Smack-bang in the middle of Manhattan is a block known as Billionaires Row.

This small stretch on 57th Street, between 5th and 6th avenues, is a short stroll to famous landmarks like Central Park and Carnegie Hall—and it’s home to some of the most expensive real estate in the world. Here, even studio apartments easily fetch over $1 million.

So why, then, did an apartment here just change hands for the low, low price of $180,000? Yep, only four zeros.

In February, apartment 2G, a one-bedroom in the historic Carnegie House co-op at 100 W. 57th St., was snapped up by some seemingly lucky buyer for a tiny sliver of what comparable properties cost in the area.

And for those who presume this bargain must have something seriously wrong with it, guess again. On the contrary, the airy and light-filled 950-square-foot apartment boasts updated appliances, roomy closets, and gorgeous hardwood floors. It’s more or less move-in ready.

But there is a catch—and it’s a problem for not only 2G but also every other apartment in the 324-unit building: Carnegie House doesn’t own the land it sits on.

Land leased properties: bargains or beware?

The land under Carnegie House is owned by the Werner Group, which purchased this plot in 2014, according to Habitat. Before this point, co-op members had an agreement in place with the previous owner that the rent they paid was based on the land being valued at a modest $53.4 million. But that lease expires in March 2025, and the land’s new owners say the rent should be based on what they paid for it —which is more than quadruple the previous valuation, at $270 million.

Unless the co-op was willing to buy the land itself—which would cost a staggering $280 million—this rental increase is set to be passed on to residents as early as next year. Once the ground lease expires, shareholders could see their yearly rent increase from $4 million to $30.4 million. Equally spread among its members, this will amount to a massive hike in maintenance fees. Those who can’t afford it could lose their apartments or be forced to sell at deflated prices.

After the Carnegie House co-op board sent residents a “doomsday letter” in June 2019, shareholders frantically began to unload units. At least 50 went on sale at steeply discounted prices ranging from $100,000 to $695,000 for the 1,800-square-foot penthouse with a terrace.

Currently, another one-bedroom in Carnegie House has been listed for $399,000, with an open house scheduled for Saturday.

Meanwhile, a two-bedroom has been listed for two months at $450,000.

Some co-op members joined forces in a lawsuit, according to the New York Post.

All in all, Billionaires Row or not, none of this sounds all that enticing to a homebuyer. Nonetheless, apartment 2G was snapped up in just two weeks. Why?

The pros and cons of buying in a land-lease building

For all its faults, buying in a land-lease building is often a more affordable way for buyers to gain access to a property that would normally be far out of their budget. Without a land lease, a one-bedroom in Carnegie House, for instance, would typically hover around $1 million. At a mere $180,000, the apartment might seem too good to pass up.

Land leases are generally par for the course for mobile homes in trailer parks and also common in Hawaii, where as many as 1 in 8 homes have land leases, according to Hawaii Business.

While land-lease buildings are rare in New York City, with the costs of land continually rising, it’s becoming an increasingly attractive option for developers as a cost-saving measure, says Jennifer Lenz of Manhattan’s Dolly Lenz Real Estate.

“There are a few ultraluxury land-lease buildings that are very desirable due to their coveted location and rare attributes,” Lenz notes.

However, she also thinks that the risks of buying land-lease properties often outweigh the potential rewards.

The pitfalls are many: Costs are sure to explode when a land lease expires. Owners who can’t afford the increase could be forced to sell at steep discounts and, if they can’t sell, face foreclosure if they have a mortgage—or eviction if they don’t.

Broker Roman Davygov, of Exit Realty First Choice, negotiated the deal for apartment 2G but wouldn’t discuss any specifics due to client confidentiality. However, he says that buyers should look before they leap into what might seem a stunningly great deal.

“In general, it’s not a safe investment,” he says of land-leased properties. “You never know what will happen when the lease expires. It’s unpredictable. Some people think it will eventually be a winner for them. Others might say, ‘Why would I risk it?’”

Lenz agrees, offering a blunt comparison: “Owning property within land-leased buildings like Carnegie House is akin to catching a falling knife.”

All that said, if the alternative is coughing up a million-plus bucks for another apartment in that area (see examples below), this recent sale suggests that certain buyers with a healthy tolerance for risk might weigh the balance and decide to roll the dice.

1BR at 58 West 58th Street, 8B

Price: $999,950

1BR at 77 West 55th Street, 4H

Price: $910,000

1 BR at 106 Central Park South, 4F

Price: $1,075,000

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