It’s hard to feel sorry for people who live on Billionaires’ Row.
Yet residents of 100 West 57th Street are portraying themselves as potential victims of the city’s housing crisis.
It’s true that most would not be able to afford their co-op dues if the ground rent, currently just $4 million a year, resets to $40 million on the Ides of March.
But that’s why apartments in the co-op are so cheap. Unit 2G, a one-bedroom, sold for a mere $180,000 earlier this year. That’s about half the price of a parking spot in some Manhattan neighborhoods.
In fact, from 2019 to 2022, at least 50 of the 324 units in the 21-story building at West 57th and Sixth Avenue were sold, most for under $300,000 and some for less than $100,000, according to the New York Post.
The Carnegie House co-op shareholders, some who have lived there for 50 years, are suing to stop the arbitration process that will set the new ground rent if they cannot come to terms with the land owners, entities linked to Ruby Schron and David Werner.
Judge Arthur Engoron, who is no friend of real estate, ruled that the arbitration shall proceed, according to Kathryn Brenzel’s report in The Real Deal on Friday morning. He didn’t throw out the lawsuit, but commented that it had little chance of succeeding.
There’s an argument that Schron and Werner engineered the pending rent increase by overpaying for the ground initially in 2014. They shelled out $261 million, probably to the dismay of the shareholders living above.
But CBRE, in marketing the ground before that sale, advertised that the ground rent would likely reset to nearly $40 million in 2025. The seller at the time was — wait for it — the Georgetown Company, which now is part owner of retail space in the building and has joined co-op shareholders to oppose the very rent increase that its brokers advertised a decade ago.
The shareholders are fighting not only in court, but also in Albany. Their bill would prevent large rent increases of ground leases.
Regardless of what the land under 100 West 57th sold for in 2014, it is undeniable that property values on Billionaires’ Row have since shot up.
Some shareholders are on fixed incomes and don’t want to leave. But they don’t own the land, which is why their units cost so little. They benefited from the laws of economics, and now they want to suspend those laws by passing one of their own in Albany.
Yes, there’s a housing crisis. But if you’re looking for victims, Billionaires’ Row is not a good place to start.
What we’re thinking about: The New York Times, in an excellent primer for non-real-estate people about how development works in New York City, wrote, “A project ‘pencils out’ when it generates rental income that covers its costs, including debt and taxes, and makes the developer enough of a profit.” But doesn’t the phrase refer only to projections, rather than actual results? Send your thoughts to eengquist@therealdeal.com.
A thing we’ve learned: The wage requirements in the state’s tax break 485x increase construction costs by $50 to $100 per square foot, according to real estate lawyer Joshua Stein. Operating costs also figure to be higher because the law was written to all but ensure 32BJ SEIU workers would be staffing these developments.
Elsewhere…
Two things that improve office occupancy are happening: leases are being signed and not much office space is being built. Only 7.8 million square feet of new space was delivered to the market last quarter, a 37 percent drop from the quarterly average since the onset of the pandemic, according to Colliers. That helped the market achieve positive absorption, meaning more space was leased up than became available. It was the first positive quarter in two years.
The vacancy rate is still rising, but slower than it had been.
In another positive sign for office owners, developers don’t plan to dump a lot of new space onto the market in the near future. Only 50.3 million square feet is in the active development pipeline, the lowest since the Great Recession, Colliers reported. This year is on pace for 36 million square feet to be built, down from 39.2 million square feet last year.
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A thing you learned: New Jersey has only 2.8 charging stations for every 100 electric vehicles registered in the state — the worst ratio in the country. Hawaii (3.4) and Illinois (3.5) are second and third worst, respectively, a Zutobi analysis found. Wyoming (22.1), North Dakota (21.8) and West Virginia (16.2) have the most charging stations per EV, in part because they have few registered EVs, but also because they focused on building EV infrastructure first because otherwise residents won’t buy an electric vehicle.
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Landlords know they can charge more rent when competition for their units intensifies. Turns out, this is just as clear to apartment hunters, as a survey by the U.K. tenant app Tlyfe found. When asked what the main factors were in failing to secure a place, the No. 1 reason they gave was that the property in question was taken by the time they applied. The No. 2 reason was that others applied for the flat and it went to someone else. No. 3 was that numerous applicants had caused the rent to increase beyond what they could afford..
Closing time
Residential: The priciest residential sale Thursday was $19 million for a co-op unit at 39 Fifth Avenue in Greenwich Village.
Commercial: The largest commercial sale of the day was $22 million for a 12,662-square-foot vacant lot at the intersection of Butler Street and Third Avenue in Gowanus. Yitzchok Katz was the buyer.
New to the Market: The highest price for a residential property hitting the market was $37.9 million for a 4,322-square-foot condominium at Zeckendorf’s 520 Park Avenue in Lenox Hill. Nikki Adamo of Brown Harris Stevens has the listing.
Breaking Ground: The largest new building application filed was for a 160,908-square-foot, 103-unit, multifamily project at 211-13 26th Ave in Bayside. Jay Valgora of Studio V Architecture filed the permit on behalf of Cord Meyer Development.
— Matthew Elo