Shall You Buy A Unit At The Solaire | 20 River Terrace — Battery Park, Manhattan

Battery Park

Sitting between West Street and the Hudson River at the southern tip of Manhattan, Battery Park remains a residential community only a short distance from the Financial District. Construction began in 1980, and any residents in the area today would agree it was a success. Battery Park City has a decidedly different pace and vibe from other parts of Manhattan. Landscaped squares and paths separate residential buildings, while a riverside promenade runs along the neighborhood’s western edge. Something made even more appealing by the sunset views over and cool breezes off of the Hudson. On sunny summer weekends, there is an almost festive air to the neighborhood. It feels like the entire city is rejoicing in a stroll along the promenade. And thanks to continuing retail and restaurant developments nearby, Battery Park City’s popularity only continues to grow.

Ground leases are interesting.

Every building in Battery Park City is sitting on land owned by an arm of the State of NY. This arm (the Battery Park City Authority) “rents” this land to each condo or coop located there.

The leases all expire in 2069

However, different buildings have different terms regarding the “rent” escalations, which are usually a buyer’s initial concern. While land lease buildings (the words “ground lease” and “land lease” are used interchangeably) have rent payments, not land lease buildings, have mortgages on the land upon with they sit, so those buildings still have payments to make.

The Solaire at 20 River Terrace ground lease

The lease for THIS building began in April 2001 and expires in April 2069. This is when all of the ground leases in Battery Park City expire. Some

There is no automatic right of renewal.

But what will likely happen as the years progress is that the Board will negotiate to either extend the existing lease or enter into a new Lease.

A portion of the monthly maintenance goes towards the rent

As of right now, the rent comprises only about 3% of the annual budget. However, the rent is going to reset in 2024. The way the lease is structured, the base rent will be 6% of the land’s fair market value. Now, of course, there is no way to predict the fair market value accurately. If appraised high enough, it could cause a significant rent increase. However, the Lease also allows the tenant and landlord to reach a mutual agreement on the Base Rent Reset, thus doing away with any of the appraisals and resulting increases.

Likely to trigger a maintenance increase for 20 River Terrace!

In 2020, one informal study was done that put the value of the land at $96 Million. Well, 6% of that would mean rent of $5,760,000 per year.

  1. Hudson View East
  2. Hudson View West
  3. Battery Pointe
  4. Hudson Tower
  5. Soundings
  6. Liberty Court
  7. Liberty Terrace
  8. Cove Club
  9. Liberty House
  10. Liberty View, and
  11. Regatta

An illustration in numbers for 20 River Terrace

The plan states that IF The Solaire negotiated a new Base Rent at the same rental rate per square foot price as the 2011 Rent Negotiations, then for the Ground Lease Year commencing on April 4, 2024 (i.e., the reset date), the Base Rent would be $2,425,641.00 or less, even $2 Million. Assuming that higher number, if we divide that number by the 100,000 shares, then multiply it by the number of shares for a standard Unit (say 418), it would mean the rent portion of the maintenance would be $844 per month, rather than the current $104.00 per month which is with the 300K per year rent. So, with proposed maintenance for a Unit currently at $1,798, we would be adding the differential in increased rent and wind up with the maintenance of $2,538. IF the assessment was 96 million, then the rental component jumps to $2,006 per month, making maintenance $3,700 per month. This does not include the pilot. But again, that is the worst-case scenario and probably unlikely. In a coop, a piece of the maintenance goes to pay the property taxes. Because the Sponsor is the one paying the taxes, you are making PILOT payments (an acronym for payments in lieu of taxes.) Right now, the PILOT payment for a unit is $2,020.00. However, that PILOT payment reflects the last phase of a 421a tax abatement that this particular piece of property was given ten years ago. In the 2023–2024 tax year (starting July 1, 2023), the abatement will be over, and the PILOT payment can increase by as much as 20%, making monthly PILOT here at $2,424.00.

To summarize:

Current monthlies: PILOT 2,020 and MAINTENANCE 1,798 = total of 3,818 After the rent escalation and PILOT abatement is gone:

  1. Worst Case Scenario: PILOT 2,424 and MAINTENANCE 3,700 = total of 6,124
  2. Hopeful Scenario: PILOT 2,424 and MAINTENANCE 2,557 = total of 4,962
  3. Even Better Scenario: PILOT 2,424 and MAINTENANCE 2,390= total of 4,814

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Georges Benoliel

Georges Benoliel

Georges is the Co-Founder of NestApple.com and has been working in Wall Street for the last 17 years trading derivatives and mortgages with hedge funds.