Last installment:
Selling Price for comparable units: Condos sell for more (also cost more to buy); Co-ops sell for less (also cost less to buy)
Profit for comparable units: My figures show that a co-op bought here at 315 psf is substantially more profitable than a condo purchased at 420 psf. The differences in the purchase price & mortgage account for most of this.
Likelihood of Default (not able to pay mortgage & operation costs):
According to the NYU Furman Center...
Co-ops: There are currently 3,623 co-op (corporations) in the city. In the past 19 years 94 have failed. There are no stats for number of individual units for co-ops, but a large failure would have made headlines. Probability is high that most of the 94 were very small, 2-3 unit buildings. The only co-op failure of any size I was able to find was in Queens in 1987, 83 units: http://www.nytimes.com/1987/06/28/realestate/when-a-shaky-co-op-tumbles-into-default.html?pagewanted=all&src=pm.
Condos: There are no stats on overall condo bankruptcies. Since 1993 there have been 5,805 individual unit defaults. It's not hard to find overall condo bankruptcies. Just google 'condominium bankruptcy new york'.
So far as I can see there are no differences in likelihood to fail. If anything, per unit co-ops appear to be somewhat more stable.
Impact of Default: Please note...what I have been able to find out about the impacts of default strike me as not sufficiently substantiated. But the benefit of this forum is for folks to contribute what they know. So if you have solid information, please comment.
Co-ops: There are many safety valve measures that can be taken to keep a co-op from going into default including filing for bankruptcy protection. Large defaults seem to be extremely rare (not sure if any really large defaults have ever occurred); however, my understanding is that like any corporation if a co-op goes into bankruptcy, the mortgage holders become the owners and tenant-owners may lose their investments.
Condos: If a condominium goes into bankruptcy, the sponsor can file for chapter 11 bankruptcy protection. Tenants retain ownership of their units. The condominium usually comes out of bankruptcy protection, possibly with a new sponsor.
Co-ops & Condos have developed ways of handling
individual defaults, and both have proven themselves to be stable structures
when appropriately implemented. Sponsor defaults in either case are generally unlikely.
I just wanted to say you are doing a great job on this blog, but at the end of the day, once the Roberts litigation is sorted out, CW will put the complex up for sale and will just sell to the highest bidder, so does not make any difference to to buyer or the seller, what we think about Condo V Co Op, hopefully Brookfield or G-W will be the high bidder, but if it is someone like Trump or Le Frak, then we could be in for another rough ride.
ReplyDelete007
I'm going to agree & disagree. Agree that CW will be looking to get back as much $ back as possible. But there is a rub with the highest bidder, and it is here that this blog will start pivoting shortly. We're talking about billions. Unless a sponsor doesn't much care about tenant buying-financing at all, most plans will depend on tenants buying in sizable numbers. If the overall price is too high leading to high prices per unit, CW has to wonder if enough people will buy to make the plan viable. Not talking about the 15% minimum required by law. Talking about 40-45% buy-in that might be needed. Worst case scenario, especially with a condo plan, if it turns out the buy-in isn't there, a lot of time will have been wasted...bondholders angered...professional reputations questioned.
DeleteSorry if I am naive here won't CW take the money and run, no matter who buys? Does Trump of LeFrack have that kind of money? If they do who can stop them? On the other hand, If Robert's works out nicely - what good would it do for them, as I am hoping that it is not at all viable to be a rental property.
ReplyDeleteOR--Is anyone able to wait out the 6 plus years CW has before it has to sell?
Is it worth it for anyone to buy and hold this place? Is it feasible for CW to hold out? Is it legal?
Anonymous (April 29, 2012 1:58 AM), can you please explain why CW has to sell in 6 years?
DeleteOthers to comment. My understanding is that as part of the restructuring agreement, unless there are extenuating circumstances CW is legally mandated by the state to sell the place. Not sure if this is by 2014? 2018?
DeleteIt is probably more likely to get hit by lightning than to have a coop or condo default.
ReplyDeleteIn the now long history of NYC non-eviction conversions this is likely the first to go "condo".I put that in quotes because the board's two-tiered pricing plan includes a low priced "condo" offering with no property rights.
ReplyDeleteWhat kind of condo comes with no property rights???
Once upon a time,back in the 40's n' 50's there were co-ops structured like that.The Grand St Co-ops were like that.You bought in for very little,3-5K with an even lower downpay,had low monthly costs and had to sell back to the co-op at no profit.Then again the concept became so obsolete [as buy-in prices moved into six-figures] the Grand St. Co-ops lifted all sales restrictions twenty years.Residents can now sell or rent at market.
So not only is the very concept obsolete in the 21st century,structuring it as a condo is totally bizarre.
The Grand St complexes are co-ops.Tudor City's 1990 non-eviction conversion was to co-op.The residents own those communities lock,stock and barrel and manage it themselves.They're delighted by the results of their respective conversions.And both complexes are located only a mile from our northern and southern borders.It's only natural to expect his complex to go the same way.
The politicians and the TA board that obeys them simply ain't gonna let that happen here.No doubt,the bizzarro "condo" idea will play a role in discourage residents from buying,hence keeping a maximum under rent regs - the main priority for the board,politicians and rent reg. lobbyists,namely Jack McKee.
Then again,we could always do what the residents did at Grand St.Buy in on the low priced deal with all it's socialist restrictions - join the TA - vote the leadership out - and replace them with a slate of reps who vow to lift the restrictions.Voila'!
Normal property rights granted! What's required is enough residents willing to step up and buy with the confidence the rules can be changed.500 would probably do the trick.The TA has less than 2000 members,many very elderly.
Regardless,one thing is for sure.It is morally nauseating that rather than leading a tenant purchase the board is facillitating the sale of this community to another landlord who will derive all the equity benefit created by this so-called "conversion".The residents who've paid tens and hundreds of thousands in rent over the decades will get nothing but another landlord to fight in court and the endlessly rising regulated rents which is already pricing some long timers out.That is what the board means by "taking control of our destiny".
They don't mean YOUR destiny.
They mean THEIR destiny!