conned into buying now," says Steinberg. "They will pay a premium for quality, but they won't pay for less than the best." "If it is marketed properly it can fetch [those numbers]," adds Frances Katzen, a senior vice president at Prudential Douglas Elliman. "But it will be a process because the [current] absorption rate is slow." What bodes well for both the Koolhaas and Clock Tower buildings, aside from their starchitecture and iconic status, is that the Madison Square Park area has already bred not just one super-luxury building, but a slew of them. (And still on the horizon could be a Daniel Libeskind tower at One Madison Ave. - adjacent to the Clock Tower - being developed by Elad Properties, which did not comment on the project's status.) When it comes to high pricing, there's strength in numbers - just look at Central Park West. Steinberg likens what's happening around Madison Square Park to what happened on Bond Street when Ian Schrager's 40 Bond was followed by 25 Bond and 48 Bond. "If it wasn't for the fact that One Madison was such a hit, and Versace's in the Clock Tower, we would probably have priced [lower]," Gonzalez says of 23 E. 22nd St. Even so, two $50 million condos? Given that the current record for an apartment sale below 57th Street is a $31 million deal at One Madison Park, $50 million still sounds like, ahem, madness. But this looks like a mad Mad world indeed. Food flight Look out, Central Park - loyalties are changing. San Domenico, a restaurant that spent 20 years at 240 Central Park South, has signed a 21-year lease for an 8,000-square-foot retail space at 15 Madison Square North. It will rebrand itself as SD26. "It will be the same staff, the same quality, but a different incarnation," says Steve Forest, executive managing director of 15 Madison Square North developer Walter & Samuels. And this isn't the only high-end eatery that will cater to Madison Square Park's

new well-heeled residents. Also on tap is the Clock Tower's Donatella Versace-designed club and restaurant. Rotem Rosen, CEO of developer Africa Israel's US arm, says his firm is currently "finalizing negotiation with a top chef" for the Clock Tower restaurant. Madison Square Park will also get a little something Central Park coveted, then expected, but never actually got. After backing out of a proposed restaurant at the Time Warner Center, Chicago super chef Charlie Trotter (pictured) is now planning on opening a restaurant at One Madison Park. There's no doubt that area foodies will have plenty of new options, but we still don't anticipate shorter lines at Shake Shack.