Rich hit by property crunch – super-rich unscathed
Dominic Rushe, New York

The Sunday Times
August 10, 2008

REIGNING over 68th Street between Central Park and the designer shops
of Fifth Avenue, the Henry T Sloane mansion has one of the most
desirable addresses in Manhattan.

Finished in 1905 and designed by CPH Gilbert, architect to New York’s
rich at the turn of the century, the mansion was built in Manhattan’s
`Great House’ era and its 19,000 sq ft provide 30 living rooms, 15
bedrooms, 17 bathrooms and five terraces.

Sloane, heir to a luxury furniture firm whose clients included the
White House and Tsar Nicholas II of Russia, built the mansion after the
collapse of his marriage to a society beauty. Jessie, the former Mrs
Sloane, remarried five hours after her divorce came through. Sloane
never married again.

When his estate sold the mansion in 1941 to the Armenian archaeologist
Hagop Kevorkian it fetched $199,999. At the time it was a princely sum
but in today’s terms that money is worth $2.9m (£1.5m), allowing for an
average rate of 4.1% inflation. That is about the price of a
three-bedroom flat in Manhattan. Sloane’s mansion, however, is on the
market for $64m.

Multimedia
Pictures: The Henry T Sloane mansion

His house lacks many of the comforts buyers ‘ especially rich buyers ‘
would expect: no airconditioning for a start.
Not so long ago it
comprised 11 apartments and the new owner will be the first for decades
to return it to its former glory as a single family home.

`It’s like Doctor Zhivago when he returned to find 20 families living
in his home,’ said Paula Del Nunzio, agent at Brown Harris Stevens and
the Sloane’s seller.

Whoever buys it will have to pour a second fortune into it to make it
habitable. It’s the most expensive `fixer-upper’ in New York. Its agent
does not think it will be short of buyers, however. While the rest of
the property market has dropped faster than you can say `Fannie Mae’,
the top end of the housing market is holding firm.

Del Nunzio, a former Hollywood writer, has $400m worth of property on
her hands in New York. She specialises in town houses. If the Sloane
fetches its asking price, it would be the most expensive town house
ever sold in the city.

It is a record Del Nunzio already holds with the 2006 sale of the
Harkness Mansion a few blocks north for $53m to J Christopher Flowers,
an investment banker.

`In New York at least it seems the very top end is a very different
market,’ said Del Nunzio. `So far our buyers don’t seem to have been
affected in the same way that people in other sectors of the market
have been.’

Just a few rungs down the property market, prices=2
0are still sliding
fast. Houses aimed at the merely rich ‘ not the really rich ‘ are
suffering. In nearby Connecticut, home of hedge-fund managers and Wall
Street bankers, prices are down 30% and inventories are up 20% as more
homeowners have decided, or been forced, to get out of their homes.
Earlier this month Antares Investment Partners, a builder of big
mansions, pulled out of the market as its buyers disappeared.

`Connecticut is a wealthy state but a lot of that money depends on what
happens on Wall Street. If they are not getting bonuses, everything
goes into retreat,’ said Ken DelVecchio, president of the Connecticut
Association of Realtors. `It’s a good time to be a buyer.’

The sub-prime lending debacle mainly affected the banks that made the
loans and the very bottom end of the housing market. But the problems
are spreading upward, with higher quality loans, and more expensive
homes, being sucked into the crash.

In a recent conference call with analysts, James Dimon, chairman and
chief executive of JP Morgan Chase, said he expected losses on prime
loans at his bank to triple in the coming months and described the
outlook for them as `terrible’.

At the top of the top end, though, the credit crunch has yet to bite.
In part this is down to supply and demand. During past recessions most
of Manhattan’s town houses were broken up into=2
0flats and few remain as
single homes, said Del Nunzio.

`People used to move to the suburbs to raise their families. Now they
want to raise them in the city and they want the space to do that
comfortably,’ she said.

Those American families are now competing with newly wealthy buyers
from Brazil, Russia, India and China as well as Europeans using the
weakness of the dollar to bag top properties at bargain prices.
Proximity to Central Park ‘ Manhattan’s biggest green space ‘ and good
local schools adds to the premium prices.

With apartments fetching an average price of $7,500 per square foot,
Fifth Avenue ranked in third place in Barclays Wealth Bulletin’s recent
survey of the top 10 most expensive residential streets in the world,
behind Avenue Princess Grace in Monaco ($17,750 a square foot) and
Severn Road on the Peak in Hong Kong ($11,200 a square foot). London’s
`Billionaires Row’, Kensington Palace Gardens, came in fourth place
with an average price of $7,196 a square foot.

`Foreign buyers have always been present in New York,’ said Del Nunzio.
And while interest has grown, she said more often than not Americans
ended up taking the top properties. If there had been a change in the
nature of the buyer `it’s that they have got richer’, she said.

In 2000 Forbes magazine estimated there were 306 billionaires
=0
Aworldwide. Last year the figure was 946. Living beyond the constraints
of salary or bonuses, Del Nunzio’s buyers are not directly affected by
the credit markets because they do not need loans. They pay cash.

The Sloane mansion is not the most expensive New York property for
sale. A short walk away, apartments are fetching record prices at 15
Central Park West. Musician Sting owns a flat in the newly opened
building as do top investment bankers including Goldman Sachs chief
executive Lloyd Blankfein and former Citigroup boss Sandy Weill.

Demand has been high and Dolly Lenz, another of New York’s top estate
agents, recently told a property conference that some new residents
were already looking to turn a profit and asking somewhere between $80m
and $125m for their apartments. She said one flat was `quietly’ on the
market at $150m.

Asking price and sale price don’t always tally but, despite all the
problems lower down the property ladder, top-end homes are still
fetching top-end prices.

Last month Candy Spelling, widow of television producer Aaron Spelling,
paid a record $47m for an apartment in Los Angeles.

In May Donald Trump sold his Palm Beach estate for $100m. Trump’s sale
points to some softening in the market ‘ he had originally wanted
$125m.

However, property expert Jeff Meyers said that while the number of
buyers might have shrunk slightly at the very20top end of the market,
prices in general remained firm.

`When you get north of $20m, most of the buyers don’t need financing.
But those buyers who took out jumbo mortgages for $3m, $4m, $5m . . .
they are in trouble.’

Meyers, the founder of Meyers Builder Advisors, said the present slump
most closely resembled the 1970s when a sharp fall in the housing
market was triggered by rising job losses.

This time things are different and the job market remains strong. If
that changes, though, the rich will suffer as well, he predicts. In the
recession of the early 1990s California lost 500,000 jobs. `Nothing
moved,’ said Meyers. `If job losses rise, that’s going to affect prices
at the top end, too, because then everyone loses confidence. The
undertow at the bottom end of the market is unbelievable.’

So far that undertow has no more than ruffled the surface of the pool.
So far.