When a full-floor penthouse at Manhattan's One57 sold at a foreclosure auction, it didn't just settle an international mortgage gone bad. The deal also set a new price standard for the Billionaires' Row tower that once stood as a symbol of unlimited extravagance.
The 6,240-square-foot condo spanning the skyscraper's 79th floor sold for $36 million last week to an unidentified buyer, the highest of five bidders in addition to the lender. The price was 29% less than the $50.9 million that Nigerian businessman Kolawole Akanni Aluko paid for the apartment when he bought it new in 2014.
The transaction marked the fourth time since 2015 that a resale condo at One57 traded at a loss from what the previous owner paid, according to data compiled by New York appraiser Miller Samuel Inc. The price cut on Aluko's property was the biggest, exceeding even the normal discount one would expect when buying a home from inside a courtroom, said Grant Long, senior economist for listings website StreetEasy.
"For anyone who thinks they can flip these ultra-luxury units for quick profits, this sale is going to cause a lot of questioning," said Long, whose site shows 16 apartments at the Midtown building listed for sale, most of them by the developer. "It brings into question how quickly they can make a profit."
Standing at 1,004 feet and sheathed in ocean-blue glass, One57, the most conspicuous icon of New York's ultra-luxury buying frenzy, is now at the center of its slowdown. Extell Development Co.'s tower, which broke ground in 2009, drew investors paying large sums for lavish homes they rarely live in and reached $1 billion in sales after six months. Its success inspired other developers, ushering in a high-end construction boom in Manhattan and creating an effective "Billionaires' Row" along West 57th Street. One57 still holds the record for the most-expensive residential sale in New York, at $100.5 million, completed in 2014.
But that was then. Now, as high-end condos proliferate, well-heeled buyers are holding back, and expecting discounts. A 4,483-square-foot apartment on One57's 65th floor sold in April for $22.5 million, or 23% less than its 2014 purchase price, according to StreetEasy. The owner of an identical apartment on the 62nd floor, who paid $31.7 million in 2014 and tried to flip it six months later for $38.9 million, ended up settling for a loss last year when the apartment sold for $23.5 million.
"We cannot speak to the specific cases as to why some of our residents have decided to sell their homes, but are confident that One57 will continue to be one of the best investments and buildings in New York," Anna Zarro, director of residential sales and leasing for Extell, said in an email.
Extell itself is marketing units at a discount, after deciding to sell 38 apartments at the tower that were slated as rentals. In August, the developer sold a 1,060-square-foot, one-bedroom apartment on the 33rd floor for $3.64 million, 11% less than the original asking price, StreetEasy shows. An identical unit one floor above sold for $3.7 million after a similar reduction. In a regulatory filing this year on the Tel Aviv Stock Exchange, where Extell sells debt, the company acknowledged that ultra-luxury sales are slowing in New York and said it had adjusted its profit forecasts for the building.
With both resellers and the developer trying to offload apartments, "selling a unit there now would be a horrible mistake," said Martin Jajan, the attorney who represented the buyer of the discounted 62nd floor apartment last year. For purchasers, he said, "it's still a well-known building where, if you can get a very steep discount, and you're willing to speculate on where the luxury market is going, and are also willing to wait four or five years, you might do well" in a resale.
Perhaps in that spirit, would-be buyers registered for the right to bid in last week's auction of the condo owned by shell companies linked to Aluko, who defaulted on a $35.3 million mortgage from a Luxembourg bank and is accused by the U.S. government of laundering money received from illicit government contracts in Nigeria.
The bidding started at $15 million, and went up in minimum increments of $100,000. While the lender, Banque Havilland SA, bowed out before the price reached $20 million, most of the other participants stuck around well after it crossed $30 million.
Even though it's a foreclosure auction, "when you have multiple parties fighting for this unit, that's a credible benchmark for value," said Jonathan Miller, president of Miller Samuel. "It places this type of transaction within the realm of what's happening in the market."