Sunday, November 18, 2007

Through the Roof

The New York Times
November 18, 2007
By VIVIAN S. TOY
http://www.nytimes.com/2007/11/18/realestate/18cov.html

IN the classic New York City real estate dream, the sleeper discovers a room, maybe an entire wing, that he or she never knew existed. Then, just as the exhilaration of the newfound space starts to settle in, the dreamer awakens to crashing disappointment.

But for some New Yorkers, the dream is not so far-fetched, because they can build those illusory rooms on the rooftops of their own buildings. Squeezed by rising maintenance costs and in search of new sources of income, dozens of small-to-midsize co-ops and condos across the city are looking to their rooftops — the latest frontier for cashing in on every available inch of space — and are opting to sell building rights to top-floor residents or to other apartment owners.

The owners of the top-floor apartments pay for the chance to expand their apartments into duplex penthouses and to create roof decks with panoramic city views. The buildings, in turn, get money to pay for major projects like replacing the elevators or remodeling the lobby, as well as additional monthly income through higher maintenance or common charges as a result of the new space.

"We're seeing more of this now, and it's simply because the value of space has become so dear and rooftops always were the undiscovered value in this city, the underappreciated surface," said Tony Goldman, a developer and a restaurateur who has renovated many buildings in SoHo and the financial district.

The roof additions tend to be in loft conversions and brownstones — smaller-scale prewar buildings that have not been built to the full height allowed by zoning regulations. Large postwar buildings, on the other hand, tend to have already maximized their allowed square footage.

Jonathan Miller, an executive vice president of Radar Logic and its director of research, said that the "popped up" rooftop in loft conversions was probably what prompted many existing co-ops and condos to consider building upward.

He said that Miller Samuel, the appraisal arm of his business, has gotten more requests to appraise roof space in recent years. "Co-op and condo boards are looking for new ways to bring in money," he said. "They're naturally looking at everything that has been underutilized and that now has enormous value."

The city's Buildings Department says that by late October, 35 buildings in Manhattan had applied for rooftop additions, already exceeding the 2006 total of 34. In the 1990s, there were just a handful of applications each year.

But since 1999, just about the time that the city's real estate boom took hold, there have been a few dozen rooftop applications annually.

Of course, as with any co-op or condo issue that involves major construction and large sums of money, the perils are many. In any building, there is likely to be at least some disagreement over who gets to buy what and for how much, as well as anger and frustration over how disruptive and time-consuming rooftop construction can be.

Structural engineers must review the designs to make sure the building can physically support the addition. The projects also often require contractors to extend existing vents and chimneys. Buildings' proprietary leases and bylaws can vary, but in most cases, any deal will have to be approved by at least a majority of the owners, and project plans will have to be approved by the building's board.

But penthouse owners who have weathered the travails connected to cracking through the roof say that in the end, the results are worth all the trouble. They get more space without having to move, and they point out that buying similar quarters in a newly constructed building would probably cost them much more.

Juan Urrutia bought the rights to build on top of his Greenwich Village building about six years ago when the co-op wanted to raise money for renovations. It took more than five years, but his 1,500-square-foot apartment on the 16th floor grew to include a 300-square-foot screening room on a mezzanine level, an 800-square-foot addition with two bedrooms, a bath and an office area, plus two terraces with more than 1,200 square feet of outdoor space.

He is now in contract to buy an additional 750 square feet of space to provide a buffer around his penthouse. "We ended up having to buy more to protect what I had already bought," he said. "It guarantees the view forever."

The price per square foot in his building started at $65 and has since risen to $450. "The whole process was a lot more complicated than it sounds," he said. "And it's very expensive to build, but I still figure it would have cost me twice as much to buy it already done."

Mr. Urrutia credited his architect, Arpad Baksa, with finding ways to maximize the amount of buildable space and giving his duplex a seamless feel even though only a part of the top floor is directly above the original apartment.

It was Mr. Baksa who pointed out that an unused water tank — a remnant of a factory sprinkler system — and other ductwork on the roof could be removed or moved to make Mr. Urrutia's addition more functional.

Mr. Baksa, who has completed about 35 rooftop additions since the late 1990s and is currently working on six such projects, said that buildings have also hired him just to figure out how much additional space is permitted under zoning regulations and how many square feet can actually be built, two figures that are not always the same.

"You might have the square footage but not be able to use it," he said, noting that zoning restrictions can limit the usable space. Rooftop additions in landmark districts, for example, must be set far enough back that they cannot be seen from the street.

The price of roof rights is linked directly to the apartment beneath it and varies greatly, said Mr. Miller of Radar Logic. He said that rights generally sell for anywhere from 15 to 50 percent of the value, on a square-foot basis, of the apartment that will be connected to it, depending on whether the buyer plans to build a terrace or a new room.

So in a building that has top-floor apartments worth $1,000 a square foot, rooftop space could sell for $150 to $500 a square foot. "It's really what the market will bear because you're giving somebody the potential to upgrade their apartment," Mr. Miller said.

At 56 West 82nd Street, Eric Rath, a Bellmarc Realty agent representing the one-bedroom apartment on the top floor, urged the seller to take the option to purchase the roof rights above the $695,000 one-bedroom. "The option was a few thousand dollars, and it gives whoever winds up buying the apartment the exclusive right to buy the roof rights within a year," Mr. Rath said.

"It was the logical thing to do," he added, because otherwise another resident in the building could buy the space and build above the apartment. Actually purchasing the rights to build a 500-square-foot addition on the roof would cost $60,000, he said.

When Lara Sullivan bought her top-floor apartment in an Upper West Side brownstone in 2003, roof rights were included. The previous owner had already acquired the rights to the entire roof, including the space above a neighboring apartment. But because of that, Ms. Sullivan paid a premium for her 600-square-foot one-bedroom.

Stuart Moss, a broker with the Corcoran Group who handled the sale, said that about 30 percent of the $362,000 that Ms. Sullivan paid was attributable to the roof rights. But after she completes a $250,000 rooftop expansion next month, he estimates that the apartment will be worth about three times what she paid.

Ms. Sullivan, who is a principal in a private equity firm specializing in health-care investments, started planning the rooftop addition in 2005, but getting city approvals took more than a year, and she was disappointed to learn that even though she had the rights to nearly 1,400 square feet of roof space, zoning and landmark regulations limited her addition to 270 square feet.

Still, the renovation will give her a more open living space downstairs and a larger bedroom on the upper level, along with two terraces with more than 1,100 square feet of outdoor space.

"It feels like a different world on the roof," she said. "The price I had to pay for it was all the aggravation and the time it took to finish it."

Ms. Sullivan said that when the co-op board approved her plans, it also voted to increase her maintenance by $130 a month, to $850, which she thought was reasonable. "The number of shares I own in the co-op went up, but I think it was the right thing to do for the building," she said, "because I had the smallest space in the building to begin with and I now have close to the largest."

Penthouse apartment owners, of course, are not the only ones presenting building boards with rooftop proposals. Burt Wallack, president of Wallack Management, which manages about 60 apartment buildings, said several developers had approached him with proposals to build new penthouses on top of their buildings.

When that happens, he advises the building's board to get an independent appraisal, and to offer the space to residents before selling the roof rights to an outside developer. Getting residents' approval is important, he said, because construction can cause lots of disruptions.

"If it's done right, it could be an excellent thing for a co-op or a condo," he said. "But if it's not done right, it can easily turn into a nightmare."

Stuart M. Saft, a real estate lawyer who is the chairman of the Council of New York Cooperatives and Condominiums, said developers who propose building a new penthouse for sale to outsiders face an uphill battle because top-floor residents "generally won't want their apartments devalued with something on top of them, and they don't want the risk of noise that doesn't exist right now."

When Dennis Mitchell and his wife, Akiyo Matsuoka-Mitchell, opted to expand their top-floor apartment in SoHo three years ago, they had to grapple with many disappointments and complications.

A neighbor initially thought she, too, would expand above her apartment, so they limited their project to the space above theirs, only to learn later that the neighbor had decided not to build. "We would have liked to have the extra space, but by then it was too late for us to change our plans," said Mr. Mitchell, a fashion photographer who was president of the co-op board at the time.

They paid $100,000 for the right to build a 450-square-foot master bedroom suite, along with 600 square feet of deck and a 400-square-foot terrace on top of the addition.

Along the way, the roof height on the addition had to be scaled back from 16 feet to 12 feet after inspectors from the city's Landmarks Preservation Commission examined a mock-up of the expansion, created with sticks on the roof, and ruled that a penthouse with 16-foot ceilings would be visible from the street, a violation in a historic district.

The commission also required them to scrap plans for a stucco exterior and to substitute more expensive brick, to match a nearby chimney.

On the plus side, they were also able to buy about 50 square feet of hallway space on the lower floor. They paid $68,000 for the interior space, significantly more per square foot than what they paid for their roof rights, but it allowed them to create two bedrooms downstairs for their young children, one of whom was born during the construction period.

"We love the area and the building, and I feel like we were so lucky that we didn't have to move when the family expanded," said Ms. Matsuoka-Mitchell, who runs a jewelry design business from the apartment. "The space was able to grow with us."

Who Can Tell You What?

Finding out whether you can build an addition on your building's roof is more complicated than you might think.

The Department of City Planning can tell you the zoning and height regulations for your property, but it's the Buildings Department that tracks what has been built at any given location over time, and neither agency will answer your rooftop expansion questions.

Because roof rights involve the overlapping jurisdiction of both agencies, Kate Lindquist, the press secretary for the Buildings Department, recommended that owners of co-ops or condos consult a licensed architect or engineer with professional expertise in zoning and building regulations.

But Arpad Baksa, an architect who has advised many co-ops and who has done dozens of rooftop additions, said that the Web site PropertyShark.com could give you a good idea whether your building has any buildable space.

To get a ballpark figure for how much more space your building can add on, plug in your address at PropertyShark.com.

If a building has available space, the site will list a number for "SF under FAR," which stands for the amount of unused square footage under the allowed floor-area ratio, or FAR. The ratio is used to determine the maximum building size allowed under zoning regulations.

PropertyShark's disclaimer makes clear that the numbers are an estimate. "They tell you their guess from maps, but they haven't actually measured the site," Mr. Baksa said, "and they don't know if there are other regulations that mean you can't actually build. But it's an amazing start."


Hiroko Masuike for The New York Times

Stairway to the stars Dennis Mitchell, Akiyo Matsuoka-Mitchell and their children, Leo and Lena Mitchell. The couple enlarged their top-floor apartment in SoHo with a master-bedroom suite on the roof.


Hiroko Masuike for The New York Times

The roof is reached by a sweeping staircase.


Hiroko Masuike for The New York Times

Eric Rath, who has a listing for a top-floor apartment at 56 West 82nd Street, urged the seller to take an option for rights to build on the roof


Hiroko Masuike for The New York Times

Lara Sullivan is expanding upward.


Hiroko Masuike for The New York Times

Arpad Baksa designed a penthouse and two terraces for Juan Urrutia.

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