After a brief down period during the years 2008 and 2009, the real estate market in New York City has bounced back making development parcels in Manhattan, Brooklyn and Queens extremely attractive. An interesting structural problem that arises from time to time involves a property owner that uses property in his business, for example a store or restaurant, where the underlying land would permit the construction of a much larger building. While in most cases, the simplest solution would be to sell the land to a developer and move the business to a new location, often the property owner has either a sentimental or economically rational preference to maintain the current location for the business. A savvy developer will often see the advantages in accommodating the desires of such an owner.
It is easy to envision the end result the property owner and developer desire, a large building with the property owner’s business located on the ground floor and residential or commercial units constructed above it. It has, however, generally been difficult to agree on a transaction structure that would achieve such objectives at a reasonable tax cost.
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