Whitney’s brownstones founder in the sinking market Buildings didn’t sell: may affect museum’s expansion plan

The Whitney Museum has been unable to sell its brownstones to raise money for a downtown expansion, and with the credit crisis hampering investment in real estate the museum faces a market with fewer buyers and lower prices. The four contiguous five-storey brownstones, located along Madison Avenue just south of the museum, had been for sale since last summer through commercial realtor CB Richard Ellis Group, but sources in the field told The Art Newspaper that the buildings did not sell and have been withdrawn from the market. A spokesman for the museum denies that the buildings are no longer for sale, and a spokesman for Richard Ellis declined to comment.

The failure to find a buyer may affect the Whitney’s expansion plans. Proceeds from the sale of the brownstones were to go towards the campaign to build and endow a new branch of the museum designed by Renzo Piano, in the meatpacking district, south of the Chelsea gallery neighbourhood on Manhattan’s west side. The cost of the new facility has been estimated at $435m plus hundreds of millions more needed to endow the expanded operation.

George van der Ploeg, a townhouse specialist with Manhattan realtor Prudential Douglas Elliman, says that the collapse of the market has impacted sales and values. “Demand for retail space on Madison Avenue has declined because of the economy and the poor market for luxury goods,” he says, noting that the primary value of the brownstones is their potential retail use. “Those buildings are probably worth 20% less than they would have been last summer,” he says. And there is no guarantee when or if the market will fully rebound.

How much the buildings are worth depends not only on demand for retail space, but also on whether or not the property for sale includes the air rights for the site. Before opting in 2006 to build the downtown branch, the Whitney had planned to construct a nine-storey tower in the narrow parcel immediately behind the brownstones. If a buyer could purchase the rights to construct a comparable structure, the value of the property would be considerably higher than the brownstones alone. It is not clear if the Whitney plans to sell the additional land and air rights. The museum tendered the buildings very quietly with a single broker and never listed the property in the Real Estate Board of New York database, which is not required for commercial sale listings.

“They were probably looking for a single owner, and a price in excess of $100m,” says Mr van der Ploeg. “If they were trying to transfer the rights for the Piano tower to a new buyer they might have been seeking considerably more.” But with the collapse of financing for development, he estimates that the air rights are worth about half the $500 per square foot that they were worth at the height of the market in late 2007. “The moment has passed. Not many developers are interested in that now,” he says.

The museum would not say if failure to realise the anticipated funds from a sale would result in the downtown expansion being reconsidered, scaled back or postponed. Public approvals are in place for the planned new facility, but the museum has yet to complete its contract to acquire the City-owned site, at Gansevoort and Washington Streets. The site is adjacent to the southernmost entrance to the High Line, a park currently under construction on a disused elevated railway, and the City has backed the Whitney project as a cultural anchor for the development. A spokeswoman for the Department of Cultural Affairs confirms that $55m has been designated in the City’s projected ten-year capital plan for the Whitney expansion, including $3.5m in the current financial year. Whitney director Adam Weinberg has stated that the museum will operate both the existing uptown museum and the future downtown branch, which would increase the Whitney’s budget. The museum has not revealed how much has been pledged towards the downtown project, but with the fundraising climate severely hampered in the economic downturn, it seems likely that at the very least it will have to adjust its timeline.