Prices for Luxury Real Estate Keep Rising. It Must Be Art.

The following is an excerpt from an article in 

The New York Times
Saturday, September 01, 2012

Prices for Luxury Real Estate Keep Rising. It Must Be Art.

By JAMES B. STEWART

If it’s $100 million, is it art?

Since Citigroup’s former chairman, Sandy Weill, sold his penthouse at 15 Central Park West late last year for $88 million, or $13,000 a square foot, to a Russian billionaire, sales prices in Manhattan have been flirting with $100 million, and brokers say it’s only a matter of time until the barrier is broken.

Sales at such stratospheric levels in Manhattan, as well as records in certain neighborhoods in Miami, Los Angeles and a few other pockets isolated from the nationwide collapse in real estate prices, have left real estate professionals struggling to explain the surge. Art may be the answer.

“Art is what people are willing to pay for, and an apartment like this is like a piece of art,” the Long Island real estate developer Steven Klar told a colleague of mine at The Times, Alexei Barrionuevo, in late July as he listed his penthouse on West 56th Street for $100 million.

Kathleen Coumou, senior vice president at Christie’s International Real Estate, said that some residential properties could legitimately be marketed and sold as art.

“When we call a property art, it tends to have architectural or historic significance,” she said. She cited the recent sale of a Manhattan town house designed by the famed 19th-century architect Stanford White, which was listed by Christie’s at what now seems a bargain, $49 million. “But even new construction could be considered art. It’s the equivalent of postwar and contemporary art, which is setting record prices.”

Something is certainly leading to record prices for what brokers describe interchangeably as trophy or art properties. An apartment at One57, a tower under construction across from Carnegie Hall, sold for $90 million and another is in contract for a sum said to be over $90 million (though less than the list price of $115 million.) The casino executive Steve Wynn, who is also a prominent art collector, bought a penthouse at the Ritz-Carlton on Central Park South for $70 million in June. A duplex co-op on Park Avenue sold for $52 million in May.

For high-end real estate sellers and buyers, the art analogy holds obvious appeal, since prices for paintings cracked the $100 million barrier at auction years ago and quickly rebounded from the financial crisis. The record for the most expensive painting is said to be held by Cezanne’s “The Card Players,” sold last year to the royal family of Qatar for a price estimated by Vanity Fair at $250 million. (A few weeks ago, a member of the same family walked away from a deal at One57, opting instead for a $47 million Upper East Side town house.)

To reduce the Cezanne’s 97-by-130-centimeter dimensions to real estate terms, that’s $19,826 per square centimeter. Mr. Klar is asking only $12,500 per square foot, and his apartment comes with swag drapes and a crystal chandelier.

It may be time for a reality check.

David Kusin, a former Metropolitan Museum of Art curator who also worked on Wall Street and now runs Kusin & Company, a consulting firm in Dallas that specializes in the economics of the art market, told me the comparison of real estate to fine art infuriated him.

“There’s absolutely no statistical validity to it,” he said. “It’s like comparing Earth to Saturn. And I’ve been studying these markets for 18 years. I live in a home designed by the dean of Taliesin,” Frank Lloyd Wright’s school of architecture. “The interior designer and landscape architect are at the apex of their fields. There is no comparability at all between the structure I live in and the art that hangs on the walls.”

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