No, Cantor Fitzgerald CEO Howard Lutnick didn’t “save” $81 million when he bought the most expensive listing in New York City, the 12,000-square-foot, 16-room triplex penthouse on the 41st, 42nd, and 43rd floors of The Pierre, a co-op tower on Fifth Avenue dating from 1930s. By the way, the owner also pays monthly maintenance charges for the apartment of $51,840).
Asking price was $125 million when it was first listed in March 2013. In December that year, the price was slashed to $95 million. In 2015, it was cut to $63 million. That’s half of the original asking price. But it still didn’t sell. So it was taken off the market. After it underwent a modern redesign, it was re-listed in April 2016 for $57 million. It still didn’t sell. But on August 2, Page Six reported that Lutnick bought it for $44 million. At 65% below asking.
“Cantor Fitzgerald CEO buys iconic triplex at $81M discount,” said the Page Six headline.
“Best Real Estate Headline Ever,” said Jonathan Miller, real-estate appraiser and author of the Elliman Report series, in his Housing Notes.
Miller has a word for this phenomenon of enormous blue-sky asking prices that trigger subsequent massive and serial price reductions until finally someone bites: “Aspirational pricing.”
The very idea that a home seller would discount their home by $81 million to make the sale is an insane thought. This speaks to the concept I call “aspirational pricing.” The asking price was set to a price so ridiculous that it would literally sit on the market for years and the market would unlikely catch up in a lifetime. More importantly, it serves as misdirection for other high-end properties coming to the market by influencing them to also wildly over price as well.
The 6,800-square-foot fully furnished penthouse occupying the top floor of the beachfront condo tower at 321 Ocean in South Beach, Miami Beach, was listed for sale in December 2015 for $53 million. The sellers had bought it when the building was completed six months earlier, for $20 million.
“Financier Aims for Ambitious $53 Million Miami Penthouse Flip,” The Wall Street Journal said at the time. The hopeful flippers are Boris Jordan and Elizabeth Jordan:
Founder of the private-equity and advisory firm the Sputnik Group, Mr. Jordan previously served as chief executive of the state-controlled Russian media conglomerate Gazprom-Media, and as head of the Russian television network NTV.
But the hot air has come out of the condo market in Miami Beach. In the second quarter, after years of soaring, the median sale price for non-distressed condos dropped 7.5%, and the average price plunged 15.2%, according to the Elliman Report. The median price per square foot dropped 12.5%.
So the hoped-for flip hasn’t worked so far. And price cutting has commenced. Recently, the price was cut to $39.5 million. And still no takers. So the condo flippers changed their listing agents from ONE Sotheby’s International Realty to Douglas Elliman Real Estate. And a few days ago, the price was cut again, this time to $34,999,999.
That’s a very hopeful number, all these nine’s. Like a car on a car lot. And it’s down 32% or $18 million from the original asking price. The new listing agents told the Wall Street Journal that the previous asking prices, despite the reductions, had been too high.
Food for additional and perhaps amusing thought: Zillow’s estimated price – the infamous “Zestimate” – is $7.6 million.
The agents blamed factors such as Brexit, the US election, and currency fluctuations for the trouble in the high-end market in Miami Beach last year. These factors deterred international buyers, they said.
If this foreign buyer doesn’t materialize with an acceptable offer, the flipper might become the end user.
Another deal emerged on August 4 after the sellers cut prices from “aspirational” to something more in line with the, albeit crazy, market. A 9,200-square-foot five-bedroom mansion in Los Angeles, built in the 1960s on 1.2 acres with a three-bedroom guest house and a four-car garage, was listed for sale last year at $27.5 million. After a while, the price was cut. And after several price cuts, the most recent asking price was down to $19.9 million.
Now, Adam Levine, lead singer of the pop rock band Maroon 5, bought it for $18 million, “according to people with knowledge of the transaction,” said the Wall Street Journal, which added that “people familiar with the home said it needs renovation.” So that would be 34.5% off original asking price.
The couple still hasn’t sold their digs in Beverly Hills, which they listed for sale last summer at $17.5 million. Nothing happened. So they cut the price to $15.95 million. Nothing happened. And they pulled it off the market – perhaps they’ll try again later, presumably at a still lower price.
In San Francisco, the most expensive home currently for sale isn’t even finished yet. The 6,941-square-foot five-bedroom penthouse occupies the top flow of the condo tower at 181 Fremont that is still under construction. It should be ready for move-in next year. The developers put out an asking price of $42 million, hoping for some condo flipper or a foreign buyer or a startup-billionaire kid or something.
That these prices floating up there in this rarefied high-altitude air are slashed by mega-percentages isn’t a sign that the high-end market is collapsing – though it doesn’t appear to be doing all that well either. It’s a sign that “aspirational pricing” is seen as BS pricing by the market. And nothing happens until enough massive price cuts occur. Even then, there might not be any action.
A first red flag for California goes up. But for the Bay Area, it’s more than a red flag. Read… These Job Trends in Silicon Valley, San Francisco Bay Area Will Hit Real Estate, the Economy, Municipal Budgets & Hype
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.