The Million Dollar "Mansion": What $1M Buys In NYC?

I am working with a few $800K - $1.05M buyers these days. None of them has the time to do any work on an apartment, so they want something new. None of them wanted to go through the scrutiny of a co-op board, or they didn't quite have the 20% down plus 18 - 24 months of assets in reserves to purchase in a co-op, so they needed something with no board approval. Adding to the challenge was that they all wanted to be below 34th street, which is, in general, more expensive than Midtown East and West and the Upper East and West Sides.

I joke about the Million Dollar "Mansion," because when you buy an apartment over $1M in NYC, you pay a "Mansion Tax" of 1% of the purchase price of the apartment. In a new development, the sponsor's transfer taxes somehow also "count," so usually you have to buy something under about $980K in order to avoid the Mansion Tax. Most New Yorkers find the tax to be ridiculous, because a million dollars does not buy a mansion in Manhattan.

So what does $1M buy you in a new development or condo conversion below 34th street these days?

It buys a one bedroom apartment. An approximately 750 - 1000 sq ft apartment. To make you more depressed, in buildings like the new "W" Hotel & Residence in the Financial District, a million dollars buys you 500 sq ft, but we're going to try to avoid the insanity in this post & focus on some semblance of normality. (If you can call it that!)

There really is a difference between a condo conversion & a new development built from the ground up. A lot of people say that you are paying a premium for buying in a new building and that it isn't worth the money, but in reality, you get what you pay for. Here are the buildings we looked at and my and my buyer's overall impressions.

The Charleston (225 E 34th St) is 90% sold (occupancy is immediate upon closing) and only has two apartments remaining for under $1M for sale by the sponsor. Both are about $1,000/sq ft, which is a fabulous value for a new, from the ground up development with a fitness center, roof deck, zen garden, and private storage that comes with each apartment. Apt 2K ($875K for 836 sq ft) is on the ground floor and has 131 sq ft of outdoor space, but not a substantial amount of light. It faces the "zen garden," so at least it is quiet. My buyers loved that there was a washer dryer in the unit, the bathroom wasn't cramped, and they much prefer open kitchens with a large breakfast bar to galley kitchens. They also loved the central air/heat, garbage disposal, 9'4 ceilings, and floor to ceiling windows. You rarely get these little luxuries in a rental building that is being converted to a condo. The second apartment (5B) we looked at was on a higher floor, also facing north, with a balcony and was less than $1000/sq ft (1005 sq ft with a 67 sq ft balcony for $960K). Sometimes when you buy at the very end of sales in a new development, you can get a relatively good deal. The developer just wants to sell out the building. He/she wants to stop paying the salespeople to be there, can stop spending the big marketing bucks, and can move out of the apartment that the sales office is in. I would say that at this time, the building is a really good value. The downside of the building is the location on 34th street next to one of the midtown tunnel exits. The apartments themselves are quiet, however.

Twenty 9th is being built on 29th street between Park and Madison, across from the site of the new Gansevoort Hotel. The sales office is not yet in the building but they have a model apartment so you can see what the finishes will be like. They had a few studios and quite a few one bedrooms on the market, but since they're over 50% sold, there wasn't that much left under $1M. Every one bedroom on the higher floors will be over $1M. A south facing one bedroom on the 5th floor came in at $950K and a north facing unit on the 10th floor (less light, less of a view on the low floor apartments on the north side), was $920K. The apartments also have washer dryers, an oven and an additional microwave/convection oven, an open kitchen with breakfast bar, & floor to ceiling windows. My buyers thought that the finishes were more luxurious and the building would be more high end than the Charleston, so 788 sq ft for $950K was reasonable (common charges of $611 and with the 421A tax abatement, taxes of $47). Above the 5th floor in some units, there is a window in the bath, and above the 10th floor in some units, there is a small, corner window, so you have a double exposure. The building will have a roof deck with BBQ and wet bar, fitness center, parking and resident's lounge. Occupancy is expected on the lower floors in mid-June to mid July and on the higher floors closer to the fall of 2008.

133 W 22nd Street had one apartment left at $1.005M and by the time my buyers got back to it, it had a contract out. There aren't many new construction buildings below 34th street and above the financial district with a pool. And the ones that are out there don't have anything under $1M. The pool at 133 W 22nd is a 25 footer, so it's not quite the lap pool you can find at the (farther north) Laurel, Sheffield57, or One Carnegie Hill, but at least it's a pool. Closings are anticipated in January 2009.

I thought it would make sense to bring my buyers by 205 Third Avenue because they really love the location. The building is on 18th street so is really close to Union Square as well as Irving Place & Gramercy Park. 205 3rd is a co-op building but the sponsor of the building is selling off the apartments he owns and is gut renovating them with finishes you would find in a new condominium. The apartments are a good value for the location. You can buy an 868 sq ft Junior - 4 (one bedroom with a dining area) with a terrace for $950K. Your total monthly charges including electricity are $1,150/month. But once a buyer gets used to seeing buildings with a washer/dryer in the apartment and a huge, gorgeous, brand new fitness center, roof deck, and resident's lounge, it is hard to move into an older building with 8'4 ceilings, laundry and a small gym in the basement, and an older lobby & hallways. I still think these apartments are a great value for someone who might not quite have the liquid assets in reserves to pass a strict co-op board but wants to live in the Village/Gramercy area. There is no board approval and you only have to put 10% down. Although you pay the sponsor's transfer taxes of approximately 1.8% of the sales price, you are still paying about 3% less in closing costs than you would be paying if you bought an apartment in a new condo building. Of course, when you resell the apartment, your buyer will need co-op board approval, and you have sublet restrictions that you wouldn't have in a condo.

I checked the A Building & The Oculus just in case, but they only had one or two small studios or ground floor apartments available. I have stopped taking buyers to The Gramercy (which was once my favorite downtown new development for entry level buyers), since the word got out that a McDonalds and a CVS are going into the commercial space in the building. Ugh. And we scoped out a resale one bedroom at Crossing 23rd, which is only about 2 years old, but the apartment had kind of an awkward layout. It was overpriced in comparison to what we had seen, even taking into account the 2% savings in closing costs you get when buying a resale condo.

One couple also wanted to see how much farther their money would go in the Financial District. Light and a view were important to them, though, so we skipped District, The South Star, and 45 John, and a few others that only had apartments in their budget on low floors where there would be another building or an interior courtyard less than 25 feet away. Since the buildings are so close together in the heart of the financial district, you usually don't have much light or a view unless you are on a really high floor. My buyers fell in love with the Setai (40 Broad), but the only available one bedroom was out of their price range at ~ $1.1M. There was one apartment left at The Exchange (25 Broad) but it faced a courtyard and didn't get much light.

We had a few apartments to choose from at 88 Greenwich on higher floors with open views and a peek here or there of the river. One apt (just over $1M) had 16 foot ceilings! My customers liked the iPod docking stations, wine rack & step stools built into the kitchens, personal trainer available for most of the day in the fitness center, the library, the resident's lounge, the roof deck, and the continental breakfast in the morning. They really wanted a washer dryer in the apartment and if they could have had a larger bathroom, they might have been sold. It was a great combination of price per sq ft, amenities, light, views, and finishes, and there are so many different layouts, the building doesn't feel "cookie-cutter" even though it is huge.

99 John, recently converted from a rental building, had two stunning and unique apartments for right around $1M. One of them had a slightly triangular shape, high ceilings (over 11 ft), an open view, fantastic light and SEVEN windows. When you walked in, the first thing out of your mouth was, "WOW!" I doubt that the apartment is even still available - the price per sq ft was fabulous. My customers had the same issues at 99 John as they did at 88 Greenwich, though - the bathrooms in a conversion are usually smaller than in a ground up development, and there was no washer dryer in the apartment.

At 99 John, even in the hallways that have been redone, I couldn't shake the feeling that I was still in a rental building. It's a little hard to explain, but the entryways to the apartments don't have a luxury condo feel. There are narrow planked wood floors instead of wide planked floors & shower rods instead of glass partitions. The resident's lounge had about 8 different design elements going on, so it just seemed a bit over the top for the size of the space. Still, it's tough to beat 970 sq ft for $955K in a gut renovated condo with light and a view!

Next up: Battery Park City

We stopped at 225 Rector Place. Since it isn't a pre-war building, the ceiling heights are lower, windows are smaller, baths are smaller, no washer dryers in the apartment (laundry on the floor). They loved that the building will have a POOL, though. And a few of the apartments in their price range had river views & fantastic light. Since BPC is on a landlease, the real estate taxes (called PILOT - "Payment in Lieu of Taxes") are higher than in the tax-abated buildings in the Financial District. For example, 99 John Street still has 6 years left on their tax abatement, so taxes are $120/month for a one bedroom, versus $650/month at 225 Rector. The taxes at 99 John will increase every 2 years, however. Also, when there is a pool involved, your common charges are higher. You might have $750/month common charges at 225 Rector and $500/month common charges at 88 Greenwich St. for a comparably sized apartment. Of course, it isn't just the pool, if a building has 600 apartments, your common charges are probably going to be lower than in a building with 300 units. The more apartments there are in a building, the more people to split the costs between.

The last stop on our trip was Visionaire, a LEED certified "green" building in Battery Park City. There were three lines of apartments that would have worked for my customers, and they were impressed with the quality of the workmanship in the building. No detail has been spared. And it is always nice to feel that you are helping the environment. 5% of the building's power will run on solar power and electric bills are expected to be 40 - 65% lower because of the way the building was designed. My customers were excited that the amenities included a pool, but felt kind of far from the subway, stores, restaurants, etc. The saleswoman at The Visionaire was unbelievably friendly and knowledgeable about the building.

So what did my buyers choose? I will let you know when the ink dries on the contracts! Until then, I'm keeping it a secret:)

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