One For the Bean Counters

Hearing more about the deal, what was gained?

Current residents:
For Preferential Rate Tenants: Nothing.
Preferential Rate Affected By Roberts: Some protections probably because they meet or exceed destabilization standards and would be at risk when j-51 benefits expire in 2020 (looks like Blackstone won't renew J-51).
Legal Rent Tenants:  Nothing.  They're protected by rent stabilization.

The case can be made that the playground and green spaces are protected.  Not sure everyone believes they would ever be at risk given the community outcry and political reactions that would occur if they were threatened.

Posterity:

Well, it's hard to say.  It all depends on turnover here.  Right now there are about 5500 'affordable' units.  We're told these were turning over at the rate of 300/yr.  Does anyone believe that all 5500 would have turned over in 20 yrs?  At  most perhaps 1/2 of them would have turned over so at most perhaps 2500 units remain are kept affordable.  But I seriously doubt the number is that high.

Remember, STPCV was put up in 1946 to house returning WWII vets who might have been between 21 and 26.  Adding the intervening years,  a lot of these folks probably passed on over the last 10 yrs.  So chances are the mortality rate will drop over the next 20 years.

In addition, an apartment renting now for around $1000/mo.  (and there some of these), after 2 churns in 10 years will rent at $1440/mo.  Or a unit renting at $2000/mo. after 2 churns in 10 years will rent at $2880/mo.  All still affordable in 10 yrs.

So that's why this is one for the statisticians and bean counters...of whom I'm sure Blackstone has many.  The city gave up $225MM in tax and fee revenue and non-repayable loans in order to enable this deal.  Was it worth it?  Only statisticians and bean counters can tell you for sure.  If projected turnover among the 5000 is realistically small and/or if current low rents will stay affordable in 10 to 20 years , the deal is of little or no value to tenancy..

I wouldn't take the word of any politician about the projected worth of this deal.  They're all scrambling to establish their bragging rights on this one.  Only a good statistician would have a handle on it.

Deal or Non-Deal

I copied this from the Stuy Town Report site.  At the meeting on Saturday. let's ask the politicians to explain if they really can claim any bragging rights for this which really seems like no deal at all.

"Over 1/2 the complex is already at preferential market rates.  Which means that as is, roughly 5000 units are now at legal rents.  And checking the voting roles (which anyone can do), if the majority in these units is around 70 yrs of age, then for about 20 yrs, there isn't going to be a lot of turnaround anyhow, so thank you very much for nothing. For the rest of the units, their legal rents will continue to get jacked up to the max.

So let's take a look at 3 perspectives then. 

1. The long term governmental perspective:  has middle class housing here been preserved for 20 yrs?  Well, if the median age of legal-rent-residents is about 70, the answer is this deal has bought nothing more than what we would have with no deal at all.  So deBlasio, Garodnick and the TA can lay claim to having done nothing.  And of course, the new owners will probably continue renting to students which really helps the churn and jacks up the legal rents.  So anyone paying the preferential rate is still in jeopardy because at renewal time, the landlord can still jack you up to the legal rent (beyond your means to pay) and then you're out on the street.  Again, thank you very much for nothing.

2. The short term view:  How is my life affected?  Well, this question just goes back to MCIs.  Expect to see more MCIs and more battles over tenants having to pay for landlord strategies to raise rents.

3.  Overall: the complex is essentially in the same situation it was in under Tishman-Speyer except the new owners have been wised up to renting to students and working the MCIs.  So having paid top dollar for the place, what happens if there is another real estate crash...and don't think it can't happen.  Deja vu all over again?"

Zzzzzzz....

I think we were supposed to hear something from the Mayor's Office last August about long term affordability here.  Over a year near now and still waiting.  Why promise what you can't deliver??

And also it looks like any final sale is on indefinite hold.  It's not Compass Rock we need to hear from.  It's the major bond holders: Fannie Mae and Freddie Mac.  Just love these cowardly politicians who hide behind bureaucratic silence.  Just a form of corruption.

The idea is we're all supposed to go to sleep.  Zzzzzzzz.......

Rent Stablization

Mayor deBlasio is advocating the end of vacancy decontrol, the end of vacancy allowance and serious limitations put around MCIs.

I have written my support for deBlasio to Governor Cuomo, Speaker Hastie and have called Brian Kavanagh's office directly.

Please stand up for yourself.  Write Cuomo, Hastie and Kavanagh either by email or snail mail.  Make your voice heard.

Not Freddie Mac, Not Fannie Mae, Not The Usual Others

This community should be under no illusions about whether or not it will receive any outside help with respect to ongoing efforts to force long time residents out of ST and PCV.  It will not.

In spite of their stated missions to aid affordability in housing & rental markets, Freddie Mac and Fannie Mae will not help out in any new ownership deal that the community will like.  They have already shown their stripe as well has the Federal Housing Finance Authority that has oversight responsibility for the FMs.  I say this because the FMs and the FHFA know full well about the student rentals that have occurred here and know about all the MCIs that have occurred over the past 3 years that have served to jack up rents.

It is the FMs and the FHFA that are in the real driver's seat here, not CW/CR.  But obviously the FMs and the FHFA have done nothing to stop legal rents from getting jacked up via student rentals and have done nothing to stop the MCIs.

Now, outside of talking a good game and making promises, in the past 10 years of disruption here what have any of our politicians delivered for us with respect to affordability?  What have de Blasio, Glen, Schumer, Maloney, Hoylman, Kavanagh or Garodnick done that has changed anything here?  Actually changed and improved affordability here.  I believe the answer to that is nothing.  Why would anyone believe this will change in the future?  Kindly note, we were supposed to have heard something from de Blasio/Glen last August.  Six months late and counting.

What has the TA done with respect to student rentals or MCIs?  I'm aware of no organized effort to challenge or defeat any of these landlord moves that clearly have occurred as part of a coordinated strategy to jack up rents and make STPCV less affordable.

Unless something happens within the community itself to mount challenges to this landlord/developer strategy that's been in effect for the last 3-4 years, it's inevitable that more and more of us will get forced out.

Community Inaction-Capitulation By 1000 Cuts

What exactly are tenants here hoping for with the deck so stacked against them?

No more student rentals?  Unless illegal (which they're probably not), they will continue.

An opportunity to buy at a 'reasonable' price?  Looking less and less likely with every passing day.

Continue at affordable rates under rent stabilization?  Well, for you market raters who  might be paying well under the legal rent, better watch out.  At any lease renewal, Compass Rock could decide to lower the boom on you and charge the legal rent.

Looking to the City or Fannie & Freddie for help?  Everything stated seems to have just offered false hope.  We've heard of no help from any governmental entities now for close to 6 months.

For market raters and those paying the legal rent, the only landlord move you can fight are the MCIs.  But the Dept of Housing has already shown that it hardly responds to single challenges.  Without an organized effort backed by councilman inquiries, nothing of significance will happen.

A tenant association would be the organization most likely to help organize an effort to fight MCIs, but the PCVST Tenant Association seems to have its efforts focused elsewhere.  Nor does our councilman seem to be mounting an effort to fight MCIs.

Consequently, each MCI that goes unchallenged represents a cut, each cut unanswered represents a capitulation.

CW-Fortress-Freddie Mac-Fannie Mae-Schumer-Maloney

If you take a free market point of view, CW & Fortress are doing their capitalistic, opportunist best.  But the real enablers of what's been happening recently are Freddie Mac & Fannie Mae.  

We've been fed pure bull by Schumer & Maloney about these groups supporting any plan we'd like and the city would like.  They're already supporting a plan and scheme we don't like and city officials are also feeding us bull when implying they'll be able to help.

It would be encouraging if for once politicians told the truth instead only telling it when forced to by hovering media revelations.

Right now thanks to Freddie and Fannie, it looks as if CW-Fortress will retain control for a long time...Freddie and Fannie who also must be in this for nothing but the money & are profiting now or expect to profit in the future in ways (through the deal made with CW) that haven't been made public.

To all appearances, CW-Fortress will maintain control for 3-6 years, sell to Fortress, continue the legal rent churn by renting to students and continue stressing older tenants through MCIs.  The goal: force older tenants out, increase legal rents, continue market rate rentals, when real estate prices are at a high, start renewing market rate leases at legal rents which will force these renters to move leaving a lot of vacant units, then convert the place to condo and sell all the vacant units at a windfall premium.

BTW, another goal of the MCIs is to make market rate condo sales that much more attractive.  By the time the sales occur, many years will have passed and many MCIs added.  But at whose expense?  We will wind up paying for these luxury MCIs (certainly not needed or requested by us), and Fortress will get the ultimate benefit of them.  Yes, this community is truly being played for all its worth.

Mayor's Office & CW

While we're waiting for the other shoe to drop, just wondering....

If the complex is going to be sold, why is the mayor's office talking to CW about keeping the place affordable?  Wouldn't the mayor's office need to talk to the new owner?

Just An Idle Speculation

Step 1: Keep Renting To Students; Keep  Pumping the MCIs.  Goal 1: Churn apartments and get legal rents sky-high but keep renting at market rates.  Goal 2: Force out as many people as possible through the MCIs.  Any who vacate for any other reasons are gravy but keep renting to students to keep the churn going in order to raise legal rents.

Step 2:  Sell after all lawsuits are settled.  Most likely winner: Fortress @ 4.7B.

Step 3: Keep the place rental for about 10 yrs...or whenever real estate has totally recovered and is running high.

Step 4:  Keep executing Step 1 to force out tenants and keep raising legal rents.

Step 5:  At some point with 70% to 80% of the apartments at market rate, upon lease renewal selectively set many units to legal rent forcing out a huge number of tenants.

Step 6: With so many apartments vacant because they will be unaffordable to most renters at legal rent, convert the place making the insider prices affordable to the few renters remaining (to achieve the 15% needed to meet legal requirements in order to convert.).

Step 7: Sell the vacant units at near market rates.  7000 units @ 2MM = 14B or more.  Worth any risks and outlays.

Warehousing apartments is illegal.  But charging legal rents is not.  So if units are vacant because no one will bite at such high but legal rents, it's not warehousing. Rather it's an opportunity and windfall for the owner provided by the ability to charge for MCIs (needed or not) and the strategy of aggressively renting to students.

No Sale For A While

According to this article, http://www.marketwatch.com/story/fitch-downgrades-2-distressed-classes-of-ml-cfc-2007-6-affirms-remaining-classes-2014-10-03, STPCV continues to lose money for the lenders and no sale will occur until the mezzanine debt holder suit is settled.

So there's no rush for the mayor's office to act and who knows what other suits may follow.  Kind of explains why the complex is only 'sort of' getting readied for sale.

MCIs Reviewed

MCI Regulations call for the following below.  What they don't seem to take into account is whether or not a landlord is putting in MCIs  that are unnecessary for any purpose other than  raising rents in order to force tenants out.  What they don't seem to take into account is whether or not the MCIs conform to a clear pattern designed to oust tenants.  Such an obvious oversight.  

Who among our representatives is minding the store?

To qualify as an MCI, the improvement or installation must:

1. be depreciable pursuant to the Internal Revenue Code, other than for ordinary repairs;
2. be for the operation, preservation and maintenance of the building;
3. directly or indirectly benefit all tenants; and,
4. meet the requirements set forth in the useful life schedule contained in the applicable Rent Regulations.

To be eligible for a rent increase, the MCI must be a new installation and not a repair to old equipment. Some procedures qualify as MCI's as well, such as "pointing" a building. DHCR Fact Sheet #33, "Useful Life Schedule" includes a partial list of installations that qualify for MCI rent adjustments. All applications for MCI rent adjustments must be filed within two years of the installation.

Well, Alicia...

After 3 1/2 months, where's the beef?

What Happens To Democrats In NY City After They First Win...

There's only one way Democrats win...by promising fulfillment of a progressive agenda. Which always includes real estate and tenant issues. But then what?

Start getting invited to a lot of dinners and parties all the time? Start being a center of attention? Start liking to hear the sound of one's own voice? Start feeling reluctant to go back to the old less exciting life, a life that may not even be interested in having one back? Start meeting all the real estate titans often heard about? Enjoy having them court favor? Start thinking maybe they're not such bad guys after all? Start listening to their arguments about how what they want will help create jobs? Start picking up on their veiled threats about what will happen if they don't get their ways? Discover that it takes money to win a second time once you have a record that can be judged? Start getting worried about taking clear stands?

Maybe some, part or all the above is wrong. Nonetheless, 9 times out of 10, the Democratic candidate you voted for when first on the scene isn't what you expected after 2 years. The substance you expected on real estate issues is usually gone, and what you're left with is a lot of spin.

Brian Kavanagh: Paying Attention?

http://www.nytimes.com/2014/09/15/nyregion/in-harlem-tenants-see-a-campaign-to-oust-them.html?_r=1

Would make sense if our Assemblyman Kavavagh met with Riverton Assemblyman Wright to see if there is synergy to be gained by STPCV linking up with the Riverton suit against CW and Compass Rock. How about it Assemblyman Kavanagh? We'll look forward to hearing your conclusions and hearing a public statement.

Families: Caveat Emptor

The churn of apartments here by marketing to students continues relentlessly.  I'm told some students don't even stay 1 yr when the find they can get cheaper housing across the street.

So legal rents are getting jacked up.  Why would any families want to move in here if totally aware of the circumstances?  If the legal rent for an apartment is relatively low, it still might be a good deal.  But if the legal rent is quite high, on lease renewal the newbies will be at the mercy of the landlord.

One wonders if every new family considering PCVST realizes this.  If they don't know, they should.  And if they do know, they won't want to rent and the only real growing market moving forward will be students.  More and more of them.  Expect more and more student pitches.

Fannie, Freddie, CW & Mel

I'm watching CW going about its business, consolidating its hold on PCVST, more and more promoting to students.  Even the so-called Refer A Friend program is nothing more than a thinly guised attempt to get more students in.  (Think how great it would be to have your friends living near you.)

And what do Freddie and Fannie do during all this?  They must be supporting it.  Fannie and Freddie...the friends of middle and low income housing.  Not for a minute.  They're acting like any other private concern out for a buck.

I had some hope when Mel Watt was put in charge of FHFA.  But now that's over.  Well, Mel, I guess if we put dollars signs in front of it, your governmental role and mission are over.

CW & the City Extend Talks Beyond 60 Days

Well, surprise, surprise.  Pray tell, what will be different 1 month from now, 2 months or longer?

Personally, I'm looking to the city for nothing because I don't think the city has any real cards to play when it comes to the amount of money that can be made from this place privately.

So let's stop kidding ourselves and stop treating the community like a bunch of children and fools.  The bondholders and the community have been held in abeyance more than long enough.  Let's get on with dropping the next shoe.  No matter what, more lawsuits are likely anyhow.  So if you like delay, there will be plenty more for everybody.

The city is doing the community no favors by being party to even more fruitless stalling.

Alicia Glen & CW

It's been reported that in spite of the mayor's request for a rent freeze, Alicia Glen supported the rent increase that was passed by the Rent Guidelines Board.  The same Alica Glen that was head of the Urban Investment group at Goldman Sachs.

Is anybody really seriously looking to this deputy mayor to represent tenant interests?  Combine this with CW whose strategy and positioning have been much more effective than Tishman-Speyer's moves ever were.

Given the Glen-CW combo, do you really think anything great for tenants is going to come out of these talks?

Freddie Mac-Fannie Mae: Meaning of "Affordable"

'Sounds' like a nice step for tenants here:  Freddie Mac & Fannie Mae have said they won't lend toward any plans that don't provide for some portion of affordable housing.  Now for the questions:

1. Some portion?  What does that mean?  What does it mean in terms of number of units?  What does it mean in terms cost; what is the definition of  'affordable' knowing that what's affordable to some won't be affordable to others.

2. Does the general proposition have much meaning?  Right now about 1/2 the complex is made up of long timers who are already paying what many would consider affordable rents.  Saving these people further expense would be like saving someone who is already saved.  What is the value here?

3.  For those who are already paying 'affordable' rents, what will the deal hold for the future?  That is, many long timers are retired or will retire soon.  Once on fixed income, in 10-20 years will their rents still be affordable?

4. What about the costs not considered 'affordable'?  Maybe this is just a matter of semantics, but sometimes semantics count.  Will everybody else be paying 'unaffordable' costs?  How does that compute?

5. Are Freddie Mac & Fannie Mae strictly referring to affordable rents?  Or are they also referring to affordable opportunities to buy?  The same questions about numbers and standards would apply.

6. From what sources are the FMs and the mayor's office getting tenant input?  Our councilman?  The TA Board?  This blog hopes that the FMs and the mayor's office spreads a wider net and gets responses from the grassroots.

The tenants here are generally informed and vigilant.  Whatever the outcome, it's for sure they'll remember every time they vote.

Shame On NYU; Shame on Freddie Mac & Fannie Mae

NYU has participated in destroying our family-oriented community and advancing the interests of CW Capital by subsidizing students to live here.  Freddie Mac & Fannie Mae (designed to support lower & middle class housing) were the major lenders that enabled the Tishman-Speyer plan to convert from middle class to luxury housing.  Noble institutions no more....just craven, self-seeking, greedy institutions not worthy of high esteem.

The Case for a Co-op Conversion

I offer this as counterpoint to the TA Board which presented a case in favor of a condo conversion.
1. Co-ops are much less expensive.  Lower base prices and much lower closing costs.  Means more tenants would be able to buy.
2. Co-ops are usually very restrictive when is comes to subletting.  This is a plus for me.  Fewer absentee owners, less subletting to students, fewer packed units, less noise.
3. Co-op populations are generally more stable, more oriented toward community.  Again, a plus for me...more the way things were.  Higher turnover for condos, higher degree of mobility.
4. The default rate for large co-ops is almost non-existent.  There have been many individual condo defaults and in some cases whole buildings have been reorganized.
5. According to my calculations (subject to challenge), generally the percentage return selling a co-op is higher than the percentage return selling a condo. The condo may sell for more, but given high closing costs and higher mortgage balances, the percent return on your money is better with a co-op.
6. Lest there be any misunderstanding, 70-75% of the resident owned buildings in NYC are co-ops.  It's the oldest form of ownership dating back to the 1920's.

These are the main points for me.  Any statements about renters remaining stabilized or open spaces not developed strike me as a bit misleading.  Most every plan offered will likely be non-eviction with pledges not to develop open spaces.  Anything else would generate political thunderbolts.

I've said before.  I don't see any value in making an alliance with Brookfield or any developer for that matter.  I think a tenant advocacy group should be simply pushing for lowest possible prices and best service for all the tenants.  There has been no open community debate about any of this so far as I can see.  Hopefully that will change.

Why You Should Care Which Type of Plan Wins

A lot of you who don't intend to buy may feel that 'Co-op vs Condo' is of no interest to you.  But you should reconsider.

Condos are generally known for lower owner occupancy...which of course means liberal subletting policies.  If what you have in mind is owning and subletting your apartment and moving to Florida, or moving anywhere else and supplementing your income through subletting, then 'condo' is for you.  This could mean more students, could mean more 3-5 to an apartment.  Could mean some hygiene issues, too.  But an owner far off-premise isn't generally too concerned about these.

On the other hand, if you're a renter or an owner living here long term, and you care about who's moving next door to you, you're more likely to want a co-op plan to win.    Even those with young families may feel this way.  Co-op plans usually restrict subletting and are very careful about who is allowed to buy.  Just remember...not paying attention to issues like this now won't help you once a plan is passed and your new neighbors start moving in.

Co-op vs Condo pt 1

Posting information from the Condo vs Co-op Spreadsheet (link above) to enable discussion about all points.  Here's the first group:

Time to go into effect:  Co-op will take less time by at least a year if not much more.
Tenant Financing:
  Loan options: Equal
  Likelihood to Obtain: Equal
  Size of Down Payment:  Greater for the condo; less for co-op
  Interest to be Paid:  using a blended rate for the co-op, rates are about Equal
  Closing Costs: Much more for condo; much less for co-op
  Lengths of Mortgages: about Equal

So far, co-op seems the winner.  These specifics may bring some discussion.  All the above information was developed by speaking to a mortgage broker, the Co-op & Condo Council, the Dept of Finance, Dept of Buildings and others.
I will substantiate as much as I can with links; however, in some cases you'll have to make phone calls.
It really doesn't matter if someone comments "statement X is wrong" with no substantiation.  What matters is...you will see an isolated  discrepancy, and you will have the opportunity to find out answer for yourself.

Co-op vs Condo Pt 2

Comparison between co-op and condo continued.


Capital Improvement borrowing: Easy under co-op  (single entity borrower);  difficult under condo (multiple entities...like 11,232)
Governance Rules: Equal.  Can be as flexible or as strict as specified in either condo or co-op plans.
Governance enforcement:  Condo - little or no ability to enforce; Co-op - covered under state multiple dwelling law...so considerable ability to enforce in some areas (maybe not as much as some folks might like)
Common restrictions on subletting, new buyers, unit renovations: Equal.  All dependent on what is specified in the bylaws.

For me, the co-op has the advantage here because I would like there to be some restrictions that are enforceable.  For example, I would like to be able to sublet but am concerned that subletting be done responsibly (apts kept clean, not noisy).  I'm concerned about dogs ruining the grounds.  These are areas about which there may not be agreement; they deserve some open discussion.

Please note:  the sponsor has control of setting the bylaws.  The bylaws will be set down in the plan that gets approved by the AG.  I'm told that once these bylaws are set, they're not so easy to change.  I would have serious doubts about any sponsor that does not show a willingness to discuss bylaws with the tenants prior to submitting the plan to the AG.  And by 'discuss bylaws with the tenants' I do not necessarily mean the TA.

Co-op vs Condo Pt 3

A comparison between the parts we know about Brookfield & G-W.

Involvement:  Brookfield - Long Term; G-W - Short Term.
I've said I favor short term involvement.  I think we can govern ourselves well after 2-3 years.  What's not clear is me is what is the benefit to the tenants of having Brookfield involved long term.  And in particular, I've been told that after 5 years property control is posited with the tenants even if the sponsor still owns the majority of the units.  What then does a commitment from Brookfield to stay long term mean in this case when we will have control after 5 years?  Doesn't really add up.  One thing is clear though.  Over the long term, if Brookfield owns a great many rental units(due to high prices to buy), Brookfield will benefit greatly when these units vacate & can be sold at market rates.  So Brookfield must be involved long term to benefit from these sales.  No altruism here.

Flip Tax:  Brookfield- there's been mention of a substantial flip that might go on for some time.  G-W - no flip tax.
Who benefits from a flip tax?  It's true that the flip tax might generate some price stability but after some period of time, the flip tax becomes something of a liability for those tenants who wish to sell.  I think G-W has stated it would like a moratorium on tenant selling for about 2 years in order to sell the vacant units it might take over at closing.  It wants this moratorium so that it will not have to be in competition with tenants selling.  Hmmmm.  So by the same token, if there is a stiff flip tax in place for many years, who would benefit from that?  I think it would be...Brookfield.  Because during the long time needed for rental units to eventually vacate, with a stiff flip tax in place Brookfield would have limited tenant competition while trying  to sell the units it owns at market rates.  So our hands will be tied while Brookfield is free to slowly clean up.

Commercial space: Both sponsors will own. (One of our bloggers said that this was revealed about Brookfield at one of the house meetings.)
Treatment of open spaces:  Both sponsors will not build
Effect on Rental Units:  Both sponsors will present non-eviction plans.

Which scenario do you think is better for the tenants?

Co-op vs Condo pt 4

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.