Ziel Feldman’s HFZ Capital Group just bought one of the most expensive development sites ever sold in Manhattan. He won’t be building the city’s priciest condos there.
“I don’t want to be hostage to a $10-to-$20 million condo market,” Feldman said in an interview. “I don’t want to be in that market a year or two from now.”
HFZ paid $870 million for a full square block in Chelsea, nestled between the High Line elevated park and 11th Avenue and beside Barry Diller’s IAC/InterActive Corp. headquarters. The deal, completed May 7, was the most expensive New York City lot sale since a partnership including Extell Development Co. paid $919 million for a much larger site on the Upper West Side almost a decade ago, according to Real Capital Analytics Inc.
To recoup his investment, Feldman plans to build smaller than the competition, figuring that the market has more than enough choices for the ultra-wealthy. The project, still under design by architect Bjarke Ingels Group, will have two buildings of about 28 and 38 stories, respectively. Apartments will average 1,500 to 2,000 square feet (139 and 186 square meters).
That’s roughly half the size of new luxury condos that have sold in Manhattan since 2013, data from appraiser Miller Samuel Inc. show. Developers since the credit crisis have focused on building ever-larger apartments in an appeal to multimillionaire buyers seeking havens for cash.
The price per square foot at the Chelsea site will probably range from $3,750 to $4,000, Feldman said. That’s in line with the average for new luxury condos that traded in the first quarter, according to Jonathan Miller, president of Miller Samuel and a Bloomberg View contributor.
“It’s still high-end luxury,” Miller said. “The price per foot is consistent with what’s already being constructed. The only difference is that the units are smaller.”
Condos at Feldman’s project, at 501 W. 17th St., will start at less than $4 million, he said.
“If you’re pricing well, your audience is much greater,” he said. “We want to be able to deliver a product that people will hopefully wait in line for.”
Prices for newly built Manhattan apartments have been climbing rapidly as developers try to profit in the face of escalating land costs. New condos will sell this year for an average of $5.9 million, up from $4.8 million in 2014, according to estimates by CityRealty.
The value of all new apartments sold last year totaled $4.1 billion, a 52 percent jump from 2013, even though the two years had about the same number of purchases, the data firm said.
HFZ’s West Chelsea development may have as many as 300 apartments, most with two or three bedrooms, according to Feldman. One-bedroom units will probably be smaller than 1,500 square feet and can be combined by buyers to make larger homes, he said.
While he paid a high price for the land, Feldman estimates he’ll spend less by building towers that don’t aspire to touch the clouds. While skyscrapers of 60 to 70 stories cost about $1,200 to $1,300 a square foot to build, “the costs are half that” for his project, Feldman said.
“You don’t need the height because you’re already on the water, you’re already on the High Line,” he said.
Feldman envisions a “self-contained kind of city” with a courtyard where cars can drop off residents, and amenities such as a restaurant and fitness center. He might add a hotel in the smaller building if he can find a brand that would boost the project’s cachet. Even without one, residents would enjoy hotel-type services such as concierge and housekeeping, he said.
As part of a deal allowing him to build up to 400 feet (122 meters), Feldman is also building a public park at the site that may include a new entrance to the High Line. The park would adjoin retail shops at the base of his buildings.
Ingels was chosen for the project because of his “iconic, extraordinarily creative and somewhat complex” designs, such as the pyramid-shaped apartment building under construction on 57th Street near the West Side Highway, Feldman said. “He’s extraordinarily brilliant, easy to work with.”
The Chelsea development -- expected to be ready in 2018, with sales starting early next year -- will veer from a crowded field of ultra-luxury offerings in Midtown that are due to be completed around the same time.
Properties now under construction include architect Jean Nouvel’s 82-story tower adjacent to the Museum of Modern Art, with a duplex penthouse seeking more than $70 million, and Zeckendorf Development’s 520 Park Ave., where asking prices start at $16.2 million and jump to $130 million for a 12,000-square-foot triplex.
“The stars are aligned to have the best building in the best location where you don’t have to write a check north of $10 million,” Feldman said.