Real Estate

Residents of Billionaires’ Row co-op told to pony up $280M

Co-op residences in a luxurious doorman constructing on Billionaires’ Row are promoting for as little as $100,000 for a studio and $659,000 for a three-bedroom penthouse with a terrace.

But the glitch within the only-in-New York situation is that house owners within the 324-unit constructing should pay a mixed $280 million to purchase the land beneath the structure, or face an extra $26 million a year in floor hire on prime of the present $4.4 million a year. If they don’t cough up, they face dropping their properties.

Carnegie House at 100 W. 57th St., on the nook of Sixth Avenue, is a 21-story, grey brick structure that resembles many different early Sixties, middle-class Manhattan condo buildings. Its “luxury” standing appears modest in contrast with neighboring giants, such because the 1,550-foot-tall Central Park Tower to the west and 111 W. 57th St. to the east; models in each new initiatives price up to $30 million.

But Carnegie House has all of the drama. It sits on land that’s owned by David Werner’s and Rubin Schron’s actual property agency the Werner Group. Co-op condo house owners pay floor hire to Werner Group, which purchased the land for about $270 million in 2014.

A contract between the co-op and the land’s earlier proprietor included a formulation for figuring out the annual hire past the lease expiration in March 2025 — which might have been solely $53.4 million.

Exterior of the Carnegie House.
Land locked: Co-op residents in Billionaires’ Row constructing told to pony up $280 million or beat it.
Matthew McDermott

But the acquisition robotically valued the land at $270 million, Werner mentioned, claiming the hire ought to be based mostly on that a lot larger worth. A newly filed lawsuit claims that the co-op board agreed — to the detriment of shareholders.

Not all Carnegie House residents — many of whom reside on mounted incomes, in accordance to insiders — can afford both to pay their share of the land buy or to pay the enormously jacked-up hire.

“Up to 90% of residents, some of whom have lived there for 50 years, stand to lose their homes,” one insider mentioned.

Resistance got here to a head in a swimsuit filed by Birinder S. Madan, a resident since 2003, who’s suing all 10 of the co-op board members, in addition to consulting agency JM Zell Partners. The swimsuit, filed on behalf of the opposite shareholders, claims that the board, somewhat than struggle for shareholders’ pursuits, is taking part in ball with Werner’s “illicit” scheme to overcharge residents.

“Up to 90% of residents, some of whom have lived there for 50 years, stand to lose their homes.”

Anonymous insider

His swimsuit, filed by lawyer Massimo F. D’Angelo and several other different attorneys, costs that JM Zell was supposedly employed to negotiate higher phrases with Werner however as an alternative endorsed its high-priced provide. The board thus “became a willing participant in Werner’s scheme” to pressure residents to pay “exorbitant additional sums” to maintain their residences or to give them up in order that Werner can put up a brand new constructing on the positioning.

As a end result, shareholders “live in a perpetual state of fear that they will be uprooted from their homes,” the swimsuit claims.

Key to the dispute is how the land ought to be valued.

Madan claims that the hire owed to Werner ought to be linked to the “fair market value of the land underneath Carnegie House,” in accordance to a renewal provision within the authentic floor lease.

Exterior of Carnegie House.
Carnegie House sits on land owned by David Werner’s and Rubin Schron’s actual property agency the Werner Group.
Matthew McDermott

He added that the “astronomical price” Werner paid was based mostly on a “developer fantasy” of what the positioning could be value if it have been vacant and ready to assist an all-new constructing.

At a tense shareholders meeting on Tuesday night time, board members mentioned that talks with Werner have been ongoing after they went on maintain through the early months of COVID-19.

“The board believes the allegations [in the suit] are baseless and without foundation and it will vigorously defend them. They are confident they’ll be successful.”

Laurence S. Tauber, lawyer for the co-op’s board

They mentioned they held the “most productive in-person meeting to date” with Werner on June 15, and the landowner has since “indicated a willingness to sell at improved pricing.”

But the meeting led to fireworks with indignant exchanges between lawyer D’Angelo and board members.

With the clock ticking down on the bottom lease expiration, condo house owners wasted no time to begin bailing out proper after the board despatched shareholders a “doomsday letter” on June 14, 2019, and adopted it up on June 19 of that year at a meeting that spelled out Werner’s phrases.

Some 50 models have traded since them, in accordance to public information, at costs that appear too low to be actual — together with a number of for simply $100,000 and most beneath $300,000.

The largest worth was $695,000 for an 1,800-square-foot penthouse with a terrace overlooking Sixth Avenue. Such a unit in a standard co-op with out a floor lease would fetch a number of million {dollars}.

Scotty Sheriff, a Charleston, SC-based businessman, purchased the penthouse in October 2020. Unlike some Carnegie residents, he has at all times needed to purchase the land.

“I thought we would just buy the land lease and be done with it,” he mentioned. “[But] our board has been sitting around for two years, using COVID-19 as an excuse and not making any counter offers and spending money on professional fees. They should have made an aggressive counter offer.”

Board president Richard Hirsch declined to remark.

The board’s lawyer, Laurence S. Tauber of Cohen Tauber Spievack & Wagner, told The Post: “The board believes the allegations [in the suit] are baseless and without foundation and it will vigorously defend them. They are confident they’ll be successful.”

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