West 57th Street has become known as Billionaires’ Row for its cluster of luxurious residential towers and the asking prices for its well-appointed condos. But you don’t have to be a billionaire to rent there. Now that Extell Development Co. has sold most of its condos at the West 57th tower it calls One57, it has begun offering a little-known set of rental apartments on lower floors. The units appear positioned for mere millionaires and other financial mortals: The six listed last week on the 37th floor asked monthly rents ranging from $13,350 for a one-bedroom to $50,366 for a three-bedroom. The 38 rental apartments are on seven floors sandwiched between the 94 condos with king-of-the-universe views and the Park Hyatt New York hotel on the lower floors of the 1,004-foot-high building. While rentals can confer certain tax advantages on builders, the city’s current round of luxury real-estate development has seen most projects emphasize condos—rather than rentals—because they can generate more profit. That is especially true for units on the higher floors. “Extell always planned on having a long-term investment in the building,” an Extell spokeswoman said when asked why the firm decided to keep the 38 rental units. Like the condos on higher floors, some of the rentals have breathtaking views of Central Park, though they are obscured by a few other tall buildings. Others have broad city views and glimpses of the Hudson and East rivers. The units all come fully furnished with equipped kitchens. They include many throw-ins such as bathrobes, cocktail shakers and oven gloves. They also include access to many services from the hotel downstairs. Compared with the eight condos at One57 that have sold for more than $50 million each, the rentals might be considered more affordable housing. Many landlords look for tenants whose incomes total 40 times the monthly rent. Such a formula would make the least expensive one-bedroom affordable for someone earning $534,000 a year. By the same measure, the three-bedroom would be affordable to someone with a $2 million income. “It affords a very luxurious lifestyle and a luxurious home, and you don’t have to pull out all of your investments to be able to move in,” said Cathy Franklin, who is listing the rentals along with two other Corcoran brokers, Alexis Bodenheimer and Dennis R. Hughes. The brokers say they have had about 20 nibbles so far for the apartments. Luciane Serifovic, director of rentals at Douglas Elliman who isn’t involved in the listing, said she saw the One57 rentals filling a niche market. “When we get super luxury uber clientele there is not a lot of luxury furnished product out there,” she said. “If they want to get this type of product they usually have to go to a hotel.” Ms. Franklin said she expected the apartments to appeal to New Yorkers, including those going through time-consuming co-op renovations, relocating executives and foreigners looking for pied-à-terre apartments in New York. Rentals at One57 ranked as the second and third most expensive apartment rentals in the city, with a rents close to $270 a square foot per year, based on a review of listings at Streeteasy.com. Luxury rentals in new rental buildings are closer to $80 a square foot. The most expensive listing was a $65,000 48th-floor three-bedroom apartment at One Beacon Court on E. 58th St., at $272 a square foot. Extell’s decision to rent out the units may mean certain financial benefits, experts say. By renting out a separate rental portion of a condo building for a period of years, a developer may be able to qualify for lower capital-gains tax rates in the event it eventually sells them as condos, said Robert Willens, an accountant who specializes in complex corporate transactions. Extell will also be able take advantage of a city property-tax abatement at One57 known as 421a, a program to spur development. For one rental apartment (unit 37D) now being offered for $13,350 a month, tax records show that with the abatement Extell is due to pay about $500 a month in taxes beginning in July—taxes that amount to about 3.8% of the asking rent. Taxes on rental buildings without abatements typically make up 30% to 35% of rents, according to the Real Estate Board of New York, an industry group. Extell said the taxes would gradually rise between now and 2023, but declined to comment further. Another factor may have been a series of court rulings following the 2008 financial crisis that shocked developers and made them consider reducing the number of condo units in their buildings to 99 or fewer. Courts found that New York developers were required to comply with a federal law governing interstate land sales in condo buildings with more than 99 units. The law, since amended to exclude condos, was used by buyers to back out of deals and recover their deposits. Adam Leitman Bailey, a real estate lawyer who brought many such cases against developers, said he knew of several condo developers who had reconfigured the units to keep the total below 99. Extell declined to comment on the law. Write to Josh Barbanel at josh.barbanel@wsj.com This article was originally published on The Wall Street Journal
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