161 MAIDEN LANE, NY NY
There was a little office building at the eastern end ofMaiden Lane, a few blocks from Wall Street. If you tore it down and acquired some available air rights, you could build a tall, thin residential condo building with unobstructed views of the East River and all of nearby Brooklyn, and uptownManhattan. And the land price per square foot was relatively low at about $200 per gross square foot of building. The problem was that building the proposed building with its substantial height and relatively small floor plates could equate to very expensive construction on a salable square foot basis. We convinced ourselves that the expense of construction would be justified by the above market prices we could sell at, due to the amazing views that most units would enjoy.
However, when a hungry buyer, with more money than brains, surfaced, we got out of the deal and banked a nice profit. Subsequently, our overly enthusiastic buyer decided that the proposed building’s views would be so outstanding, that he bought enough air rights to double its height. To illuminate the extent of the emerging folly, let’s focus on the numbers. Construction costs for a normal condo building of say twenty five floors, with decent sized floor plates of say 7,000 gross square feet and a 15% loss factor are about $375 per salable square foot. Now double the height and bring the floor plates down to 4,000 gross square feet with a 25% loss factor and the construction cost per salable square foot jumps from $375 to about $560. While in certain prime residential neighborhoods in Manhattan, the right type of condo units can sell for just about any price, in the old downtown financial district, its pretty hard to break through price ceiling that are relatively low.
Of course, nothing has been built on the site and there have been legal fights and note sales. Providently, Blue Rock ducked the bullets, but those who followed in our foot steps got a costly education.