Hampton Sheet magazine and Joan Jedell partnered with Paola Garzoni and her international boutique real estate firm LaSeven to create an over- the-top Spring Into Summer bash at LaSeven's 58th Street 5,000 sq. ft. space.
The 350 power-pack included former top cop Bill Bratton and TV-anchor wife, Rikki Klieman who recently settled back into town from LA, rubbing elbows with David Dinkins, Republican Senate hopeful Bruce Blakeman, RFR's Richard Farley, St. Giles Hotel GM David Lopez and William Parris, Gilan jewelry VP Samir Tahan, John and Margo Catsimatidis, Gabi Garzoni, Jerry and Adrienne Cohen, Jean Shafiroff, Sharon Bush, Sirio Maccioni, Janna Bullock, Rikki Kane, David Hyrck, Don Epstein, Phil O'Brien, Lisa Solomon, Andrea Stark, and Vanity Fair's George Wayne. DJ Vera Kolovic had the crowd up on their feet on the dance floor. A special thanks to LaSeven's Noel Hernandez, who worked tire-lessly with us to transform the empty 5,000 sq. ft. space into a fabulous tropical oasis setting for the party. Also a special thanks to our wonderful sponsors including St. Giles Hotel exec. chef Andrew Carranza for the fabulous food that our guests flipped over, Lex Bar, Ajune Day Spa, Dr. Perricone, MarieBelle Chocolates, Waterworks, Brugal rum, Repton Group for Tito's Vodka made in Texas, Cole Bernard and Eric Unger of the Status Group for the yummy Red Velvet cupcakes and bar, St. Supery wines, and DLA Piper. The event benefited Same Sky, founded by Francine LeFrak, to empower HIV-positive women artisans in Rwanda. A great time was had by all at this 6pm to 8pm party that went past 11pm!
Former top cop Bill Bratton is seriously settling back into town. The chief and his TV-anchor wife, Rikki Klieman--who moved back from LA late last year -- have rented an apartment on East 65th Street and bought a house in Hampton Bays.
The couple was spotted at Hampton Sheet magazine publisher Joan Jedell's summer party at real-estate firm LaSeven's East 58th Street space Tuesday night, rubbing shoulders with David Dinkins, Republican Senate hopeful Bruce Blakeman, Sharon Bush, Russian millionaire Janna Bullock and architect Richard Meier.
"I want to be a part of it, New York, New York", sang Frank Sinatra and Liza Minnelli. Just as these classic crooners suggested, many investors are now taking advantage of dropping share prices and declining value of the dollar to find bargains on condos and townhouses in some of the Big Apple's prime neighbourhoods,
like the Central Park area. Among those taking advantage of this trend is Paola Garzoni, the founder of LaSeven, Inc., a New York-based, Swiss-managed real estate agency. "At the moment we are facing a rare opportunity as market conditions are showing the first signs of improvement after the slowdown," Paola Garzoni affirms. "This means it is the best time to invest, not only for short term value but also for long term growth".
While American buyers struggle to cope with today's tight mortgage restrictions and declining property values, the number of foreign investors has been growing rapidly in the recent months.
The U.S. regulatory climate has long encouraged property investment without limits on financial speculation. Foreign firms also benefit as they invest in properties both large and small without restriction.
As a result of the U.S. mortgage crisis just over a year ago, financial institutions have become less willing to loan money and the loan conditions have become much stricter. For foreign investors, however, the tightened mortgage restrictions are not an issue.
Mortgage loans normally represent 70-75% of a property's value, calculated by considering both the future profit potential and the present budget including rent contracts, costs and expenses. Before granting a loan, banks evaluate the property budget, and then consider the financial condition and other property holdings of the investor seeking the loan. Mortgage taxes can be fixed - calculated by adding a spread to Treasury Bill rates - or variable, based on adding Libor (the rate banks charge each other for loans) to a spread.
In any case, the best bargains are available with "all cash" offers - without any loan - and can be concluded in a short time, often within 45 days from signing a purchase contract.
"Differently from Switzerland, loan interest in the U.S. is tax deducible," Paola Garzoni says. "The real estate (excluding the underlying soil) has to be written off or depreciated according to the established laws and standards, but there is no property tax. " In this area, we rely on the expertise of
Ms. Garzoni, who earned her B.A. in Architecture from ETH in Zurich, an M.A. in Real Estate from Columbia University in York, and an M.A. in Construction Management from New York University.
Regarding taxes, even if spreads grow, the ongoing financial crisis has brought a substantial drop of Treasury and Libor taxes. In the recent months recorded transactions have been in the 4.4-5.1% tax range.
"Foreign investors are purchasing luxurious estates in the heart of the city paying entirely cash, using their own capital or foreign loans without applying for U.S. mortgage loans," Paola Garzoni explains. "The majority of the foreign investors are not realtors, but are companies or family businesses, usually – usually having accumulated their capital from among various industries. LaSeven, Inc. provides even the most demanding of these clients with personalized professional advice," he said. "In addition to English, our staff also speaks Italian and French.
"Current LaSeven client preference has been concentrated in the New York City metropolitan area - mainly Manhattan - where the economy has been more stable than in other U.S. cities," affirms Paola Garzoni, who has long family experience in the real estate sector. "Because New York seems to have suffered less from the economic crisis, the city has proved its capacity to maintain and increase real estate value, Many international investors, who were previously most interested in investing in their own countries, are now buying apartments in prestigious U.S. areas thanks to the double drop of the dollar and real estate value," he said. "The advantage of these investments is that they both protect current capital and provide potential for middle/long term increases as the market continues its recovery."
"An interesting aspect of real estate market is its indifference to inflation: its value grows when the inflation is strong and stays stable when the inflation is moderate," explains Ms. Garzoni. "Investments can be long or short term because there is no progressive tax, like the TUI in Switzerland (a capital gain tax on Real Estate) which declines gradually, thus allowing a profit only if the real estate is held for a long time. In the dynamic U.S. economy, just one investment a year is enough to halve the capital gain tax (from 45 to 20%)", explains Ms. Garzoni. "Those who plan on making a long or very long-term investment shouldn't be concerned because – unlike other U.S. cities where newly built areas compete with previously fashionable ones - Manhattan has remained the heart of New York City for over four centuries."
Differently from Britain, in the U.S. (save the rare exceptions) there is no such concept as leasehold. Real estate is normally bought giving the owner an absolute right to it. There is a peculiar concept of "air rights" in the U.S. allowing property owners rights to the airspace above it. Laws have been enacted permitting the transfer of such "air rights" – either completely or partially – thus allowing construction on undeveloped property.
Annual real estate tax in the U.S. is based on the estimated value of the real estate multiplied by a local or state-established percentage. It is calculated annually by the state institutions in charge and the rate can be appealed. This tax is billed semi-annually in New York. Property tax doesn't exist in the U.S., but – similar to Switzerland – there are applicable transaction taxes that apply at the time of property transfer, inheritance or with a mortgage bond. Transfer taxes, for example, are applied to every real estate transaction and depend on the state and county where the real estate is located. In New York, the transfer tax amounts to 1.825% of the sold real estate based on a combination of state and county taxes.
In New York there is also a 1% tax on all purchased real estate of over 1 million dollars, usually called a "mansion tax". Fortunately, this feature does not consider anticipated profit, but only applies to actual acquired real estate profit net of administrative and maintenance costs, mortgage interest and allowances.
"In the U.S., anyone – including foreigners – can purchase real estate and register it directly in their name," Ms. Garzoni pointed out. "This happens rarely, however, to avoid the annual U.S. fiscal declaration, inherency tax (about 45-55% of total estate value), and to allow reasonably-priced property insurance in case anything unexpected should happen", she said.
The most popular legal structure for purchasing real estate in the U.S. is a Limited Liability Company (LLC) which can be treated as either a pass-through entity or as a corporation for U.S. tax purposes,. "This entity or corporation will be best determined according to investors' needs, desires and requirements, rather than only considering how to make a good deal," Ms. Garzoni explains. "This entity can be set-up as a trust or as a U.S. or foreign company".
For financial reasons, trust ownership is normally the best choice for Americans, as it doesn't imply double taxation. Corporations, on the other hand, are taxed at 20 % of the transaction profit. European investors are therefore encouraged to obtain a thorough analysis of each specific transaction to determine their most suitable solution.
In spite of the economic downturn and mortgage crisis, the number of real estate transactions grew by 16% in the most recent quarter – creating a market very much in the buyers' favour. "This is a sign of trust that signals the first signs of recovery, especially if we compare average prices on condos in New York in the third quarter of 2009 to the third quarter in 2008," says LaSeven's Principal. "We've seen an 18% decrease in average prices. For example, the current average price is $1,012 per square foot (10,700 Swiss francs per square meter) – a third less than in June 2008 – but the actual drop was even greater: 40% on condos and 51% on the average townhouse."
"As usual, the most luxurious real estate kept its value, with average prices dropping only by 8 % - keeping the average price at $2,000 per square foot," Ms. Garzoni pointed out. "Sales of new developments (buildings under construction) dropped by 70 % compared to last year, even as their price increased by 25%.
"This data isn't very precise, though, as it is calculated on the number of sales of very luxurious buildings which were contracted a year or two ago when the construction work began," she continued.
"At the moment you can find some real bargains because much of the real estate on the market is owned by people experiencing the fall of stock market or those who've lost their jobs in the economic downturn," according to Gabi Garzoni, a real-estate manager and Vice President of LaSeven, Inc. "Unfortunately, a lot of people find themselves struggling to paying huge mortgages and having to sell their apartments – many of which in very nice areas and – at comparatively low prices meant to sell them quickly" she said. "In fact, we've recently completed transactions with discounts of 20-35% compared to last year purchase prices".
In Manhattan, most of the apartments for sale (85%) - especially in prestigious areas on Fifth Avenue, Park Avenue and on Central Park West - are Cooperatives or Condominiums, usually situated in the old buildings. A Condominium is a type of property where one can purchase a single unit in a complex of multi units. The buyer, then, owns the individual apartment as well as a proportionate share of common elements of the building. Each Condo owner pays a monthly fee to cover their share of the expenses for the building. Ordinary administrative decisions concerning the common property are normally made by a Condo Board and executed by a management company hired by the Board.
An apartment in a Cooperative represents a very different form of ownership. The trend started in the aftermath of the World War II when the cooperatives were established as a legal institution to allow real estate owners to transform their buildings into Cooperatives Housing Societies. Under this arrangement, owners could sell minor shares of their property and, by doing so, ensure not only immediate income but also the total control of their assets. A Cooperative is a company that owns the entire building including the purchased apartment. Purchasers acquire not only a piece of real estate but also a minority stake (shares) in the company that owns the building - similar to shares purchased on the stock market. The minority share holders receive a lease contract allowing the exclusive use of the apartment they purchased, rarely giving the exact size of the apartment. The maintenance of the building and all decisions pertaining to all the apartments are determined by the Coop Board at their sole discretion, and are not bound by fairness or to explain reasons that result in the denial of application to sell, rent or to perform renovations in the apartment.
As far as the taxes are concerned, the U.S. Internal Revenue Service applies the same standards to both Condos and Cooperatives. However, as purchasing an apartment in a Cooperative means obtaining some shares and not the real estate, the state does not request any estate taxes from the buyer as is the case with a Condo.
All these subtleties can be overlooked by a real estate investor and must be considered by real estate agencies specializing in serving European customers. LaSeven, Inc., follows a complete transaction process - from defining the investment through negotiations to legal requirements and, if necessary, administration. LaSeven offers clients extremely efficient assistance.
Boasting an experienced team of legal, fiscal and accounting experts, LaSeven is well suited to professionally assist with all aspects of international investments.
"If our investors require, we are prepared to assist with administration, accounting, legal and fiscal services after the sale," Gabi Garzoni stated. "We also offer supervision with real estate renovation or redecoration."
The perspectives for commercial real estate are different, like office spaces and shops. "There is likely still some decline in this sector," Gabi Garzoni commented. "The impact of the financial crisis caused lots of renters (tenants) to negotiate for cheaper rent prices or leave their commercial spaces before the end of their term. Investing in this sector is quite risky nowadays, as the profit this kind of estate can generate is shrinking and there is no sign of quick recovery", he said. "This is a sector in which foreign investors play an important role in the few transactions taking place at the moment."
LaSeven, Inc. has been involved in the New York market for over 15 years. It offers exclusive and confidential service mainly to European customers, providing private clients or companies interested in investing in New York or Miami with professional advice and personalized service.
In Miami - as in Las Vegas and other popular, fast-growing U.S. cities - an uncontrolled surge of real estate speculation took place in recent years.
As the worldwide economic crisis unfolded, Miami was hit hard, bringing a sharp drop in share values. In Miami Beach, the most attractive South Florida area for international investors, "the drop wasn't as strong as in the other areas in Miami, but it was enough to create some very good deals," explains Paola Garzoni, a real estate manager and architect who founded of New York-based, Swiss-managed LaSeven, Inc. "Anyone wanting to purchase a condo right now for personal use has a rare opportunity to find bargain pricing on luxurious condos in very strategic locations seaside and along the beach," she said.
Current real estate prices in the heart of Miami are exceptionally low, often even lower than the construction costs. "A lot of owners, having purchased during the real estate boom and now forced to sell, find themselves competing with apartments being sold by hard-up real estate agents and promoters, along with banks selling estate after bankruptcy proceedings", Paola Garzoni says. "In addition to the well-publicized foreclosures, there are also short sales and debtor-in-possession sales before bankruptcy proceedings.
"There are now about 15,000 such apartments on the market in Miami, with many of them sitting empty because of lack of demand," she said. "These properties are available for exceptionally good prices per square meter."
Foreign investors considering U.S. real estate should keep in mind that there are substantial differences between the markets in New York and in Miami. For one thing, cooperatives which thrive in New York are almost nonexistent in Miami where condos dominate the market. Another factor is that there are no gain or income taxes for Florida residents which much higher real estate income. The annual real estate tax in Miami is 2% of the estimated market value of the property – about twice what it is in New York.
The process of negotiating a real estate purchase is also different between New York and Miami. In New York, a buyer can make a number of purchase offers without being bound by a contract. In Miami, a proposal to purchase real estate typically requires a signed purchase contract which includes a cash deposit to confirm the buyer's seriousness, whereas in New York it is necessary only when the price is agreed on and the contract signed.