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Ayer’s update: Condos

PHILADELPHIA, PA, September 29, 2007

The Ayer housed the nation’s first advertising agency, N.W. Ayer & Sons, where catchy slogans such as De Beers’ “A diamond is forever” and AT&T’s “Reach out and touch someone” were conceived.

The historic building has new tenants and its own tagline, “History made modern,” as a 56-unit luxury condominium on Washington Square. The $75 million renovation was unveiled Wednesday.

Like 10 Rittenhouse and Parc Rittenhouse, the Ayer fronts premium green space in Center City. And like those Rittenhouse Square addresses, the Ayer’s prices are way up there. One-bedroom units, which average 1,200 square feet, start at $850,000, while the four penthouses, which average 3,000 to 3,600 square feet, go for $4 million apiece.

“They’ve done a very nice job to the building,” said Allan Domb, who specializes in the luxury condo market in Center City. Domb’s real estate office sold two units for the Ayer. “A building of that caliber and quality only helps Washington Square, and really benefits the surrounding buildings, Independence Place and Hopkinson House, both high-end condos.”

Developer Greg Hill, president of Brown-Hill of Huntingdon Valley, said the 1929 building lent itself well to the conversion with its 8-by-5-foot windows, high ceilings, ample floor space, and three elevators. It also allowed for adding balconies in 22 units.

“The pros were that we had this amazing limestone structure that you could never afford to build today,” said Hill, 49.

But at the same time, he added, “we had to work in 4-foot increments because of the size of the windows. Cost-wise, it’s really not much cheaper” than building from scratch, “despite the fact you have an existing building to create this.”

Hill and his partner, David Mercuris, said they decided to go with a very modern interior design using expensive materials, including limestone from Portugal, marble from Greece, and slate from England. Eucalyptus for the lobby, concierge desk and hallways came from Australia.

Mercuris, who is vice president of development for The Goldenberg Group, said what sold him on the project in 2004 was the building and its distinctive lobby. Large Egyptian-style deco sculptures adorn the top of the building’s exterior, and the lobby features Mayan temple shapes and Egyptian imagery.

“When I walk into that lobby, it takes my breath away,” said Mercuris, 47, who previously worked as an executive at Seagram. The Ayer is his first real estate development project.

Perks at the Ayer include 24-hour valet and concierge service and a chauffeur-driven Mercedes sedan.

“What’s unique about this project is that the usual step is to take an empty building and convert it into residential condos,” said Jim Egan, senior vice president at Grubb & Ellis Co., who focuses on commercial real estate. “They took a nearly fully leased building, and converted it into luxury condos.

“That showed that residential had a higher value than being an office building,” he said. “That was a home-run location for that type of use.”

Egan said the market has changed since the renovation began in 2006, with commercial real estate picking up in value, and “if the Ayer were an office building today, it would be more valuable.”

Kevin Gillen, vice president of economic-consulting firm Econsult and a Wharton School economist who tracks housing and public policy issues, said the number of total number of condos listed for sale in Philadelphia has hovered around 2,100 units over the last year. Two years ago, it was less than half that at under 1,000.

In any given month this year, he said, between 5 percent and 10 percent of all listed units actually sell. Two years ago, between 10 percent and 15 percent of listed units would sell during any given month.

“While inventories more than doubled, the sales rate got cut in half during the past year,” Gillen said. “This is because the market has cooled at the same time many new units were being completed and listed for sale.”

Still, some real estate brokers say the Ayer, with its location, intimacy and upscale product, has a good chance of succeeding despite a tightened condo market.

“It has given, along with the Lippincott Building, a real boost to the Washington Square area, and has really brought it into its own,” said Joanne Davidow, a Realtor at Prudential Fox & Roach in Center City who specializes in the high-end residential market. “The renovation is first class, and the sales are doing very well.

“My take on it is that people that want to be there, and can afford to be there, are able to do so and are not as concerned with temporary ups and downs in the market,” she said.

Nancy Alperin, president and chief executive officer of Maxwell Realty Co., said buyers would continue to buy if they perceive there is real value.

“But they will not buy an overpriced product if they do not see value,” she said. “We have cultivated a non-Philadelphia market to buy very high end in Philadelphia because, as the sixth largest city in the country, Philadelphia is unequivocally one of the best values.”

Hill and Mercuris, who were recently interviewed inside a two-bedroom model unit offered for $1.4 million, said 39 of the 56 units have been sold at full price. Buyers are eligible for a 10-year tax abatement from the city for purchasing in a newly built or renovated building.

Some residents began moving into their units last month. All of the buyers, with the exception of one, are living at the Ayer.

Among the eclectic mix of buyers were Jim and Mary Brown, who closed on their three-bedroom unit Monday. They are scheduled to move in next month after living in Wynnewood for 14 years.

With the couple’s two daughters grown and moved out, Mary Brown, 52, said it was time to move back to the city, where they frequent the Avenue of the Arts.

“We were spending a lot of time there for music, going out to dinner and theater about a couple nights a week anyway,” she said, “so it was really easy for us to make the move.”

A handful of the units are still being built to the buyers’ specifications, like the two-bedroom unit, with a den facing Washington Square, that Drew Katz picked out.

“I love the park, the proximity to Old City and the water, and getting over the Ben Franklin Bridge to get to New York or Cherry Hill is much more convenient than Rittenhouse Square,” said Katz, who expects to close on his eighth-floor unit later this year.

Katz, who owns an outdoor-advertising agency with headquarters in Cherry Hill, with an office in New York, said he felt another connection to the building where the Kellogg’s Rice Krispies’ “Snap, Crackle, and Pop” slogan was born.

“I just found the building to be very special,” said the 36-year old bachelor, who went on his first advertising sales call at N.W Ayer in New York City in 1996 to pitch a leased wallscape. “It has great history.”