Gristedes is pulling out of it’s 21 South end location in Manhattan’s Battery Park City. They are also closing their FiDi location as well. Due to increased competition including Whole Food’s, Eataly and all of the shops at Brookfield and Westfield, the reality is that the downtown customer has much more choices in food markets than when these stores opened many years ago.
If you are thinking of buying in a building where they lease the land below the condo, only do so if there are sufficient time left on the land lease, meaning 30 years or more and you understand fully the risks.
In general, the land price can skyrocket at the end of the land lease in the case where the owner is a private individual or company so have an attorney very knowledgeable in these matters advise you. Also, have a buyer broker who knows what questions to ask to save you unnecessary attorney expense. How much does the land lease go up annually and for how long are those rates locked in?
In Battery Park City, the owner of the land leases of all the buildings is the Battery Park City Authority, a non profit set up to create and preserve the neighborhood of Battery Park so there is not an interest to raise the rents beyond the realm of reason. Having said that, you and your broker, plus later attorney should exercise caution and make sure that you are getting exceptional value for your purchase.
For example, as a result of paying rent on the land, your monthly charges might be higher than a typical Manhattan apartment. If you are going to be paying a higher than normal monthly charge then the apartment should be less expensive than something similar where the monthly charges would be on par with Manhattan averages. Also, you might not see the typical appreciation that you would see on other Manhattan apartments.
According to NYT, there are about 100 building in Manhattan, that have land or ground leases. Due to the rental payments they need to make on the land, they tend to have high monthly charges. Also, sometimes as in the case of Trump Plaza at 167 East 61 street, increases in the land lease can lead to a sharp inrease in the monthlies. With this on the horizon, the co-op Board at Trump Plaza decided to buy the land from the owner. In order to do this, there was to be a large assessment of several hundred thousand dollars to a few million for each apartment. Without the purchase of the land,due to a deal that Donald Trump made when he constructed the building, the maintenance figures would have gone so high that the apartments would have been worthless.
So it pays to excercise caution when purchasing in a building with a land lease. Although, according to the NYT article, there are some very sophisticated buyers who are purchasing in Land lease buildings. All of Battery Park city is on a land lease and as a result, values in some buildings go up generally less than the market as whole due to the high carrying charges. In Battery Park City, each building makes a different deal with the City so it pays to excercise caution and find out when the land lease is due to expire and estimate what the carrying charges will be at that time. Many buildings pay a percentage of the fair market value for the rental of the land. As a result, of the current sky high price of land, the land lease prices will spike up as well.