Thursday, December 23, 2004

No Price Too High for a Lap of Luxury

By MOTOKO RICH , The New York Times

IN a city where the price of luxury seems to march inexorably upward, wealthy apartment buyers are showing they are just as prone to the herd mentality as mere mortals rushing to buy the same iPod or pair of Diesel jeans.

Last week the media billionaire Rupert Murdoch agreed to pay $44 million for a co-op on Fifth Avenue. It turns out that sale was no fluke. From Manhattan to Woodside, Calif., the market for multimillion-dollar properties is increasingly buoyant.

In October, Ronald O. Perelman, the Revlon chairman, sold his Mediterranean-style house on seven acres in Palm Beach for $70 million. That same month, a 16-room triplex penthouse at the Pierre hotel in New York went on the market, also for $70 million.

In Manhattan the number of sales of condos or co-ops at $5 million or more rose to 163 in 2004, a record number, said Jonathan Miller, president of Miller Samuel, a New York real estate appraiser. Brokers say that since Thanksgiving apartments selling for more than $10 million have ignited bidding wars and frantic showings.

"It's a peculiar behavior," said Kirk Henckels, the director of Stribling Private Brokerage in Manhattan. "It's as if they all go to the same cocktail party and say `Are we going to shop tomorrow?' "

Because the stock market has been more volatile than real estate in recent years, "people feel more comfortable than ever before having a higher percentage of their portfolio than ever before in their home," said Hall F. Willkie, president of the real estate firm Brown Harris Stevens in Manhattan.

According to a survey by Capgemini, a consulting company, and Merrill Lynch, high net worth individuals — those with assets of $1 million or more — put 17 percent of their portfolios in real estate in 2003, up from 15 percent in 2002.

Louise Sunshine, president of the Sunshine Group, a luxury condominium marketing company, said she was locked to the phone all of Sunday, negotiating with three bidders vying for a penthouse condominium atop the new Bloomberg Tower on 58th Street with an asking price of $26 million.

While low interest rates have kept the market for one- and two-bedroom apartments humming for four years, the highest reaches of New York's rarefied real estate market softened after the Sept. 11 attacks, the dot-com bust and a string of accounting scandals that sent the stock market spiraling.

At a time of relentless speculation over whether a bubble in real estate prices could be ready to pop, the wealthiest buyers are shopping for living space again, lured by the general pattern of rising sales prices over the last four years.

Pamela Liebman, chief executive of the Corcoran Group, the New York real estate company, said more than 20 people had asked to see a $30 million six-story town house on 64th Street near Fifth Avenue. "Normally we would get half that," she said. "In my 20 years in the business, I've never seen as many qualified buyers for $20 million apartments as I'm seeing now."

Michele Kleier, a co-president of Gumley Haft Kleier, a real estate brokerage firm in New York, said what many people are thinking: "There seem to be more and more rich people. Where are they all coming from?" Successful hedge fund managers, bankers who expect huge Wall Street bonuses and Europeans capitalizing on the weak dollar, other brokers say.

The revived market seems to have motivated the seller of the penthouse at the Pierre. The apartment features a living room, once a ballroom, with 23-foot ceilings; five wood-burning fireplaces; and four corner terraces. Oh, and did someone mention monthly maintenance fees of $47,767?

In the Hamptons, said Diane Saatchi, a broker in the East Hampton, N.Y., office of Corcoran, buyers snapped up 37 homes priced at $5 million or above through October, compared with 29 during all of last year.

In Northern California, where the bursting of the tech bubble in early 2000 humbled the real estate market, high rollers are back. "A lot of people who were sitting on the sidelines after 2000 now have the confidence to buy in that price range," said Avram Goldman, president of Coldwell Banker San Francisco Bay Area. He pointed to the initial public offering at Google this fall, a bonanza for about 1,000 employees who are now millionaires. In just the last month, Mr. Goldman said, two homes sold in Woodside, south of San Francisco, for close to $10 million each. "We haven't seen a lot of those sales in a while," he noted.

Gregory Weadock, a managing partner of Barclays International Realty in Palm Beach, Fla., said a house there sold this year for $30 million. At the time it was deemed the peak. But then several other houses sold for even more. Now, Mr. Weadock said, "$30 million doesn't seem that prohibitive."

Donald Trump paid $41.4 million this month for the Gosman estate in Palm Beach, six acres with a 7-bedroom, 16-bath main house and three guesthouses along 475 feet of ocean frontage. Mr. Trump said he hoped to renovate the main house and sell it for $100 million within a year.

"There's nothing like real estate," he said with characteristic bravado.

Mr. Trump, who is still trying to sell apartments at Trump World Tower in Manhattan, four years after they went on the market, added, "No matter what you paid for the best, it's always worth more money the following year."

Perhaps. One broker, who spoke on condition of anonymity, saying she did not want to be barred from selling in Trump buildings, handled the sale of an apartment last month in Trump World Tower that went for less than the owner had paid for it. She blamed a surplus of available apartments in the building.

Mr. Trump acknowledged that there are a "very few" apartments for sale in the building, but, he said, "I've sold $600 million worth of apartments in that building. That building has been a spectacular success." He added that, overall, apartments in Trump World Tower have escalated in value by about 50 percent since it opened in early 2001.

Deluxe apartments are also still for sale at the Time Warner Center on Columbus Circle, Trump Park Avenue and the St. Regis hotel on 55th Street.

Yet developers in New York are rushing to build lavish condominiums. Just recently a condo conversion was undertaken at the former Helmsley Windsor Hotel on 58th Street.

One broker wondered out loud if a glut was looming. According to his survey of recent real estate listings, there are currently 262 condos priced at $5 million or more for sale in New York.

But for some buyers the hunt is on. A few weeks ago Ms. Kleier, of Gumley Haft Kleier, helped a buyer topple the competition in a battle for a town house in the Carnegie Hill neighborhood. Two weeks later, she said, the broker representing the losing bidder called to offer Ms. Kleier's client the winning bid plus $500,000. Ms. Kleier's client declined. The losing bidder then offered to pay $1 million more than Ms. Kleier's client had paid.

"Something is always that much more desirable because you know someone else wants it," she said.

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