Luxury Lemons?

In a spacious, tastefully appointed living room at 145 East 76th Street, a couple who’ve spent most of their adult lives on the Upper East Side are reliving the moment when they decided to make the leap from prewar Park Avenue to their current $2 million, high-ceilinged three-bedroom in one of the nineties’ signature residential developments. The seduction, which began in March 1999, was conducted with virtual-reality tours (on which the developer, Harry Macklowe, spent $100,000), renderings of the elegant Hugh Hardy facade, and with brochure copy that promised “a residents-only private lounge and dining room,” along with a “cortile” – a cortile! – “patterned after the intimate colonnaded courtyards of Rome.”

“I have to admit,” she confesses, “I was somewhat captivated.”

Eleven months later, however, the thrill is definitely gone, and hell hath no fury like a luxury-condo buyer scorned. “The hardwood floors look like rippling waves,” the man says. “They told us oak floors are subject to shrinkage and swelling,” the woman adds. “I’m a New Yorker, I’ve had wood floors all my life, and nothing ever got swollen or shrunk.” There are floor-to-ceiling cracks bisecting the toile wallpaper in the study, and stained bathroom marble. The glass doors to the “Juliet” balcony are so heavy, they bent their own hinges. “Our contractor came in and said, ‘We’ve never seen walls this uneven.’ “

Then came the last straw: “I’m going to flush the toilet,” she says, jumping up from the floral-patterned couch and marching down a long hallway to the powder room. Moments later, there’s a furious, crushing explosion – sssssppplllllluuuuussssshhhhhh!!! She marches back in. “And that’s with the door closed.”

When nineties money went searching for trophies, much of it ended up in buildings like 145 East 76th Street, which combines prewar details like maid’s rooms, back stairs, and fireplaces with top-of-the-line amenities, appliances, and technology. They promised an idealized vision of Manhattan living to people – bonus-heavy Wall Streeters, Internet moguls, Warren Buffett charter investors – whose financial lives in the nineties couldn’t have been more ideal.

These promises were typically made in hyperbolic brochures, one of the great art forms of the real-estate boom: heavy, luxe folders, packed with CD-roms, sentimental snapshots of neighborhood hot spots (Prada, Fendi, and the Carlyle, in the case of 145 East 76th Street), and near-pornographic pamphlets mapping out the promised land. For gourmands, there were Viking stoves. Webheads and workaholics got ISDN lines. Design connoisseurs were wooed with a Robert Stern facade or a David Rockwell lobby. Europhiles got details like the aforementioned cortile for dining alfresco (though just how many knew what it was is open to debate). And if creature comforts couldn’t close the sale, celebrities did. Just about every boldface name that signed a contract for one of these buildings – or even trooped through with a broker – seemed to end up in the gossip columns.

Given the expectations that were loaded onto these apartments, how could the reality possibly measure up? But in a world where every tech stock went up, up, up, reality wasn’t a major concern.

Now it’s cold-grey-dawn time. “A lot of people are disappointed,” says Michele Kleier, chairman of the brokerage firm Gumley Haft Kleier. “It’s like buying from a catalog. The fabric looks beautiful in the catalog, but when you actually touch it, it doesn’t feel as good as it looked.”

At 145 East 76th, as at a few other new buildings, recriminations and bickering are the order of the day, and the three residents who sit on the building’s board have begun battling Macklowe to have the building’s deficiencies addressed. “Macklowe’s like a character in a Molière play,” says a resident. “He thinks he’s a wonderful person, but he’s a clown in my eyes. The attitude is, you don’t like it, sell the apartment or fix it yourself.”

The Macklowe camp, of course, sees things differently. “We have a flooring issue,” allows William Macklowe, son of Harry and executive vice-president of Macklowe Properties, Inc. “And there are some individual punch-list issues. But this is not something we’ve dropped the ball on. When you have a successful sales program and you sell out during construction,” he continues, “once the building’s done you get a rash of move-ins, and that really takes a physical toll on a building. The unit owners, I think, have very good value and should enjoy their apartments.”

Of all the new construction, the Chatam, at 65th and Third, is considered the best in value by many industry players. (As Dolly Lenz, executive vice president of Douglas Elliman, is quick to note, she was able to sell a $3 million three-bedroom there for $5 million in one day.) But that doesn’t mean that all those who actually plan on moving into the Robert Stern-designed building are satisfied. One buyer started to worry when the developer, Related Companies, wouldn’t let her inside her $900-a-square-foot apartment-in-progress. “First they promised I could see it when the building was framed out. Then they said not until ten days before we closed. I don’t think I ever would have signed up for something that I really was never going to get a chance to see or plan in an organized fashion. The other thing that really ticked me off was that the master bath was designed with no medicine cabinet. That was their idea of fine. You’d get the hair spray when you meant to get the deodorant and pick out the killer pills instead of the aspirin because you’d be reaching down into a drawer. They wouldn’t put one in, nor would they leave the bathroom blank. It was highly annoying.” Aside from the unexpected $900 a month for a garage space she was lucky to get (residents of the 24th floor and above got first garage dibs), the biggest disappointment of all was not having the first-class restaurant she once heard was to be run by Jean-Georges Vongerichten. “That was a big hook for me. It was in all their marketing materials,” she says. “I heard they had it stationed too close to a church entrance. So they couldn’t get a liquor license and had to cancel it. Somebody really screwed up big-time.”

A spokesman for the Chatham says the decision not to have a restaurant had nothing to do with proximity to a church or difficulty getting a liquor license, but that after trying unsuccessfully to secure a dining establishment for the space, they decided on a different course and are now looking for a spa. Since the restaurant was only mentioned in the marketing materials and not in the offering plan, a lawsuit is not an option. “Believe me,” she says, “I asked my lawyer.”

Many in the real-estate business would be more than happy to hold a gigantic pity party for these disgruntled buyers. “People are just going to complain one way or another,” sighs a broker who specializes in the Upper East Side. “Are the finishes going to be what someone who’s spending $15 million might put in their house? Probably not, but they should have known that going into it.”

“You always have to deal with a few teething troubles,” says Corcoran broker Leonard Steinberg. “Even with the best buildings, I tell my customers to expect problems. People are finding out that developers aren’t gods. They are just people who made spaces available. Assume you buy in the Chelsea Mercantile and you just hate the subway tiles in the second bathroom. You hire a contractor and you spend $20,000 to get a new bathroom put in. It’s still an incredible value. I always thank God that I can afford good clothes and a decent haircut, because without them I’d be pretty darn ugly.”

Still, buying an apartment before it’s built poses a unique set of difficulties. “There’s a temptation for the developer to cut corners once all the apartments are sold,” says Lenz.

“Things have gotten so expensive construction-wise in New York that it’s becoming very difficult to build things the right way and still make a nickel,” concurs David Goldsmith, director of marketing at DG Neary Realty. He recently toured a high-profile development in the West Village and returned with horror stories: “They used green board instead of WonderBoard for the wet areas around the tub, which means the painted surface around the tub is going to go,” he says. “And they had this huge oval steeping tub with only half-inch piping to the spigot. Do you know how long it takes to fill up a tub that huge with half-inch piping? But it’s cheaper.” In a Chelsea conversion, he saw water cascading over just-installed insulation. “Over time, it’s going to mildew and start to stink.”

“It’s like buying from a catalog. The fabric looks beautiful. But then you touch it.”

The Ice House, at 27 North Moore Street, is downtown’s poster child for the pitfalls of luxury conversion. Its high-profile residents, including Billy Crystal, sportscaster Warner Wolf, and Alexis Stewart (yes, that’s Martha’s daughter), all of whom reportedly have $2 million penthouses, could not get the principals of 27 North Moore Associates LLC to fix a long list of problems, ranging from buckling floors to plumbing problems. In January, Attorney General Eliot Spitzer stepped in with an $8 million lawsuit citing 26 defects in the 57-unit building. (The suit was reportedly settled – for the full amount – two weeks ago.)

Problems there certainly were. But Corcoran’s Steinberg maintains that “if you add up the pros, the cons fade into insignificance. The Ice House has phenomenal spaces with phenomenal windows, incredible ceilings, working fireplaces. A lot of these new developments are like Christmas gifts. They really are.”

Construction delays have also created a new class: the superrich refugee. “I’ve got a lot of people staying in hotels,” says Lenz. “I had one client who had to live in a studio for six months,” adds Steinberg. “Then she moved into an apartment in the North Moore just shy of 2,000 square feet.” “My client was supposed to close on the Empire in July; she moved in in January,” reports the broker on the deal. (The Empire spokesman Steve Solomon insists, “There were no major construction glitches. Closings began in November and proceeded very smoothly.”)

Others are being forced by developers to close on their apartments before the rest of the building is finished – or, as some would argue, even livable. “BridgeTower is a construction site,” says a condo broker for developer Dan Brodsky’s BridgeTower Place on East 60th Street. “Everything is full of dust.” (Brodsky insists that while “there was some construction going on on the lower floors and the very top floors,” the building was more than habitable when the first residents moved in last November). Donald Trump anticipated first closings on his 90-story Trump World Tower in April 2001; they began in December 2000, even though the building’s top half is still going up. “People were standing in line with money in their hands,” says a real-estate lawyer. “They’re not going to let you put in all these clauses to postpone. If you’re buying ten floors,” he notes, only half-jokingly, “then maybe.”

All of which prompts a significant number of buyers to put their purchases right back on the market, sometimes without ever laying down a single Aubusson carpet. At Zeckendorf Realty’s 515 Park Avenue, former PolyGram CEO Alain Levy is reportedly trying to flip the apartment that he bought for $11.5 million. The asking price was reduced to $16.5 million from $18 million in January. He is not alone: 13 out of the building’s 37 apartments have come up for resale. Not a surprise to brokers who cite low-quality light fixtures and kitchen cabinets, given the record-setting asking price.

“I sold something at the Westbury,” adds Michele Kleier, “a beautiful apartment. When the woman went to do her walk-through the day before the closing, she said, ‘There’s no back door for garbage.’ I said, ‘Well, whoever said there was?’ She said, ‘Well, I never thought to ask that question. I can’t possibly live in an apartment were I have to put my garbage out the front door.’ So we put it back on the market and sold it overnight for a million-dollar profit. We closed on Friday at 3 p.m. for $3.5 million; by Sunday she had $4.5 million. You have to understand that with all the money that’s been floating around the last few years, it’s become, ‘If you don’t like something, why keep it?’ “

At the Chelsea Mercantile on 252 Seventh Avenue, where prices have gone up 50 percent, Rockrose Development Corporation is willing to let owners flip their apartments to a third party without closing, according to the company’s Charles Singer. In other cases, some brokers suspect sponsors make changes in floor plans to encourage just such an end result. “Sponsors would love to see people default,” agrees real-estate lawyer Errol Brett, who has one client waiting two years to move in to the Park Laurel. “If I came to them and said, ‘He’s pissed, he’s not going ahead,’ they’d say, ‘Okay, here’s his money back.’ They figure they can make another $500,000 or $600,000. But he’d have to start over, and a $1.3 million apartment now is not same as a $1.3 million apartment in 1999.”

Back at 145 East 76th Street, our guide has also forgone the idea of starting over, and instead has fully committed herself to the crusade of obtaining the level of luxury she paid for. On a tour of the “private lounge and dining room” – which ended up resembling a ballroom at “a low-end Marriott” – she reports the space is going to be refashioned as a children’s play area. The cortile, which was covered with gravel instead of the more elegant paving stones in the rendering, is, at the board’s insistence, being redone in the spring. “I thought this would be like a Park Avenue white-glove building,” she says, heading back toward the elevator. “Macklowe thinks this is first-class. But he wouldn’t know first-class if it hit him.” Thankfully, the toilets are next on her list.

Luxury Lemons?