(Bloomberg) -- New York’s condo market is brimming with costly apartments in glittering new towers. Now it’s about to get more pricey homes, this time in a building that’s more than a century old.
Ziel Feldman’s HFZ Capital Group plans to convert 95 empty rental units at the Belnord, a gated complex occupying a full square block on the Upper West Side, into condos that will be listed at $3,000 a square foot on average -- more than the boroughwide average for new-development sales in the first quarter. He’s hired architect Robert A.M. Stern for the project at the landmarked limestone-and-brick building, reaching for a formula that’s succeeded at other properties that have pushed price boundaries in Manhattan.
Stern is taking on the Belnord after having studied it for inspiration for his own ground-up design for 15 Central Park West, the ultra-luxury project by Zeckendorf Development LLC that shattered price records. He also worked on 30 Park Place, Silverstein Properties Inc.’s limestone condo tower atop a Four Seasons Hotel in lower Manhattan, where a penthouse on the 81st floor sold for $26.6 million in January.
“Clearly, Robert has magic dust and we hope some of it rubs off on us,” Feldman said in an interview about plans for the Belnord, on the full block between Broadway and Amsterdam Avenue and 86th and 87th streets.
Feldman is testing New Yorkers’ appetites for luxury real estate in a market that’s already oversupplied with high-end homes, including condos his own firm developed several years ago that he’s still working to sell. And while Feldman is embarking on the Belnord conversion, he’s seeking about $1 billion in financing for a ground-up project along the High Line in Chelsea. HFZ is working with architect Bjarke Ingels on plans for about 230 condos and a hotel on that full-square-block site, purchased two years ago for $870 million.
Deals for Manhattan luxury apartments -- those priced at $4 million or higher -- have had a strong start this year, jumping 33 percent in the first quarter from a year earlier to 330 contracts, according to brokerage Olshan Realty Inc. But there’s a lot of inventory to clear. About 4,282 newly developed condos will reach the market this year, about double the number that were listed in 2016, data from Corcoran Sunshine Marketing Group show. About 60 percent are considered luxury, costing at least $2,400 a square foot.
The prices HFZ is seeking at the Belnord, completed around 1908, are “not crazy,” given the building’s place in New York City’s history and high demand for apartments on the Upper West Side, where there isn’t much supply, said Andrew Gerringer, managing director of the Marketing Directors, a new-development brokerage that isn’t involved with the project.
“I think it’s got an opportunity to shine, even in a market like today,” said Gerringer, who had marketed previous HFZ projects while at another firm. “But the caveat is, as long as the apartments aren’t ridiculously big.”
Two-bedroom condos at the Belnord start at just over $3 million and three-bedrooms will range from about $4.4 million to $7.3 million, according to preliminary documents filed with the state attorney general’s office. The most expensive unit, with seven bedrooms and 5,093 square feet, is $18.4 million, the filings show.
The Belnord, with a 22,000-square-foot (2,040-square-meter) landscaped courtyard at the center of its fortress-like walls, is special enough that “there is no competition for us,” Feldman said. “Nobody’s replicating the Belnord. They can’t afford to replicate the Belnord.”
Feldman likes the building so much he bought it twice -- first in 1994, for $15 million, with partners Gary Barnett of Extell Development Co., and Kevin Maloney of Property Markets Group. The trio managed and refurbished the Belnord as rentals, with Feldman eventually selling his stake. In 2015, he paid $555 million to make the property his.
Stern’s plans, which have been approved by the city’s Landmarks Preservation Commission, amount to a “very high-class Botox treatment” for the building, the architect said. He’ll reconfigure the apartment layouts, adjust the courtyard’s circular driveways so cars of today can pass each other, and include modern amenities such as a fitness center and central air conditioning. Plans also call for adding some duplex penthouses on one side of the property, where the upper levels lead out onto a terrace.
“It is a uniquely New York kind of apartment house -- like a palace,” Stern said. “It’s got great bones.”
HFZ eventually plans to renovate the entire 213-unit Belnord into condos as the remaining apartments, now occupied by renters, become vacant over time, Feldman said. In its filings, HFZ estimated a full-building sellout at $1.35 billion, which would be among the highest ever on the Upper West Side.
That’s pushing boundaries for a property that’s only 14 stories high, and too far west to offer unobstructed views of Central Park from even its top-most floors, said Jonathan Miller, president of appraiser Miller Samuel Inc. Manhattan’s loftiest prices are usually reserved for upper-level apartments in the tallest towers, he said.
“Buildings that are over 50 stories in a neighborhood, that’s what skews the luxury price per square foot, because the views are what they’ve been selling,” Miller said.
The $3,000-a-square-foot average HFZ plans to seek at the Belnord compares with $2,645 a square foot for all sales of newly built Manhattan apartments in the first quarter, according to a report by Miller Samuel and brokerage Douglas Elliman Real Estate.
Feldman sees his pricing for the Belnord as a bargain compared with apartments of similar size and historic stature that command a premium just because they’re closer to the park.
“If I want to live on the Upper West Side, and I want to live in the finest building and I can’t afford necessarily to be on Central Park in projects that are selling at $8,000 to $9,000 a foot, I’m going to be at the Belnord,” he said.
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