building at 54 East 8th Street

The land was once owned by Sailors Snug Harbor, along with much of the neighborhood. The land and building are now owned by 50/8 Associates LP, whose principals are Robert G. and Bernard Friedman.

The co-op's lease runs until 2049. Nothing in the memorandum of lease about the terms, renewal, etc.

The land lease is due 2049. The apts are great but tough to get financing. The maintainence is already high and will go up. If you can tolerate the risk, the apts are underpriced. Fyi, lots of sublets in the building. Very risky building. "Coop was looking to purchase the land".

Unless the Coop has an option to buy the land underneath it, or at minimum a right of first
refusal, the landowner can refuse to extend the lease in 2049 and take back and keep for it-
self the entire Coop building, inclouding all the individual coop apartments.

The apartments at 54 are not underpriced; their price is lower than similar apartments because
of the risk of losing them in 39 years.

Under New York law, courts cannot rewrite contracts or substitute their judgmenbt for terms the
parties have agreed to. As long as the terms of the land lease are clear, they must be enforced.

As far as the above comments, I know Prudential Elliman's bank has financed this building in the past months, and continues to do so currently. I was also told by building management that the land lease owner is in talks to extend another 20 years.

This is a great building, and a great deal for anyone who wants to live in the neighborhood.

kind of like the arabs and israelis are in talks to divide the west bank. don't hold your breathe

If it's due 2049 and you're only going to be there for 10 years, then (i've read) you should go for it. but i'm not a broker so...

Look at it this way:

The place will have zero value in 2049. If you pay $380K for your shares, all you're doing is paying 38 years of rent, in advance. That's $10K per year, but if you borrow the money that'd be another $350K in interest, so figure $20K per year. Now add on the monthly maintenance and see how it stacks up.

The landowner is carrying a $36,000,000 mortgage on the place, so god help you if the co-op decides to buy the land and building.

Mighty handsome building, though.

Yes, fire escapes add that homey touch. Add a pillow and a flowerpot and it's just like Rear Window.

But if you get out before the land lease come up, then you can get your equity back, correct? upon "sale", with all the mitigating factors.
someone has to be living in all these land lease buildings.

Someone buys lottery tickets.

No, you don't get out with your equity. The place loses at least $10K per year in value. Your equity will be gone in a few years after buying, and the value will continue to decrease faster than you can pay off the mortgage.

If you want to pay $x per year to live there, then fine, but you have to run the numbers to know what x is.

You'd have to calculate how fast the maintenance will increase, estimate any future rent increase, and figure out the potential issues with lack of liquidity as you get closer to 2019. I would take a look at 101 west 23rd to look at the future.

the 101 west 23rd thread on this site says the board there imposed a moratorium on sales, so the tenants could not sell their units. it also says a moratorium like this might be illegal on the part of the board. yikes.

If you're considering this property, I just happen to know of a stunning bridge that might be of interest. Great views. Lots of leg room. Shared outdoor space.

It is important to understand that the drop-dead date is not the expiration of the land lease in 2049. It is 2019: 30 years earlier. The reason is that no bank will extend a 30 year mortgage on a property that has less than a 30 year land lease. The same banks may well not even extend shorter mortgages either as that mark is passed--I don't know banking policies on ARMs and the like for land lease buildings with less than 30 years left on the lease.

Practically, what this means is that if all stays the way it is now, in 2019 the units will essentially stop being sellable. Their value will plummet like a stone but it won't matter because no one will buy them at any price.

Is that correct? 36,000,000 mortgage!!!? It should be more like 6,000,000. If the underlying mortgage is truly $36MM, then no purchase of the land is possible. The coop could never carry such a debt without maintenance being something like $12,000+ PER MONTH per apt if it is about 140 units.

This is not a good situation. The 101 W 23rd St nightmare is a good example.

Any comments on 2 Tudor City Place....also reportedly has a land lease for 99 yrs?? thanks

I came across this while researching the land lease subject:
wiseGEEK.com

What is a Land Lease?
A land lease is a type of financial arrangement in which the ground under a structure is leased, rather than sold to the builder, meaning that the land and the structure are owned independently. There are several reasons to enter a land lease contract, but it occurs most commonly when a real estate investor wishes to retain a piece of land, but not necessarily put energy into developing it. In this instance, the investor might work with a developer to create a land lease contract, allowing the developer to build a structure and rent or sell it, with the understanding that the land is leased and does not come with the building. This type of arrangement is more common in urban areas, and is often associated with cooperatives or tenant-owned buildings.
Generally, the contract for a land lease runs for at least 50 years. If the land lease is near termination, the land owner is usually willing to renew it, providing that the building has been profitable and well maintained, although the amount of rent will likely increase, as the property value will have increased as well. The terms of a land lease usually require that the property be developed in some way, and that rents for the land are paid monthly or quarterly into the accounts of the landlord.
For people renting space in a structure on leased land, the terms of the lease arrangement are usually not very important. It becomes more of an issue when consumers wish to buy a condominium or apartment on this type of property, because it does have an impact on the quality of the investment. If the lease is about to run out, it may be difficult to find a financial institution willing to lend money, for example. However, if the lease does not expire until well into the future, buying a structure on a land lease can be a sound investment, because the building is usually significantly cheaper than neighboring real estate because of the unique situation.

Return to online version of this article
Written by S.E. Smith

copyright © 2003 - 2011

I also came across this piece published in the Wall Street Journal and reprinted in Business opportunity Journal, more food for thought:

Consider Both Sides In Land-Lease Deals
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Article archives

By PATRICK BARTA
Question: I'm currently in the process of buying an apartment in a co-op building that has what's known as a land lease. The lease won't expire until 2058, but I know that my mortgage company needed to know when it expired because they would not give me a loan unless there were at least 10 years left on the lease. What exactly is a land lease, how common is it, and what are the possible detriments to buying an apartment in a building that has a land lease?
-- Emily, New York, N.Y.
Emily: A land-lease property is one in which the land beneath the building is owned by someone else. While such an arrangement can make buying a property a little more complicated and can in some cases reduce the unit's resale value, it's usually not a big problem, and it certainly isn't a reason to dismiss the transaction out of hand.
Although land-lease properties are relatively uncommon, they do pop up in some big cities, especially New York. Typically, they occur when a real-estate investor refuses to sell the land that a developer covets for a residential building. If the developer really likes the location, and can't find a good plot of land somewhere else, sometimes he or she will agree to a land-lease arrangement, paying to lease the land for a specified period -- like 50 or 99 years -- and then erecting the building. Land-lease arrangements are also known to occur when developers convert a rental property to an owner-occupied cooperative building, but the original owners refuse to sell the land.
There are downsides for people who want to buy units in these buildings. The properties are sometimes harder to finance and consequently harder to sell, possibly reducing their resale value. There also could be some extra costs involved in owning the units, as well as some negative tax implications.
But land-lease properties also have an upside: They're often discounted relative to other nearby properties, offsetting some or all of the risk and hassle involved in owning them. In some cases, that discount is tiny, but in other cases, it can be as high as 25%, real-estate agents say.
One reason for all the hassle is that someone has to pay for the lease on the land, and often, that cost is split up among the owners of all the units. In many cases, that monthly lease expense is tacked on to the maintenance fees that are being charged to individual unit owners.
Another weak point is that some lenders are afraid to extend credit for a land-lease property if the lease is likely to expire within a few years. Although it's extremely unlikely the landowner would refuse to renew the lease or decide to build something new on the site -- indeed, most leases are renegotiated in advance of the expiration -- lenders still worry about their collateral, and the owner could jack up the lease fee. That, in turn, would raise the unit owners' costs and possibly reduce the market value of the units.
Despite all that, if the land-lease arrangement has plenty of time before it expires -- say more than 20 years -- there's little reason not to dive in. Once some of the terms are worked out, "it's like any other purchase, and as long as you go into it with your eyes open," you should be fine, says Stephen Kotler, an executive vice president at Douglas Elliman, a New York-based real-estate brokerage. At the very least, you could be getting a bigger, nicer unit than you would have been able to afford otherwise.
If you're still antsy and want to learn more about the intricacies of land-lease deals, contact a real-estate agent who has experience in similar transactions. The leading New York City residential real-estate firms, including Douglas Elliman and The Corcoran Group, will have some agents on staff who know land-lease deals well.

WHAT NWT is saying above cound not be summed up any better!!!!

The place will have zero value in 2049. If you pay $380K for your shares, all you're doing is paying 38 years of rent, in advance. That's $10K per year, but if you borrow the money that'd be another $350K in interest, so figure $20K per year. Now add on the monthly maintenance and see how it stacks up.

The landowner is carrying a $36,000,000 mortgage on the place, so god help you if the co-op decides to buy the land and building.

*** Brokers will tell you it is a great "bargain" but the value of this property is driven by fools that either got fooled or is trying to fool you.***

The value of the property will be harder and harder to sell as time goes on. It will spike when the lease renews, but then start going down in value again.

Pointless risk taking if you ask me. You deserve to lose money when you buy something you have no understanding of and expect to profit from it.

sbehringer, we see you have four listings in the building, so what you say is understandable.

It'd be more to the point, though, if you ran the numbers for us and explained the value of shares in a corporation that will own nothing in 2049. Or just copied out the note about the lease in the 2010 financials.

Please enlighten us sbehringer!

Still waiting....

Anymore news or updates on the land lease?

Hi - there's an available apt at this address I'm interested in. Does anyone have any updates as to the status of the land lease situation?

Land Lease seems like it is going to get negotiated into the positive. Proximity to NYU makes it a likely deal.

It still terminates on 5/1/2049.

The landlord is carrying a mortgage of $27,000,000 on the property. There's no reason at all for the landlord to agree to change the terms.

NWT is incorrect. The $27,000,000 mortgage is a COMBINED mortgage for multiple properties, 44-58 E. 8th Street AND 1380 York Avenue. You can check the NYC Department of Finance/Office of the City Registrar filing dated May 23, 2011 to see for yourself. The exact amount allocated to 44-58 E. 8th Street is unclear, but it is NOT the full $27M. These are the facts from actual legal documents of record.

At best, you're taking a gamble on whether the land-lese will be renewed and at what terms. The best thing for all parties would be to extend based on same to similar terms as existing land lease agreement, but with an increase in the rent rate. If the extension happens, that enhances your unit's value, otherwise what's been said about a decaying value to $0 is true.

If the co-op wants to buyout the land from the owners, it seems unlikely that they want to sell and if the co-op wants to improve its negotiating power, it should probably try to go at it on its own first, but if that doesn't work, it should look to working with the other properties that are under the same master mortgage.

Actually, it was renewed as of about three weeks ago. There are 70 years left on the lease now, with plans set for renewal then also. I am an owner in the building, and bought only after the land lease was extended, closed last week. It was in my contract that we would only close once official paperwork was provided to renew the lease. The only change that was made was a $50 increase in maintenance per bedroom (ie a four bedroom fee went up $200, where as my one bedroom apt went up only $50).

By the way, there is absolutely NOT a 27,000,000 mortgage on THIS property. It is a mortgage for the COMBINED multiple properties of the management company. They even offer the finances to prove this on their website.

Care to comment upon this story? http://gawker.com/that-rich-22-year-old-s-250-000-apartment-actually-cos-1372429961

A better match than the other early-June closing. She should write a follow-up story, explaining how a one-bedroom in that location could be had for $345,000. Maybe a little something about how property works, and why owning for a finite number of years is so much less expensive than owning in perpetuity.

Oops, sorry, $345,000 for a studio.

There are still quite some activities in the past couple months, could anyone please provide some insights? Thanks.

what is the rental policies on this building?

Seems like the land lease was extended to 2075. Does anyone have any suggestions or comments on this coop? Is there still an underlying mortgage?