The new year is still very new, without a new development to rave about, per se.
I have been busy viewing “busted” new developments, leftover units in Upper East Side buildings that were not properly renovated (I won’t name names), and resales in recent new buildings.
It has me thinking of the warts on current projects, particularly those building with Tax Abatements and those without.
There are a few flavors of tax abatements related to new construction (421a) and those of pre-existing structures (421G, j51).
Then there are buildings with no abatements whatsoever.
Further, the 421a program will not last forever, and many buildings constructed in 2004-2008 are seeing their programs expire starting next year.
If you live in a cooperative, you are likely to see big discrepancies in monthly costs when compared to other buildings, which vary by the number of units to carry the costs, underlying mortgages your building has undertaken, tax increases, and capital expenditures.
If you live in a condominium, the monthly costs are impacted in the same way- except that tax abatements in newer projects make the swings even wider.
Take 101 West 87th Street for example, a new condo project I wrote about last month which has been a rental building since the late 80’s/early 90’s.
Any tax credits the building had are long gone, leaving the monthly common charges and taxes
on these new purchases to be very high.
How high?
Well, the building only has 66 units, which helps it deliver great service to its residents.
However, the common charges are $1.16 per square foot, and the taxes are $1.25 per square foot, both per month.
That adds up to $2.41 per square foot.
Gorgeous View
I think back to last year, when I sold the penthouse at 45 East 30th street.
This 4400sf unit (plus 2500sf of terraces)
had carrying charges of nearly $13,000 per month, or approximately the same per square foot cost, once you factor in the outdoor space correctly.
We argued at the time that the monthly cost was
one big impact of the number at which we sold the property (just under $5mm).
Why would this not equally impact a property like 101 West 87th?
Then again, in a smaller unit with a layout that appeals to most buyers, should a buyer care?
The most tony cooperatives see monthly costs in this range all the time.
$3.00 per square foot is not shocking compared to the $4-5/square foot in projects like The Mark Hotel.
Further, when most tax abatements, $2.00 per square foot is going to be commonplace in nearly all condos.
And with taxes continuing to go up, does a 20% increase over and above the “average” make a difference?
I would say yes, but only compared to its neighbors on the West Side- not the East Side.
When compared to full-service buildings on the West Side, both cooperatives and condominiums, it seems to be nearly double what other buildings’ apartments cost on a monthly basis.
There are many Upper West Side buildings with a monthly cost of $1.25-1.75 per square foot, if a coop can be measured by square footage.
For instance, if a 2000 square foot West Side cooperative unit costs $3500 per month to carry, it would cost $4820 per month at 101 West 87th, and the unit would cost about the same.
And on a mortgage, a $1300 payment could afford someone a mortgage of $500,000.
So it seems that it should be a factor in the calculation.
And perhaps the $1300 per square foot selling prices are accounting for this.
But should a project like this actually sell for $800,000 more because the common charges were lower?
Compared to the East Side, where maintenance often pushes over $2.00 per square foot now, it would likely be less of a consideration.
Decisions like these are impacted by the lack of inventory, but I thought I’d offer up this food for thought this month, and I’ll follow up next month with more properties over which to drool.
Happy Hunting!
Scott