There’s an old bit of real-estate wisdom that says you’re better off buying the cheapest house on a nice block than the most expensive house on a not-so-nice one. Makes sense – after all, you want to have your neighbors’ pads pulling your property’s price up instead of your home taking a hit in value when your neighborhood never quite pans out.
As for who first came up with the tip, who knows? But if they were around and apartment-hunting in New York City today, they’d probably be giving Midtown East a careful look.
Home to swank spots like Beekman and Sutton Place and less exclusive but nonetheless popular residential neighborhoods like Murray Hill and Turtle Bay, the East 40s and 50s of Manhattan are about as well-established a stretch as it gets. And, typically, prices in the area reflect this, with condos averaging $1,250 per square foot in 2006 (compared to the $1,142-per-square-foot average of Manhattan as a whole), according to data from appraiser Jonathan Miller.
But while Midtown East might be anything but undiscovered country, the area lately has seen a set of new developments flaunting the sort of prices a person might expect to find in a more recently emerging Manhattan ‘hood. Right now, next to some of the toniest addresses in the city, a buyer can get into a new condo unit for about $1,000 a square foot – or, in the case of 865 U.N. Plaza, as little as $900 a square foot. That’s what an 880-square-foot one-bedroom recently went for in the 57-unit converted condo building.
Overall, the 18-story development consists of studios and one-bedrooms ranging from $446,000 to $1.025 million (although many of the smaller studio and one-bedroom apartments are currently in contract). Add to those reasonable prices (well, by Manhattan standards) the fact that the building’s developer has agreed to cover closing costs up to 5 percent of the total purchase price, and you’ve got a real deal on your hands. You’ll also have some rather well-heeled neighbors just down the way at 845 U.N. Plaza – a k a the Trump World Tower.
It was this combo – a brand-name location matched with an off-brand price – that drew trader Katerina Hapzipetrou to the development. Already renting nearby at 50th Street and First Avenue, she didn’t have any plans to buy, but when she saw she could get a newly converted condo in the area for $1,000 a square foot, she decided to take the plunge.
“You can find co-ops in the neighborhood at that price, but you don’t find condos,” she says. “You add in also that they are paying the closing costs, and how can you go wrong with that?”
According to Halstead Property Vice President Louise Philips Forbes, the broker for 845 U.N. Plaza, Hapzipetrou is just the sort of buyer the development was designed to attract – an area renter turned into a buyer by the project’s relatively low prices. So far it’s a strategy that seems to be working – the building has sold 30 of its 57 listings in just more than 2½ months.
One of the reasons for those low prices is the lack of tax abatements. While many new developments in the city take advantage of New York’s 421a tax-abatement program (which can dramatically reduce a unit’s real-estate taxes for 15 years), condo conversions like 865 U.N. Plaza aren’t eligible. And because buyers in such a building won’t be getting a discount on their taxes, the units’ sticker prices will typically be lower than they would in a comparable building with the abatement. In short, the bad side is higher taxes. The good side is a lower purchase price.
The same forces are at work at Extell Development’s new condo conversion at 212 E. 47th St. Here, in a building also without a tax-abatement, a one-bedroom can be had for as little as $950 a square foot (prices for the building’s one-, two- and three-bedroom units range from $672,000 to $1.575 million).
“We have one-bedrooms that are selling in the $600s and $700s,” says Extell president Gary Barnett. “I think that’s an extremely attractive purchase price in today’s market. It’s a great neighborhood. Some of the new condos around the corner are selling for $1,700 to $2,000 a square foot.
“Tax abatements are great, and they’re certainly very helpful, but at the end of the day, you will have to pay taxes,” Barnett adds. “I think people understand that. So if they can get an attractive buy here, they’ll compare it to a new building that has 421a and know in the back of their mind that with the new building the abatement will go away.”
The lack of a tax abatement isn’t the only factor. The size of the apartments is also a reason there are deals in Midtown East. As Prudential Douglas Elliman’s Jacky Teplitzky points out, typically the smaller the apartment, the lower the price per square foot. So if you’re looking to slip into a high-end neighborhood like Midtown East at a discount, it’s easiest to do it with a studio or one-bedroom.
Take, for instance, the new M at Beekman building at 343 E. 50th St., which is being sold by Deanna Kory and Karen Kelley of The Corcoran Group. Two-bedrooms in the 23-unit development (which also does not have a tax abatement) are going for as much as $1,800 a square foot. Set your sights on a one-bedroom, though, and you can get 1,033 square feet for $1.04 million – or about $1,000 per square foot.
Not bad for a pad in one of the city’s most exclusive neighborhoods, and it’s right down the street from other buildings like the much hyped Grand Beekman and Beekman Regent.
It’s the unique nature of the area that makes these sorts of prices possible, Teplitzky says. Young professionals looking to be close to their Midtown offices and a large population of foreign buyers in the market for pied-a-terres near the U.N. make Midtown East a prime place for developers to build sizable blocks of lower-priced studios and one-bedrooms.
“It depends on the location,” Teplitzky says. “I don’t think you could build this kind of product and be successful on the Upper East Side. It has to be very strategically located.”