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SE folks - "I personally do not believe in purchasing in a land lease building. Who needs the headache, and if the building doesn't own the ground it rests on, count me out." A friend recently looked at a building that was a land lease, and that was my immediate response.
But then they informed me that it was a new building, and it held a 99 year land lease, of which all is basically still on the term.
Have any of you ever heard of this in NYC? That term sounds more like something I'm accustomed to in London, but not in NYC. Is this normal for a NYC land lease?
Would it change your mind about buying into a land lease building? It sort of stumped me....
We see this in Harlem, as local churches try to monetize their real estate. (Often there's a component to the deal that allows the church a venue in the new building as well.)
My feeling is that any land-lease is a risk, and -- like any other risk -- it can be priced at a point where the buyer feels comfortable accepting it. I at one point considered buying at Carnegie House (though, FWIW, I didn't). However, a former colleague from my firm is a very happy owner at the Marais.
DG Neary Realty
Ali: Thanks - it just seemed so odd to me - as you say, in Paris (or London) it's something that is the norm, and that I'm accustomed to.
This is indeed Harlem, but is not a church. So you are on the mark with that.
I wouldn't go near a land lease when there are better options here in NYC (owning outright). In London (or Paris) it would be a different proposition....
Right, new land-lease co-ops tend to be on church-owned land. E.g., The General Theological Seminary at Chelsea Enclave, and those associated with the Islamic Center and the Greek Archdiocese.
Sometimes a church's land was donated with the proviso that it reverts to the donor if the church sells it. Or it could be as simple as hanging on to an asset with an inflation-adjusted rate of return.
That latter point is the killer. A land-lease co-op is always paying the landowner a percentage of the land's current unimproved value. What "current" is is very often determined by an appraisal every five years or so, and 6% is a common rate.
So, when you buy in a land-lease building, you're paying upfront only for your share of the building itself. The developer built it for something less than that, takes its profit, and goes away. For the buyer, it's a combination of the worst aspects of both buying and renting: you bought the depreciating part and are renting the non-depreciating.
As Ali said, the numbers could still work, and you see presumably-savvy people buying them.
matsonjones, I believe Ali meant this:
and NOT Paris...
I apologize for the basic questions, but how do I find out if a building is a land lease building? I'm looking around a bit on the UES. Can condo buildings by land lease buildings or generally only co-op's?