Most Expensive U.S. Residence: Fact or Fantasy?

Nov. 9, 2007— -- It was billed as the priciest residential transaction in the country.

A three-floor, 30,000-square-foot penthouse with 23 bedrooms, 25 bathrooms, five powder rooms, a rooftop terrace, a gym and twice-daily maid service was about to be sold to a Russian billionaire for $150 million, the New York Post reported in a front-page story Thursday.

But Len Blavatnik's record-setting purchase isn't happening. Sources close to the billioniare say that there is no deal for the three apartments at the famed Mark hotel at East 77th Street, which Blavatnik had reportedly planned to combine. Blavatnik's spokesman declined comment.

The sale report is just another sign of the real estate hysteria gripping Manhattan, where some of the planet's richest plutocrats are snapping up the priciest property.

While the rest of the country suffers through a severe housing slump, with homebuyers forced into foreclosure, the city's real estate market continues to bubble.

In the last few months, there have been several eye-popping transactions:

Vera Wang paid $23 million for her father's 10th floor duplex at 740 Park Ave., one of the most luxurious buildings in the city. (Wang's father bought the place for $350,000 in 1983.) The venerable address, the residence of old-money families such as the Vanderbilts and Rockefellers, and new masters of the universe, including Ron Perelman, Edgar Bronfman Jr., Henry Kravis, David Koch and Steven Schwarzman, even has its own book, "740 Park: The story of the World's Richest Apartment Building," By Michael Gross.

Private equity king Chinh E. Chu, a senior managing director at Blackstone, spent $34 million for the entire 89th floor and half of the 90th floor at Trump World Tower; the space includes 34 rooms, 12 bedrooms and 16.5 bathrooms.

Some of Wall Street's biggest financiers, including Goldman Sachs CEO Lloyd Blankfein and hedge fund hot shot Daniel Loeb, have snapped up penthouses at 15 Central Park West, a palace covered in 85,000 pieces of limestone where every apartment has an open view. The building features a private dining room, a walnut-paneled library, screening room, and a chauffeur's waiting room, 30 private wine cellars and 29 maids' suites. The latest buyer is Citigroup's ex-CEO Sandy Weill, who spent $42.4 million for Penthouse 20 for his wife, Joan.

Blavatnik bought Edgar Bronfman's 31-foot-wide town house on East 64th Street for $50 million. The building includes a 2.5-story indoor piazza with secret stairways, a glass-floored library terrace, and a master bedroom and children's playroom with balconies. Blavatnik bought the place after he tried to get an apartment at 740 Park but was turned down by the building's co-op board, which preferred oil billionaire David Koch.

And there are still some luxury apartments available -- the most expensive one listed in New York is a $70 million three-story unit at the Pierre Hotel, with 26-foot ceilings, library with fireplace, gym and a terrace with a rooftop pavilion.

What accounts for the electric appeal of Manhattan's real estate?

Most real estate observers attribute to the city's dynamism and limited space. "Within a finite universe, you also have a finite number of the finest buildings in the world," says Michael Gross, who wrote "740 Park."

Foreign Buyers

Gross says that the market for classic co-op buildings is so strong because they have inherent values that safeguard them from real estate slumps. "These co-ops have certain ownership structures that protect you against credit crunches -- their boards don't allow people with shaky finances by not letting them borrow 90 percent of the value of the apartment; they are architectural treasures and the location is priceless."

Another major reason is the continuing appeal of living in the city. "A lot of very rich people who've made money in the last five years want to live at the center of the world, and the dollar is weak, so people with currencies have money to buy these units in cash," says Steven Gaines, the author of "The Sky's the Limit, Passion and Property in Manhattan."

Yet that enthusiasm may be starting to ebb as the credit crunch continues to damage the economy, say a few of the city's high-end real estate brokers. Dolly Lenz, the city's premiere luxury broker, who was nicknamed "Jaws" by former Tyco CEO Dennis Kozlowski, notes that many of the recent high-end deals were actually made earlier in the summer before the onset of the subprime mortgage crisis.

"At the high end, $20 million and above, nothing's selling," says Lenz. "Nothing's been selling since August. That's when the whole mentality went from 'Why not?' to 'Why?' You ask yourself, do you really need the room for that extra $23 million?"

The market for under-$6 million apartments is stronger than ever, with buyers flocking to open houses on worries that they won't be able to get financing as banks tighten up on credit, Lenz says.

"People at the very high end who are never cautious are cautious, and people who were always cautious are jumping in because they may never get another opportunity," she added.