When I was a kid, we sometimes played a game called Hot Potato. Kids would sit in a circle and toss a ball to one another while music played; when the music stopped, the one holding the ball was out, gone, loser. That Hot Potato concept may explain why 140 West Franklin seems to be struggling to sell its condominiums.
Because the town owns the land that 140 West Franklin will be built on and has only leased it to Ram Development, albeit for 99 years, someone purchasing a condo in the building buys the right to occupy a unit. The transaction is a leasehold, as opposed to the freehold transaction of condos at East 54, where East West Development owns the land the complex is built on. Once Ram’s 99-year lease is up, the right to occupy the unit you’ve purchased ends. Presumably, some other arrangement will be worked out — Ram will negotiate a new lease with the town or the town, as freeholder, will negotiate new leasehold agreements with the condo owners — but no one knows for sure. And who wants to be holding title when the music stops?
The leasehold concept may be why buyers are uneasy about signing a deal for a unit at 140 West Franklin. Although the units have been priced to sell since Ram dropped its prices last year, sales have stayed at the same 30 units for more than a year. Buyers still pay the high property taxes as if they owned the physical property. But the property may not have the investment appreciation that a freehold does. A leasehold unit owner can sell the leasehold, but at a point that much closer to the end of the 99-year lease. At some point, the appeal of buying a unit that is, say, within 20 years of the end of the lease would have all the appeal of buying beachfront property with the ocean lapping at its foundation.
The leasehold concept also might explain why no one with the town wanted to answer my question about what it would cost to back out of its agreement with Ram. All I got was a verbal “We can’t back out” from the mayor, but he did not follow through on sending me an e-mail confirming that. Nothing in writing to back up his assurances to me.
He might not want to emphasize that the town could make changes down the line that would change the terms of the leasehold.
With the gun-shy investors of this economy, it may take awhile before Ram comes up with the 50 percent of unit sales it needs before its lender will approve it breaking ground.
— Nancy Oates