Land lease co-op owners fear rising rents

Monthly fees are often calculated as a percentage of land value

TRD New York /
Jun.June 15, 2015 02:15 PM

Fast-rising Manhattan land costs are the subject of concern for the city’s entire development community. But another group biting their nails is co-op owners in land-lease buildings.

In Manhattan, about 100 buildings are on land leases. Most of these are co-ops, though some are condominiums. Co-op owners in these buildings pay high monthly maintenance fees — driving the value of the apartments down, according to the New York Times. The trade-off is getting a lower-priced apartment with a higher rate paid to the landowner in monthly rent.

“Discounts in land-lease buildings are 25 percent, although I’m beginning to think it is more like 35 to 40 percent,” said Susan Landau Abrams, a broker with Warburg Realty.

These monthly fees are even less attractive when considering the potential volatility. Rather than having set monthly fees, many co-ops have agreements that specify the rates can change based on the value of the land. Given the current state of the market, this could be a terrifying prospect to a potential buyer.

“All over Manhattan, land values are escalating at a very rapid pace,” said Brian Corcoran, an executive vice president of Cushman & Wakefield. “There are many co-ops on ground leases and it is rare that shareholders get a chance to buy the land. But if they do, it is in their best interest to do so if at all possible.”

Corcoran recently advised Trump Plaza co-op members, at 167 East 61st Street, on their acquisition of the land underneath the building for $190 million.

At the Excelsior, a land-lease co-op at 303 East 57th Street, residents are facing a rent reset in 2018. According to its lease, every ten years the rent resets to 6 percent of the land value. [NYT] — Tess Hofmann


Related Articles

arrow_forward_ios
Clockwise from left: Vornado’s Steve Roth and 220 Central Park South, 42 Crosby Street and 15 Commerce Street

These are some of the most notable resi sales in NYC this week

Meet the “gambler” shaping the Westchester skyline

Meet the “gambler” shaping the Westchester skyline

Vijay Mallya, daughter avoided foreclosure on Trump Plaza PH

Vijay Mallya, daughter avoided foreclosure on Trump Plaza PH

Trump Plaza thumb

Trump Plaza loan recipients sell unit for $5.6M

Carl Icahn’s deal for Trump casinos on hold

Carl Icahn’s deal for Trump casinos on hold

Trump Plaza’s $185M land deal could force some residents out

Trump Plaza’s $185M land deal could force some residents out

Trump Plaza co-op’s dilemma: big assessment or big rent hike?

Trump Plaza co-op’s dilemma: big assessment or big rent hike?

Trump Plaza and Donald Trump

Trump Plaza in Atlantic City sells for $20M

arrow_forward_ios