Flatiron District

Flatiron

Some neighborhoods in New York City are named after their geographic location (Upper East Side, for instance), others for historic reasons (Greenwich Village was once Groenwijck, or green district, in the time of New Amsterdam and was in fact a village), but today’s dérive (an unplanned walk through an urban environment) is in a district named instead for an iconic building – the Flatiron. Because of the diagonal swath that Broadway cuts across the grid system in Manhattan, occasionally interesting intersections occur. Times Square is the result of the intersection of Broadway and Seventh Avenue, and the iconic Flatiron Building occupies the triangle formed when Broadway and Fifth Avenues cross between 22nd and 23rd Streets.

Surprisingly, the location of the Flatiron Building was an early sort of prototype for Times Square. The Cumberland, a seven-story apartment building on the site in the 19th Century, leased out the top four floors to advertisers, including the New York Times, who created a sign made up of electric lights. The owners of the lot eventually put up a canvas and projected an array of advertising photographs on the side of the building. In 1901, construction on a new skyscraper (22 stories!) was started, and the building was finished a year later. This part of Manhattan is in the section where the bedrock, or schist, is much deeper from the surface than in lower Manhattan or midtown, so when the Flatiron Building (technically named the Fuller Building, but the inevitable nickname stuck) was being built locals took bets on how far the debris would fall when the building collapsed. However, the steel skeleton used for the building, and the elegant Chicago-school Greek column construction, has ensured that it has sturdily anchored the area over well over a century.

So what is the Flatiron District? As a informal name to a neighborhood, there are no set boundaries, and in fact the term only gained popularity in the 1980’s. Originally an industrial area with an abundance of photography studios due to the low rents, and sometimes called the “Toy District” because of several toy manufacturers, the neighborhood has evolved into one of New York’s top residential areas downtown. As the area gentrified and became more residential, real estate agents needed a term to describe the neighborhood, roughly from 20th to 25th Street and from Sixth or Seventh Avenue to Lexington, and naming it after the landmarked Flatiron Building made the location clear.

Starting a walk through the neighborhood by standing in front of its namesake (where else?), it’s hard to decide which way to go, with Eataly (Mario Batali’s emporium to Italian food and drink, with various restaurants – or purchase products for home use) beckoning at Fifth and 23rd, and the original Shake Shack nestled in Madison Square Park at about Madison and 24th Street. Walking through the park, one is reminded that this is the source of the name for Madison Square Garden, originally just north of the park but now in its fourth location above Penn Station. The MetLife Tower at Madison and Fifth was once the tallest building in the world (700 feet tall) until being unseated by the Woolworth Building in 1913. The enormous clock on the top is visible from far away (I recently saw one of the new penthouses in the Puck Building in SoHo with a direct view of this clock from the bedroom) and a symbol of the neighborhood. Of course, many of the new apartments at One Madison would have a terrific view of the clock.

The Flatiron district combines residential use with shops, restaurants, and businesses. Many of the tech companies in the district and surrounding areas have led to a description of this as New York’s “Silicon Alley,” and there are also many advertising and financial firms in the area.

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Williamsburg

Williamsburg

My previous blog posts about taking a dérive (an unplanned walk through an urban environment) have all happened to be located in Manhattan. However, it’s time to get off the island and explore one of the hottest neighborhoods in the city. Bordered by Greenpoint, Bed-Stuy, Bushwick, and the East River, Williamsburg has rapidly evolved in the past decade, with the housing price increases to prove it.

The area of Williamsburgh (yes, there was once an extra h) was within the town of Bushwick during the days of New Amsterdam. It became the city of Williamsburg in 1852, and was annexed into Brooklyn just three years later. Cornelius Vanderbilt built a mansion in the area next to the river in the late 19th century, and the economy boomed with factories (in a perfect reflection of the area’s change, the old Domino’s Sugar Factory was recently the site of a large scale public art project by Kara Walker). The building of the Williamsburg Bridge in 1903 led to swarms of immigrants from Manhattan’s Lower East Side, and Williamsburg became the most densely populated area of New York City (itself the most densely populated area in the United States). After World War II, the neighborhood became run down, and although many artists settled there, it took a major rezoning in 2005 to spur redevelopment of the abandoned warehouses into residential buildings.

The first subway stop in Brooklyn on the L Canarsie train is Bedford Avenue, and it’s a perfect place to start exploring this charming area. Walking north along Bedford, you immediately get the feeling of the neighborhood. Generally, low rise buildings and rows of townhouses predominate until you reach larger warehouses and new development high rises near the river. Shops tend to be unique rather than branches of mega-chains. Bedford eventually dead-ends at McCarren Park, which borders Williamsburg and Greenpoint and hosts the SummerScreen free movie festival (you are too late to see Zoolander this summer but Cry Baby, Heathers, and The Big Lebowski are still ahead).

Turning west toward the river on 11th Street, within a few blocks you can smell the hops at Brooklyn Brewery before you see it. Their small batch tour (Monday-Thursday at 5) is highly recommended, but you have to reserve online a month in advance or will likely not get in (each tour is limited to 30 people). Your $10 admission pays for a guided tour of the working brewery and curated tastings of four of their beers. On Fridays there are no tours but people line up to purchase tokens ($5 each) and taste very fresh cask beer. Saturdays and Sundays there are free tours, and beer available for purchase ($5 per token). The hieroglyphs on the side of the brewery say, “Beer has dispelled the illness which was in me,” so a stop at Brooklyn Brewery could perhaps be seen as a necessity for your health (that’s my story, anyway).

Turning south on Kent Avenue, you can see the Manhattan skyline just over the East River. The most spectacular view of Manhattan I have ever seen was from the rooftop garden of an apartment building on Berry Street in Williamsburg, but I don’t personally believe that a view of Manhattan is what Williamsburg is about. Passing the Music Hall of Williamsburg on 6th Street when heading back to the subway, I remember fantastic concerts I have attended and notice five or six places I would like to return to and stop for food or drinks. Williamsburg is easy to get to from Manhattan, and vice versa, but it doesn’t need Manhattan to charm a visitor, or perhaps to turn a visitor into a resident.

New York City real estate for the foreign purchaser

Just last week, I was fortunate enough to be in London, a city I truly love and have been able to get to know over numerous visits. As an agent in New York City, I wanted to meet with the team at W.A. Ellis and learn about the similarities and differences between our markets. In the process of our conversation, Lucy Morton, Senior Partner at W. A. Ellis, invited me to write a guest article about the process of structuring a real estate transaction for foreign purchasers in New York City. I am happy to do so, and also pleased to note that the United States taxation and capital gains laws are quite favorable for foreign purchasers. The New York City real estate market is unique, however, and a little knowledge in advance of beginning the process of purchasing can be very helpful.

The rules for taxation and capital gains are the same for foreign nationals as they are for citizens or resident aliens. If a property produces rental income, foreign nationals are only required to file and pay income taxes on U.S. source income. Foreign nationals are similarly subject to estate taxes and gift taxes only on their U.S. assets. When selling a U.S. property, foreign nationals are held to the same capital gains taxation as citizens or resident aliens. The only difference is that foreign nationals selling their property are subject to FIRPTA (Foreign Investment in Real Estate Act), in which the purchaser withholds 10% of the gross sales price and either sends it to the IRS places it in an attorney’s escrow account until the capital gains tax has been paid, at which point the seller receives a refund of the remaining funds minus the capital gains tax.

So what to do if you have decided to take the plunge and purchase a home in New York City, whether to live in, use as a pied-a-terre, or as an investment? The first step I would recommend is to assemble a team of professionals to help you in the process. A real estate agent is the logical first member of the team, and can also help you assemble the other key members – a real estate attorney (required to deal with a contract, and useful if you want to consider buying as a limited liability corporation, or LLC), an accountant to help with matters of taxation and estate planning, and perhaps a bank loan officer (although, for reasons discussed later, most transactions with foreign nationals are all-cash). A good real estate agent will be able to provide the names of recommended professionals who are familiar with the nuances of a transaction with a foreign purchaser. Let me also note that I am a real estate agent, not an attorney or an accountant, so all legal or accounting information in this article is subject to review by those more qualified members of your team.

The next step would be in deciding whether you are looking for a townhouse, condominium, or a cooperative apartment. A townhouse is real property, solely owned by one entity (either an individual or an LLC), and you are personally responsible for the payment of all maintenance, utilities, real estate taxes, and insurance for the home. Although townhouses are relatively rare in New York City, they can be an excellent choice for foreign nationals since there is no application package, and no limits on renting out the property for income.

A condominium is also real property, and the purchaser owns the interior space of the apartment as well as a share of the building’s common areas. Real estate taxes are paid directly based on the assessed value of the apartment, and in addition, there are monthly common charges that pay for the upkeep of the common areas. There is an application process, but rejection is generally limited to the board’s right of first refusal. Condominiums traditionally have been less restrictive regarding the application process and rules regarding renting out the apartment, but today some condominiums can have an extensive board package and stringent rules. A good real estate agent can let you know in advance how difficult a particular condominium building can be, particularly important if you plan to rent out the apartment for income. A sponsor apartment in a new development can be particularly attractive to foreign investors, since there is no board package required in this situation. Closing costs can be higher in sponsor apartments, however, since transfer taxes are generally paid by the seller but are paid by the purchaser in a sponsor apartment.

Cooperative apartments are very common in New York City, but rare elsewhere. In a coop, the entire building is owned by a corporation, and purchasers receive shares of stock equal to the value of their apartment. In addition, the buyer receives a proprietary lease that allows residency in the apartment. Real estate taxes are paid by the corporation, and the shareholder pays a monthly maintenance that includes their share of real estate taxes, interest on any underlying mortgages on the building, and the cost of running the building (a percentage of this is tax deductible). Coops are run by an elected board from within the pool of shareholders, and most have lengthy board applications and require an interview. A potential buyer can be turned down by a coop board without being given a reason, and many coops (but not all) are less likely to approve a foreign purchaser because of the difficulty in verifying income and assets. Coops generally do not allow subleasing for rental income, or have restrictions on doing so.

Is it difficult for foreign purchasers to move money into the United States? Generally not – many experienced attorneys have escrow accounts and allow the buyers to wire the deposit, purchase price, and closing costs to this account and write the checks for the buyer. Getting a mortgage as a foreign purchaser can be less easy – often there is a maximum loan amount of $1.5 million, a requirement of a 12-24 month cash reserve and large deposit held at the bank, and it can be difficult to verify employment and assets. For these reasons, most foreign purchases of real estate are all-cash.

The intellectual reasons for owning property in New York City as a foreign national are real: favorable tax treatment, and a historically strong appreciation of value. However, as a resident of New York City, I would like to add that there are a multitude of intangible reasons to own a part of this vibrant city as well. If you are interested in finding out more about purchasing real estate in New York City, feel free to contact me.