YL Real Estate shows how it's done with Sheffield 57.

When Manhattan based real estate investment firm YL Real Estate Developers emerged with its successful $418 million bid for the midtown luxury residential building The Sheffield last year, it seemed like just another instance where a mammoth price was wrung in the name of a scorching condo market.

Now, just over a year later, condos are sitting for sale for longer periods of time and prices have even begun to dip, indicators that the once booming residential market is finally beginning to cool. The slowdown is sobering news to developers in the city who are preparing to roll out newly completed condo projects, especially those whose profit margins anticipated the kind of continuing appreciation that had gripped the residential market up until only months ago.

In fact, many developers have now seen apartment pricing level off or decline during the months it generally takes to construct a condo project, a period where developers risk whether their initial market projections eventually will translate into what condo buyers are actually willing to pay. Some observers say that a disjoint has begun to emerge between the two--long feared by developers--that could put a dent in what had for years been a tremendously lucrative business.

In recent years, developers could seemingly always count on buyer demand to meet and often exceed a condo building's initial sales estimates. But as prices have risen for condos, development has also become more expensive in the city due to rising land and construction costs. Land prices are not apt to moderate just because residential developers now may not be able to pay as much.

Manhattan's booming office market and the consequent rush among developers to build new commercial buildings is beginning to supplant demand for development sites and could be part of the dramatic reversal of a years-long trend in which developers have greatly favored residential over commercial development because it has yielded better returns.

The cooling residential market will also serve as a litmus test for existing condo projects, revealing whether developers built in enough of a cushion for profitability to accommodate the possibility of shrinking sales. It will also separate derivative condo projects from those desirable enough to draw buyer interest regardless of the overarching market slowdown.

The Sheffield, whose purchase made YL Real Estate Developers appear susceptible at the time to a pricing correction in the residential market, has instead become an example of a well-conceived condo conversion.

The building's price, which translates into roughly $600 per square foot, now looks tame compared to succeeding sales that have traded in the city such as Tishman Speyer's $5.4 billion recent acquisition of Stuyvesant Town and Peter Cooper Village.

The building has also stood out among the hordes of similar projects for its amenities and location.

Abutting the Hearst Tower on 57th Street near the corner of Eighth Avenue, the over 800-unit building is being converted from rental apartments into condominiums that offer sweeping views of Manhattan's burgeoning West Side. The building will receive a new lobby as part of its conversion as well as a renovated rooftop fitness center that boasts a pool and outdoor terraces.

The greater Columbus Circle neighborhood in which it is located has become an emerging office district within midtown thanks to the recent development of architecturally iconic buildings The Hearst Building and nearby Time Warner Center.

It has also garnered attention over competing buildings because of Columbus Circles' emergence as a residential neighborhood lauded for its equidistant proximity to midtown, the Upper West Side, Times Square, the Plaza District as well as the planned commercial development on the far West Side.

"I think we started this building at the right time and bought in at the right price," said Dan Deutsch, vice president of YL Real Estate.

"It's kind of insulated from what's going on in the residential market because it's such a great product and it's not one of these buildings that was trying to fetch absurd numbers to begin with.

"We don't have to do that, which why it's doing so well."