As developers struggle to offload excess condo inventory in an oversaturated market that at least partially stalled at the onset of the coronavirus pandemic, it is widely reported that investors and mezzanine lenders have swooped in with offers to buy units in bulk. While experts say that the steep discounts being proposed render most of these offers DOA, some transactions have gone through; the latest being the bulk sale of 10 units at Gramercy Park’s Rutherford Place.
The Real Deal notes in its reporting of the sale that Rutherford Place is an outlier among the projects involved in bulk deals, in that it is not one of the estimated 900 new or in-progress developments - mostly in Manhattan - that currently include the more than 15,000 unsold units across New York, according to real estate data provider Marketproof.
Instead, reports TRD, the 10-story building at 305 Second Avenue dates back to 1902, when it was built by none other than banker J.P. Morgan, who at the time intended it to be the city’s largest maternity hospital. Eventually it became a general hospital, and in the 1960s a drug treatment center. In the 1980s, Winthrop Chamberlin and Barnet Liberman bought the property from Beth Israel Medical Center and turned it into a residential condominium with about 127 units. They paid $5.5 million.
Initially, the developers—owners of real estate firm Mountbatten, known also for its 1980s conversion of the West Village’s Printing House into condos—opted to rent out most of the units to receive related tax benefits. Over the years, according to New York Magazine, tenants at the building included a sizable list of well-knowns: comedian Dave Chappelle; producer Benny Medina; rapper and producer Sean “Diddy” Combs; musicians David Lee Roth, Duncan Sheik, and Ryan Adams; music scions Theodora and Alexandra Richards (daughters of Rolling Stone Keith); celeb sibs Charlotte and Samantha Ronson; and actors Penn Badgley, Wesley Snipes, Judd Nelson, Chris Farley, and Tom Cruise and his then-wife Mimi Rogers.
According to a New York Times piece from 2006—the year that Chamberlin and Liberman first began to sell units in earnest—the units at Rutherford were as interesting as their storied residents. “Because of the limitations imposed by its structural origins as a hospital,” the Times describes the building, “no two of the 127 apartments have the same layout. ... There are eight simplexes, 50 duplexes, 66 triplexes, and three quadriplexes [sic]. With some rooms perched over others, including sleeping lofts over studios, ceilings vary drastically from 7.6 feet to 19 feet—in some cases, in the same room.”
Earlier this month, a limited liability company called 305 Second Avenue Mezz Lender bought 10 of these unusual units in a bulk purchase for $18.64 million. That averages to about $1.86 million per unit. Compass is listing Mountbatten’s remaining units—the number of which is unknown—for between $825,000 and $3.195 million, according to TRD.
The outlet notes that developers prefer to keep bulk sales like these quiet, lest they indicate distress to the rest of the market. But a few bulk deals have garnered some publicity; namely, Elad Group’s $90 million sale of 70 units at a Hell’s Kitchen condo to Tishman Realty—the largest bulk deal on record. Compared to other, single units in contract at the building, the bulk price represents a 40.5% discount. Another bulk sale of 8 units at GID Development’s Waterline Square went for $27 million to a South American family, which was a 7% discount, according to TRD.