UES Development Update: Azure
I love trying to explain what a "condop" is to buyers. Do condops exist anywhere besides NYC? I somewhat doubt it - we do everything a little different here when it comes to real estate! There are several definitions of a condop, but in the case of Azure, a new building going up at 333 East 91st St, a "condop" is a co-op with condo rules.
"Why would someone build a new co-op instead of a condo," you might ask. Azure has a 75 year lease on the land under the building. The City of New York owns the land. You can't have a landlease building that is a condo, so the next best option is to build a co-op that has condo rules. The developers of Azure agreed to rebuild a school next door as part of their development. The public school will be a "gifted and talented" middle school. In working with the City of NY on the school and on building low income housing outside of Manhattan, Azure may well be one of the last new buildings in Manhattan to receive a 421(a) tax abatement.
Since the building is a co-op with condo rules, it is investor friendly. You can rent out your apartment right away and there is no board approval for buyers when you sell the apartment. So you avoid the frustrating headaches that can come with owning a co-op. The building also requires only 10% down and the rest at closing. Generally in a new development, buyers would need to put down another 5% sixty to ninety days later. They are also offering closing incentives and attractive financing rates through their preferred lenders.
I think this building might be a tough sell for some people. In 26 years the land rent will be renegotiated with the City of New York and will be based on the market value of the property at that time. In 26 years in Manhattan, the value of land dramatically increases. So in 26 years, the land rent will increase and hence, the maintenance will increase. Additionally, in 10 years, the 421(a) tax abatement will be over, so those low monthly payments will only increase (recall Noah's post on 421A abatement). You'll never be one of those lucky co-op buildings that pay off their underlying mortgage & the maintenance actually goes down.
You're also paying almost the equivalent of condo closing costs (about 4% of the sales price for apartments over $1M, about 3% for apartments under $1M) but you're getting a co-op (usually your closing costs would be about $2,500 for anything under $1M).
15% of the apartments are sold and the sales office has been opened since November (unfortunately for them, November is probably the worst time to open a sales office, so they weren't blessed with great timing). The apartments are not exactly flying off of the shelves especially with the current market conditions.
The building's finishes are nice, the developer is open to combinations and buyers even have 4 choices for their kitchen cabinets and 3 choices for their counter tops. Usually, you get whatever finishes the developer says you get & all apartments are delivered with the same kitchens and baths; so its nice to have some level of 'choice'. Some of the apartments are around $1,000 per square foot, which is probably the lowest price per square foot for a new building on the Upper East Side. The 2nd Ave Subway will one of these years have an entrance on 94th street. Maintenance is around $1/ft on the lower floors, increasing to about $1.50 for higher floors. Studios start at $650K & one through five bedrooms are available.
Sample pricing. Maintenance is 53% tax deductible.
4D, 724 sq ft studio, $780K, Maintenance with 421a is $720.
4F, 601 sq ft studio, $605K, $596/month maint.
4B, 1063 sq ft one bed, 1.5 baths, $1.098M, $1,054/month maint.
8C, 2 bed, 2 bath, $1.55M, $1,728 maint.
18D, 2 bed, 2.5 bath, 1487 sq ft, 100 sq ft balcony, $1.697M, $2,141
18A, 3 bed, 3 bath, 1810 sq ft, $2.407M, $2,206 maint
31A, 4 bed, 4 bath, 2496 sq ft, 67 sq ft balcony, $4,127M, $4,517 maint.
Amenities:
Valet, 24 hour doorman & concierge, Residents' Lounge with Private Dining Room, Children's Playroom, Game Room, Fitness Center, Roof Terrace.
Storage Bins are also for sale.
Estimated Completion: Spring 2009.
Comments (20)
I think this specific location will be a hard sell and the fact that it is not a pure condo yet still is asking 1,000/sft and closing costs are same as for condo purchase.
I do think your closing costs will be lower though, and that your estimate of 2,500 for coops under a mil is a bit aggressive. Attorney alone will cost about 2K. Overall, good unbiased post Toes.
Posted by Noah | February 22, 2008 10:39 AM
This is a condo that I've been interested in on the UES. Like Christine says, the pricing in this building is attractive vs. other UES developments. I think 2 things are hurting it:
1) - The Co-op issue
2) - I've lived on 91'st b/w 1st and 2nd years ago. It's a full 5 blocks and 2+ aves to either the 86th or 96th street subway. Not very convenient. It's somewhat of a "fringe" location.
That said, there are a number of positives. The layouts are great, the fixtures are top notch, and like we said the pricing is very competitive for the UES.
Posted by brm | February 22, 2008 11:07 AM
brm - how much weight do you put into the non ideal location and how would you discount that per sft compared to other bldgs in UES that are in better location, condos, and asking $200-300 more per sft?
Honestly, for new dev I expect finishes to be top notch and amenities to be in line with current trends; that to me is a must. Its the location that I think is the hardest sell for this bldg. The land lease and co-op is also something that SHOULD discount the value compared to pure condo in which the land is owned.
Posted by Noah | February 22, 2008 11:18 AM
Noah, you are forgetting that a Cond-Op allows you to save on (i) mortgage recording tax (as there is no mortgage) and (ii) title insurance (as there is no home ownership). It would cost you about $50,000 of non-financable cash to buy a $2 million condo that a $2 million Cond-Op. That is a fair amount of money.
Posted by Wes | February 22, 2008 12:09 PM
Wes - Christine wrote the piece. Yes I agree except with title insurance. Why would you need to insure a clear title if you will be the first to get it?
Posted by Noah | February 22, 2008 1:20 PM
Wes - in addition, she does mention 4% of purchase price over $1M! For a condo, it would be more like 6.5% of purchase price with that mansion tax. So, the number was about right, its the condo costs that are on aggressive side at 4% over mil!
Posted by Noah | February 22, 2008 1:22 PM
Are all cond-ops land lease buildings? If not, what are other reasons for them?
Posted by Jay | February 22, 2008 1:44 PM
Noah, you need title insurance regardless of whether you are buying new construction or not - your mortgage bank will require it as a "checklist" item on your loan. You do not need title on a co-op or Cond-Op because you are not buying the land, simply the shares in the Building. When you buy a condo, even new construction, your mortgage lender will require title insurance.
Frankly, I am surprised, but not shocked, that you do not know this.
Posted by Wes | February 22, 2008 1:51 PM
oops..my bad! I am thinking of a conversation with a colleague that bought at 1 Carnegie and he wondered why he had to pay title insurance if he is first buyer..I forgot, that was a condop too and that was reason why he didnt have to pay although at first we questioned why the first buyer needed it.
Yes, condo, you must have it! Momentary lapse
Posted by Noah | February 22, 2008 1:59 PM
NO! Battery Park has a lot! If the land is not owned, it must be leased!
Posted by Noah | February 22, 2008 2:05 PM
noah - You can't comp this building vs. the Brompton or the other new UES buildings. If pressed, I'd say the discount is already priced in at a reasonable PPSF. The amentiies, layouts and fixtures are on par with any new condo. The views in some of the units are even better than some new condos. Unfortunatley for the developers, the state of the sales to date in this building don't support my positive view.
I haven't taken a walk around that immediate neighborhood in a few years and I'd be interested to do so. the UES or Yorkville, as we know it, used to basically end at around 91st and 1st ave.
Posted by brm | February 22, 2008 3:37 PM
Title insurance is necessary even in new construction...before the new building was developed there were previous owners going back to the original Dutch, as well as neighboring/abutting properties that may have incidents of ownership.
Lenders also require title insurance to insure their lien priority.
Posted by pny | February 25, 2008 11:59 AM
You dont mention anything about school that will be located in this building. Do you have any information about this? Irina.
Posted by irina | March 3, 2008 1:29 PM
This building has a lot of positives. Gifted & talented middle school entrance is on 92nd St, while Azure entrance is on 91st St. All finishes, including subtleties like HVAC units and flooring, are top of the line -- developer went for quality over gimmicks (e.g. bathroom vanities with actually space on the countertops, high end appliances, dramatic windows, high 9'6"-10' ceilings). Factoring the $500 psf pricing differential versus other new construction (e.g. Brompton with its low 8'6" ceilings & Laurel with its somewhat equivalent location & lesser views on First Ave 12 blocks south, although it does have that cool triathon training pool), Azure is an unbelievable value. Unlike other new construction projects, Azure is not charging for combinations (compare $200K at Laurel), which coupled with the local amenities (Asphalt Green sports club, Ballet Academy East, Champion Tennis Club, 92nd St Y, Diller Quaile & Mary Ann Hall Music Schools, Art Farm, NYC Public Library with Childrens Programs, Carl Schurz Park, Top Public & Private Schools, etc etc) makes this a great building for families whose top priority is space. Additional amenities include Zabar's East (aka Vinegar Factory) a half block away and a wide selection of high quality, ethnically diverse restaurants. From a location standpoint, the draw is living in a neighborhood community that is in advanced stages of gentrification, with a higher slope of appreciation (one could argue) than more established neighborhoods. Population trends and anecdotal evidence would indicate the UES is running out of space, meaning expansion is eastward and northward. Given the new 421A requirements being introduced for all construction that has not laid a foundation by June 08 -- notably the enforced inclusion of mixed income housing on the residential site, rather than in distant boroughs -- this may be one of the last 421A "bargains," especially in this competitive part of the city. Yes, the co-op format requires a bit of understanding for most buyers, but the closing cost math is favorable (approx 4% vs 6% given the avoidance of an onerous 1.925% mortgage recording tax) and the cpsf more than compensates. I would assume the geographic interdependence of the school and the condop would mitigate the city's inclination to raise land lease rates precipitously upon renewal in 26 years. Azure feels like the real estate anomaly in NYC.
Posted by smv | March 12, 2008 9:42 PM
How will the crane collapse effect everything?
Posted by Gram Gothko | May 30, 2008 10:11 AM
Crane effects side.
Posted by Nert Fazda | May 30, 2008 10:23 AM
Where was Superman?
Posted by Bolf Hoonthorb | May 30, 2008 10:27 AM
Crane did not hit the building under construction. Fault found with crane company / Asian parts manufacturer. Looks like construction has recommenced on building - a lot of activity underway.
Posted by abc | September 17, 2008 3:16 AM
It seems that Azure cost per square foot is not much difference than other new coops. What is the real advantage in purchasing Condo-up?
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