Residents of Billionaires' Row Co-op have been ordered to shell out $280 million

Co-op apartments in a luxury doorman building on Billionaires’ Row sell for as low as $100,000 for a studio and $659,000 for a three-be...


Co-op apartments in a luxury doorman building on Billionaires’ Row sell for as low as $100,000 for a studio and $659,000 for a three-bedroom penthouse with a terrace.

But the problem in the unique New York scenario is that the owners of the 324-unit building must pay a total of $280 million to buy the land under the structure, or face an additional $26 million a year in land rent in addition to the current $4.4 million per year. If they don’t cough, they risk losing their home.

Carnegie House at 100 W. 57th St. at the corner of Sixth Avenue is a 21-story gray brick structure that resembles many other middle-class Manhattan apartment buildings of the early 1960s. Its status of “luxury” looks modest compared to neighboring giants, such as the 1,550-foot-tall Central Park tower to the west and 111 W. 57th St. to the east; units in the two new projects cost up to $30 million.

But Carnegie House has all the drama. It sits on land owned by David Werner and Rubin Schron’s real estate company, The Werner Group. Co-op apartment owners pay ground rent to the Werner Group, which bought the land for around $270 million in 2014.

A contract between the co-op and the former owner of the land included a formula to determine the annual rent beyond the lease’s expiration in March 2025 – which would have been just $53.4 million.

Exterior of the Carnegie House.
Landlocked: Residents of the Billionaires’ Row building co-op have been ordered to shell out $280 million or beat it.
Matthew McDermott

But the purchase automatically valued the land at $270 million, Werner said, saying rent should be based on that much higher price. A newly filed lawsuit claims the co-op’s board agreed – to the detriment of shareholders.

Not all residents of Carnegie House – many of whom live on fixed incomes, insiders say – can afford to either pay their share of the purchase of the land or pay the hugely increased rent.

“Up to 90% of residents, some of whom have lived there for 50 years, are at risk of losing their homes,” an insider said.

The resistance came to a head in a lawsuit brought by Birinder S. Madan, a resident since 2003, who is suing the co-op’s 10 board members, as well as consulting firm JM Zell Partners. The lawsuit, filed on behalf of other shareholders, claims that the board, rather than fighting for shareholders’ interests, is playing with Werner’s “illicit” scheme to overcharge residents.

“Up to 90% of the residents, some of whom have lived there for 50 years, are at risk of losing their homes.”

Anonymous Insider

His lawsuit, filed by attorney Massimo F. ​​D’Angelo and several other attorneys, accuses J. M. Zell of having been hired to negotiate better terms with Werner, but instead endorsed his high-priced offer. The council thus “played Werner’s game” to force residents to pay “exorbitant additional sums” to keep their apartments or give them away so that Werner could construct a new building on the site.

As a result, shareholders “live in a perpetual state of fear of being uprooted from their homes,” the suit claims.

The key to the dispute is how the land should be valued.

Madan says the rent owed to Werner should be tied to the “fair market value of the land under Carnegie House,” according to a renewal provision of the original ground lease.

Exterior of the Carnegie House.
Carnegie House sits on land owned by David Werner and Rubin Schron’s real estate company, the Werner Group.
Matthew McDermott

He added that the “astronomical price” paid by Werner was based on a “developer’s fantasy” of what the site would be worth if it were vacant and able to support a brand new building.

At a tense shareholder meeting on Tuesday evening, board members said talks with Werner were continuing after being suspended for the first few months of COVID-19.

“Council believes that the allegations [in the suit] are groundless and baseless and he will vigorously defend them. They are convinced that they will succeed.

Laurence S. Tauber, Co-op Board Counsel

They said they had the “most productive in-person meeting to date” with Werner on June 15, and the landowner has since “indicated his willingness to sell for a better price.”

But the meeting ended in fireworks with angry exchanges between attorney D’Angelo and board members.

With time running out as the ground lease expires, apartment owners wasted no time in starting to bail out just after the board sent shareholders a ‘doomsday letter’ on June 14, 2019 , and followed her on June 19 of this year at a meeting. which spelled out Werner’s terms.

Some 50 units have since traded, according to public records, at prices that seem too low to be real – with several for just $100,000 and most for less than $300,000.

The top price was $695,000 for an 1,800 square foot penthouse with a terrace overlooking Sixth Avenue. Such a unit in a normal co-op without a ground lease would bring in several million dollars.

Scotty Sheriff, a Charleston, SC-based businessman, bought the penthouse in October 2020. Unlike some Carnegie residents, he always wanted to buy the land.

“I thought we would just buy the lease of the land and be done with it,” he said. “[But] our board has been sitting for two years, using COVID-19 as an excuse and making no counter-offers and spending no money on professional fees. They should have made an aggressive counter-offer.

Board Chairman Richard Hirsch declined to comment.

Board attorney Laurence S. Tauber of Cohen Tauber Spievack & Wagner told the Post, “The board believes the allegations [in the suit] are groundless and baseless and he will vigorously defend them. They are convinced that they will succeed.

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Newsrust - US Top News: Residents of Billionaires' Row Co-op have been ordered to shell out $280 million
Residents of Billionaires' Row Co-op have been ordered to shell out $280 million
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