Billionaires’ Row residents fight for their ground lease co-ops

Residents of a Billionaires’ Row co-op hired a cadre of lobbyists to plead their case to lawmakers: They don’t want the ground leases underneath their buildings to increase rent by 600 percent. 

Carnegie House at 100 West 57th Street has a ground lease that expires in March 2025. Under such arrangements, ownership of the land and the building are separated, meaning that the cooperative leases the land long-term, often for 99 years, and faces periodic rent increases. Ground lease co-ops are relatively rare in New York, with roughly 64 operating under such agreements.

The co-op board at Carnegie House hopes to upend these agreements through legislation that would cap ground lease rent increases and ensure lease renewals. The measure would apply to both residential and commercial properties.

Over the last months, the board has hired at least three lobbying firms to support the measure: London House ($7,000 a month), Corning Place Communications ($1,000 a month), and Alidade Realty Services ($12,500 a month).

The bill is being pushed by the Ground Lease Coop Coalition, which describes itself as an “unstructured, grassroots effort that reflects common concerns of those living in ground lease coops.” The group is listed as a client of Alidade, and its spokesperson works for Corning.

An entity that owns the retail co-op at the building also paid CMW Strategies $60,000 in 2023, and rehired the firm at the same $7,500 per month rate this year, records show. The Georgetown Company’s Adam Flatto signed off on lobbying records, but a representative for Flatto said Georgetown is a minority owner in the LLC that controls the retail unit. 

A shareholder at Carnegie House sued the co-op board and the land owners, David Werner Real Estate and Cammeby’s International Group in 2022, alleging that the parties were conspiring to pressure residents to buy the land for $280 million by threatening to impose massive rent increases. The lease expires in March 2025, and shareholders face a potential annual rent increase from $4 million to $24 million. The case was dismissed in January.

A representative for Cammeby’s Rubin Schron declined to comment. Carnegie’s board president Richard Hirsch was not available. 

Carnegie House is not the only neighborhood property mired in this battle. 

Down the block at the Excelsior at 303 East 57th Street, the co-op board also hired Bolton-St. Johns to lobby in favor of the bill. The board paid the firm $46,000 last year, and then hired the firm again this year at $7,500 a month. It also hired the firm to lobby on issues related to protecting shareholders in ground lease co-ops in July 2022 through June 2023, at $7,500 a month.

Board president Jonathan Karen, a real estate fund attorney, declined to comment. The East 57th Street co-op has more time than Carnegie House, however. Its ground lease expires in 2064.

At issue is a state bill that would limit annual rent increases on ground leases to 3 percent or the Consumer Price Index, whichever is greater. Shareholders would also get the right to renew the ground lease and the right of first refusal if the landowner decides to sell the underlying property. It would also override provisions in ground leases that prevent shareholders from borrowing money over certain thresholds.

The bill, introduced last year and sponsored by Sen. Liz Krueger and Assembly member Linda Rosenthal, likely faces an uphill battle with a little over a month left in the legislative session. Lawmakers just passed a massive package of housing bills as part of the state budget, and may not be keen to wade into another housing battle. 

However, the Senate Judiciary Committee signed off on the bill, and the extent of the lobbying around the measure shows the determination of its proponents. 

The measure has caught the attention of the real estate industry. The Real Estate Board of New York has lobbied against the bill (alongside several other measures, spending $70,000 in March and April) and called it an unconstitutional intrusion into private contracts. 

“It is simply bad public policy to give a legislative handout to the millionaire co-op owners who bought their homes at cut prices years ago with full knowledge of these ground lease arrangements,” Zachary Steinberg, senior vice president of policy at REBNY, said in a statement.  

But the reality of the coalition pushes back on the notion that the measure only benefits wealthy Manhattanites. A survey by the group found that the most ground lease co-op units in the city are in Queens, with 4,718 apartments, followed closely by Manhattan with 3,991. Members of the coalition held a rally in support of the bill last week. 

“I think there’s a misunderstanding that this is some kind of gift to extremely wealthy people,” Krueger said. “The vast majority of these co-ops are owned by middle class people.”

Krueger noted that similar rent limits were approved for manufactured homes in 2019. 

Carol Brooks, a longtime bus driver, has lived in an apartment at Shore View Cooperative in Far Rockaway for more than two decades. She inherited the unit from her mother, and said she didn’t learn of the ground lease until she got on the board. 

She said because less than 29 years are left in the building’s ground lease, shareholders or prospective buyers are unable to secure 30-year-mortgages. 

“We’re in limbo,” she said. “We’re looking for fairness, stability and affordability.”

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In 1981, a resident of a Manhattan ground lease co-op spoke to the New York Times and compared the benefits of living in such buildings to the “Cheshire Cat,” slowly disappearing over time until the shareholders are left with nothing. 

Real estate attorney Stuart Saft pointed out that if a ground lease is terminated, residents are not kicked out, but become rent-stabilized — a fate many fee owners would rather avoid. (Saft serves as chair of the Council of New York Cooperatives and Condominiums, though the group has not taken a position on the bill.)

Saft said changing the rule around ground lease co-ops could have a chilling effect on real estate investment in New York. 

“They are punishing the family of the original fee owner,” Saft said. “This is just going to frighten away investors thinking that the legislature could do this tomorrow to them.”