Big Deal: Higher Prices Migrate to Far Upper East Side

A penthouse in the Charles, a glass-and-limestone condo rising from a nondescript block on First Avenue, recently went into contract for $37.94 million. The buyer is creating a quadruplex with 1,300 square feet of private terrace space on two levels. Credit Williams New York

Third Avenue has long been a dividing line on the Upper East Side. “West of Third” serves as shorthand for the stylish neighborhood in the TV show “Gossip Girl,” where private-school girls live in stately Park Avenue co-ops and shop in boutiques along Madison Avenue. “East of Third” refers to the delis and bagel shops that make up many of the storefronts around York Avenue, and the tenement style walk-ups filled with recent college graduates who flock to the cheap rent.

These boundaries, however, seem to be shifting. The penthouse at the Charles, a glass-and-limestone condominium rising on a nondescript block on First Avenue, well beyond the Third Avenue demarcation line, recently went into contract for $37.94 million. The price is more than double the previous sales record in the area, the $17 million paid for a condominium at 170 East End Avenue in 2009, according to data from CityRealty.com.

And at $3,196 a square foot, the transaction at the Charles is the second-most-expensive deal east of Lexington Avenue in the 60s and 70s. It is topped only by the sale of the entire 47th floor of Trump Palace, the 55-story tower on 69th Street at Third Avenue, which sold for $3,855 a square foot in September 2013, according to CityRealty.

News of the transaction has left some longtime observers scratching their heads. “Who would pay that on First Avenue?” wondered one broker. She declined to be identified for fear of upsetting her relationships with brokers at Town Residential, which is representing the Charles. “I don’t have a single client who would ever look at the building. First Avenue is in the middle of nowhere.”

Yet someone did pay that sum (the sale has not yet closed, so there is no public filing that might lend clue to his or her identity). And the mystery buyer is not alone. Since sales began in October, roughly 40 percent of the units at the Charles, at 1355 First Avenue between 72nd and 73rd Streets, are in contract.

Even the developer, R. Ramin Kamfar, seems surprised at his good fortune. “People can call us crazy for doing a building with only full-floor apartments asking $7 million on First Avenue,” said Mr. Kamfar, the chief executive of Bluerock Real Estate, “but at the end of the day, the proof is market perception.”

Mr. Kamfar acquired the site that is now the Charles in 2007 and had been developing the project when the real estate market crashed. Although it had already sold roughly 20 percent of the building, Bluerock shut down operations and returned its deposits to the buyers. In February 2013 construction was restarted, this time hewing to a revamped layout of entirely full-floor apartments and a 31-story tower rather than the originally planned 33 stories.

With completion expected this fall, the Charles will have just 26 apartments, either full-floor units or multifloor combinations. The buyer of the penthouse created an 11,740-square-foot quadruplex with 1,300 square feet of private terrace space on two levels by combining the original duplex penthouse with the two contiguous floors beneath. The least expensive unit is the third floor, where a 3,600-square-foot apartment is listed at $5.82 million, or roughly $1,600 a square foot.

It is the first New York City project for Bluerock, which has partnered with Victor Homes to help oversee the development. Ismael Leyva Architects designed the building, which features two cantilevers. David Collins Studio of London created the interiors.

“There is sticker shock,” said Ginger Brokaw, a broker at Town Residential who is a director in charge of sales at the Charles with Jason Karadus, another Town Residential broker. But, she added, when people realize that the average sales price at the building is “only $2,000 a square foot, for a beautifully appointed new condo on the Upper East Side, if anyone knows their market, they know that is lower than a lot of the other buildings.”

The prices at the building actually average around $2,500 a square foot, compared with an average condominium price of roughly $1,600 a square foot elsewhere in the neighborhood from 2013 through today, according to data from CityRealty, which uses the parameters of Lexington Avenue to the East River, from 59th to 79th Street.

Carlos Martegani, a broker at the Corcoran Group, represents a family that is relocating uptown from Chelsea and had been considering an apartment at Manhattan House, a condominium conversion at Third Avenue and 66th Street. That deal fell through, and the family now has an accepted offer at the Charles. The building’s small size and the fact that all of the apartments are full floors “is a unique product in the market,” Mr. Martegani said. Bluerock was also willing to negotiate, offering the buyers a discount on the asking price, he said, declining to say how much.

“And from a resale perspective,” Mr. Martegani added, “it is only one block away from the 72nd Street subway, which will definitely help increase value in the future.” He was referring to the long-awaited Second Avenue subway.

Part of what may be enabling the Charles to achieve these high prices is the change that is expected to occur in the area when the new subway becomes a reality. The Second Avenue line was conceived as far back as the 1920s, but it wasn’t until 2007 that construction began on the Upper East Side. And now, if all goes according to plan, the first phase of the line, East 96th Street to 63rd Street, including a stop at 72nd Street, is expected to open in December 2016.

“The Second Avenue Subway will have a major impact on the perception of the whole far eastern area of the Upper East Side,” said Amanda S. Brainerd, a broker at Brown Harris Stevens. First Avenue, she said, “will be much more of a through corridor than it has been in the past, where it was more off to the side.”

In expectation of these changes, developers have been buying up sites and planning residential projects in the area. One is in the works at 1711 First Avenue, between 88th and 89th Streets, while the Extell Development Company, which is building One57, the pricey glass tower rising on East 57th Street that has sparked a spate of copycat buildings, has bought properties on Third Avenue in the 90s. And as the construction mayhem surrounding the subway project has forced many older storefronts to shutter, they could soon be replaced with more fashionable tenants.

Despite the prices at the Charles and the coming changes to the neighborhood, buyers can still find deals. The Charles “is not representative of the neighborhood,” Ms. Brainerd said. “It doesn’t show the great value that still exists in this area.”

Ms. Brainerd is the listing broker for a 2,900-square-foot condominium at 524 East 72nd Street, between York Avenue and the East River, with a $5.495 million asking price, or roughly $1,800 a square foot. The building is about 15 years old, but the apartment was renovated in the last three years. “I don’t know where else in Manhattan you can get a triple-mint, full-service condominium for that price,” she said.

A penthouse with floor-to-ceiling windows, a hot tub and a private roof deck recently went into contract at 408 East 79th Street, between First and York Avenues, for close to its $8.495 million asking price, or just under $2,400 a square foot. “It is a fantastic full-service building that was built about eight years ago,” said Hilary Landis, a broker at Corcoran who represented the seller. “I constantly see families say they will try the area because it is a better value, but then they stay and buy the apartment next to them.”

Still, while many listings around the Charles are less expensive, the developer has no qualms about pushing the market boundaries. “Our vision was always to create a townhouse in the sky, a place for people who want the privacy of their own home but with all the services,” said Mr. Kamfar, who plans to live in the building with his family.

And as Ms. Brokaw noted: “With the Second Avenue subway becoming a reality, it is just rational to bet on the area. First Avenue is not a sin.”

Copyright © 2014 The New York Times Company. Reprinted with Permission. Ruth Fremson/The New York Times. 

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