Even if the U.S. government never sees its money back from the $150 billion bailout of American International Group Inc. (NYSE:AIG), at least real estate developer Young Woo could stand to make a killing from the insurer's near-death experience.
Woo bought AIG's 66-story headquarters near Wall Street in May for $150 million, and he is planning to turn the top 40 floors into luxury condominiums. Deal Journal, with the help of Fox-Pitt Kelton real estate analyst Robert Stevenson, has run the numbers and concludes that Woo's per-square-foot cost is $105. Stevenson conservatively estimates Woo could sell condos in the building for at least $1,000 a square foot, with Deal Journal noting that top floors could go for more. Of course Woo is not going to net $895 a square foot when he sells because he'll likely have to spend a great deal of money converting office space into residential units, leading Stevenson to estimate Woo could turn a profit of $500 a square foot per unit, or $600,000 in profit for each condo he sells.
However, all of Stevenson's presumptions are based on a rebound of the residential real estate market. Certainly New York City has weathered the storm better than a lot of other places, but there remains the possibility of continued turbulence. U.S. housing prices may still fall more than 10%, killing an incipient recovery, economist Nouriel Roubini warned Thursday. Granted, it will likely take Woo awhile to complete a project as large as 70 Pine St., so maybe the storm clouds will have broken by then. - Matthew Wurtzel
