Mr. Macklowe has hired the Carlton Group's Howard Michaels to help him search for another partner for the deal (Mr. Michaels told The Observer a couple of weeks ago that a mystery European investor was the initial partner). So far, Mr. Macklowe has secured a $250 million mortgage, which is equal to the purchase price of the building, according to an email by Mr. Michaels, cited to The Observer by a source.

Mr. Macklowe has also offered to put in $30 million, according to the source. But he's on the hunt for a $75 million mezzanine loan or preferred equity partner. Mr. Macklowe did not respond to requests for comment; Mr. Michaels declined to comment.  

The pre-war building is currently configured as an apartment tower, and Mr. Macklowe is expected to convert it to a condo, requiring around $50 million of renovations. But here's the rub: 20 percent of the building is still occupied by rent-regulated tenants, who will either need to die or be bought out, slimming a developer's margins. 

That presents a challenge worthy of Harry Macklowe--the deft developer who brought us the Apple cube outside the GM Building and 510 Madison (not to mention, the forthcoming 70-story condo tower on the Drake site). Units will on average have to sell for $4,000 to $5,000 a foot, according to an expert source familiar with the building--surpassing reigning condo king 15 Central Park West.

But combining Mr. Macklowe's development acumen and the building's status as a rare pre-war condo is enough to pull it off, said another source familiar with the transaction. "I know that there are a lot of investors interested," the source said. "It's a pretty unique situation to have a pre-war condo on the market. Co-op boards are difficult and a lot of people who are going to be very excited that it's like a pre-war co-op, but it's a condo."

The deal is expected to close in July—if all the pieces fall into place—and the potential sky-high sale price could set the benchmark for a new boom. 

lkusisto@observer.com