Unreal Estate: $28 Million Art Condos in N.Y.

The Palazzo Chupi in Manhattan's West Village has been the embodiment of Pablo Picasso's sternest warning to his disciples: The chief enemy of creativity is "good" sense.

Artist Julian Schnabel, known as much for his outsized ego and pals like Lou Reed as for his neo-expressionist art and films "Basquiat" and the "The Diving Bell and the Butterfly," has heard for months what the $14.95 million penthouse and $12.95 million duplex unit in his "Pompeii red," Euro-inspired building at 360 W. 11th St. aren't: Namely, sold.

Schnabel painted his building "Pompeii red."

Lost amid speculation about potential buyers (Richard Gere bought in, Bono and Madonna passed) and personal expense (Schnabel auctioned Picasso's "Femme au chapeau" from his collection for more than $7.7 million to cover the project's costs) is what the Palazzo Chupi properties are: Namely, works of art underappreciated in their time.

The Palazzo requires context that only its neighborhood near the West Side Highway can offer. Its first two floors, which house the 58-year-old Schnabel's studio and gallery, are still the slate gray that once blended in among the post-industrial shades of its surrounding apartment buildings and townhouses. On the nearby blocks just beyond Washington Street, you can see Reed walking a dog while wearing the brightest patterned shirt outside Havana, catch Julianne Moore's Emmy glinting in her front window or miss Michael Stipe, Jay-Z, Bono or Fatboy Slim enjoying a secluded bite at their celeb restaurant co-op The Spotted Pig.

It's a pocket of Manhattan where extraordinary people just want to do ordinary things like go to the Rite Aid ( RAD) or Starbucks ( SBUX), which makes the Palazzo Chupi frustrating at any price to neighbors who think it sticks out like a Pompeii red sore thumb. The Venetian balustrades along the Palazzo's tiled terraces and the curves of the wooden cathedral windows, however, more resemble a middle finger extended directly at the lifeless "luxury" boxes erected just blocks down the Hudson River. Schnabel's works definitely weren't built by Toll Brothers ( TOL) or Lennar ( LEN).

"It has one very important factor: That it was designed by a living artist," says Peter McCuen, the head of New York luxury real estate brokerage Peter McCuen and Associates and the latest broker attempting to sell the Palazzo properties. "He designed everything himself, down to the handles."

Forget for a moment that all the handles, knobs and fixtures were hand cast in a foundry. Forget the cast stone fireplaces and the private, twin-door, double-height elevator with copper ceiling that descends to the tiled, skylit pool, steam room or garage. Forget the chandeliers, the views of Midtown and the Hudson River or the artwork as eccentric as the landlord who has called himself "the closest thing you'll see to Picasso in this (expletive) lifetime."

Artist Julian Schnabel is struggling to sell two Manhattan properties.

Those items seemed excessive and garish when the penthouse and duplex went on the market for $32 million and $27 million, respectively, prompting one anonymous Manhattan broker to say of Schnabel: "It's very clear he's an artist and not a realtor." Now that the combined price has dropped nearly $31 million, shoppers who once had the "good" sense to keep away see those details as Gaudi-style artistic touches.

"There are currently offers being considered, including offers that combine the units," McCuen says. "The price now is just the asking price, so you know it can be had for less."

Perhaps only in New York could spending $4,000 per square foot for a 3,719-square-foot penthouse (which includes another 2,300 square feet of terrace space) be construed as a steal. Compared to the 3,000-square-foot, non-penthouse Unit 30 at 40 Mercer St. that went for nearly that amount per square foot earlier this year, Palazzo Chupi looks like a vibrant piece of art amid a lot of pale canvases.

Jason Notte is a reporter for TheStreet.com. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, The Boston Herald, The Boston Phoenix, Metro newspaper and the Colorado Springs Independent.

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