Curious about deal structure here

30, I researched this for another similar building. The common charges and taxes for affordable apartments are indeed being and will continue to be subsidized by owners paying full prices as common interest is allocated in proportion to the price paid.

It's just shocking to me that attorneys who are supposed to be reviewing these deals for their clients are not warning them off deals like this (in same way as I was shocked when all the J-51 tax abatements we're expiring and very few owners were aware of the impact it would have on their maintenance).

While it is very unfair to pay for your neighbor’s real estate taxes and common charges after having paid taxes in multiple different ways, there is transparency as the common charges are already high and projected taxes after tax abatement reflect larger share.

Personally, even if I had the money to spend, I wouldn’t want to be a part of this type of socialist set up purely on principle.

This is a peculiar dichotomy. Does the condominium actually own the rentals? Will the "affordable" rentals actually constrain the tax rates for the condos? When you look for comparable rentals to calculate taxes, one might argue that the most comparable rentals are downstairs, and very cheap.

Would love to known the final tax treatment after abatement ends and how subsized apartment taxes are calculated.

nyc_sport,
I don't think they can use the rentals in the same building for the tax assessment because they don't use individual apartment rents, the use the entire aggregated Income and Expense Statement from a whole rental building.

BTW this is also why I would probably never buy into one of these "half rental, half condo" buildings - because you know the Sponsor shifted costs onto the condo portion, yet at the same time has a huge vote as far as doing anything building wide.

Does anyone know any specifics about 685 First Avenue which is smixed rental/ condo building? More floors rental than condo . Don’t know if there are any affordable units

Could it be that the condo owns the rental portion?

The attraction here is the owners will get reduced property taxes for the duration of the bonus. I'm not a lawyer but it seems to me after the bonus ends the rentals will probably become stabilized.

30yrs -- I agree, which is why I wondered who owns the rental portion and how ownership is structured. I assume that the rental portion is a separate tax lot and ownership retained by the developer, as it was the developer that promised to create and maintain the affordable units. If so, the rentals could effectively be their own building, with 107 units at a seriously below market revenue per sq ft. Also, the other new development rentals around Hudson Yards also have fairly significant low income allocations, which might depress the rent per sq ft equivalents used to set fair market values.

If I remember correctly, the majority of Hudson Yards "affordable" rentals are scheduled for "Phase 2" of Hudson Yards (if that actually happens).

nyc_sport,
I haven't seen the offering, which is why I asked, but it's fairly easy for the sponsor to play with the numbers especially when they won't actually be selling a unit. Since the RE taxes and Common Charges get apportioned ad valorum (unless there is some special structure allowed in this case) if you set the (arbitrary) value to some very low number, both the Common Charges and RE taxes get set to much lower $/sf numbers than the units you are selling (even though it's hard to argue that the cost of operating these units is that much lower than that of the sold units). As such, the Common Charges being collected from unit owners end up subsidizing the sponsor's unit (i.e. all the "Affordable" units). It would not be hard to structure the deal in such a way that the "Affordable" units threw off a profit even when "shouldn't" be doing so based on the percentage of actual operating costs they present to the building.

30, In general, aside from this situation, do you know what is the rationale for setting common charges ad valorum rather than by square footage?

There was actually a case in (I think) Museum Tower - where they had allocated an equal percentage of common interest to every unit within a line of apartments. A unit owner sued the city over his RE taxes stating (correctly) they must be ad valorum under the law, yet clearly higher floor units were worth more, but were being taxed the same amount. They entered into a private letter ruling to change that situation, and ever since that the AG's office sends offerings to be signed off by NYC Dept of Finance/Assessor's Office.
Under the AGs rules, percentage of common interest in condos and share allocations in coops only need to be "rational and reasonable" which has led to all sorts of "interesting" allocations by sponsors in the past.

Or maybe it was Olympic Tower?

Thank you. I understand the rationale for taxes based on value but can a condo have different common interest - one for common charges and the other for real estate taxes? The higher floor is not really using extra heat or doorman time.

Not as far as I know - the percentage of common interest is used to apportion taxes, operating expenses and capital items, just like with shares in a coop. This can sometimes lead to odd assessments : for example take a building wide window replacement. You could have a unit on a first or second floor with 10 windows which each had to be custom made (due to an arched top or other decorative element) where the cost of each window was $4,000 for a total of $40,000, and the assessment to the unit owner could be less than a high floor unit with 6 standard windows which cost $2,000 each for a total of $12,000.

Sales for 35 Hudson Yards opened with 15 Hudson Yards only half sold:
https://newyorkyimby.com/2019/03/yimby-tours-supertall-views-from-35-hudson-yards-with-architect-david-childs.html

I wonder what they had planned for? Obviously the original idea had to be that the market would be in substantially better shape than it is right now. At what point will they have to consider alternatives (selling at big discount, renting, reconfigure units) if they can't move these units?

30, I do not see any closings for 15 Hudson yards but I see rentals. Do you know why?

Note: they are talking about occupancy this Fall. So they put off marketing units till just ?6 months? prior to completion. By contrast 15 Hudson Yards units went on the market over 2 years prior to completion.

I'm assuming the reason you don't see closings recorded is the normal lag time in recording at the city registrar's office.

https://www-nytimes-com.cdn.ampproject.org/c/s/www.nytimes.com/2021/02/06/nyregion/hudson-yards-nyc.amp.html