Thinking of buying in a Manhattan building with a tax abatement expiring soon?

I am constantly searching for apartments for clients and occasionally come across buildings that are tax abated. Generally speaking apartments above 96th street had 20-25 year tax abatements and below 96th street the length of the abatement was only 10 years. As a result, in the last several years, the abatement is phased out, and the taxes go up substantially.

When the monthly numbers are lower, buyers will pay more for the apartment which helps developers of new condos make more profits. But how do you analyze the value of a condo with a tax abatement expiring shortly and how much time is enough that is left on a tax abatement?

Let’s look at an example of a well known building on the west side- The Atelier which is located at 635 W 42nd street. This building had a tax abatement which ends this year.  Note the below table and all numbers are monthly taxes and for a certain unit with about 800 sqft(75m2)

2016 $600
2014 $400
2012 $200
2010 $28
2017 $709
2018 $857
2019 $1,000 +/-

In 2007, the apartment (20F) transferred for just over $1 million. Then in 2016 was purchased with only 2 years left on the tax abatement for $1,225,000 and now it’s listed for $1,350,000.

As a result, and after looking at this example, I would not recommend buying into a tax abated building with less than 5 years left on the abatement unless you are fully aware of the risks associated with purchasing and factor that into your offer. Additionally, think of the tax abatement like the wind that pushes the sailboat either forward or in the case of headwind stops you in terms of appreciation. If you are buying at this time when the market is close to a peak, and you buy in a building with an expiring tax abatement, you may take a loss to sell if you need to liquidate in less than 5 years.

Here’s another example- 100 Riverside boulevard aka The Avery is an amenity rich building located at 100 Riverside boulevard right in front of Riverside Park. See the below example of the monthly taxes of an apartment with slightly more than 1000 sqft (92m2), and  2bd/2ba.

2009 $200
2014 $374
2015 $680
2016 $1000
2018 $1458
2019 $1700

Accordingly, the taxes will be $21,000 or $1700 per month without the tax abatement in 2019. So an apartment with 1000 sqft 2bd/2ba, $1100 in common charges plus $1700 in taxes for a total of $2800 is going to be a tough sale if you need to sell soon.  As a result, said apartment was listed last year for 6 months and did not sell.

Based on these numbers, what do you think? Does it make sense to purchase in a Manhattan condo with less than 5 years left on its tax abatement? How much would you adjust the price for the expiring abatement if you are selling?

The Author-  Brian Silvestry , a licensed real estate broker, has been selling residential and commercial real estate since 1999. He has sold in every neighborhood from Battery Park City to Washington Heights.


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