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How Popular Are Long Term Leases?

September 8th, 2008 · Comments · By Matt

The April issue of Metropolitan Home had a feature on “The Smith Penthouse”. While definitely an interesting project, check out SkB Architect’s site for photos, what caught my eye is that its leased:

He gave up his house in the suburbs and signed a long-term lease on the [2200 square foot] penthouse of a downtown office building that had recently been converted to residential use and certified as LEED silver.

I’m curious to find out more about these long term leases. Does anyone know more? How common is it? What does it cost? Wouldn’t you worry about dropping a lot of money on a renovation but not actually owning the place?

And for the curious here’s a photo lifted from SkB:

smith 9 How Popular Are Long Term Leases?

Popularity: 7% [?]

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  • Eric Kennedy
    The tenant of that unit is the developer of the building, so it's no surprise that he gave himself a great long-term lease on the unit.
  • EconE
    Celebrity pied a terre perhaps?
  • Justin
    The giant roof deck is split into three parts. One for each penthouse and the the third is a common area for all residents use. That one is covers the corner of the building along forth ave. and toward union st. Although even with it open to everyone, it is very seldom used.
  • @CVM: I work in the Rainier Tower now and look down on those decks as well, with the same jealousy that you once had. The only thing is, I've never seen anyone out on the terrace: morning, day, night, weekday or weekend. There are actually some portable heaters around a table so someone must sit out there occasionally. A phantom millionaire, I suppose.
  • CVM
    Oh, I'm an idiot. Everything I wrote is mentioned in the article Matt linked to.
  • CVM
    I used to work in the Rainier Tower when they just got started renovating the Cobb Building. I saw those penthouse spaces from my cubicle and could only dream...

    Wondering why they are apartments and not condos? Unico has a ground lease on the land, which I think is owned by the University of Washington. Unico didn't want to deal with explaining the ground lease with buyers, so they decided to just go with apartments. Because the large building is already there, it probably made more sense to renovate than to tear it down and build something new. A new building is very expensive and they would lose it eventually anyway. Unico also probably doesn't pay much for the lease and in the meantime realizes a significant benefit from collecting rents on the apartments and figured the conversion from office to residential made sense given the rents they projected.

    (Sorry for that terrible run-on writing.)
  • Thanks Justin. Here's an article on the conversion, Historic Cobb Building begins new era as apartments:

    "Monthly rents range from $925 to $3,200 for most units. The smaller penthouse rents for $7,500 per month. The larger penthouse could rent for up to $16,000 per month, though owner, developer and manager Unico Properties LLC of Seattle won't reveal the precise amount."
  • Justin
    That picture is from the deck of one of the two rental penthouses in the The Cobb building.
  • Mark
    Long-term leases are pretty common in commercial realty. I wonder how this lease is actually structured (to an individual, or to a corporate shell)

    I haven't heard about it in residential, except in rent controlled/rent stabilized situations, where there is a de facto long-term lease.
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