Land lease co-op owners fear rising rents
Monthly fees are often calculated as a percentage of land value
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