Paying up for extras
Purchasing a New York City apartment has long been viewed as a smart long-term investment. But do optional extras — like parking spots, private storage units or rooftop cabanas — hold their value over time?
During the real estate downturn, the answer seemed to be no, with condo developers often giving away — or deeply discounting — these extra features to lure buyers to their buildings. But as the market tightens, buyers and renters are paying higher prices for optional add-ons. Developers are responding by increasingly adding these extras into their plans for new buildings, and taking steps to make them easier for buyers to finance.
After the financial crisis, extra features “were negotiated more, or used to hold an apartment’s purchase price,” said Stephen Kliegerman, president of Halstead Property Development Marketing. But in the last year, he said, “we’re getting our apartments’ asking prices, and we’re able to charge full-price for the add-ons.”
When new condo One Brooklyn Bridge Park, for example, started sales in 2007, it had 24 outdoor cabanas and 132 parking spaces available for residents to purchase. Since then, 19 cabanas and 30 parking spaces have been sold, according to Penelope Stipanovich, an MNS broker who is director of sales at the building.
While the building’s developer had to discount these extras during the downturn to get them to move, she said, they’re now selling for their full asking prices of $150,000 to $200,000 for cabanas, and $150,000 per parking space.
“We were seeing 10 percent off cabanas and parking in the last two to three years,” she said, “but there’s been less negotiating in the last year, and right now we’re going full price.”
Room to grow
Developers use add-on sales to monetize parts of their properties that can’t be used for apartments, explained Frances Katzen, a managing director at Prudential Douglas Elliman.
“The developer has bought land, and if it’s not able to be [used] as a residential area,” she said, “he can turn it into a garage and unload it [at] a very high premium.”
Add-ons like cabanas — often with running water, electric wiring and gas hookups — can also help developers market their properties. “Everybody wants to have a niche, and developers are trying to differentiate themselves,” Katzen said.
Or, as Alchemy Properties founder and president Kenneth Horn put it, “Everyone has their mousetrap — this is ours.”
Last month, Alchemy launched 291 Union Street, a new condo in Carroll Gardens, which offers buyers the option of purchasing basement storage units and parking spaces. Horn said these days, whenever space in his buildings permits, he tries to include optional extras. “It helps us sell the building,” he said.
Even rental buildings are adding more extras, beyond the standard gym and common spaces. For example, the new rental building Ten23 in Chelsea offers tenants the option of leasing private backyards off the eighth floor. The four backyards rent for an additional $1,000 per month, with full-year leases, according to the building’s rental office. Two of the four backyards have been rented since the building launched this winter.
But prices for these extras dropped at many buildings during the recession.
Dumbo’s 70 Washington Street, a high-end 2005 conversion of a former factory, was one of the first new condos to offer cabanas, brokers said. The amenity proved to be popular, with some cabanas going for as much as $325,000 during the initial sellout.
Then in 2009, during the real estate downturn, one of the cabanas at 70 Washington hit the sales market for $269,000, only to drop its price to $239,000 two months later.
Another building resident, who bought a cabana in 2006 for $200,000, put it on the market in June 2011 for $240,000 with listing agent Grant Priest of Elliman. They then lowered the price 17 percent to $200,000, Priest said, but still couldn’t find a buyer before delisting the unit several months later.
Another broker working at 70 Washington said one owner recently sold a cabana for $150,000 in a resale — taking a loss of more than $50,000.
New condo 80 Metropolitan in Williamsburg hit the market in 2008, and its sister building 58 Metropolitan followed in the fall of 2010. Both buildings offered cabanas, priced from $70,000 to $150,000, and private parking spaces for $50,000, according to Halstead Property’s Jay Overbye, the building’s director of sales.
At first, parking spaces, and especially cabanas, in the two buildings saw heavy price cuts, with cabana prices slashed by “easily 50 percent,” Overbye said.
In the last eight months, however, the cabanas have sold closer to their asking prices, with discounts now around 30 percent, he said.
A recent buyer at 58 Metropolitan, for example, paid full price for an apartment and parking space, but received a 35 percent discount on his cabana, paying $95,000 for it, Overbye said.
All the extras in both buildings have now sold out, he said, except for one parking space at 58 Metropolitan.
The fate of a building’s amenities depends, of course, on the type of amenity and the popularity of the building itself. At the indisputably successful 15 Central Park West, the price of storage units and studio “staff” apartments “has gone up tremendously,” even during the recession, according to real estate broker and building resident Noel Berk.
Building residents are the only ones who can purchase the in-demand “staff apartments,” and also use them as home offices, guest rooms or libraries. They trade for around $2 million each, and private storage units cost some $100,000, Berk said; when the building first went on sale in 2007, the staff apartments were priced under $1 million, and storage units went for $30,000.
Private storage units tend to be highly desirable everywhere in cramped New York.
Aptsandlofts.com president David Maundrell said he always encourages buyers to purchase private storage units along with their apartments because “it’s a great investment.”
That’s especially true, he said, because owners in many buildings are able to rent their unused storage spaces to neighbors for $55 to $100 a month.
He added that many buyers who were given storage units for free by developers during the downturn are making significant profits off them in resales: Prices for private storage spaces in Brooklyn currently range from $8,000 to $25,000, depending on size and the building, he said.
Optional extras are usually separate transactions from apartment sales, with their own price and deed. But, especially in today’s difficult mortgage climate, that can present some challenges since banks won’t finance a cabana or a parking space on its own.
In response, developers have started to combine the deeds of add-ons and the apartments into one, so buyers can more easily arrange financing.
Every unit at Alchemy’s 95-unit Griffin Court Condominium on West 54th Street, for example, comes with a private storage unit. The price of the storage, $40,000 to $50,000, is tacked onto cost of the apartment and included in the deed.
In addition, 16 of the building’s larger apartments also come with private rooftop cabanas, which add an extra $80,000 to $90,000 to the total price, according to Horn.
At 291 Union Street, all units come with basement storage units, while larger apartments have a private parking space included in the price, Horn said.
“If we sold storage cages individually, most people wouldn’t be able to finance them,” he said. “They’d have to buy them with cash.”
Katzen, however, noted that there are some drawbacks for buyers when it comes to purchasing add-ons: When buyers purchase additional portions of the land, for example, they also take on the property tax fees — something that doesn’t occur when residents rent storage or parking spaces in the building.
And while people will always need a place to live, the demand for cabanas and other trendy extras may not be around forever.
“It’s a risky purchase,” she said. “Will the market support paying $200,000 for a cabana in five years? In five years, people may be over it.”
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