The penthouse additions that have been constructed atop Manhattan buildings have not only created
curious-looking skyboxes for wealthy
homeowners; they have also changed the value of the buildings they sit on.
This month The Real Deal set out to find exactly how a penthouse addition changes a building’s value. The experts consulted said penthouse additions can increase the value of both the entire building and individual apartment units.
“There’s certainly potential for enhanced value,” said Jonathan Miller, CEO of the appraisal firm Miller Samuel. “You’re increasing visibility or market awareness of the building. You’re enhancing the mix of apartments in the building. Also, when a co-op approves the penthouse addition, often you will see common areas upgraded as a condition for the renovation.”
The city’s Department of Buildings, which handles permits for construction and renovations, had 164 applications for penthouse additions in Manhattan in 2006 and 141 in 2007. As of late last month, the department had 112 applications to date for 2008, which puts it on pace to reach nearly 170 by the end of the year, besting 2006’s and 2007’s totals.
Costly propositions
Miller said that purchasing roof rights begins at 15 cents on the dollar per square foot compared to apartments in a given building, but added the cost could be “far higher.” The price of the roof can increase to 40 or 50 cents on the dollar per square foot. Some pay even more.
“The more permanence you build into the structure, that ratio increases,” Miller said. “But it’s really market-driven. There are so many variables rolling around that there’s no hard-and-fast rule.”
Arpad Baksa, the architect for a rooftop addition at 477 Broome, said the structure does not make much of a difference in the value of a larger building.
But in a smaller building, he noted, “it definitely does.”
Miller generally advises against building penthouse additions in an unusual style.
“The more people a property can appeal to, the greater the enhancement in value,” he said. “That’s the primary rule of thumb. If it’s not neutral enough, that tends to have a limiting effect on value. The exception would be a world-renowned architect.”
Real estate lawyer Allen Brill, a partner at real estate firm Brill & Misel, said the cost of constructing a luxury rooftop home can run from several hundred thousand dollars to several million.
However, he estimated that the value of an enclosed rooftop structure is twice that of an unenclosed area like a simple terrace.
Architect Kevin Kennon, whose designs were finalists in the World Trade Center competition, has been working on a condo project at 157 Hudson in Tribeca, purchased for $18 million in 2004.
According to Kennon, the project has been delayed because of refinancing issues, but is now scheduled for completion in early fall.
It will have 17 units at an average of 3,000 square feet, and two stories of high-end dwellings on top of the landmarked three-story building.
Kennon seemed confident that the rooftop structures will add value to the building. “Penthouses are always more valuable,” said Kennon. “They tend to go at almost double the square-foot basis.”
Jared Seligman, who was named the Corcoran Group’s 2007 rookie of the year, noted that height regulations can be hard to navigate. But, he said, “Everyone’s first question is, ‘Can we buy the roof?'”
While negotiating for roof rights can be tricky, that hasn’t stopped many New Yorkers from doing it. One thing those looking to build have going for them is the fact that their coveted add-ons can help lower the maintenance costs for other owners in the building because they can help raise cash for the building’s board.
But sometimes the additions are precluded by zoning laws that prevent owners from establishing a permanent structure on the roof. In some of those cases, owners build “cabanas”— temporary structures on the roof — and co-op boards draft contracts so that the owner is bound to destroy the temporary structure if the penthouse is sold.
Marianne Hyde, one half of the husband-wife boutique architectural firm
Zakrzewski + Hyde, said her firm has built or developed plans for 10 penthouse addition properties. One of their projects was the addition baseball star Mike Piazza plopped onto the apartment he bought in 2004 for a reported $4 million in Tribeca. He is now reportedly planning on selling it. According to Curbed, Jon Stewart lives on a separate floor in the same building.
“In New York, everyone likes a trophy apartment, and when you want the outdoor space, a lot of times you need to be on top,” Seligman said.