Developers Sign Big Designers To Prepackage Condos

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Developers Sign Big Designers
To Prepackage Condos

By Troy McMullen
From The Wall Street Journal Online

There's nothing Nicole Tzougrakis likes more than telling guests her new almost $1 million condo in South Beach was outfitted by French designer Philippe Starck, from the stainless-steel lighting fixtures to the white-marble bathrooms.

The fact that Ms. Tzougrakis never met Mr. Starck -- and that he also provided prepackaged designs for about 100 other apartments in the same building -- doesn't take away from her pleasure "at all," she says. Working with the designer personally "would have taken me way too much time and money," adds the 31-year-old Internet entrepreneur.

In their scramble to attract high-end buyers, condominium and co-op developers are adding another item to their list of amenities: design and furnishings packages from famous names like Barbara Barry and Jade Jagger. Unlike furnished apartments offered in the past, which were stocked with off-the-store-floor sofas and tables, the new packages include one-of-a-kind designs and six-digit price tags. Some of the packages offer just the basic design elements, like bathroom tiles and lighting fixtures. Others include furnishings, too, down to sofas, silverware and bedsheets. Buyers are typically offered a number of models to choose from, with names like "nature," or "modern," and pay between $40,000 and $450,000 for the service.

The downside, of course, is what happens when neighbors think alike. Adrienne Krieger, for example, recently paid $85,000 for the design package at Turnberry Towers in Las Vegas. A retired media consultant, Ms. Krieger, 58, says she likes the apartment's finished contemporary look, from the black Italian-made leather sofa to a teak coffee table, but wishes she'd thought about other buyers' taste. Having paid $900,000 for the two-bedroom home, "It's a little embarrassing to see the same furniture at your neighbor's place," she says.

In Las Vegas, the developers of the Turnberry Towers condominiums are working with Home of Fine Decorators, a Florida-based firm, to offer furnishings packages for $50 a square foot and up. Buyers interested in the W Fort Lauderdale Hotel & Residences, which broke ground in May, have the option of two looks from Clodagh Aubry, a New York designer known for spa-like interiors, for $60,000 to $70,000 extra. At 110 Central Park South, a co-op under development in New York City, the option is straight up or down: Buyers can take -- or not -- the Art Deco-inspired design package with furniture from makers including Ms. Barry and Holly Hunt (it's $245,000 extra for a one-bedroom, $385,000 for a two-bedroom and $445,000 for a three-bedroom).

Investment Question

At a time when consumers are more brand-oriented than ever, teaming up with a prestigious designer is one way developers can add cachet to a project. It's also a way for them to attract second-home buyers too busy to do their own decorating. But since buyers are investing in design that is somewhat prepackaged, they rarely meet with the designer personally; instead, they furnish their homes by consulting catalogs provided by the building, taking virtual tours and visiting model apartments. What's more, appraisers say the investment may not hold up over the long term, because taste varies from buyer to buyer.

The offering at Avenue East, a new condominium tower under construction in Chicago, includes interiors by local designer Helen Velas, known for her hotel entertainment spaces. Customers pay $68 a square foot for either a "tailored, contemporary" look or "classic traditional." They have four color schemes to choose from, and a 50-page furniture catalog with about 30 fabric samples from designers including Ralph Lauren and Donghia.

Yet some buyers are showing resistance to the idea. New York's 110 Central Park South, which offers one set design for each apartment size, has sold about half of its 65 units. But no buyers have opted for the design option, says Stephen Glascock, who is developing the property. Of the 281 apartments sold at the Icon in Miami, 40% have opted for the design by Mr. Starck, for an extra $75,000 to $125,000. (Buyers chose from four decorating looks: minimal, classic, culture, nature.) Clients "want unique interior spaces -- not something off the rack," says New York interior designer Jasmine Lam. "If they wanted a packaged look, they'd go to Ikea."

In theory, the packages help new condos stand out in an increasingly crowded and uncertain market. The National Association of Home Builders estimates that 35% of all new-home construction in the U.S. this year consists of condos, up from 20% in 1998. Las Vegas has 40,000 to 50,000 condo apartments in the planning stages. Developers in Miami have applied for building permits for more than 50 new condominium towers. In New York, more than 25,000 new units will hit the market by the end of this year, according to some estimates.

In this market, developers need more "bells and whistles" to reel buyers in, says Jonathan Miller, of New York appraisal firm Miller Samuel. He points out that while celebrity designers are an important marketing tool for developers -- and can benefit investors who are seeking to flip apartments for immediate gain -- the impact of a designer package on resale is minimal over the long term. It "diminishes as you get further away from the initial sale," says Mr. Miller.

Hotel and real-estate developers have long used furnished homes to woo buyers, and model homes have been a fixture in suburbia for decades. But the looks of these offerings were often generic, or down-market. That started changing in the late 1990s, when big name architects like Robert A.M. Stern and Richard Meier began teaming with developers to push high-end condos.

Ms. Jagger Designs a Lobby

Indeed, designers stand to benefit from the prepackaged trend almost more than the developers. To custom-design a private home, a designer typically earns between 10% and 15% of the cost of a project, or charges the client an hourly rate of between $50 and $200. By teaming with a developer, a designer not only helps brand himself, he can get a cut of the whole project. For the Icon project in Miami -- where Ms. Tzougrakis bought -- Mr. Starck has been paid between 5% and 10% of the total price of all 281 units sold, according to the developer. (The designer has also recently joined with a European developer and Ms. Jagger, the daughter of Rolling Stone Mick Jagger, to launch Yoo Design; the firm works with developers to create elements like floor plans and entrance lobbies.)

Deborah DiMare, a designer on the Learning Channel's "In a Fix" decorating show, says she's hoping her profile will rise, now that she's signed up with three developers, including one in the Miami area, to work on condominium projects. She says will be paid a fee of about $90,000 per apartment by the buyer. "As a designer, you don't want to miss the boat on opportunities like these," says Ms. DiMare.

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-- November 29, 2005