Looking at a whole deal can give us a lot of insight into how the NYC real estate market works. Here, we're going to the Herald Square area to check out a major bundle -- a seriously profitable opportunity for a few lucky landowners, going up just exactly when the time is right -- for them. Here's what the folks are building: a 35-story mixed-use building, organized around a 36,000-square-foot retail space, with 15 stories of commercial and 20 stories of residential spaces.

Here's a bird's eye view of the lot they're building it on:

The lot was purchased in March, 2007 for $140 million. The deal took some time to pull together, for it involved six (possibly seven) individual plots of land. All six lots had buildings on: a total of $6.86 million in building value as of 2007, according to the city assessors. However, as seems to happen so often in the Big Apple, the assessors got it a bit wrong; the photo at left shows the real market value of those buildings to be less than zero -- by the cost of their demolition.

When we start to look at the tax picture for these parcels, we start to see the truly bizarre logic of New York City's property tax system. In 2007, when the sale was made, these six parcels had a total tax bill of $1,379,469. But for the 2009 tax year, the buildings were all gone, and the total tax bill was $716,162 -- even though the big deal had gone through and they had been fully prepared for new construction! (That tax bill, by the way, amounts to one-half of one percent of the land's selling price.)

To add to this deal's sweetness, two parcels that were not incorporated into the construction site were, in different ways, part of the whole deal. The map at right shows the various parcels involved in this deal. The one highlighted in red, 110 West 31st. Street, was NOT part of this sale, even though the building next to it, 112 West 31st, was! It seems clear that "855 Realty Owner LLC" is taking advantage in the coming rise of land values that its new biggie will create next door, as is "110 West 31st Realty Corp."

There are a number of interesting lessons to be learned by analyzing Big Deals such as this -- which have been springing up like mushrooms all around the town for the last five or six "boom" years. Now, it may be, of course, that this development will not succeed. it is going up in the middle of a deep recession. Will it sell its commercial and residential units quickly enough to service the developer's huge debts? Maybe it will, maybe it won't. There are always some of these projects that find themselves, like Wily Coyote in midair, knowing darn good & well that gravity's about to take hold. But -- that is most assuredly not the landowners' problem! They got their shares of $140 million, free and clear, and didn't even have to get their hands dirty tearing the old buildings down.

When we're trying to determine the true value of land in New York, we don't have to rely simply on sales of vacant lots. In a pricey neighborhood like this, any building below the maximum allowable size is a "tear-down." Economically, those lots are already vacant.

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