For the confusing (to me), but obviously significant financial aspects
of this breaking story, please refer to The Real Deal link at the bottom of my post. What follows is a bit of the Apthorp back story that began about a century ago when William Waldorf Astor lavishly built the building in 1908 as bait for the very, very rich. His marketing objective? To convince them to give up their huge city mansions and rent instead. It worked. The mansions are long gone and the flamboyant, “look at me I’m rich” NYC apartment is still king. –Landlordrocknyc
For real estate investor Maurice Mann, it was love at first sight.
Mann, a respected New York landlord, had been attracted before to faded, old architectural beauties with major makeover (and profit) potential. It’s an expensive, high-maintenance game and for Mann, an emotional one.”I knew I was going to own the Apthorp when I walked into the garden,” he told Christopher Gray of the New York Times, in 2007. “It has a majesty I have not seen in other buildings.”
But other prospective Apthorp buyers had not been so enamored. The building first went on the market in 2006 and over 80 possible suitors toured the building and passed.”It’s wonderful just to sit in the garden and listen to the water and reflect,” Mann told Gray. “We’re in such a crazy busy city.”
He wasn’t kidding. To paraphrase John Lennon (and as original Apthorp co-owner Lev Leviev and his partners have by now surely learned), New York is what happens when you’re busy making other plans.
Leviev, a pious, Russian-born billionaire, Putin pal, former diamond cutter, and resident of Israel, made his shekels when the USSR was in disarray, just after the fall of Communism.
He flew to Moscow and made the Soviets an offer they couldn’t refuse-the chance to bypass the DeBeers diamond cartel’s monopolistic hold on the diamond industry by cutting, polishing and marketing Russian-mined stones themselves. In return, Leviev would enjoy access to Russia’s vast diamond deposits.
By the time he bought the Apthorp, sight unseen, in 2007 with Maurice Mann (whom he had never met), Leviev was known as the most generous philanthropist in Israeli history.
When they bought the Apthorp, the partners paid $426 million (or $2.6 million per unit), the highest price ever paid for an American apartment building.
His real-estate holding company, Africa-Israel. (together with the Anglo Irish bank as their ATM) also went on something of a buying spree. Even by the extravagant standards of other Russian billionaires who had similarly emerged from the gray no-shopping zone of Communism with enormous wealth and flamboyant taste, Leviev was a headline-grabbing, power purchaser.
Leviev bought nothing less than historic New York icons: The Apthorp ($425 million), the original New York Times building ($525 million), and the former MetLife Clock Tower building ($200 million) paying top dollar at the height of the market.
But even Leviev’s clock tower couldn’t tell him that it was time to pull back, that rough seas were ahead. It was the last gasp of the bull market real estate bubble.
Then that bubble burst.
Meanwhile back at the Apthorp, the new owners began the long and expensive legal process of trying to convert one of the city’s most beloved, elegant and last great rental buildings into a condo residence for the super-wealthy.
It is a uniquely New York process designed to protect the regulated rental rights (and low, for Manhattan, lifetime guaranteed rents) of non-purchasing tenants, while allowing the landlord to sell off empty apartments in the building for millions. In the case of the Apthorp, hopefully many millions.
Herring, anyone? The telephone book-sized “red herring” conversion plan filed with the state Attorney General’s office that arrived at tenants’ doors in 2007 listed the highest per square foot purchase prices in New York real estate history. (Had the original offering gone as planned, the apartments would have sold for a total of $1.06 billion.)
But the market and the economy had already tanked and the most serious economic crisis since the Great Depression was upon us. Conspicuous consumption was suddenly gauche and big bucks, big shopping had gone underground. Luxury retailers even provided brown paper wrappers, banishing their signature Tiffany blue or Hermes orange.
Apthorp apartment prices were slashed. A media and advertising blitz announced “The deals of the century”. The trouble was, it was a young century and the strategy wasn’t working.
For Leviev and partners the clock was ticking and nothing was selling. They had 24 months to sell 25 apartments (15% of the condos) in-house or to outside buyers (for use as primary residence only) or the conversion plan would self-destruct.
Clearly, the Apthorp had become both soap opera and metaphor for Manhattan real estate speculation gone both wild and sour.
“If one of Mr. Mann’s investors hadn’t backed out at the last minute,” a source clost to Mann said, he would never have met Mr. Leviev. “Four days before the closing, when you have $25 million fall out of your package, you have a lot of scrambling to replace it. So someone introduced us to them, and they saw the building on a Thursday. On Friday, they wired in $55 million without a term sheet, just saying, “We want in.”
The troubled building echoed the trouble between the partners.Lawsuits ensued, later settled by rabbinical tribunals, but only after the parties involved argued over which rabbi and which tribunal would play King Solomon in the dispute.
With the clock ticking on the condo plan and with Feil/Broadwall and Andrew Ratner now managing the building instead of Mann, sales still lagged with a September 2009 “do or die” deadline looming for Leviev .
Enter Prudential Douglas Elliman superstar broker Dolly Lenz. Armed with her skyscraper Jimmy Choos. three Blackberries and arguably one of the best celebrity and high-net worth customer base in the business, she finally led the Apthorp condo bid across the finish line by selling the required number of apartments.
After rumors of foreclosure and worse, the Apthorp conversion from rental to condo, 8 amendments later, was finally approved in May 2010 by the office of former attorney general (soon to become Governor) Andrew Cuomo).
A few months later, Dolly Lenz and Prudential Douglas Elliman parted ways with the Apthorp.
Against this backdrop of landlord and real-estate hijinks, unparalleled in even the high-stakes world of New York real estate, life in the Gilded Age Palazzo goes on. A changing cast of characters and events still unfold in their dizzying dance of shekels and power, lawyers and rabbis, superstar brokers, billionaire buyers and some very befuddled non-purchasing tenants. (Like many great old pre-war NYC buildings, The Apthorp is an uneasy mix of rent control,rent stabilized and market rate tenants.)
The landmark building, which began its glamorous New York roller coaster life in 1908, was built by William Waldorf Astor for $6,000.000, making it , at the time, the most expensive apartment building ever built.
Astor, would never see the iconic gated Apthorp courtyard or block-long Renaissance Revival palace (inspired by the Pitti Palace in Italy) he built on 79th street between Broadway and West End Avenues.
By then, Astor had given up his U.S. citizenship and moved to England. In NYC on August 5, 1899, an angry mob protested the defection of New York’s most powerful landlord/developer and burned William Waldorf Astor in effigy.
“Surrounded by a hooting, jeering crowd of several hundred persons, William Waldorf Astor was burned in effigy last night in Long Acre Square. There was no policeman in sight until the work was well advanced, and when one finally did arrive there was little left of the image of the millionaire who lately renounced American citizenship.”–NY Times, August 6, 1899
The Real Deal has the rest of the story…