To Draw Celebrities, Developers Quietly Cut Prices on Condos

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To Draw Celebrities, Developers
Quietly Cut Prices on Condos

By Deborah Schoenman
Special to The Wall Street Journal

At the Meridian, a condominium tower that opened last month on New York's Long Island, the asking price for two-bedroom units on a high floor with beach views is $1.8 million.

Unless you're Billy Crystal.

The actor, who grew up on Long Island, has been offered one of those two-bedrooms for $1.6 million. The offerer: the building's marketing agent, who thinks Mr. Crystal's name would help to sell units.

"You need to find innovative ways to sell apartments these days," says the agent, Michael Shvo, who has yet to hear back from the actor.

They've been on the freebie train for years, from gratis designer fashions to restaurant tabs that never materialize. Now, America's celebrities are on the receiving end of another shopping break the rest of us don't get: a real-estate discount. With a growing number of luxury condominiums coming onto the market in New York, Las Vegas and Miami, developers are quietly offering price cuts or sweetened deals to famous faces -- from former Miami Dolphins' quarterback Dan Marino and model Naomi Campbell to actors Jeremy Piven and Mickey Rourke. The practice is an increasingly important marketing tool to attract full-price buyers in the condominium market, a field some investors worry is becoming overbuilt and attracting a disproportionate number of speculators.

"The same way every designer wants to dress Nicole or Gwyneth for the Oscars, every developer wants to say someone fabulous bought in the building or even looked at it," says New York broker Michele Kleier of Gumley Haft Kleier Inc. "All of a sudden, the building becomes an 'it' project."

To publicize the 42-story Las Olas River House condominium in Fort Lauderdale, Fla., for example, developer James Helman gave former football star Mr. Marino an unspecified discount on a 3,382-square-foot, three-bedroom unit that he bought in January. The apartment had a list price of $1.35 million. Now, billboards around town show Mr. Marino's image promoting Las Olas. "In Florida, Dan is the man," says Mr. Helman. Mr. Marino's manager, Ralph Stringer, says his client received an "amenable" discount but declines to say the exact size.

There's nothing illegal about celebrities getting preferential treatment, of course. But because the apartments involved are so pricey, the deals are often conducted in secret. Unlike typical home buyers, celebrities often purchase apartments in corporate names to avoid having the details published. For the same reason, deals are sometimes structured so that the unit remains in the developer's name. Often, builders won't discuss discounts, fearing they will give the impression their projects aren't selling on their own. Celebrities, too, are reluctant to talk about the perk because it could create an image issue. Mr. Crystal's publicist, for one, confirms the star was offered a discount on a high-floor, two-bedroom unit at the Meridan but declined to comment further.

How do the deals work? Typically, developers and brokers say a celebrity resident accepts a discount in exchange for allowing his name be used to promote the project. Often, that means having a publicist "leak" the A-list name to gossip columns, or trot it out in news releases and on billboards. Having a celebrity neighbor doesn't increase values necessarily, brokers say, but it does get more potential buyers looking at a building.

In the case of Cipriani Club Residences at 55 Wall Street, luxury condos in New York City slated to open next fall, the celebrities who've allowed their names to be attached to the project are the model Ms. Campbell, actor Mr. Rourke and Margherita Missoni, daughter of the Italian knitwear family.

Trio of Friends

During an industry preview party of the building in September, co-developer Guiseppe Cipriani touted the building's amenities, including a wine cellar, 24-hour concierge service -- and the trio of famous faces as future neighbors. "They are my friends, and they are moving here," he said, as marketing agents handed out promotional brochures. In one photo, Mr. Cipriani is shown holding a cocktail shaker, standing next to Ms. Campbell, who is wearing a low-cut dress. In another, Mr. Rourke is shown smoking with friends; Ms. Missoni is pictured with a man's head cradled in her lap. Ads using some of the images have run in Vanity Fair and the New York Times Magazine.

All three received a discount in exchange for allowing the use of their photos in the promotions, says Mr. Cipriani, declining to be more specific. Ms. Campbell's publicist, Rob Shuter, says her modeling fee was deducted from the condo cost. He wouldn't say how much was deducted or how much she paid for her unit. Publicists for Mr. Rourke and Ms. Missoni didn't return phone calls seeking comment.

Here's Johnny

While modern-day condo developers have jumped on the celebrity discount as a sales tool, the practice goes back almost 100 years, or more. According to author Steven Gaines, in 1912, developer Douglas Elliman (who started the eponymous New York brokerage firm) gave Nobel Peace Prize winner Elihu Root about 50% off the rent to move into 998 Fifth Avenue, one of the city's first fancy apartment buildings. More recently, Donald Trump says he gave Johnny Carson a discount on an apartment in Trump Tower in 1983 "because it was good for the building."

But with increasing competition in the luxury-condo market, developers are looking sell their projects as quickly as possible. According to the National Association of Home Buyers, condos account for 35% of all new home construction in the U.S. this year, up from 20% in 1998. At the same time, condo prices are rising quickly, with the median price reaching a record $221,700 in June, up 14% from a year earlier, according to the National Association of Realtors.

One of the biggest celebrity-wooing markets is Las Vegas, where, according to SalesTraq, a real-estate information company, about 8,000 condo units are under construction. While many stars guard the privacy of their residences, in Vegas, it has become almost commonplace for celebrities to announce their decisions to buy apartments in specific condo complexes.

In April, the married pop stars Jessica Simpson and Nick Lachey announced their agreement to purchase a luxury-condo unit at the city's Palms Resort and Casino. In a news release sent out by the developer, the couple is described as buying the apartment because of their "love for the city of Las Vegas and, in particular, the Palms property." The release also quoted Mr. Lachey as saying the building "is going to have a two-story basketball suite which is down the hall from a multimillion dollar state-of-the-art recording studio there ... so I'm there."

Ms. Simpson and Mr. Lachey will own a $1 million 1,200-square-foot unit, according to the press release. The developer declined to say whether the couple received a discount. A spokesman for Ms. Simpson also declined to comment.

In some cases, it's the celebrity -- or his representatives -- who approach the developer. Izak Senbahar, who developed 165 Charles Street in New York, says actor Leonardo DiCaprio's broker, Susan-Gilder Hayes, asked to get the star a 20% discount last year on an approximately $5 million condo. According to Mr. Senbahar, the actor visited the building six times. "The message to me was, 'you have to give him a 20% discount,' " says Mr. Senbahar. "I said, 'I don't think so.' We don't need gimmicks." A spokesman for Mr. DiCaprio declined to comment. Mrs. Hayes declined to comment. Nine of the building's 31 units, which range in price from $5.3 million to $13 million, are still available after a year of being on the market.

Sometimes, celebrities aren't offered discounts outright, but instead are given first pick of apartments in a building still under construction. That kind of arrangement could benefit the A-lister, since prices can rise quickly in a new building as more units become available. In such a scenario, a celebrity could resell the unit without moving in.

Although there is no offering plan yet for the Sundari Lofts & Tower in Manhattan, for example, one of the building's developers has already lined up his first customer, actor Jeremy Piven, of HBO's "Entourage." The developer, Andrew Heiberger, says he gave Mr. Piven first dibs after meeting him through a mutual friend. "His persona is consistent with the persona I'm trying to target for the building," says Mr. Heiberger. Mr. Piven's publicist, Siri Garber, says that in addition to planning to buy a unit, "Jeremy is even going to the ribbon-cutting at the groundbreaking."

Of course, most residents will have more luck seeing their famous neighbors on the big screen than in their buildings. New York real-estate broker Haley Binn recently bought a loft in Tribeca after reading in a gossip column that the actress Meryl Streep bought a penthouse in the building for $8.95 million. (Ms. Streep paid full price, says the developer. A spokesman for Ms. Streep didn't return phone calls.) Says Mrs. Binn: "I'm still waiting to run into her in the elevator."

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-- November 07, 2005