New development activity is back in New York, and the roar of construction has awakened a dreaded industry bogeyman: the holdout.
From the Diamond District to Billionaires’ Row, neighbors and tenants have dug in their heels and hobbled major projects. Perhaps the starkest example is playing out at Miki Naftali’s Upper West Side condominium conversion at 215 West 84th Street.
In February, the developer sued Ahmet Ozsu, the sole remaining tenant in the 16-story apartment building on the site, alleging that Ozsu’s refusal to move has cost him $25 million in lost rent and profits.
But that hefty price tag doesn’t tell the full story. There are financing and operational costs to be considered, as well as legal fees and a great intangible: reputational damage.
All of them must be weighed against the high price, but relative simplicity, of buying out a tenant or paying off a pesky neighbor.
So just how much can a holdout cost? The Real Deal put together a breakdown.
The Community Housing Improvement Program, a landlord trade group, recently broke down the operating costs for buildings with rent-stabilized units, including properties that are 95 percent market-rate.
CHIP’s data pegs maintenance, fuel, labor, utilities and insurance at $6,200 per year per tenant, on average. And although just one tenant remains, Naftali is likely on the hook for keeping the whole building online.
“The tenant has a right to full habitability, meaning all the services the tenant got when the building was full, the tenant still has the right to get now,” said Adam Leitman Bailey, the attorney representing Ozsu in the Naftali case. Bailey declined to comment in more detail, citing ongoing litigation.
Those expenses could run as high as $795,000 per year, or $2,178 per day for Natfali. Tack on the annual property tax bill of $822,000, according to public records, and that adds another $2,252 per diem.
Between financing and operations, Naftali could be spending nearly $10,000 daily.