A Blog by Jonathan Low


Jul 24, 2019

Intangible Value Rising - $11 Million To Preserve A New York View

Value is in the eye of the developer. JL

David Goodman reports in the New York Times:

When the residents of a 12-story loft building in Chelsea learned that a proposed tower threatened to darken most of their windows and block their Empire State Building views, they banded together to make the developer an offer: $11 million not to build. They bought the developer’s air rights. "These people paid market value.” Nothing taller can ever replace it.Unless someone some day shows up with an offer too good to turn down.
In New York City’s forest of tall buildings, having a view is an inestimable commodity, to be treasured and, when necessary, fought over.
There have been pitched battles over Brooklyn Bridge vistas blocked by waterside apartments, and the shadows cast by billionaires’ apartment towers over Central Park.
But when the residents of a 12-story loft building in Chelsea learned that a proposed tower next door threatened to darken most of their windows and block their Empire State Building views, they tried a less confrontational approach.
They banded together to make the developer an unusual offer: $11 million not to build.
The gambit captured the kind of wealth that now courses through New York City, where residents of a former warehouse building — with full-floor apartments that stretch 5,600 square feet, twice the size of an average American new home — were willing to pay a hefty price just to protect a view.
The owners used a typical developer strategy and turned it on its head: They bought the developer’s air rights — normally used to allow for taller buildings than allowed — at the neighboring property.
But the loft owners have no intention of using those air rights to build; their full intent is to prevent the neighboring developer from building anything taller than the three- and four-story buildings that had been on the site, at Seventh Avenue and West 17th Street.
“Sometimes people have bought a dinky little asset next door,” said Jordan Barowitz, vice president of public affairs at the Durst Organization, a real estate firm. “But I’ve never heard of that much cash being spent for an intangible, for a view.”
The deal, which took place in 2016, has not been previously reported, and some of those involved were reluctant to discuss it. It was expensive,” said John R. Muse, 68, a Texas investor and absentee owner whose grown children live in the building, on West 17th Street. “I wouldn’t say prohibitively. But expensive.”
Not everyone paid the same amount, with lower-floor owners paying less and, on the lowest floors, nothing. Mr. Muse admitted, with some embarrassment, that he could not recall exactly how much he had paid — perhaps around $1 million for his unit’s share.
A review of records over the last five years by The New York Times turned up another instance of a similar deal between a condominium and an adjacent property owner. That one involved neighbors of the Zen Studies Society on East 67th Street.
In that case, residents of the neighboring six-story apartment building paid $3.25 million to purchase the air rights from the Zen center, ensuring their windows would not be blocked in the future. They worried about future development on the site of the religious institution, which was facing legal trouble.
“It’s typically done by developers,” said one resident of the Upper East Side building, Ryan Freedman, who works in real estate. “This was the opposite of that.”
The L-shaped loft building in Chelsea, a few blocks from the West Village and Google’s New York headquarters, has been home to artists and celebrities drawn to its tall ceilings and sprawling space.
Meryl Streep’s husband, the sculptor Don Gummer, once lived in the building, a former warehouse known as City Prairie, as did the actor Harrison Ford, who owned the penthouse until 2012, when he sold it for roughly $15 million. One unit recently sold for $9.75 million.
“At the price point, it just happened you had some valuable apartments and it was worth a fair amount of money to them,” said Jonathan L. Mechanic, chairman of the real estate practice at the law firm of Fried, Frank, Harris, Shriver & Jacobson, who was not involved in the deal. “If you had $500,000 apartments, it would be much harder to get to $10 million.”
The idea for the deal materialized almost immediately after the developer, Gary Barnett of Extell Development, made clear his intention to erect a 145-foot condominium at Seventh Avenue and 17th Street, replacing a set of short buildings.
“He contacted the building management and said, ‘I’m putting a big building there,’” recalled Thomas Levine, 73, a painter who lived on the eighth floor for two decades and sold his apartment last month.
The proposed new building would have been roughly as tall as the L-shaped loft building — and positioned directly to its inside.
The residents moved quickly: Within about a week, a small group sat down with Mr. Barnett to offer to buy the air rights. He initially wanted far more than $11 million. Over several meetings, they haggled in Mr. Barnett’s offices. He never came to see the views.
Mr. Barnett recalled telling the residents that he would be willing to make a deal if they were willing to pay the right price. They were.
“It’s not common,” Mr. Barnett said. “Most of the time, they sue you and try and stop you somehow. These people stepped up to the plate and paid market value for the building rights.”

The deal took a few months to work out, but ended with a meeting in the sixth-floor unit to vote on the proposal. All agreed to go forward, even if, for some residents, it was a stretch.
“There were pros and cons about it,” Mr. Levine said. “But everybody realized that it was something we had to do. We wanted the light, we wanted the views, we wanted the value.”
Mr. Levine said he did not have enough available cash for the transaction, but that a neighbor was able to loan him the money.
“I think it was the most financial pressure on me,” Mr. Levine said, standing in the mostly empty corner living space where his studio had been. “But it would have been a disaster. It would have been a lot of dark.”
Now, instead of new condominiums, a short glassy commercial building is nearing completion at the corner, and nothing taller can ever replace it.
Unless, that is, someone some day shows up with an offer too good to turn down.


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