Brooklyn Point

@30yrs - Yep. At least purchasers who bought before Jennifer Realty “clarified”
the law have some recourse, but even that recourse is suboptimal as the gentleman quoted in that article highlights. Purchasers in current developments, where the risk is clearly disclosed, will be SOL if such was the developer’s actual plan all along. As we have discussed in other threads, the saving grace for those who own these things is that few purchasers have the resources to do real due diligence, so properties where these risks have materialized will always trade eventually.

@Blyndent - Take heart that few read these forums, and those who do are not representative of the general buyer population. The fact that you are here and have engaged in the productive manner that you have suggests you will ultimately be fine.

Kudos to BKindent for clarifying details of the building. Most times, this forum is too skeptical including myself.

Keith: "It's part of their marketing material."

MCR: "My money is on Extell that everything is disclosed, but my money is against any buy-side real estate attorney's fully understanding the disclosures. "

MCR,
Based on both a broker and a buyer being sure of information which comes from Extell's marketing, but conflicts with what is in the Offering Plan, it seems as though Extell is misleading people about the project and relying on standard contract language which usually reads along the lines of "the purchaser shall not rely on any representations made, including Real Estate Broker's setups, etc" and assuming that most purchasers won't have adequate representation who can (or will bother to) actually read what the Offering Plan says and explain to them it's not what Extell's people are saying. Because just from what Ali posted above 2 things are clear:
1) This is not a Land Lease, and
2) The option to purchase does not kick in 25 years when the tax abatement expires.

Who knows. Speculation based on hearsay. With that said, I am now tempted to read the Offering Plan out of sheer curiosity. It is low on the "things to do while procrastinating" list; nevertheless, it is on the list.

I really would encourage people to actually read not only the Brooklyn Point offering plan, but virtually every other offering plan out right now. On the cover page, EVERY SINGLE offering plan I looked up contained the same verbiage as Ali posted that 30yo was up in arms about. Most of these offering plans contain the same exact risks and rights retained by the developers. The only difference with the Brooklyn Point offering plan is really its discussion of the land/building arrangement, in which it clearly states over 10 times in different places that the coop has the absolute right to purchase the landlord's interest.

Also, in response to the previous 30yr comment,
1. It is a lease of the residential condominium unit and the land associated with the condominium. Read the plan.
2. The option to purchase DOES kick in within the 25 years. The year we are in is 2020. 25 years from 2020 is 2045. The option to purchase is from 2031 to 2055.

Again, I wish that people would actually read the offering plan before making comments on things that they are just speculating about.

Based on the language included in basically every offering plan today, on the first page, we should never buy any new construction, as every developer retains the right to rent rather than sell units, don't guarantee your views, never guarantee that the owners will gain control of the board, etc...

30yr: "Ali,
Of all the Offering Plans you have seen, how many had the risk of Sponsor ownership be so great that the AG's office made them print a warning about on the front cover?"

All of them.

76 Eleventh Avenue:
BECAUSE SPONSOR IS RETAINING THE RIGHT TO RENT RATHER THAN SELL UNITS AFTER THE OFFERING PLAN IS CONSUMMATED, THIS PLAN MAY NOT RESULT IN THE CREATION OF A CONDOMINIUM IN WHICH THE MAJORITY OF UNITS ARE OWNED BY OWNER-OCCUP ANTS OR INVESTORS UNRELA TED TO THE SPONSOR.

One Manhattan Square:
BECAUSE SPONSOR IS RETAINING THE UNCONDITIONAL RIGHT TO RENT RATHER THAN SELL UNITS, THIS PLAN MAY NOT RESULT IN THE CREATION OF A CONDOMINIUM IN WHICH A MAJORITY OF THE UNITS ARE OWNED BY OWNER- OCCUPANTS OR INVESTORS UNRELATED TO THE SPONSOR.

11 Hoyt:
BECAUSE SPONSOR IS RETAINING THE UNCONDITIONAL RIGHT TO RENT RATHER THAN SELL RESIDENTIAL UNITS AFTER THE PLAN HAS BEEN CONSUMMATED, THIS PLAN MAY NOT RESULT IN THE CREATION OF A CONDOMINIUM IN WHICH A MAJORITY OF THE UNITS ARE OWNED BY OWNER-OCCUPANTS OR INVESTORS UNRELATED TO SPONSOR.

10 Nevins Street
BECAUSE SPONSOR IS RETAINING THE UNCONDITIONAL RIGHT TO RENT RATHER THAN SELL RESIDENTIAL UNITS, THIS OFFERING PLA N MAY NOT RESULT IN THE CREATION OF A CONDOMINIUM IN WHICH A MAJORITY OF THE RESIDENTIAL UNITS ARE OWNED BY OWNER-OCCUPANTS OR INVESTORS UNRELATED TO SPONSOR.

388 Bridge Street
PURCHASERS FOR THEIR OWN OCCUPANCY WILL NEVER GAIN CONTROL OF THE CONDOMINIUM BOARD UNDER THE TERMS OF THIS PLAN.

196 Orchard
BECAUSE SPONSOR IS RETAINING THE UNCONDITIONAL RIGHT TO RENT RATHER THAN SELL RESIDENTIAL UNITS AFfER THE CONSUMMATION OF THE PLAN, THIS OFFERING PLAN MAY NOT RESULT IN THE CREATION OF A CONDOMINIUM IN WHICH A MAJORITY OF THE RESIDENTIAL UNITS ARE OWNED BY OWNER-OCCUPANTS OR INVESTORS UNRELATED TO SPONSOR.

277 Fifth
BECAUSE SPONSOR IS RETAINING THE UNCONDITIONAL RIGHT TO RENT RATHER THAN SELL RESIDENTIAL UNITS AFTER PLAN CONSUMMATION, THIS PLAN MAY NOT RESULT IN THE CREATION OF A CONDOMINIUM IN WHICH A MAJORITY OF THE RESIDENTIAL UNITS ARE OWNED BY OWNER-OCCUPANTS OR INVESTORS UNRELATED TO SPONSOR.

200 East 21st
BECAUSE SPONSOR IS RETAINING THE UNCONDITIONAL RIGHT TO RENT RATHER THAN SELL RESIDENTIAL UNITS, AFTER CONSUMMATION OF THE PLAN, THIS OFFERING PLA N MAY NOT RESULT IN THE CREATION OF A CONDOMINIUM IN WHICH A MAJORITY OF THE RESIDENTIAL UNITS ARE OWNED BY OWNER-OCCUPANTS OR INVESTORSUNRELATEDTOSPONSOR. PURCHASERSFORTHEIROWNOCCUPANCYMAYNEVERGAINCONTROL OF THE CONDOMINIUM BOARD UNDER THE TERMS OF THIS OFFERING PLAN.

130 William
BECAUSE SPONSOR IS RETAINING THE UNCONDITIONAL RIGHT TO RENT RATHER THAN SELL RESIDENTIAL UNITS, AFTER CONSUMMATION OF THE PLAN, THIS OFFERING PLAN MAY NOT RESULT IN THE CREATION OF A CONDOMINIUM IN WHICH A MAJORITY OF THE RESIDENTIAL UNITS ARE OWNED BY OWNER-OCCUPANTS OR INVESTORS UNRELATED TO SPONSOR.

220 Central Park South
BECAUSE SPONSOR IS RETAINING THE UNCONDITIONAL RIGHT TO RENT RATHER THAN SELL UNITS THIS PLAN MAY NOT RESULT IN THE CREATION OF A CONDOMINIUM IN WHICH THE MAJORITY OF THE UNITS ARE OWNED BY OWNER- OCCUPANTS OR INVESTORS UNRELATED TO THE SPONSOR.

550 Vanderbilt
BECAUSE SPONSOR IS RETAINING THE UNCONDITIONAL RIGHT TO RENT RATHER THAN SELL UNITS, THIS PLAN MAY NOT RESULT IN THE CREATION OF A CONDOMINIUM IN WHICH A MAJORITY OF THE UNITS ARE OWNED BY OWNER- OCCUPANTS OR INVESTORS UNRELATED TO THE SPONSOR. (SEE SPECIAL RISKS SECTION OF THE PLAN.)

None of those are Coops, and this is total nonsense:
"1. It is a lease of the residential condominium unit and the land associated with the condominium. Read the plan.
2. The option to purchase DOES kick in within the 25 years. The year we are in is 2020. 25 years from 2020 is 2045. The option to purchase is from 2031 to 2055."

Anyone who is trying to say this:
"After the 25 year tax abatement, the building board has the absolute right to buy the land for $1 from the City of New York. "

Means the same as this:

"The option to purchase DOES kick in within the 25 years. The year we are in is 2020. 25 years from 2020 is 2045. The option to purchase is from 2031 to 2055."

is purposely trying to spin some serious BS.

BTW in your scenario, what happens to the Commercial Unit after the City sells the land to the Residential Unit? Do they have to start paying ground rent to the Residential Unit? Because, you know, THEY own the land the building is built on now.

I haz not yet gone through 30's entire list of questions, but I was going to start with the sponsor reserving the right to rent and answering "all of them," as well. I do like Downtown Brooklyn a lot - I flirted with buying an investment unit in 388 Bridge. One of the worries for me was that there would be so much building that some of the sponsors would turn to renting, and they would rent at whatever prices it took to clear and therefore I wouldn't have pricing power as a single landlord.

If I were looking as an owner/occupant, I would have been much more positive about the whole idea. I do like the neighborhood very much. And BKIndent, you are a very good sport to let the peanut gallery box your ears like this.

Speaking of which, isn't it almost time for another drinks night for all of us sometime soon? I miss having Alan to organize them... but I might have the strength to once we get past school break.

@30yrs - I hear you. For further discussion offline.

@ali - IN for drinks, during which this discussion is continued. I am not in NY very often, but I will reach out when I am next.

Again, before we keep going around in circles, I would encourage you to read the offering plan so that you can see what it actually says.

I think that this would allay any concerns that you have about the building. Just because you don't like it or don't understand it, or why the deal was made, doesn't mean that there is something wrong with it.

In the end, people will read it with their attorneys (many already have), and decide if the price is right, and whether or not they want to live there.

Closings are commencing very soon, and they have a lot of units in contract. I will let you know how it goes in 25 years!

Enjoy your new home Bklndent! Although in 25 years, I will have retired to my Costa Rican coffee farm.

Keith
TBG

I'll (knock on wood) be around in 25 years, strolling down the Eastside Greenway right outside my doorstep on Beekman Place, and then hopping on the 2nd Ave Subway to facilitate popping over to Brooklyn to see the outcome in person. None of us knows what any of these projects will look like in 25 years, but cheers to all of us who embrace the risks and buy real estate in New York.

MCR, I will be sure to keep you updated on this one!

Okay, I couldn't help myself. I downloaded the offering plan.
Bklndent - Are you aware that the City of New York owns the actually condominium unit, which it is leasing to the corporation to form a residential coop? [Also, the Offering Plan defines Condop as 30 years and I understand that term (meaning that the building is comprised of condominiums, one of which is a residential housing cooperative]). Can you direct me to that part of the Offering Plan that discusses the land as opposed to the condominium unit? This is a very creative offering indeed.

Also, it is extremely important to distinguish between the Condominium Board (controlled by the 3 condominium units that comprise the entire building) and the Tower Board (the board that will govern the condominium unit that will be purposed as a residential housing cooperative).

I welcome clarification from Bklndent, but it appears to me that the coop (one of the the three condominium units) has the option to purchase the condominium unit that houses it (physical unit that will be purposed as coop will be leased in the interim), but I have been unable to locate a portion of the offering plan that gives the coop the option to purchase the land itself. It looks like at some point the coop will own the physical portion of the building that houses the coop (sharing ownership of building's common elements with the two other condo owners), but who owns the land? This is a rabbit hole that I should resisted.

Last comment: This offering plan shares elements of one that I looked at in Columbus, Ohio - The Levecque Tower Residences. That one was complicated enough without the city component or the coop component, but it involved residential towers residing insider a greater building that is controlled by a 900-lb gorilla. I only spoke with one actual tower resident in that property, and they were happy to have the 900-lb gorilla do everything and wholly unconcerned with the level of common charges or having any say in the governance of their building. In terms of resale value, they were well aware that it is a niche product, they planned to live there indefinitely, and they said that at the end of the day, they could not find anything comparable in Columbus.

MCR,
Note that when it comes to contributing $ to the Condominium the Percentage of Common Interest is 0% for the Development Rights Unit, 7.8067% for the Commercial Unit, the balance to the Residential Unit. And how many Condominium Board seats do those units get?

@30yrs - I closed the Offering Plan because it was making me angry. I believe we are in agreement that this offering would not be suitable for either you or me.

BTW, The Condominium Offering Plan is much shorter (155 pages) and it fairly easy to see that the land is not conveyed to the Residential Unit. Since the hierarchy is that the Condominium Offering Plan supercedes the Coop Offering Plan, how could the owner of the Residential Unit possibly convey anything to anyone which it was not granted under that Condo offering?

@30yrs - Because you are not a lawyer, you can say things that I, as a lawyer, shy away from saying for a host of reasons. With that said, I would take your advice over any lawyer’s advice in these matters every time, but that is just me because I have been paying attention to your posts for so long now and I appreciate the material nuances you highlight. Asking the right questions is 99% of the battle.

From taking a very cursory look at LeVeque Tower it seems like the projects at 21 India St and Waterline Square, where the sum total of the Condominium owner's interests are so overshadowed by the developer's retained interest in the rental/commercial portions of those projects that I don't see how they aren't going to ride roughshod over them at every conceivable opportunity.

All of these mixed rental/condo projects where the developers retain a majority interest in the buildings seem like disasters in the making to me. It's like putting yourself into the Jennifer Realty situation on purpose, and one where the Sponsor couldn't sell more even if they wanted to.

@30yrs - Completely agree, and it is all disclosed in the Offering Plans, but those who are buying these things must have a different preference structure than you and I do (or they are not coming away from the disclosures with the same interpretation that you and I are). We passed on LeVecque Towers in Columbus.

I appreciate that MCR has downloaded the offering plan and has seen it. Now we can have meaningful conversation about it.

There is a condominium board and a tower board. The tower board (residences) contains 5 members. The condominium board contains 7 members; FIVE from the residential section, and TWO from the Commercial section. The DR unit has no representation.

It is worth noting that the DR unit development rights are a total of 206 .58 square feet, which is negligible.

MCR, if you go to the Declaration of CP3 condominium, on page 667 of the plan, you will see that the condominium includes the entire building and the land. There is a certain interest in the property that is divided between the three condos. This is a condominium, and in order to be a condo, the building must own the land!

We are aware that NYC is the owner of the building and land. NYC created the condominium.

NYC then leased one of its units, the residential unit, to Extell, which formed a coop. It gave the coop the right to purchase the landlord's interest in the property. The landlord owns the residential unit, and the land. See page 616 of the offering plan, Article 25 of the lease, which states that "Tenant is hereby granted an option to purchase the landlord's interest in the Premises."

See page 646 of the offering plan agreement, which is the purchase agreement for the purchase of the building and land.

BTW, The Condominium Offering Plan is much shorter (155 pages) and it fairly easy to see that the land is not conveyed to the Residential Unit. Since the hierarchy is that the Condominium Offering Plan supercedes the Coop Offering Plan, how could the owner of the Residential Unit possibly convey anything to anyone which it was not granted under that Condo offering?

@Bklndent - Outstanding detailed response that clarifies quite a bit. Very interesting development and creative offering. Congratulations on your purchase, and many thanks for participating in the discussion in such a productive fashion; definitely helpful for those looking at the property and representative of the best of Streeteasy!

@30yrs - It looks like under the condo's offering plan, the owner of the residential unit is NYC and the owner of the land is NYC. NYC won't sell that residential unit (entire coop) until the coop exercises the right to buy it, at which time it will transfer that portion of the building and the land to the coop? The page citation Bklndent provides does appear to support his assertion, but I'm not going over any of this as a professional; merely as a curious nyc real estate dilettante.

Further to the point above, the coop offering plan contains the condo declaration. The page citation Bklndent provides is to the condo declaration that is an exhibit to the coop offering plan. Again, the entirety is over 800 pages, and that is why I asked Blndent to give me a citation (I am curious, but not so curious that I was going to read 800+ pages). I have to give him props for nailing the cross-examination.

Okay, last post (for the moment at least, until either 30yrs or Bklndent steers me to further research): The "news" to me is that NYC is the Declarant in the Declaration of CP3 Condominium. I was assuming that a private entity related to Extell was the Declarant for purposes of condo offering plan (as distinct from the coop offering plan, which does have a private entity as the Sponsor).

Question for Bklndent: Where in the Declaration of CP3 Condominium does NYC promise that it will sell the land to the Residential Unit? I see where Sponsor in the coop offering plan promises that it will sell whatever interest it has in the Residential Unit to the coop, but NYC would not be bound by any promise made by Sponsor in the coop offering plan, so back to 30yrs question: Where has NYC, as the actual owner of the land, agreed to sell the land to the Residential Unit? There must be something in the condo declaration; alternatively, has NYC bound itself to the Sponsor's promises in the coop offering plan? A page citation along the lines of those you provided earlier would be outstanding.

Never mind. I see it now. As Bklndent pointed out above, Article 25 of the Residential Unit Lease (the Residential Unit Lease is Exhibit 12 to the Offering Plan, and the Declaration of CP3 Condominium is Exhibit 13 to the Offering Plan) is where NYC agrees to sell the land apportioned to the Residential Unit to the coop. Again, really interesting offering. The Jennifer Realty risk is still there, but that risk is there with every new development, and all the Offering Plans are clearly disclosing that risk, so I agree that if you want new development, that is a risk you are going to have to take. The best you can do is go with a reputable developer, and it seems that Bklndent has done all the homework and is happily off to the races, and more power to him (or her)!

I am a him! I am glad that I was able to provide some clarity to this. I understand that it is something that people don't see very often. Here are some other areas where the purchase of the land is in writing by both the seller (New York City), and the Sponsor (Extell):

Page 616 is page 57 is the lease agreement between the City of New York and the tenant of the lease, which is now Extell. NYC (the landlord) in this document agrees to give the tenant (Extell) the right to purchase its interest in the premises for a fixed price.

Furthermore, on page 598, where New York City is "Landlord,": "Section 9.16. (a) Landlord agrees that it will not mortgage its fee interest in the Premises and (b) Landlord further agrees that it will not sell, convey or relinquish its fee interest in the Premises except to (i) Lease Administrator or its successor in function, or (ii) the Person exercising the right to purchase the Premises pursuant to Article 25 hereof."

On Page 691, in the Condo declaration, "26.1 As of the date hereof, all of the Units are owned by The City of New York in fee simple and are leased to the Unit Tenants pursuant to the Unit Leases as set forth in Section 2. 2 of this Declaration. As more particularly set forth in each Unit Lease, and subject to the terms thereof, and without intending to limit any rights expressly reserved to NYC as Fee Owner herein, The City of New York, as landlord, has granted to each Unit Tenant all of the respective rights and obligations of a Unit Owner hereunder."

In the Condo Declaration, Page 683, Article 27: "In accordance with the Unit Lease for the Residential Condop Unit, the Apartment Corporation has the absolute right to purchase the Residential Condop Unit at any point between 2031 and 2055. At such time as the Apartment Corporation exercises its right to purchase the underlying the Residential Condop Unit, or at an earlier time if permitted by Law, this Declaration, the By-Laws and the Floor Plans may be amended and restated (the "Amended and Restated Declaration") at the sole cost and expense of the Residential Condop Unit Owner to provide for the subdivision of the Residential Condop Section into individual condominium units and appurtenant Limited Common Elements."

On Page 50 of the sponsor's offering plan: "The Residential Unit Lease provides the Corporation with the absolute right to purchase the Residential Condop Unit at any time between July 1, 2031 and June 30, 2055 (the "Option Term") for a fixed price."

I'm not going to keep going over the same thing. Nothing above creates a Land Lease situation. Of course when any seller of any condominium sells anyone any condominium unit they are selling both the unit and any interest that unit might have in the land owned by The Condominium. But that doesn't mean that the unit being sold owns the land or is selling the land. It's only ownership interest in the land is through The Condominium.

What may be confusing people is the fact that the unit owner in this case is NYC, and they were who owned the land. But when they sell the the Residential Unit they are only selling whatever interest that unit had in the land, not any land interest NYC might own. You're not getting Prospect Park either, even though NYC owns that too.

@30yrs - There are multiple components to the offering that all work together. Forget land lease concepts and look at this as an entirely different animal altogether. I can’t wrap my head around the severed leases and tax lots and how that works if the condo units sit on top of each other, but that confusion notwithstanding, I do see a plan under which nyc has agreed to sell both the land and the residential unit to the coop if the coop elects to exercise the option granted to it under the Residential Unit Lease.

"Tenant is hereby granted an option to purchase the landlord's interest in the Premises."

How is "the Premises" defined in the Offering Plan?

" I can’t wrap my head around the severed leases and tax lots and how that works if the condo units sit on top of each other"

But that's how every Condominium works:
You can't have a Condominium on leased land because (aside from certain statutory case mentioned above by myself and Ali) the individual tax lots need to be tied to land ownership THROUGH THE CONDOMINIUM. Every condominium unit has an interest in land, but it's an undivided interest*. That is to say no single owner can point to any particular square foot of the property and say "that one is mine." All the square feet are only owned collectively. So any condominium owner (and this is the case here too) always sells their undivided interest in the land along with the unit, because not only is the land interest not severable from the condominium unit, it's also not severable from the other unit owners land interest.

It's like having a glass of water where the owner of the oxygen atoms wants to sell (I know that's a very imperfect analogy).

* "Undivided Interest" is a term that can be difficult to understand, but it is key to understanding how jointly owned Real Estate works.

“Premises” is defined in the Residential Unit Lease I believe (as opposed to coop offering plan or declaration of condo) to include both the building and the land. I don’t pretend to understand any of this, but Bklndent did answer the questions that leapt out at me.

PS - The way I read all the highlighted provisions is that the interest in the land that will be conveyed with the Residential Unit is only whatever interest in the land the Residential Unit owns through the condominium; the other two condo unit owners in the development will continue to own the land associated with those condo units.

Question for 30yrs - I think we are all on same page now that this is a leasehold cooperative rather than a land lease. We all agree that whatever interest Residential Unit has in the land will transfer with the sale of the Residential Unit. A new question I have is why did NYC the need to create three severed ground leases? Those would seem to be superfluous to what was needed to create the leashold coop and just added confusion for me.

I'm not sure what you are asking. There are no ground leases. There are 3 Condominium leases.

@30yrs - Thank you. Then everything makes sense, and it just shows how cursory readings such as mine can be dangerous.

Think of it this way:
Whenever you rent a Condominium or a house, you are renting the owner's interest in that property (obviously the could be special lease terms written into any lease which could change that: you could rent a house and put in rider that the own still retained the garden, the tenant was not to trespass upon it, etc. But that wouldn't be standard.) But are those situations ground leases just because there was some aspect of land included in the lease? In my mind a Land Lease is when the landlord is ONLY leasing the tenant the land and nothing else, and the tenant owns the "betterments and improvements."

NB just because those betterments and improvements may revert to the landowner at the expiration of the lease doesn't mean they aren't owned by the lease holder during the term where the lease is in full effect.

Yes, it all makes sense now, and I give the lawyers and Sponsor credit for making the disclosures loud and clear. They make clear at the very outset that leaseholders could be left with nothing if option to purchase is not exercised and new lease terms are not negotiated at the expiration of the lease. The documents all form a contract allocating risks, and I fully own the fact that not being a student of that particular market (b/c I am neither a buyer or seller), I have no opinion on the offering at all, but I will be watching it to further my own education.

MCR absolutely. It is anticipated that the residential unit will be able to come up with $1 in 2025 when the tax abatement expires. The corporation will then own the residential condo (which is 93% of the condo), and its interest in the land.

The commercial condo will continue to be owned and operated by NYC and will have two members of the seven member condo board. (The residential condo will always have five, so, a large majority).

The residential owners could then decide to leave it as a coop, or convert to individual condos, which is discussed in the offering plan.

Everything is spelled out in the offering plan, and I agree that the risks are fully disclosed, as they are in every new construction these days. The risks are almost always all the same. It is true that the coop could decide not to purchase the land for $1, and then it would remain a land lease, although, I fail to see a situation where the residential owners would decide to not purchase the residential section and its land.

It can't "remain a land lease" because it isn't a Land Lease no matter how many times you think that repeating that fabrication will make it the truth.

@30yrs - I don’t think Bklndent’s misuse of the phrase “land lease” is material to his understanding of what he has purchased. Just substitute “leasehold” wherever he writes “land lease.”

@Bklndent - You do strike me as someone who has thought all of this through and done all of your homework. Keeping my fingers crossed that Brooklyn Point becomes one of the preeminent buildings and many thanks for your patient and productive engagement throughout the discussion.

So should we move on to how heavily the Residential Unit is going to be subsidizing the Real Estate Taxes of the Commercial Unit after the tax abatement expires?

Ha! I noticed your comment on this point early in the thread (retail unit is approx 11% of square feet but only 7.8% of common charges), so I am guessing Bklndent did too, so I’ll leave you two to discuss that further, as well as the possibility of Extell’s retaining indefinite control of the coop board. Maintaining control of coop board is not Extell’s thing, is it? (unlike at least one other “developer” I’m aware of). Accordingly, I’d be inclined to assume that risk with Extell. Re subsidizing retail space, I have no opinion on that, but could see myself being okay with that if the offering had what I was otherwise looking for.

Do you foresee a scenario where the Sponsor retains indefinite control of the coop board either through lack of sales or deliberate design and ultimately decides not to exercise the option to purchase from the city?

Please, someone make this thread go away! Lol. It's like driving by the proverbial car wreck on the highway...

@Keith - But I am learning so much!

@Rock28 - For my part, no. I cannot imagine what the Sponsor would gain by doing that, but as could not be more clear from this thread, I don't understand the bulk of this stuff.

MCR,
More important than the square footage is the value and historically in buildings like this the Dept of Finance would assess based on greater than 50% of that attributable to the commercial portion.

MCR,
This is really just for you:
https://cooperator.com/article/mixed-use-buildings/full

I know it's over 15 years old, but should give you some idea of how having a majority interest in the Coop and having the ability to appoint a majority of the 5 seats on the Condo Board, in addition to the 2 seats the Commercial Unit already has, could have the Condo Board allocate more costs to the Residential Unit.

@30yrs - That is a great and densely informative article. For a relatively recent case where all the risks materialized, arguably by the developer’s business plan from the get go, see Bauer v Beekman International. As the article you posted highlights, these are fact intensive cases where litigation is incredibly expensive and problems of proof render justice elusive.

And that's the problem with a lot of these risks:
Generally you have small unit owners who are fighting to retain property values/rights vs deep pockets developers who are fighting to make larger profits while using the cash that the property in question is throwing off to fund their legal war chest. And the Offering Plan is not a negotiated document so while inconsistencies might be construed against the maker, they aren't inconsistent - they are brutally geared towards the Sponsor's interest. This particular offering is a Rubic's Cube by design which seems to intentionally lead buyers to believe representations by those marketing which aren't really accurate. I'm not going to take the time to fully read and digest that 800+ page Offering Plan and my guess is neither are any of the buyer's attorneys because they can't charge a client $7,500 just to review an Offering Plan. But if I did, I'm willing to bet I'd find more inconsistencies from what the marketers are claiming and more red flags.

There are tons of lawsuits from Condominium purchasers against Sponsors because their marketing teams made promises which the Developer didn't deliver on - from a unit owner at Zeckendorf Towers who was unhappy that the drawings for their huge terrace in the marketing materials showed planters, benches,trees,etc and the space delivered was full of vent stack "mushrooms" from the commercial space below, not one of which appeared on the marketing materials; to 56 Leonard St where supposedly the buyer was promised "soaring 14-foot ceilings, a private elevator, a breakfast bar and an electronic curtain system for the apartment’s floor-to-ceilings windows"
https://therealdeal.com/issues_articles/when-luxury-leaks/
Note that article also points out:
"At the same time, New York generally sees fewer of these cases than other states, Saft said. The primary reason for that is that the state attorney general requires sponsors to meticulously detail their projects in offering plans. Other states don’t have that level of guarantee on a project. Nonetheless, he estimated that 10 percent of new buildings — residential and otherwise — wind up in litigation."
But what happens when the Offering Plans start becoming the problems themselves? Again, I haven't read the Coop Offering Plan (and I don't need to in order to make the assertions I have made in this thread because they are based on what I read in the Condominium Offering Plan which supercedes it) but from the confusion I'm seeing I'm not sure this plan would have passed the AGs Office back when Doug Heller was in charge of these things (the author of the article posted about mixed use buildings).

"so while inconsistencies might be construed against the maker, they aren't inconsistent - they are brutally geared towards the Sponsor's interest." So basically all of these offering plans are the same. Are you trying to make the statement that no one should buy a new construction unit? That is a little ridiculous. Let's also keep in mind that you have not read or seen this offering plan.

"This particular offering is a Rubic's Cube by design which seems to intentionally lead buyers to believe representations by those marketing which aren't really accurate." This is patently untrue because:
1. YOU HAVE NOT READ THE OFFERING PLAN, so how can you have an opinion as to who it misleads?
2. Anyone who purchases based on an offering plan, and any real estate attorney will tell you that you cannot rely on what the marketing materials say, or what the marketing team tells you. It is actually written into the contract that you sign when you purchase a new construction in New York State. So, if it is not in the offering plan, you cannot expect it.

I have actually not provided to you any references to marketing materials in anything that I have said. The citations that I provided were from the actual offering plan.

"I'm not going to take the time to fully read and digest that 800+ page Offering Plan"
Everyone knows that you aren't going to.

"against Sponsors because their marketing teams made promises which the Developer didn't deliver on". Again, no one will tell you to take anything the marketing teams say as concrete... It has to be in the offering plan.

"to 56 Leonard St where supposedly the buyer was promised "soaring 14-foot ceilings, a private elevator, a breakfast bar and an electronic curtain system for the apartment’s floor-to-ceilings windows". Was this in the offering plan? If 14 foot ceilings and a private elevator for your unit are in the offering plan, but the developer does not build them, then the buyer definitely has a right of rescission.

" I haven't read the Coop Offering Plan (and I don't need to in order to make the assertions I have made in this thread because they are based on what I read in the Condominium Offering Plan which supercedes it)". Are you sure that you actually read THAT offering plan? Maybe it was for a different building.

I just can't with this anymore. You clearly have some sort of negativity toward this building which I don't understand. Maybe you are just negative on every building, I don't know. But what I cannot understand it why you seem to want to spread complete misinformed misinformation about the building without having actually read anything first hand.

Say it's a Land Lease again.

@Bklyndent - I do not think it is personal to this development. I do think 30yrs’ overarching point is “Beware of all new developments.”

@30yrs - The Offering Plan for our 1925 coop (including price schedules, house rules and form proprietary lease) is 25 pages total. And cumulative voting is part of the COI. They just don’t make things the way they used to!

Bklyn you're not converting anyone here. I'm glad you like your unit.

Who am I trying to convert? I am not telling everyone that they should go buy a unit here... What I am saying, is that people should inform themselves about the details of what they are discussing before making statements and drawing conclusions. Is that too much to ask?

YTest

Interesting we have a client considering bidding on a unit here. I pointed him in the direction of the thread, he had already read it thoroughly!

Has anyone heard about delays in closing amidst the Covid-19 crisis?

The website originally said move in, in "early 2020". It got changed to just "2020" ~2 months ago. I'd imagine it's going to be late 2020 at the earliest.

I suspect that at least part of this project might have been financed on the Israeli bond market. If so, things could get interesting.

Was driving by downtown and by the looks of the lights on in the various apartments -- maybe many people have already closed and moved in? How have people enjoyed the building thus far?

The first closing just happened on July 22. The lower floors have their COA, but none of the amenity spaces are currently open yet.

How many of the 458 units are in contract?

Sounds like those who signed contracts before are already losing money.

"When Extell hired Serhant, only 10 percent of the building’s 458 units had closed. Goldstein says there has been “a giant uptick in every statistic” since then. “People are able to get great deals now,” he says, “that they weren’t able to get before.”

https://www.curbed.com/amp/article/ryan-serhant-million-dollar-listing-nyc-real-estate.html

" 2 years ago
Posts: 52
Sales are going extremely well. "

BWAHAHAHAHAHA!!!

Two years ago sales were going extremely well. That is when I purchased my unit here. Unfortunately, we did and do have a worldwide pandemic that has caused a big downturn in New York City real estate sales and prices... Have you heard about that? It's called the Covid-19 virus and many people have left the city... not sure where you live or whether you watch the news.

Anyway, sales of the building have been doing fine. Serhant came on when the building first started closings, so yes, there were only a few CLOSED sales at that time, but over a hundred more in contract. Every week we have new closings/residents moving in and new contacts being signed. The building and its amenities are beautiful and exactly as described in the offering plan.

Please do continue to let us know when the building is in the news. I know you have an obsession with this building, so I'm sure nothing slips by you.

Bitter much?

Don't worry stache, according to Keith people's goal when buying Real Estate is not to make money.

>30- I always appreciate your take on things but here I understand Keith, who is basically saying buy a place you want to live in. You might make money when you go to sell, but that is not why you bought.
Flipping Is one thing , living is totally different

Pp

But that being said I am an investor in a firm that invests in commercial real estate

And they sold the Helmsley Palace at a really good markup

And we bought our apartment knowing that it is the elephant on top of the building ; because it is spectacular.

Putting aside the question of the land lease, the 421a abatement here seems like a ticking time bomb relative to (say) 11 Hoyt.

It looks like 1BRs here sold for $1.35M with $1220 in taxes abated for 22.5 years. Net present value of $300K, so we can think of it as buying 22.5 years of pre-paid taxes. So an actual purchase price of $1.05M. These apts have $930 in cc and rent for $3500.

Meanwhile, similar units at 11 Hoyt renting for just under $3500 sold for that $1.05M, but with cc of $750 an taxes of $700. So monthlies of $1450.

The 11 Hoyt calc seems straightforward: $24K net on $1.05M, so a net yield of 2.3%.

By my math, Brooklyn Point’s monthlies are $2150, 50% higher. That means a net yield of $16K on $1.05M, so 1.5%. So appreciably worse for effectively the same product. In my mind, it costs 50% more for the same thing.

I wonder if buyers are looking at this as netting $3500 - $930 = $2570 a month. So $31K per year on a purchase price of $1.35M, making it a 2.3% yield. Seems to based on a fallacy that the loss of each future year of $15K in tax abatement does not result in an loss of $15K in value relative to 11 Hoyt.

BKIndent or other buyers here, can you please illuminate. What drove you to purchase here rather than 11 Hoyt?

Curious why 11 HOYT is $750 in taxes and $1220 if not abated for the similar unit in BK Point? Also, what reinvestment rate are people using for taxes not paid?

Inonada,

The taxes that are advertised at 11 Hoyt are the taxes prior to full completion of the building. You will have to look at the estimates for what the second year taxes will be. They will be almost double what they are now.

1.35M is for many of the higher floor 1 beds, or the ones that have views of Manhattan or open views of Brooklyn. Most of the 1 beds sold for between 1.05 and 1.2M.

You also have to consider that over the next 25 years, we don't know what the taxes at 11 Hoyt will be. We do know that they will always go up. How much will they go up every year? We don't know the answer to that.

The rental prices you are seeing now at both buildings is the result of a depressed rental market. Across the city rent prices have gone down. I do not know what the rents will be in 2030 or 2040, but hopefully a lot higher than they are now.

As for me, I liked Brooklyn Point better than 11 Hoyt. It has a superior location to 11 Hoyt, and the apartments have higher end finishes with better views. I also thought that Brooklyn Point had the better amenities package as well as the tax abatement.

Bkindent, While I do not have a view on prices in BK point or 11 Hoyt, but your due diligence is pretty impressive.

Thanks, BKIndent. If true taxes are double what 11 Hoyt is showing, then it all makes sense in a relative comparison. In one case you are pre-paying taxes, in the other case you are not.

FWIW, in my mind, the rate of tax increases and cost of pre-paying taxes offset in expectation.

Nada, What reinvestment rate vs mortgage financing do you use for average buyer who is interested in tax abated building? And what percentage tax increase per year. For latter, it is probably no more than 2-3 percent for a new condo. Older stock has higher rate of increase due to lower base.

2-3% sounds about right to me.

Its a relatively low-volatility payment stream. So you start with a base assumption that future property taxes will remain a fixed fraction of the NY economy, and that ends you at inflation + productivity growth. A material deviation from that (say 1% a year) leads to you a pretty differently place policy-wise (30% increase/decrease in property tax as a fraction of the economy). So some deviation, but not a huge amount. So adjust a little for that risk premium.

Tax part is not so hard but it is a question of what return people buying tax abated apartments are willing to assume on their tax abatement as they may be monthly income strapped too to be attracted to tax abatement . Increase in upfront price is mostly financed via mortgage - call it 2.5/3 percent. If they assume 8 percent return (not saying what is the right number), it can make them pay more for tax abatement that a risk based reinvestment rate (call it mortgage rate) will suggest.

inonada,
Don't forget to factor in the price drop when the abatement expires.
https://streeteasy.com/blog/nyc-tax-abatements-expiring/

I'm also not so sure about zero allowance for any expenses other than maintenance (vacancy, repair, Broker fees, insurance, etc).

I was factoring in a drop of $300K over the next 25 years as the abatement rolls off, 30yrs. And yes, there are other expenses: I was just leaving them out to keep the comparison simple.

30 I bought my place with the hope of making a profit but I realized even if the value drops by half, I can still live in it so it serves the main purpose. People buy cars knowing it depreciates but it still gets them places, and some wind up living in them.

Based on these 2 units:
https://streeteasy.com/building/brooklyn-point/35a

https://streeteasy.com/sale/1361422

And adjusting for floor based on mtc difference it looks like they dropped prices 23% ?

I’d guess less: the cc is probably sq ft based, not price based.

Noting ask on 55A was $2591K vs $2462K for 47A:

https://streeteasy.com/building/brooklyn-point/47a
https://streeteasy.com/sale/1361422

That puts it at $18.5K per floor, or $370K for so floors. Makes the equivalent ask at 35A $2221K, maybe shave it to $2184K based on cc.

Counting upward from 28A at $2051K:

https://streeteasy.com/building/brooklyn-point/28a

You get to $2180K.

So 10% price cut would be my estimate.

In coops the initial offering everything is priced at the same $/share. Maintenance must also be equal $/share. So the ratio of mtc must be the same as the ratio of the initial asking price.

Note 45D at $3,275,295.00 (original ask) vs 43D at $2,610,000 (current ask) as well.

The original asking price is overpriced in this building, I’m not surprised to see another 10 to 15% drop in asking.

Condos tend to charge CC by sq ft these days, I think. In my current building, CC per sq ft is pretty much the same across all apts despite ppsf that can vary (even at initial sale) by a factor of 2.5x. Last building was similar.

Good find on 43D vs 45D.

Comparable building which is a condo (same developer, vintage, mix of units, etc) 1 Manhattan Square.

11G 723SF Common charges $775
60L 709SF Common charges $953

It will be interesting to see what 41D actually closed for:
https://streeteasy.com/building/brooklyn-point/41d

It was originally listed for $3,113,490, then a couple of price drops later $2,459,000, but then raised to $2,500,000?