Our Deal of the Month

Our deal of the month is a three bedroom, three-and-a-half bath apartment at 1289 Lexington Avenue which we just closed. Its last asking price was $5,700,000. Tip of the hat to Robert Levine, a valued member of the Harris Residential Team, for closing it. And congrats to our buyer!

I got curious, as I usually do. I’ll tell you more about the building and its history. But as I normally do, I want to unpack why it sold for the price it did, and compare a piece of the deal to others. Here, I was curious: What is the discount on this property because it is on Lexington Avenue, and not Park Avenue or Madison?

I’ll explain.

The Location

This is on the corner of 86th Street and Lexington Avenue. For those of you who do not know the Upper East Side, this is really its commercial center. The only express stop for the 4/5/6 subway line on the East Side. So loads and loads of people coming and going. Its major shopping hub is along 86th street from Park to Second Avenue, which makes sense, since this is where so many start and finish their subway commute. And the M86, the crosstown bus that runs along 86th Street, has the “highest ‘per mile ridership’ of all bus routes in the city, and the second highest ridership of all Manhattan crosstown routes after the 14th street bus (thanks Wikipedia).

Is That A Bad Location to Live?

You may be wondering—Is it bad to be at 86th and Lex? I like to say there’s a lid for every pot, and there’s a price for every property. So it’s not whether it’s a good or bad location, just that the demand drives the price up or down. In this case, the price was driven down.

Here’s the Story.

I had heard about this building before it was built, and before I usually hear about new developments. You can imagine that I might learn of what’s happening as a real estate agent before it hits the press, but in this case my friend at HOK, a prominent global architecture firm, had give me the scoop. It’s on their website if you want to look at what they have to say.

When this building first hit the market, it was known at the Hayworth. Launched in 2019, they were asking as much as $2900-3100 per square foot for high floor units (like this one here).

The pricing felt high to me at the time, and the market agreed. In fact, nothing went into contract, and the original developers ended up going into foreclosure. Ultimately, it was bought in 2022 by the owners of Brown Harris Stevens, Will and Arthur Zeckendorf, for $250 million (story here). The original expectations were a sellout of $375 million, which would have helped cover the investment of both time—ten years it took to assemble the site—and money to carry the site while it was being built. So the only thing left to find out was how much of a discount to the original asking prices it would take for the new owners to sell the units.

Let’s look at the nearby comparables. That is, condominiums in the immediate area, and what they’re selling for.

The Lexington Comps

There are two other full-service condo buildings at this location, the Lucida (built in 2009), and a brand new building, Arloparc, just completed and starting sales, at 126 East 86th Street.

If you look at a recent closing of this mid-floor unit at the Lucida (sold in April 2023), you can see that they are getting $1935 per square foot. It’s not brand new, and its entrance is on 85th Street, not on Lexington. An earlier sale, when mortgage rates were still around 3% was a higher floor three-bedroom that sold for $1880 per square foot. That sale was both poorly timed and reflective of its condition; because it sold for a $1 million dollar discount to when it was purchased as a resale unit in 2017 at $2284 per square foot.

Arloparc is another matter. Their efficient three-bedroom unit is asking $2345 per square foot. This is a much smaller building, compared to the sixty-one units at 1289 Lexington and the 118 at Lucida. Some may like its boutique elements, but the amenities simply cannot compare, nor can the level of service. I would also point out that its entrance is directly on 86th Street, making the entrance a bit more exposed and less attractive, amid the bustle of the foot traffic.

We could either conclude that going prices in 2023 for 1289 Lexington should be bracketed between the lower level of the Lucida, and the asking prices of the Arloparc. And that’s what we see. The unit we sold at 1289 Lexington was at $2135 per square foot.

Onto Park Avenue

There is no new condominium on Park and 86th Street. The closest is 1055 Park on the Southeast corner of 87th and Park, but it’s not a great comparison. Built in 2011, it’s only six units, and mostly duplexes, and 33% larger than our target unit (3246 square feet). I would point out unit 4, though, which has a colored history. It sold originally for $1656 per square foot in 2011. Then the owner tried to resell for $9.3mm in 2019, but wasn’t successful. When it did trade in 2021, right after COVID, the owner swallowed quite a loss; he accepted $923 per square foot, a $2.5mm discount to his original price. Not at tough a beat as the 1289 original developers took, but a 45% loss. Ouch.

The Helpful Comparison- Madison Avenue

Take a look at another developent on Madison Avenue. The Bellemont is a luxury 12-unit building on the Southeast corner of Madison Avenue and East 86th Street. The smallest unit, this three-bedroom on the third floor at 2848 square feet, sold for $3131 per square foot in July of this year. The penthouse sold for around $5000 per square foot, but ignore that data point.

Final Thoughts

You can say that the Bellemont is designed to look like a Prewar building, which seems to be preferable to the all-glass curtain wall of 1289 Lexington. And you could say that the premium for these Prewar lookalikes like 200 East 83rd, The Beckford, and others is clear, regardless of their location.

You could also show that these units are much larger than at 1289 Lexington, and therefore preferable and deserving of a premium. And that it’s far more exclusive. That alone could justify a higher price per square foot.

With that in mind, let’s say that the faux prewar vs contemporary look and the exclusive nature might add 10-15% to the price. So we can take the $3131 per square foot to $2661 per square foot.

In the end, it looks like the discount for Lexington Avenue, compared to the tonier location two avenues over, is about 25%. It is the worth the premium to go to Madison? Or is it worth the 25% discount to get the same shopping, access to the same restaurants, and be slightly further from Central Park?

Our buyer chose the discount, but I’ll leave you to discuss what you might do. -Scott & The HRT