NYC Rent Freeze is Over

For years 2015 and 2016 rents for one year leases of rent stabilized units were not subject to an increase. On Tuesday June 27, 2017, the Rent Guidelines Board (RGB), by a vote of seven to two, approved rent increases for rent stabilized units. One year leases commencing on or after October 17, 2017 will be subject to an increase of 1.25% and two year leases will be subject to an increase of two%.

Statutory Vacancy Lease Increases for a one year vacancy lease is 19.25% and 20% for a two year vacancy lease.  For Sublet Allowance: the Sublet Allowance is 10%.  For Apartments leaving Rent Control: Landlords are allowed to set a market rent for units exiting rent control, subject to the tenant’s right to a Fair Market Rent Appeal.

The rent freeze still in place for all categories of hotels.

The Luxury Deregulation threshold for New York City is now $2,733.75 up from $2,700.

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New UWS Mixed Use Building Planned

Hampshire Properties, based in Brooklyn New York,  filed plans to develop a New 15 story 33 residential unit Mixed Use Building at 2461 Broadway. 2461 Broadway is located on the North Side of West 91st Street and the West Side of Broadway. The commercial portion of the development will consist of 5,662 square feet. The residential space will consist of 58,757 square feet allotting an average of 1780 square feet per residential unit.

According to city records, Hampshire purchased 2461 Broadway for $22MM. According to “The Real Deal”, the subject property currently consists of two retail units and 12 residential units. (https://therealdeal.com/2016/05/25/hampshire-properties-buys-adjacent-uws-buildings-for-38m/). According to Propertyshark, 2461 Broadway consists of three retail units and 20 residential units. Hpd records indicate 20 residential units as well. Tax records show that there is at least one rent stabilized unit.

ODA Architecture was tapped to design the building. Here is a link to some of their projects: http://www.oda-architecture.com/projects

It is unclear as to whether the proposed building will be rentals or condominiums.

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Rent Freeze Melts

On Tuesday April 25, 2017, the Rent Guidelines Board (RGB) approved to increase rents between one and three percent for one year leases and between two and four percent on two year leases. The nine members of the RGB approved the increase in a 5-4 vote. A final vote on the exact increases for one and two year leases will be determined on June 27, 2017.

The vacancy rate and luxury vacancy decontrol threshold has yet to be determined and most likely will be set on June 27.

For the past two years, rents have been frozen despite increases in building operating expenses such as taxes and/or assessments and water/sewer rates.

In New York City, rent regulated units exist in some buildings with five or more units.

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New Morningside Heights Historic District

A new historic district was approved on February 21, 2017 by the Landmarks Preservation Committee. The new historic district includes 115 buildings from West 109th Street to West 119th Street on and between Amsterdam Avenue, Broadway, and Riverside Drive. This stretch of land is known as Morningside Heights.

Click on this link for a 3D map http://arcg.is/2lj07J0

The 3D map has cool features that allow users to navigate the Morningside Heights Historic District and learn about each individual historic building such as who is the architect and developer along with the year the building was built.

The Morningside Heights Historic District needs to be approved by City Council who will vote on the historic district in the coming months.

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How NYC Can Keep Mom & Pop Shops Open

Walk along a few blocks of almost any retail corridor, and you will find vacant stores or mom and pop shops closing down. Some banks are moving from corner locations and opting for mid-block locations in exchange for a less expensive lease.

Why is this happening in New York City? Greedy landlords are the problem right? No! New York City officials are the culprits. New York State Senate passed a bill earlier this year that would cap property taxes to 2% per year. This bill has yet to be enacted. The assessments of these buildings were increased however, which ultimately led to an increase in how much taxes landlords have to pay.

Landlords, without time to remedy the issue by challenging the new increased assessments, simply passed this expense to retail business owners and retail business owners passed the expense onto their customers. In effect, what happened was that customers were not willing to overpay for any product they can find less expensive elsewhere especially with the internet at their fingertips. This caused businesses being forced to close leaving stores vacant and New Yorkers without jobs, some of whom are now homeless.

Since Mayor De Blasio took office, there has been an increase in over 10,000 homeless people in our city.  Mayor De Blasio has an incredible plan known as Vision Zero to bring the number of traffic accidents to zero.  How about expanding Vision Zero to bring the real unemployment rate to zero? Mayor De Blasio can start by rolling back assessments and or taxes on buildings especially those with retail or commercial components.

So now the problem lies for New York City; How will New York City recoup these tax revenues? Well, with lowering property taxes, retail businesses will open, create jobs, and pay New York City sales taxes. Another avenue for New York City to increase property tax revenue is to rezone properties in all neighborhoods in all boroughs to allow for bigger buildings to be developed and allow some residential zoned properties to be converted into mixed use zoned properties. Yes, tax revenues will not be realized overnight but it will be significant in the near future.

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Tax Plan of President Trump

President Donald Trump proposed to cut taxes for all Americans. The current seven tax brackets will be cut down to three brackets but it is really four brackets because low income Americans will pay a tax rate of Zero. It is unknown how much income is considered “low income” as of yet.  Married joint filers earning less than $75,000 will pay 12%. Married joint filers earning more than $75,000 to $225,000 will pay 25%. Married joint filers earning more than $225,000 will pay 33%.  Tax brackets for single filers are half of these dollar amounts.

Capital Gains Tax will be 20% for the maximum rate. Carried interest will be taxed as ordinary income.

Standard Deduction will be $30,000 for joint filers and $15,000 for single filers. Personal exemptions and Head of Household filing status will be eliminated. Itemized Deductions will be capped at $200,000 for joint filers and $100,000 for single filers.

There will be no Estate Tax but capital gains held until death and valued over $10MM will be subject to an unknown tax rate.

All Businesses will be taxed at 15%. Corporate profits held offshore that are brought back to the United States will be taxed at 10%.

The tax plan is expected to be in effect January 2017.

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2016 Year in Review and What to Expect in 2017

2016 is proving to be a very busy year in the Upper West Side commercial real estate market. Throughout the first three quarters of the year, the Upper West Side experienced heavy activity focused in walk up multifamily and mixed use properties. Some sub-markets of the Upper West Side commercial real estate market has remained steady on a price per square foot basis.

This year through the first three quarters, 16 Townhouses of five to ten units sold at an average of $1,075 per square foot which is the same average for 23 Townhouses of five to ten units sold through the first three quarters of 2015. This year, Townhouses sold for an average of $883,023 price per unit, in comparison to $799,882 average price per unit during the same time-frame last year, an increase of 10.39%.

This year through the first three quarters, two Multifamily Elevator Buildings sold at an average of $538 per square foot compared to an average of $426 for four Multifamily Elevator Buildings sold through the first three quarters of 2015, an increase of 26.3%. This year, Multifamily Elevator Buildings sold for an average of $544,300 price per unit, in comparison to $382,561 average price per unit during the same time-frame last year, an increase of 42.28%.

This year through the first three quarters, six Walk-up Mixed-use Buildings sold at an average of $1,012 per square foot compared to an average of $994 for three Walk-up Mixed-use Buildings sold through the first three quarters of 2015, an increase of 1.8%. This year, Walk-up Mixed-use Buildings sold for an average of $804,245 price per unit, in comparison to $795,648 average price per unit during the same time-frame last year, an increase of 1.1%.

 

Even though 2016 is an election year, the Upper West Side commercial real estate market has grown strong and steady. In 2017, you can expect to see some changes in capital gains taxes as well as a tremendous change in estate taxes.

 

For more statistics on other property types such as walk-up multifamily buildings 11units+, hotels, special use buildings, and development sites, or to discuss either candidates’ tax proposal and its effect on the sale of your building, call Alex Isak at 212-658-0895.

 

For property owners who want to know what your property is worth, call Alex Isak at 212-658-0985 for a complimentary evaluation.

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