Tuesday, April 8, 2008

Top Co-ops Amid Dismal Economy: No Fear, Still Loathing

The New York Observer
by Max Abelson
April 8, 2008
This article was published in the April 14, 2008, edition of The New York Observer.

When the economy disintegrates and Manhattan bursts into flames, the board of the block-long co-op 765/775 Park Avenue will still be begging the day help and dog walkers to take the service elevator; the co-op board members at 820 Fifth will still be turning away unsatisfactory multibillionaires like Ron Perelman and Steve Wynn; and Ambassador Donald Blinken’s living room at the iron-gated River House will still have five Mark Rothkos.

The city’s most epically exclusive co-ops are the last bastions of old, over-proper, clubby, nice-nosed, perfectly heeled New York. They have values and they’re sticking to them—despite, or maybe because of, the city’s creeping anxiety.

“It’s a special island in the midst of Manhattan,” Mr. Blinken, a co-founder of E. M. Warburg, Pincus & Co, said about his co-op, where he was a board member before becoming President Clinton’s emissary to Hungary.

At Upper East Side buildings like his, where the buyers have tiptop society credentials to go with their immense wealth, a board’s standards are a protective sheath. “I would think that the people at River House, they’re certainly not flash-by-night, recent zillionaires in the last two years. They’re people who have been comfortable,” Mr. Blinken said, “and I don’t think current economic problems on Wall Street will have any impact on River House, will make any difference at all.”

Impenetrability means invincibility. “You find that people at River House are rather serious and not as exposed to the vicissitudes,” he said.

The meticulous, monogram-shirted, Virginia-born broker Edward Lee Cave said the best buildings want buyers with three times the apartment price in liquid assets. “It’s never been more important than today,” he said. “I’ll tell you why! They don’t want you going belly up, they don’t want you, your fabulous company—Bear Stearns, excuse me—all of a sudden going face down, and you have to sell apartments and you can’t pay your maintenance,” Mr. Cave said. “The current crunch doesn’t affect them at all.”

Impenetrability also means whiteness. Most of the godliest co-ops, like 820 Fifth, have exactly zero people of color. “I don’t recall ever hearing of any,” said financier H. Fred Krimendahl II, an 820 board member and a past president of the Philharmonic. “But if Tiger Woods wanted to live here, we’d be happy to talk to him.”

Considering that good co-ops loathe celebrities, Mr. Woods probably wouldn’t get very far at 820 Fifth. But to be fair, there aren’t many minorities applying to these buildings in the first place, although the late Reginald Lewis bought at 834 Fifth, Mr. Krimendahl’s old building. “If a Reg Lewis came along,” he said, “we would certainly entertain that possibility.”

“I don’t have turn-downs, thank God and pray to God,” said another broker, A. Laurance Kaiser IV. “You know before you show who can get into what building. You’re very frank with your own customer.”

When asked to describe the co-op 19 East 72nd, probably the hardest building off Fifth and Park Avenue, one top broker said: “You wouldn’t bring in a rap singer into 19 East 72nd Street—just as you wouldn’t take 19 East 72nd into some rap building. They’re divergent cultures.”

A board president around the corner brought up rappers, too, but said they’d be turned away from his building because of sensitivity about publicity, not skin: Richard Nixon, after all, got chased from that East 72nd castle (afterward, he asked Mr. Cave for help).

EXPOSURE IS SO despised back at River House, Ambassador Blinken’s co-op, that brokers can’t use the building’s name in listings. That fear of hype made things hard on Gloria Vanderbilt, Diane Keaton and Joan Crawford, who all got turned away.

And consider Chicago producer Marty Richards, who first put his $22.7 million duplex there on the market with Brown Harris Stevens’ Kathy Sloane eight years ago. Two weeks ago, the Post reported that the listing had gone to contract, naming fashion-show mogul Elyse Kroll as the buyer. The board probably didn’t appreciate the leak—or the news that Ms. Sloane was under investigation in Albany for tax evasion.

So, of course, the Kroll deal fell through, and the broker no longer has the listing. “I asked Marty to take me off because I’m going to be traveling with my husband,” the broker told The Observer, “and Marty does really need to sell.”

East River neighbor One Sutton Place South might be even more difficult. For 27 years, the board was led by Betty Sherrill, a Louisiana-accented interior decorator. (In the right Southampton store, you might find a hibiscus and butterfly chinoiserie print named after her.)

As she explained to the writer Steven Gaines, silently gay designer Bill Blass got in—he wrote her a letter “saying he would never embarrass us”—but fellow designer Arnold Scaasi didn’t, because he lived with his partner.

But Ms. Sherrill stepped down in 1999. “If she had rules that were arbitrary, and I’m not saying she did, they’re not relevant to the building anymore,” Mr. Cave said, “because she’s not president of the building.”

The same goes for shipping magnate Donald Rynne, who told his successor at 740 Park: “You have to protect our building. Keep it Christian,” according to a colossal 2005 biography of the building. Mr. Rynne’s old place is no longer considered impossible, thanks to a board with new additions like Blackstone’s Steve Schwarzman and Steve Mnuchin.

One block up, at the double-wide 765/775 Park, the board has kept its aristocratic foibles. “Well, we’ve tried to have the day help use the service elevator,” a source there said. “Dog walkers tie up the passenger elevator. Most housekeepers and so on use the front, but that has been a problem for board members over the years.” Then the source sighed. “Everyone’s just decided this is the way modern life is.”

The building’s president, an ophthalmologist, has been on the board for 30 years. “Boards that tend not to turn over tend to be the most arrogant,” said the director of Stribling Private Brokerage, Kirk Henckels, though he wasn’t referring to any particular co-op. “And that just simply follows the axiom of, ‘Absolute power corrupts absolutely.’”

While 765/775 Park has a lot of units to go around, 960 Fifth was built with just 19 apartments. “They’re a building that really likes to have somebody that they know,” Mr. Henckels said. “It’s a very friendly group in there.”

The building has a lesser twin attached to its back, called 3 East 77th Street. Even though the apartments are smaller, it’s a potent co-op: When Emily Frick, the widow of Dr. Henry Clay Frick II, bought a petite apartment there in 2006, a listing broker from Corcoran told The Observer that several potential buyers “were not board-qualified, socially, to buy the apartment.”

When asked what one needed to do to get in, the broker said, “In my opinion, rub shoulders with the du Ponts or Kennedys.” It wasn’t a joke: Ms. Frick had previously been married to a du Pont.

The old Phipps family literally built One Sutton for their friends and family, but heiress Cynthia Phipps’ mark was made at 720 Park. “She was the head of the board for many years, and she was difficult,” said the doyenne broker Alice Mason. “She was quite social and quite rich, and she preferred people who were social and rich.”

Phipps, a thoroughbred horse breeder, died last October from injuries suffered in a fire at her home. (The 720 Park board took out a Times death notice calling her a “loyal friend, fellow dog walker, kindest of neighbors.”) The head of the table is now reportedly taken by Barnes & Noble chairman and CEO Len Riggio, but Phipps’ ideals live on: “That’s really an establishment building,” Ms. Mason said. “Everyone in that world knows who everybody is.”

BUT ESTABLISHMENT DOESN'T mean old money. At 2 East 67th Street, the persnickety board is ruled by Arthur Carter, the son of an I.R.S. agent, who made a fortune buying and selling water utilities, shopping centers and sheet-metal companies. He also founded The Observer.

(How does extremely new money fare? “First arrivals like the Russians, I don’t think they can get in, they’re too new,” Ms. Mason said. “A lot of them just arrived in the last 10 years, five years.”)

“We call it the billionaires building,” said Eddie Gardner, whose stepfather Paul Manheim, a Lehman partner, was once 2 East 67th’s president. Manheim drank cognac with the elevator men and begged off on turning buyers down, Mr. Gardner said. On the other hand, Mr. Carter (or fellow board member Leonard Lauder) is not known for a soft touch: “I think he’s very easy—with people he knows,” Ms. Mason said.

“A broker would never bring anyone to these buildings that nobody in the building was familiar with,” a board member at one of the best Park Avenue buildings said.

According to the lawyer Richard Siegler, who counsels the co-op boards of 960 Fifth and 720 Park, among others, social discrimination is entirely legal. “Let’s suppose that you know somebody on the board who belongs to a certain country club in Westchester, and the applicant belongs to the same club. Wouldn’t you think, as the seller, that the board is more likely to accept the person? I don’t think that’s illegal, I just think that’s an inducement to accept one over the other.”

“It’s got a campus-like feeling, an oasis,” Mr. Blinken said about his beloved River House. He brushed aside the idea that a recession would change anything there—after all, River House survived the depressed 30’s, though its apartments nearly got carved up. “Somehow or another, it maintained a category of people who could afford to live there,” he said. “And maintain the standards.”

Property Shark

820 Fifth Avenue; 960 Fifth Avenue; 2 East 67th Street; One Sutton Place South; 765/775 Park Avenue; River House; 720 Park Avenue; 19 East 72nd Street; 740 Park Avenue.

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