Are real estate lawyers able to get a good feel for coop balance sheets. We just accepted an offer and received the coop financials for coop on the Upper East Side. The lawyer says a cursory look makes him think that the financials look reasonable, since revenue increaesd. But I seem to think otherwise since the increase in revenue is a direct result of an increase in special assessments. In... [more]
Are real estate lawyers able to get a good feel for coop balance sheets. We just accepted an offer and received the coop financials for coop on the Upper East Side. The lawyer says a cursory look makes him think that the financials look reasonable, since revenue increaesd.
But I seem to think otherwise since the increase in revenue is a direct result of an increase in special assessments. In addition, it seems there were "special assessments" in 2007 2008 and 2009. However, the good thing is that it seems their first mortgage will be fully paid soon. But then again, what's troubling or puzzling is that they refinanced the remaining first mortgage Oustanding Balance of $3M and along with another loan of $1M and made it into an interest only $5M loan. Yes - is it not odd that $3+$1 should be $4M and not $5M?
If there is anything else I should be looking at, I would love to know.
THANKS!
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Response by hofo
about 17 years ago
Posts: 453
Member since: Sep 2008
You need to read the board minutes to see why the refi was for $5 million and why IO loan. Maybe someone on the board knows or works for a bank and he/she got a kickback. I know a title search agent used to get kick backs from the lawyer.
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Response by drdrd
about 17 years ago
Posts: 1905
Member since: Apr 2007
I can see the value of having a RE lawyer look over the paperwork but I've often wondered if an accountant might not be better for some of it ..... just thinking out loud.
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Response by nycbrokerdax
about 17 years ago
Posts: 180
Member since: Dec 2008
I would have your lawyer ask follow up questions-- Find out if there is a balloon payment coming due when the loan comes to fruition, as this could be an additional large assessment. Also, does the building plan to re finance when it is coming due? If so keep in mind that these large loans are hard to refinance right now, and many banks will not lend in buildings where a balloon payment and underlying mortgage are coming due within the next 2 to 3 years. Also, how is the building maintenance normally without the assessments, it could be that this coop prefers to assess rather than increase the maintenance.
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Response by kylewest
about 17 years ago
Posts: 4455
Member since: Aug 2007
The financials cannot be viewed in a vacuum. By a lawyer or an accountant. I'd want to know what those assessments related to and what the Board has been working on. The minutes are critical. If they leave many questions open, the questions must be posed by your attorney to the management company, seller, seller's broker, and then more due diligence done to reconcile the info provided with other info available. In the end, it all has to make sense to YOU and paint a very clear picture. If not, walk. Doesn't matter how appealing the property is. In most cases, parties behave in a fairly business-like way and you can get the info you need to make a sound decision. There are plenty of anecdotal stories of times people are less than forthcoming or hedge answers, etc, but I'd approach this as a business transaction and use the type of common sense and caution you would bring to any substantial business dealing. By asking the questions you ask here, it seems you are already doing this. Good luck. I hope it works out.
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Response by NYCDowntown
about 17 years ago
Posts: 71
Member since: Jul 2009
It seems the lawyers I am looking at either charge 800 or 2800 with nothing in between. Anyone know what a good price is and if possible can someone suggest one?
Thanks for all the comments and hlep!
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Response by TheGoodLife
almost 17 years ago
Posts: 20
Member since: Sep 2009
I would also like a recommendation for a good accountant/lawyer who can help me determine the financial health of a co-op I'm looking at. Anyone have any firms they can recommend?
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Response by UWSer
almost 17 years ago
Posts: 158
Member since: Feb 2009
I have a lawyer rec who quoted me around $1800. Post email, and I'll send.
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Response by 30yrs_RE_20_in_REO
almost 17 years ago
Posts: 9913
Member since: Mar 2009
Most attorneys are NOT really good at looking at Coop financial statements (example, I once was doing a deal in a Condo and the seller's attorney questioned why the price was so low and I explained they didn't have good financials and her reply was "What are you talking about? It's a Condo".) I doubt the $800 attorneys are even LOOKING at the financials.
An easy way to choose: do you have a bunch of financials from other Coops you're been interested in? They all have cover letters from the accounting firms. Find out which one's do a whole bunch of Coop audits (make sure it's audited financials, not just preparation based on whatever numbers the Coop hands them). Just about any of such firms would be qualified.
I always liked Michael A Rozycki Cpa, 405 Fourth Ave, Pelham, New York 10803 914-654-0663 and his former firm
Jarvis Irving 104 5TH AVE NEW YORK, NY 10011 Phone: (212) 675-0856
You need to read the board minutes to see why the refi was for $5 million and why IO loan. Maybe someone on the board knows or works for a bank and he/she got a kickback. I know a title search agent used to get kick backs from the lawyer.
I can see the value of having a RE lawyer look over the paperwork but I've often wondered if an accountant might not be better for some of it ..... just thinking out loud.
I would have your lawyer ask follow up questions-- Find out if there is a balloon payment coming due when the loan comes to fruition, as this could be an additional large assessment. Also, does the building plan to re finance when it is coming due? If so keep in mind that these large loans are hard to refinance right now, and many banks will not lend in buildings where a balloon payment and underlying mortgage are coming due within the next 2 to 3 years. Also, how is the building maintenance normally without the assessments, it could be that this coop prefers to assess rather than increase the maintenance.
The financials cannot be viewed in a vacuum. By a lawyer or an accountant. I'd want to know what those assessments related to and what the Board has been working on. The minutes are critical. If they leave many questions open, the questions must be posed by your attorney to the management company, seller, seller's broker, and then more due diligence done to reconcile the info provided with other info available. In the end, it all has to make sense to YOU and paint a very clear picture. If not, walk. Doesn't matter how appealing the property is. In most cases, parties behave in a fairly business-like way and you can get the info you need to make a sound decision. There are plenty of anecdotal stories of times people are less than forthcoming or hedge answers, etc, but I'd approach this as a business transaction and use the type of common sense and caution you would bring to any substantial business dealing. By asking the questions you ask here, it seems you are already doing this. Good luck. I hope it works out.
It seems the lawyers I am looking at either charge 800 or 2800 with nothing in between. Anyone know what a good price is and if possible can someone suggest one?
Thanks for all the comments and hlep!
I would also like a recommendation for a good accountant/lawyer who can help me determine the financial health of a co-op I'm looking at. Anyone have any firms they can recommend?
I have a lawyer rec who quoted me around $1800. Post email, and I'll send.
Most attorneys are NOT really good at looking at Coop financial statements (example, I once was doing a deal in a Condo and the seller's attorney questioned why the price was so low and I explained they didn't have good financials and her reply was "What are you talking about? It's a Condo".) I doubt the $800 attorneys are even LOOKING at the financials.
An easy way to choose: do you have a bunch of financials from other Coops you're been interested in? They all have cover letters from the accounting firms. Find out which one's do a whole bunch of Coop audits (make sure it's audited financials, not just preparation based on whatever numbers the Coop hands them). Just about any of such firms would be qualified.
I always liked Michael A Rozycki Cpa, 405 Fourth Ave, Pelham, New York 10803 914-654-0663 and his former firm
Jarvis Irving 104 5TH AVE NEW YORK, NY 10011 Phone: (212) 675-0856