What's the story with 301 East 63rd Street?

bad location

Oh, please, stop it with the snob curt reply "bad location". It's not CPE or Park Ave., but it's not Harlem or some parts of LES for that matter.

High maintenance Plus it's a land lease I believe.

I realize it's a little less residential than higher 60s, etc. The land-lease wold explain it. Any sense of why the 2BR has lower maintenance than the studio?

It may due to the proposed Second Avenue subway construction. Certain buildings along 2nd Ave, will have entrances and equipment installed in the buildings which will be a nightmare for the residents. I believe 63rd St is in the MTA plans. I know that's the case at 301 East 69th.

Looks to me like a 1-br that has had a dining area converted into a bedroom. I don't consider those real 2-brs, and by that standard it's still overpriced. Also it seems to be near the 59th st. bridge, which is a pretty unappealing area. North of that it's better but you're farther from transportation. That and the high maintenance are dealbreakers.

It's a land lease bldg and it renegotiates this year or next. also bridge exit. If you look on Google Street view you can see that intersection is so bad it often has a traffic cop.

I used to live in that neighborhood, a coupla blocks north. It's a nightmare. Traffic noise 24/7. Plus, the Second Avenue subway construction will indeed make life there a living hell. You couldn't pay me to move back to that 'hood.

The location is horrendous. Upper east side east of third avenue is a construction and traffic nightmare. I don't know why anyone would want to live there.

Thanks for the very helpful info. Going through a land-lease renegotiation seems like it would be pretty unpleasant.

This is right on second avenue at the bridge runup. This area is loud, and it can be tough to cross the street with the traffic.

This should be cheaper than even a block to the east or west...

can someone explain to me the meaning of a land lease

I looked at an apartment in the summer time there and the maintenance was $1500 and it just jumped up to $3500. Something is not right, maybe there are structural issues?

Landlease buildings are radioactive very often. Here, the landlease is likely about to expire in less than 30 years I imagine. That means on the day the lease term ticks down to 29 yrs 364 days, no bank will issue a 30 year mortgage any longer and you'll basically be stuck unable to sell the apartment. To avoid this, the coop has to renegotiate the coop's "rent" with the land owner so a new lease can be generated extending the time period say 10 or 20 or more years beyond the current expirations. Then banks will lend again and all will be right with the world for at least a number of years into the future until the lease comes up for renegotiation again.

But in such negotiations, the land owner essentially holds all the cards. The "rent" can double, triple, quadruple. If the coop says "no," and can't reach agreement, each shareholder's investment can disappear I believe.

Here, it would seem that in anticipation of a tremendous rent increase, the Board has raised maintenance fees to increase reserves now in order to be in a position to phase in the coming increase in increments and to hedge against defaults by shareholders who won't be able to afford the new fees. This is among the highest risk types of coop purchases.

There was a story on the UrbanDigs site about this building.
http://www.urbandigs.com/buyer_tips_tricks/
Its a nightmarish situation.

Is there a way to ind out i a building is a "land-lease"? Other than asking on this board, of course. :)

Couple of tell tale signs: (1) listing price is below market value for comparable units in nearby buildings; (2) maintenance is out of what by a lot; (3) none of the maintenance is tax deductible [I think that is the case in a land lease building but I'm not certain--not talking about NYS or quasi-public owned landleases like Batt Pk City]; ask the agent. This isn't highly secret information.

Wow, with a $3.5k maintenance nut, the Junior 4 still has ways to go to. The maintenance alone is barely under what it would cost to rent that place. There is no way it's worth more than $250/$300k.

This building has just renegotiated its land lease and unfortunately the maintenance went way up to cover the new rent. However, the building is in the process of purchasing the land which will at least make the maintenance tax deductible.

barbiduleny, I wouldn't take this place for free. Let's face it: a one bedroom apartment (and that is what this really is) in a PRIME area would RENT for less than $3.5K. Everything about this apartment is absolutely absurd.

I can't believe the price slashings on this building! I feel bad for someone who can't afford their maitinence.

I don't know whether to feel sorry for the current owners or not... did none of them listen to their RE lawyers before purchasing??..

Its such a sad story, these guys could be literally loosing their life savings over this!

A land lease nightmare doesn't catch anyone by surprise. At least it shouldn't. It is all there in the due diligence. Nothing is hidden.

wow what a disaster... thats funny i was looking at this building before i bought! but if you are at all a smart buyer (you dont have to be that smart), you can certainly catch whether buildings are land leased or not. exactly - nothing at all is hidden - the brokers will even tell you! i never realized what a terrible nightmare this could end up as, though.

101 W 23rd St. is another cautionary tale in land leases. Sales activity basically stopped last year. No idea if progress was made with coop and land owner, but it was pretty grim last I checked. Based on only two units being up for sale and tons de-listed, my guess is that nothing is resolved yet. No bank will lend in the building since the land lease expires in under 30 years. New buyers would have to put up cash for now and accept that their apt would be virtually impossible to resell as well as potentially worthless in 28 years when the lease expires if nothing is worked out. Long before that, the coop could be driven to bankruptcy.

It's not a 2 bedroom- it's a junior 4 plus the maintenance is ridiculously expensive for the size of the apartment.

soph, I don't think you read the prior comments. The problem here is 100% the land lease. All issues flow from the fact that the landlord and coop can't reach an agreement on a new lease. Identifying the problem as calling the jr-four a "two bedroom" is like saying no one ever sailed on the Titanic twice because the food wasn't very good.

that's funny

They are huge, nice apartments - one just went down to $150K - it's a land lease building and my guess is the rent just went way up. They can't give these apartments away now and the owners are probably having a lot of trouble coming up with $2700-3500 in maintenance in addition to their mortgage. very sad as now they're probably stuck.

The land lease doesn't expire in 30 years. The issue is the land rent went up significantly and maintenance went up a lot to pay for it. However, their is an option to buy the land. This needs to be done...but some tenants say they can't afford to pay the higher maintenance or come out of pocket to pay an assessment (not the whole purchase price will need to be assessed as every co-op in Manhattan has a mortgage) to buy the land. These same tenants don't want to sell as they are probably underwater vs. their mortgage or have lived in this building forever (at least those that have been in the building forever have a low purchase price and would get out at a profit). Those that have lived in the building for a long time likely have forgotten that their building had a land lease.

Some brokers are no help as they don't know how to do math. For every $100 increase in maintenance, the price should decline by $15,000 (simply take a mortgage and maintenance and add it together and compare to comparable building). At the prices things are selling at now...if this building ends up buying the land, some people will do very well.

we are going to buy the land and restore financial stability of our building, it's the only sensible thing to do...

was the land bought by the coop corp?

Last I heard was no but they extended the land lease for something like 5 years but an option to buy for around $33 million.

I tried to do the math to justify, as advertised by the broker, pay cash to buy upfront and have only maintenance to worry about going forward. At the end it makes no sense since your monthly nut for say a 1 bedroom will be at least 3,000 a month, with potential increase to way over that if land is purchase.

well $33 million is a lot better than the $53 million figure that was originally discussed... are you sure about the $33M?

I was wrong, is around 53mm. Apparently the co-op board decided to buy at a fat premium. The land lease is based on market value of the land at 32 mm as of 2009.

This building is doomed. Even if you take the apt for free, your maint will reset in 10 years to a higher amount or if co-op does buy the land at 50+ mm, your maint will almost double.

Can someone please explain the current situation of this building? I see in listings now that the land lease expires at the end of 2059, so it's well into the future. And the mntc/CC on the apt I'm looking at is only $867 - high, but not exorbitant. Assuming you can rent it out for about $1200/month, you're still making money on the deal, no? And if the land lease is extended through 2059, why would the bldg buy the land now at such insane prices?

Look at the listing "occupied rent stabilized" - someone's already in the apartment, and if they have a good rent they ain't goin anywhere!

Ah, the rent stabilized is a big catch too here, I suppose. Even if the mntc doesn't suddenly spike, it will catch up to the stabilized rent before too long. I guess the above posts are correct - this place is not worth having, even for free.

Down to 75K a unit!

And they still won't sell, because based on the other listings in the building the mtc has already spiked. My guess is that those $75k listings listed the previous maintenance fees. What happens if the entire building just defaults on the lease? Everyone loses equity. Land lease buildings are baaaad news.

Pretty funy if you look at that older listing for a bundle of 16 units, all RS occupied. Monthly rent roll at about $16K vs $45K maintenance. All yours for $1.2MM. But, parking is just $400/mo, so that is a pretty good deal. Those are some pretty cheap RS leases.

Still will make a fine froggy trap to post a unit in craigslist paris.

Maybe we can buy a credit default swap from AIG on these units.

i think there may be some investment opportunities here. take unit 16C for instance. it's selling for $160K. let's say you invest $160k + closing costs, $170k total. your maintenance payment is going to be $1700/month through 2010 and will increase by about 20% after the land purchase, which will occur towards the end of 2010.

so from january 2011 and onwards, you are paying $2040/month in maintenance, with a guarantee of no more maintenance hikes. because there is going to be a mortgage on the $51M land purchase, the vast majority of your maintenance payment will go towards paying off the mortgage interest and therefore, about 70% of the maintenance cost will be tax-deductible.

let's say you are able to rent this unit out for $2000/month. the rental income tax will be offset by the tax-deduction coming from the maintenance, so you are basically breaking even on the apartment, as long as it's rented out.

you do this for 2-3 years. by 2013 the economy will hopefully bounce back. commercial real estate prices will start to climb again. the building will sell off the parking garage, together with some other properties and the maintenance payments will finally go down and be closer to the maintenance that other people pay in the area (while still being highly tax-deductible) -- so at this point, the apartment will regain its true equity value and you will sell it for $300K, if not more.

From 10B's sales listing, asking $240K for 925 sq ft with a $3324 maintenance:

"This Apt can easily get rented for over $3500 to cover all monthly charges!"

From 11B's rental history:

12/11/2009
Listed by Corcoran at $2,900.
01/01/2010
Price decreased by 10% to $2,600.
01/12/2010
Listing is no longer available.

UK, can't really agree with your figures. Based on what a broker told me, the current land lease is based on something like 30-35 mm. So when they do buy the land for 50mm, your main will almost double. So if it is 1700 a month now, it will be about 3000 afterwards. No way you can rent a studio for close to 3000 a month, not including your capital outlay.

As for the disposition of the garage, they may be able to unload it for 5mm, so it will offset the maint by 10% but no way it is worth half the mortgage, 25mm.

The only way, as far as I can figure, to make sense is to buy the unit for close to zero and live there yourself. Then with all the write offs, you are close to break even relative to renting elsewhere.

hofo, i have the financials. i know how much is being paid for the land lease currently and i did the math to calculate how much a 30 year fixed rate loan (using 5% as a conservative estimate), will cost. the difference between current land lease and the mortgage will amount to a 20-25% increase over the current maintenance payment amount.

moreover, once you factor in the tax-deductibility (20% on the old one vs. about 65% on the new), the increase on an after-tax basis, is almost a wash... so it's not so bad..

Under the land lease how are rent increases calculated and how often?

UNK, is the purchase price about $50 million for the land and have they closed on the deal? Just curious why the sponsor decided to dump a bunch of apts to the market at this time.

The co-op just closed on the land purchase. $45,000,000.

The new mortgage is $51,000,000. $3.2M they owed before, with a new $47.8M. The $2.8M must be for purchase expenses, fix-ups, etc.

NWT, I don't feel like ACRISing - is the mtge amortizing?

It doesn't say, or I missed it. Still don't get why some mortgages and/or consolidation-extension agreements specify rate and term while others don't.

Hmmm, 166 apartments, mostly studios and one-bedrooms. So an average one-bedroom is now carrying about $300K as its share of underlying mortgage. That looks to be factored into the current asking prices, with maybe some additional penalty due to buyers preferring to borrow themselves rather than second-hand through the co-op. Could be OK for buyers with good income but no cash, but then they'd be renting anyway.

Apt 12 F - one of several 1 BR's available for $75,000. New to the market!! No mistakes here this Apts is asking only $75,000!! For investors only, buy now below market value, occupied rent stabilized apartment. Current tenant is paying $1,371 per month. You get to pay maintenance: $3,538. Monthly loss is a mere $ 2167.
Please, somebody tell me - how would it make financial sense to do this deal??? Should they be paying you $75,000 to buy this place.

A bet on mortality. 30yrs once talked about a guy he knew who bought occupied apartments, complaining that being his tenant was a guarantee of longevity.

Of course, if standard postwar one-bedrooms like these fall to $300K again, you could buy here for $1.

From the HPD website: [lots of posts with things such as]

"....27-2018 adm code abate the nuisance consisting of vermin mice and roaches in the entire apartment located at apt 3b, 3rd story, 1st apartment from north at east..."

"...consisting of vermin mice at kitchen 2 sty east apt 2b..."

"Complaint Date Complaint# Apt# Complaint Condition Condtion Detail Location
08/05/2010 5223277 17G WATER-LEAKS ROOF-LEAK BEDROOM
07/30/2010 5219719 17G WATER-LEAKS ROOF-LEAK BEDROOM
05/26/2010 5178503 17G WATER-LEAKS CEILING BEDROOM
05/26/2010 5178503 17G WATER-LEAKS CEILING LIVING ROOM "

I'm guessing they put exactly zero dollars into this building while the land lease was getting sorted out, hence the complaints.

I don't think the $75 k would be a good bet without the RS tenant in place. Anytime the common charges are almost double what it would cost to rent in the area, it might be time to walk away.

i live in the building, first i'm hearing of the complaints above. been there for 4 years, have never seen any vermin mice or roaches, not even in the basement.....

It'll be interesting to see what the new maintenances are. As unk1911 said, they may not be that horrible. As of 12/2, the co-op is getting the income from the store and garage leases, so that'll be a good offset.

Once settled, the one-bedrooms at 301 E 64th will be a good comparison. Same vintage, but a more usual $6,000,000+ underlying mortgage.

The problem is going to be that that $51,000,000 mortgage is commercial, so has maybe a ten-year term, and rates will have to have risen. The same $51,000,000 in individual share loans could be locked in for 30 years. Overall, though, the co-op was probably smart to bite the bullet and pay the $300+ per square foot.

I walked passed the retail area, no tenants. I guess they can get some income from the parking garage but is it worth paying $150,000 for a jr 4 and have this huge side mortgage plus all the maintenance problem? My opinion is no but that is just me.

I'd also avoid a building with issues. But for some buyers it could work.

Take somebody making $200K, who could carry a $500K one-bedroom in a normal no-issues co-op. (Leaving aside whether they should buy at all.)

To buy that, they'd have to put, say, $100K down and borrow $400K.

But, if they had only $40K to put down, they could get a $200K place here and borrow only $160K.

They're still on the hook for another $360K in debt, but via the co-op rather than on their own whack.

The problem, again, will be what happens to the maintenance ten years down the road when that $51M has to be refinanced.

Oops, another $300K in debt, not $360K. I'm guessing what the share of the $51M is.

Would you be able to get a mortgage at a building with this much debt?

does this building allow subletting?

Seems to me there is still a limited buying universe here- those who want to own so badly but do not have enough for the downpayment on a normally priced studio+1-bedroom but can somehow afford the monthly nut - new grads maybe? Certainly not law school grads judging by today's NYT article.

Our resident expert unk1911 above talks about the monthly rent vs buy calculation being even but the reality is a regular one-bedroom is demonstrably cheaper to buy than rent presuming the mortgage/maintenance deduction. You're giving that up to buy at 301 E 63rd vs hundreds of other UES one-beds- for what? Basically a more levered asset purchase

I would be wondering if the 20% hike in maintenance is suppressed by a super-low variable rate on the new mortgage that would reset higher in 5 years. This plus the already evident flood of sellers who have been apparently unable to sell for the past several years would not make me want to jump and hit any asks.

I would pay $1 for the jr 4 given the high maint, uncertainty of future rate increase, and location next to the exit.

#5j had a foreclosure auction scheduled on jan 12, not sure if it happened. #5h has a foreclosure auction scheduled on march 2.

This building is on a land lease which renewed in 2010. The assessments to each unit is exorbitantly high. CitiMortgage has foreclosed on 3 units in the building as of this writing. The building will accept foreign buyers. Short sales are abundant. The building is working with all buyers. Ask your lender about purchasing but I only know of all cash deals here.

ave185 wrote "The assessments to each unit is exorbitantly high."
It isn't an assessment from what I understand. It is the actual permanent monthly maintenance.

ave185, it's no longer a land-lease. The co-op bought the land.

kylewest, right, it's plain old high maintenance until they pay off the $51,000,000 mortgage, so effectively permanent.

Do y'all think the maintenance would increase in the next few years or stay about the same?

Mayflower: I imagine the landlord ("LL") would take the coop to court. The LL would win and take possession of the coop. Shareholders would end up tenants. If they didn't pay rent, the LL could seek eviction.

It may be some other variation on this, but this is the basic gist. No scenario was ever going to end well for the coop. But the LL was not the bad guy here. There was in essence a contract that all parties knowingly entered into with eyes open. The fact that a party is later unhappy doesn't mean that party gets to stomp feet and ignore terms agreed to. No one was ever forced to buy into this landlease situation so no one can fairly cry foul now.

Right. It'd be like what happened with mortgage-heavy co-ops that went under during the Depression. The co-ops lost the property and the shareholders of the asset-less corporation became tenants of the lender. Just substitute leasehold for property and landowner for lender.

I still think i was correct 11 months ago

From the HPD website: [lots of posts with things such as]

"....27-2018 adm code abate the nuisance consisting of vermin mice and roaches in the entire apartment located at apt 3b, 3rd story, 1st apartment from north at east..."

"...consisting of vermin mice at kitchen 2 sty east apt 2b..."

"Complaint Date Complaint# Apt# Complaint Condition Condtion Detail Location
08/05/2010 5223277 17G WATER-LEAKS ROOF-LEAK BEDROOM
07/30/2010 5219719 17G WATER-LEAKS ROOF-LEAK BEDROOM
05/26/2010 5178503 17G WATER-LEAKS CEILING BEDROOM

Jason, what are you talking about? You think you could post something more direct and less cryptic?

Now now kylewest, don't be a "dummy".

"Jason, what are you talking about? You think you could post something more direct and less cryptic?"

Read the very first post. Then read what I wrote again.

Never too proud to own being a dummy. Thank you, Jason--just needed a little direction.

I am a dummy myself for still being on this board so late!! Good night!!!

NWT hits in on the head. no longer on land-lease, it was bought out in 2010. Only problem is they took out a 30 year loan to get the funds to buy the stupid building. So 30 years of insane maintenance. At least the common charges are 70%+ deductible if that interests someone...

Please keep in mind that the building has a retail space and garage on the ground floor. If I'm not mistaken, building might be able to convert to condup and then sell the commercial space and parking lot, at some point. This would allow them to pay down quite a bit of the land mortgage.

I'm interested but overwhelmed after reading this thread -- It seems the building was landlease (bad), but bought the land (good) at a high price and 10 year mortgage (bad) but could get income from stores and garage (good) which have apparently been taken by eminent domain (bad).

Anyone with a bottom line, real or imagined, on this building?

Thanks.

Just went back and read the mortgage again.

nyc10023, it is amortizing, on a 30-year schedule, though the term is only 10 years. It's at 4.875%, with hefty yield-maintenance penalties until the remaining principal comes due on 12/31/2020.

So, you'd be pretty much betting on what rates will be in 2021.

Many if not most of the sales since the end of 2010 have been by lenders. Looks as if for some owners it was cheaper to give the keys to the bank rather than keep paying maintenance.

Apartment 10JK is on sale now for 525K as of now. The monthly maintenance is $2,768 + $470 for garage, so a total of $3,238. I was wondering is this a good deal or not?

so the coop owns the land now? there is a 10 year assessment in place, what happens after that? will the maint go down?

Yes, the co-op owns the land now. It took out a 10-year $51,000,000 mortgage to do it. It's on a 30-year amortization schedule, so most of the principal will have to be refinanced in 2020. Then there'll be a new "10-year assessment" for the new payments, unless they stop shitting around and just include it in the maintenance instead of calling it an assessment.

It'll go down if rates are lower in 2020 than in 2010. Up if they're higher.