Eloise’s Awkward Phase: Can the Plaza Get Over Its Growing Pains?
By Matt Chaban May 17, 2011 11:46 pm
reprints
As the sun set last Wednesday over Central Park, dozens of the city’s top real estate brokers gathered inside the triplex penthouse of the Plaza. They sipped proper drinks and nibbled quails egg and smoked salmon. They chattered about art and opera and books, the usual uptown pretensions, but also, and mostly, about recent deals.
Chief on their lips was one downstairs, where Russian composer Igor Krutoy had bought a spread on the 12th floor for $48 million, more than anyone had ever paid for a single apartment in the city. Now that the penthouse was back on the market, asking $37.5 million, just about what it had commanded a few years ago, the hope seemed to be that the Plaza could finally check out of the hell it had been trapped in for the past few years.
No one could blame the developers for the recession that had befallen the city and hobbled this ready-made landmark. For a brief moment in 2007, the movement of the converted Plaza’s 181 condos made it the best-selling apartment building in the city, beating out the cross-park rival that has long since lapped it, 15 Central Park West. The return of this 6,319-square-foot triplex penthouse, for years entangled in a lawsuit with its previous purchaser, seemed to signal those pre-Lehman days are here again.
Still, if the top-floor party was just getting swinging again, downstairs the hangover was raging.
The Oak Room, the most famous jewel in the Plaza’s crown, had been dulled, first by bad reviews, then by bad business, then by bad beats, as management turned to burlesque dancers and cheap Champagne to stay afloat. Following a $33 million lawsuit filed in April, the restaurant revealed two weeks ago that it would be closing by the end of July.
The headache only begins there. The Palm Court has been serving (exorbitant) afternoon teas for over a year, but after as much time, shuttered. The vaunted Shops have been decimated, with two rounds of stores cycling through, and most of those gone since New Year’s. Industry insiders believe those willing to remain are doing so rent-free. The Todd English food hall has taken hold, but contrary to what had long been the plan–the Plaza did not need boldface names. Its name was supposed to be enough.
Well, that and the names of the developers behind it–Israeli billionaire Isaac Tshuva and his right-hand man at Elad Properties, Miki Naftali. It seems there was little coincidence that Paul Anka–Paul Anka!–sang “My Way” at the Plaza’s 100th birthday in late 2007, when the days were still long and heady. But now, the highway is more apt, as Mr. Naftali, the man many people blame for the Plaza’s shortcomings, is departing Elad for good, in large part because of the struggle at Fifth and 59th Street. More than an economic recovery or yet another renovation, nothing would do more to redeem the Plaza from its apocalyptic reality than this strong-headed, some say impossible, man’s departure.
“The Miki Naftalis of the world are just so hard to deal with,” said a former executive at the Plaza, who actually defended his boss once upon a time. He still believes the Plaza can be great, maybe even the best building in the city, but not under current management. “Even if there wasn’t a recession, even under the best circumstances, I think it always would have been that kind of difficult situation,” the executive said. “Even when the money was rolling in, it was like that.”
Because of hubris or ignorance–no one knows–the developers never seemed to understand New York’s attachment to this frumpy grand dame. This was the sort of thing that led to a major fight with the mayor and the hotel trades over how many hotel rooms to keep; that led to the idea of building a mall in the contorted bowels; that led to $12 coffee at the Oak Room. Mr. Naftali was a genius for realizing the value presented by the Plaza brand, but he was also a fool for thinking that was all it took. Look no further than the Plaza-branded casino in Las Vegas that collapsed after Elad paid $1.2 million just for the space on the Strip.
To an outsider it made sense that this could be an extension of Fifth Avenue, both the shopping strip to the south and the eight-figure homes to the north. But in reality, these were not so much complements as competition.
“Why would you want to be in this maze when you could be on Fifth Avenue,” Douglas Elliman retail maven Faith Hope Consolo said. She said she recommended incidental shopping built around a restaurant of some sort, but Mr. Naftali refused.
This is the sort of obstinance that sent the likes of Graydon Carter and Nello Balan packing from the Oak Room, where rents started at a stifling $125,000 per month. “They thought they had very good taste levels,” Ms. Consolo said. (Mr. Naftali declined to comment for this article.)
And yet the retail reality Ms. Consolo foretold is now approaching with the opening last summer of the Todd English food hall, which is packed the way the Oak Room wishes it were. “I love Todd English,” The Observer overheard a woman declare. She was part of a pair, back in town from Boca and carrying Henry Bendel bags. Which is to say they had not gone shopping at any of the Shops, including the Posh sample sale, which felt like a cross between Housing Works and a Marshalls. Like many things at the Plaza, the prices were too high.
Just as they were for the condos upstairs. Amid complaints of shoddy construction and missed deadlines, it cannot be forgotten that the residences did sell out, grossing $1.3 billion for Elad. The entire project cost just under $1.1 billion, so leaving all other revenue aside, fitful as it may be, that is a tidy profit. (The penthouse, returned to Elad after a lengthy feud with would-be buyer Andrei Vavilov, a Russian hedge fund manager, means the building has not technically sold out.)
At the same time, no residence, with the exception of the record-breaker, has resold for more than the price at which it was purchased. Some sellers were forced to eat only a few thousand dollars, but some have lost millions. And one real estate expert said the Krutoy home underwent a multimillion-dollar renovation so extensive that, after transfer taxes and brokers fees were factored in, it could have pushed that record sale into the red as well.
Compare that not with 15 Central Park West, the Plaza’s former rival and arguably the best-selling apartment building of all time, but with One Beacon Court, a.k.a. the Bloomberg Building. It came online far less press than either 15 CPW or the Plaza, and yet like the former, it manages to double sellers’ investments. A more apt comparison for the Plaza may be exactly those it is trying to avoid, the dowager co-ops and condos lining the park, like the Sherry Netherland and the Hampshire House, where postbubble discounts continue.
“The bar was set so high, it was just impossible for anyone to live up to that,” said Michelle Kleier, head of brokerage Gumley Heft Kleier, who had shown a number of units in the Plaza. She said they were not as bad as their reputation, but echoed something many brokers told The Observer: Every building has bad units, especially in this market.
The Plaza has not been ruined, because what was there to ruin in the first place? “Sure, everyone says, ‘Isn’t it a shame,'” said Curt Gathje, who wrote a book about the Plaza and worked there for two decades. “But it really wasn’t that great. That was a fantasy, and it hasn’t been the luxury hotel everyone pretends for generations.”
The Palm Court was restored, as was the Oak Room, for that matter, and Elad did install central air. People complain about the Plaza, but they also never go. “Everybody feels like they own the place,” Stribling broker Kirk Henkels said. “It was kind of a sitting duck, and it became fun to make fun of it. And this was even when it was still doing records.”
Someday, maybe even soon, sellers will start to break even, the right mix of retail will find its way into the basement, the Oak Room will reopen, the brokers in the penthouse will have more reason to really toast. “The Plaza will always be the Plaza,” broker A. Laurence Kaiser IV said. That will be its damnation and its salvation.
