Super-luxury condominium market heats up

Real Estate Weekly, July 29, 1998 by David J. Wine

The first requirement to qualify for the super-luxury category is location. The site must be, in a word, superlative, and more of those sites, with high prices commensurate to their rarity and value, have become available. Prices are being driven up with competitive bidding as the market has proven it can, with the right location and product, command per-square-foot prices of $900 to $1,000 and upward.

The competitive lending environment, fueled by the upward spiral of the economy and more market participants,' has also contributed to the availability of financing for super-luxury condominium developments.

With the very high cost of sites, super-luxury condominiums are, in this market at this time, the most attractive to build and finance based on opportunities for an accelerated, as well as higher return on investment than with high-end rental buildings.

Per-square-foot rents in high-end rental buildings have risen to the high 40's from the low 30's since 1995. Luxury condominiums, however, have gone from zero to $1,000-per-square foot in the same period. That is the basis for the decision by Related Companies, a major rental developer, to enter the super-luxury condominium arena.

The site with which we are entering the market is 279 Central Park West, directly on the park near 88th Street, a 10-year-old building which presented an opportunity to immediately put product on the market while other competitive projects are in development.

Central Park West is a neighborhood where real estate prices have escalated in recent years at a faster and greater rate that incomparable neighborhoods; where condominiums, the preferred form of home ownership, are scarce; and where the avenues to the west of the park have undergone significant gentrification.

As part of the super-luxury market positioning, the 38-unit building, of which Related purchased 23 units which were unsold, is undergoing an upgrade of the facade and lobby, and renovation of an exercise room and indoor and outdoor children's play areas.

The simplex and duplex apartments, built in spacious pre-war style - another identifying feature of super-luxury product on or being introduced into the market - feature 9-foot ceilings, crown moldings and rosewood flooring, as well as separate bedroom wings, wrap-around terraces, libraries or dens, and formal dining rooms in some units. Most of the units have superb views an essential to command super-luxury prices.

As an indication of the strength of the super-luxury market, units sold or under contract to date, are achieving average sales prices per square foot just shy of $1,000.

Based on market conditions and projections, Related Companies is moving forward with two additional new construction projects, a 32-story tower with 100 apartments at 65th Street and Third Avenue, and a 225-unit, 60-story, mixed-use tower at 56th Street and Broadway.