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Thread: Making a Change in Chelsea: Rentals Go Co-op

  1. #1

    Default Making a Change in Chelsea: Rentals Go Co-op

    October 18, 2002
    Making a Change in Chelsea: Rentals Go Co-op

    The 16-story Marais building nearing completion at 520 West 23rd Street in the western corner of Chelsea was intended to be a rental, but when the building opens next month, its 107 apartments will be for sale.

    The building will break from current development patterns by being marketed as a co-op — albeit without some of the restrictions normally associated with co-ops — and also by carrying lower price tags than have been typical in the area.

    The trend in recent years in Chelsea has been rental towers and condo lofts aimed at the upper end of the market, said Gil Neary, president of DG Neary Realty, sales agent for the Marais. The building's developers, the Hudson Companies, of Brooklyn, made the switch because "we concluded there was a tremendous demand for affordable-priced for-sale housing," said David Kramer, a company principal. Lower mortgage interest rates also supported the switch, he said.

    Within blocks of the project, nine rental buildings have opened in the nearly four years since zoning changes between Seventh Avenue and Avenue of the Americas from 16th to 23rd Streets permitted housing to be built in much of what had been a commercial district. The new buildings have a total of more than 2,000 apartments. Two more buildings, with nearly 600 apartments, are planned, including a 327-unit building at 555 West 23rd Street, opposite the Marais. Twenty percent of the units at 555 West 23rd Street will be set aside for families with low and moderate incomes.

    "We could be reaching a saturation point," Douglas Wagner, president of Benjamin James Associates, a Manhattan brokerage, said of the rental construction. So far, he added, rents are holding or rising, and incentives, like a period of free rent, are disappearing.

    At 22 Chelsea, a new 50-apartment rental building at 160 West 22nd Street, the Benjamin James brokerage began leasing five weeks ago. Tenants have signed leases for 46 apartments, which Mr. Wagner said range from 400-square-foot studios to 1,050-square-foot two-bedroom apartments. Occupancy begins next month. Monthly rents at 22 Chelsea, which will not have a doorman, are $1,590 to $4,490, Mr. Wagner said.

    At the Marais, prices for the 460-square-foot studios to 1,000-square-foot two-bedroom units are expected to be $252,000 to $820,000, Mr. Kramer said. That comes to an average of $280,000 for studios, $375,000 for one-bedrooms and $580,000 for two-bedrooms, for an average of $650 a square foot.

    That figure is significantly below the average per-square-foot price of $788 for new condominiums in the area in 2002, said Tara Hogan, a market analyst at the Marketing Directors, a real estate marketing and consulting firm that has represented other buildings in the area. "But on average," she said, "the Marais buyers get a much smaller apartment, a less central location and more modest amenities and finishes, enabling the developer to keep prices down."

    Mr. Kramer said part of Hudson's pricing strategy was not altering the size of the apartments when the switch was made from rental to co-op. It is also using an affiliated company, Monadnock Construction, to build the project. Roslyn Savings Bank financed the $40 million project, designed by SLCE Architects of Manhattan.

    The choice of the co-op form of ownership has been very unusual in recent years, with almost all new for-sale buildings being offered as condominiums. The Marais is becoming a co-op because Hudson leases, rather than owns, the land under the building. But Mr. Kramer said it would operate like a condominium; owners will not need board approval to sell or sublet their units.

    In switching to a co-op, Hudson also invested $450,000 to upgrade the finishes in the apartments. There will be granite countertops instead of plastic laminated ones and stripped flooring instead of parquet.

    The initial monthly maintenance cost is estimated to be just over $1 a square foot — $690 for a 660-square-foot unit — and includes the rent to lease the land. The rent from the building's 4,000 square feet of retail space will go to the co-op board, which will own the stores. The rent from the stores is intended to help keep maintenance fees down. Sales of the apartments are expected to begin this month.

  2. #2

    Default Making a Change in Chelsea: Rentals Go Co-op

    i love these new mid sized residential condo and high rise constructions, they seem to add to this cities great aura and bring about a new reformed Chelsea, it will just add to the legacy that we as a city have

  3. #3

    Default Making a Change in Chelsea: Rentals Go Co-op

    I was looking at an apartment in this building. *What threw me off was the leased land under it. *Is it common in Manhattan to have for sale units on leased land? *I see it often in commercial properties, not residential. *How do you think it will affect resale interest and value?

  4. #4

    Default Making a Change in Chelsea: Rentals Go Co-op

    I think that's the reason they are going coop and not condo. *When you buy a coop apartment, you are actually buying something like a share in the building. *Therefore, as the remaining term under the lease gets shorter, the value of your "share" may decrease.

  5. #5

    Default Making a Change in Chelsea: Rentals Go Co-op

    Yes, that's the reason I turned it down. *I was afraid the apartment would lose value over time. *It's a really beautiful building, shame about the leased land or I would have bought in a heartbeat.

  6. #6

    Default Making a Change in Chelsea: Rentals Go Co-op

    You really should talk to the developers. *Land is often leased for huge terms, like 99 years, so a new building will likely not decline in value any time soon for reasons of the lease coming to an end.

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