Jennifer V. Hughes in Bricks & Bucks
Not so long ago, it was big news when a Manhattan condo developer started selling parking spots for $1 million each.
While most buildings can only dream of generating that type of revenue, everyone knows that in car-choked New York City, private parking spaces are a coveted commodity. Condos and co-ops lucky enough to have a parking lot or garage face a tricky question: Is it better to sell or rent parking spaces?
The board at the Fieldstone Plaza Condominiums in the Bronx decided to sell their spaces, starting in 2010, in order to raise a lump sum of cash, says Michael Dailey, president of the board of directors. The board went to unit-owners who were renting spots and told them of the option to buy. Most did, says Dailey. The building raised about $300,000, which helped pay for repairs to brickwork and the roof, an awning, and renovation of the dated hallways.
In addition to that work, the condo needed to boost its reserve fund because of regulations instituted by the Federal Housing Authority in the wake of the financial crisis, Dailey says.
“At the end of 2011, we borrowed $350,000 and instituted an assessment to pay it back,” Dailey says, noting that neither the parking spot sales nor the loan was, by itself, enough to cover the work and boost the reserve fund.
“We’re a middle-class building,” Dailey says. “If we relied only on an assessment or maintenance increase, we’d have to wait a long time to build up enough funds to do the projects.”
Technically, the parking spots do not change hands. Instead, the condo association sells what’s known as an “easement” for the spot, which is an exclusive right to use property that belongs to someone else (in this case, the condo).
Dailey believes that allowing residents to buy their spots has boosted the overall appeal of the building. “It becomes an asset,” he says. “You can pass it along with the sale of your apartment. Parking is a premium, and I think (having) an apartment that also has a parking spot with it is a very attractive thing for people looking to sell their units.”
Dawn Dickstein, president of MD Squared Property Group, a management firm, has experienced the other side of the coin. She lives in a 450-unit Upper West Side co-op where some of the 50 outdoor parking spots were sold to shareholders as part of the initial conversion. Some spots are still owned and rented by the sponsor, and the remaining 13 spots are owned and rented by the co-op corporation.
“We considered selling them for a time,” Dickstein says of the co-op’s 13 spots, which rent for $350 a month. “Now they’re probably worth about $60,000 or $75,000, but are you going to (be able to sell) all of them? And if your building has a $7 million budget, is it worth it?”
In general Dickstein says she leans toward renting parking spaces, in part because the co-op or condo maintains control of the real estate.
“Let’s say you decide you want or need to do something else with the space, like you need to relocate garbage pickup,” she says. “You can’t do that if you don’t own the space anymore.”
Dickstein points out that there’s another consideration: selling an asset produces a one-time benefit; but if the board retains ownership of a parking spot and rents it, the income will stream in forever. Which is better? Time for your board to crunch the numbers.
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