building at 150 East 61st Street Land Lease Bldg

All you need to do is go check out the listings for another land-lease building in that area - 301 East 63rd Street.

Take a look at the number of units for sales, the pricing history and the maintenance for the apartments. I think this will give you your answer...LAND LEASE BAD!

http://www.streeteasy.com/nyc/building/301-east-63-street-manhattan

Land lease coops are a terrible investment, even for owner occupancy. When the lease ends the landowner
becomes the owner of all improvements on the property, i.e., the buildings and their apartments.

The value of a land-lease apartment is the present discounted capitalized value of its future net rental
income. For that reason, such apartments decline in value over time even in markets which are rising.

While the reversion of improvements risk may not materialize at Battery Park City and similar locations
for political reasons, private landowners have no reason not to take them.

The land lease matured in August 2010, and the co-op signed a 99-year land lease to 2109. The monthly land rental on a 600 sq ft unit will be roughly $250 per month in when the lease hits its maximum cost sometime in the 2020's (it remains level from then until 2109).

The purchase prices on small units in this building have been $150k+ below comparable buildings. It takes 600 months (50 years) of $250 per month to make up the purchase price difference.

If you are commited to buying in the area, the purchase price difference is effectively an interest-free loan.

does anyone know when the maintence increases in this landlease building? does it adjust every couple of years?

Are there any other issues with this building? It seems cheap relative to the other properties in the area?

Building is cheaper because of land lease coop. Land lease is set until 2109. RiskAverseBuyer lays out the financial impact of the changes to the montlhly fees. Coop board requires complete financials. If you are looking for a place to own for a long time, this is an exceptional value. Price will always be lower than other buildings because of land lease. It won't matter to some people that it is set until 2109. The lobby and hallways were renovated in 2011. Very well run building. Thick walls, little to no noise from neighbors. Units facing rear of building are very quiet.

RiskAverseBuyer, you said the land lease will peak out at $250 for a 600 sq ft unit in the 2020's and stay flat thereafter. Where is it now for such a unit?

Roughly $120 per month

An interesting lease, eh? Rent to the landowner doubles over ten years, then stays flat over the next eighty years. The more usual thing is to reset the rent to market value every ten years or so.

Any ideas why the landowner would front-load (if that's the term) the income stream that way?

Re: Any ideas why the landowner would front-load (if that's the term) the income stream that way?

Landowner is in the last 10 years of his/her life and has little regard for heirs' income?

Also, it is a negotiation.

Any risks of buying in this building now that lease runs till 2109?

Depends on what you pay, as with anything. Here's another version of the lease story, different from what RiskAverseBuyer said: http://www.lambmanagement.com/Success-Stories.asp

Whenever there're issues with a building, you should get the financials before (instead of the usual after) negotiations. You should also have your lawyer and financial advisor go over the actual lease, not just the memorandum of lease that's filed with the city.

Thanks NWT. This is very helpful. Some of the current listings are kind of close to market rate. The monthly maintenance doesn't look too crazy compared to 301 E. 63rd. However, the monthly maintenance could increase dramatically when the annual rent hits $1 million a year.

The risk is losing an opportunity like apple at $390 go right on by....

Hi NYC166 - are you ref to some other increase to monthly charges (aside from the rent increase from $120 to $250 by the 2020 period) when you say "the monthly maintenance could increase dramatically when the annual rent hits $1 million a year." What would that increase be on account of? How much would that increase likely be, you think?

Luv150: the rent was already around $1M when you asked the question. It'll keep rising with CPI until 2025, then reset back to $1M and remain pegged to CPI thereafter. Note that does NOT include property taxes, which the co-op is still paying via an undisclosed cost-sharing arrangement.

Still beats the >$5M they'd originally faced. How did the co-op pull it off? For those too impatient to read a blurry JPG, the short version is they forced their former commercial tenants to eat most of the increase.

By letting the underlying land lease expire, they were able to trigger a termination clause in the sweetheart leases held by a garage + Duane Reade + AT&T. So, they lost a bit of income, but were subsequently able to hand the keys to a very valuable asset over to the prime landlord in exchange for a sweetheart land-lease renewal.

Anyway, it's a killer location. Some of the layouts are attractive, but the share allocation looks completely wacky. Compare 4G at $3445/mo maintenance for ~1300sqft against 8C or 9C at $2625/mo maintenance for ~1500sqft.