sponsor ownership in old conversion

Generally sponsor owned apartments in conversions have rc/rs tenants who chose not to buy. Usually, they only leave to retire to Florida, assisted living or whatever lies beyond this life. I'm not sure if the sponosr is allowed to rerent these apartments or if they have to be put up for sale at market rents. In my parent's building, when a tenant moved out, the apartment was renovated and sold. One thing I would try to do is have your attorney get ahold of the tenancy records...if many of them go back to 1942, chances are the sponsor won't be a major factor much longer.

I think the sponsor has to sell the unit once it is vacant.

Sponsor definitely does not have to sell the apartment once it is vacant. In my building, the sponsor held on to the units for years, choosing to rent them. Just recently decided to sell a few, still renting out the others.

noposition - actually, the bank from which you get your mortgage will have determined if the sponsor is financially sound, which is why they will offer mortgages for apartments in that building. So, if people have been purchasing since the 80's, it would seem fairly safe for you, even though 25% is sort of high.

Lizyank, I certainly wish all the tenants a long and healthy life, but yes, it did strike me that the tenants are almost 30 years older than they were when the building converted.
ph41 - that's a great point, and there are a number of banks providing financing in this building.
Thank you so much for your input.

lizyank - why in heaven's name would you think there was a reason to look at tenants' records going back to 1932 - just to rack up attorney's fees? What purpose would that have served in any case?

Well going on the assumption (which I am not sure is correct and if it isn't the point is moot) that the sponsor has to sell an apartment once the rental tenant vacates it would helpful to know if most of the renters are 75+ and thus, unfortunately, likely to be in residence for only a limited period which would mean the influence od the sponsor would diminish over time. Now if sponosrs can continue to hold apartments as rentals, there is no purpose to the exercise.

You're forgetting the key part - if there is anyone who is entitled to a RS lease on the place once the original tenants shuffle off. I think a relative of the tenant who has lived there for 2+ yrs qualifies. No need to dig up tenant records from the 40s. Just look at the rent roll from conversion, should be able to see who is RC/RS and approx. length of tenancy from the rents.

Can I ask which building you were looking at? I'm currently buying a place with a very similar story -- that's why I'm curious.

"I think the sponsor has to sell the unit once it is vacant."

"Sponsor definitely does not have to sell the apartment once it is vacant. In my building, the sponsor held on to the units for years, choosing to rent them. Just recently decided to sell a few, still renting out the others."

I believe there is currently some conflicting case law on this.

nyc10023, right, it's two years of residence with the tenant. Must be other conditions too. Just going by what my own sponsor says, it doesn't happen much. Kids and grandchildren tend not to be willing to move in with grandpa on the chance that he'll live long enough but not too long.

In my building of 87 apartments, the sponsor still has 20. No issues. I don't know how their monthly cash flow is, but they've done very well over the last 18 years, selling as apartments become vacant.

Also, we shouldn't assume that the rent roll is always less than the maintenance. At 2 Fifth Ave, for instance, they were grossing $50K per month a few years ago. That might be peanuts as a return on the value of the apartments, but better than funding a monthly loss.

The sponsors' amended offering plans, where you can get them, are interesting. Lots in the building-document section at www.midboro.com.

30yrs - I think there have been attempts to legally force sponsors to sell apartments,(especially if they still have the units after a certain number of years) but I don't think it has actually worked in having law changes. As I posted, original sponsor in my building still has most of their unsold units rented, and not always to the original RS tenant.

And, as for the prospect of having rental tenants in place where you purchase, (turnover, differing interests of owners renting out apt. vs. owner who live in their aprts.perhaps being at cross purposes) that is no more of an issue than purchasing in a condo, which often has many rental tenants.

I don't know if this impacts anyone else but I was successful in purchasing my mother's apartment at a HIGHLY favorable price years after the initial conversion. My agrugment to the sponsors was that they were losing money every month on maintencance versus my mother's rent and sure my mother was 80+ and they could sit there and mark the days off the calendar. But if I moved in for at least two years (which I was considering for my mother's care anyway)...they are losing money much longer. The irony is that I had no desire to live there as a renter even at 1971 prices, the apartment needed a gut renovation and somehow putting six figures into a rental didn't make sense.

Right, just the sponsor figuring the odds, as everyone does.

It's funny, one of my building's sponsors is himself a RC tenant up at the Apthorp, looking at the contending interests from both perspectives.

NWT - just looked at the midboro site you noted. Fascinating that they put those documents out there, without requiring some sort of owners' password. But I couldn't get to the Exhibit A which would list out current rents (I think I tried it for the Park Royal). Just didn't seem to have been scanned. Do you have magic word that gets you that info?

NWT: there's an interesting backstory to the change in ownership at Belnord. I believe one of the previous owners was herself an RC tenant at the Belnord. When I look at sponsor sales of prewar apts on the UWS and the length of ownership of building, I don't think they take that much of a hit on the rent rolls. Many of the owners bought 30+yrs ago. Another thing to note on the UWS is that you see some of the same players over and over again as sponsors or landlords.

http://www.nytimes.com/2004/06/25/us/lillian-seril-95-dies-landlord-at-center-of-rent-strike.html?scp=1&sq=lillian%20seril&st=cse

nyc10023, yeah, those $300 rents we keep hearing about seem to be mostly mythology. There was a story the other day about a tenement being vacated for the 2nd Ave. subway. I used to live there, so know what a rathole it is, and was shocked to see the guy in the story paying >$1K. They called it five rooms, but it's a railroad flat where two of the rooms are walk-through closets.

ph41, no access. I just stumbled upon them. If you google some of the words, the docs will turn up with numeric URLs, so you can change the doc numbers and see what else is there, but in the ones I checked there was nothing that wasn't linked to from the building pages.

I'm sure you know the story of the Belnord. The Serils had a bunch of RS units that were reset to RC rates due to legal issues and some rents that were rolled back in the 80s to 70s rates. Do you think people relinquished those apts? I'm sad to say that a 5-room rat-infested apt for just over 1k seems cheap to me.

Yeah, old Lillian pushed a little too hard. Wasn't there a Violet in there too?

Cheap, but a lot for those people. When I lived in the tenement, we'd tell people the rent (~$400 back then, I think) to astonish and shock and induce envy. Then they'd see the place and think again. "WTF are you living here for?" Finally we got to a point where tenement life stopped being quirky and economical and was just squalid and weird and miserly.

ph41:

http://www.cnyc.coop/code/newsletters/2001summer/sum01_decision.html

http://www.cooperator.com/articles/152/1/When-Sponsors-Dont-Sell/Page1.html

30yrs- these cases seem to have tried to force sponsor sales in buildings where the high percentage of units still held by the sponsor was impacting buyers' ability to obtain mortgages (and thereby impacting the ability of sellers' to sell their apartments).

Doesn't seem to impact other sponsors.

but the *rulings* were still not conditioned on buying being able to get mortgages - that was just the impetus for the suits. The rulings were about "completing the conversion", and if Sponsors are ordered to sell units, they are ordered to sell units unless there are carve outs, which I don't believe occurred in the cases which have been brought. In addition, the amunt of Sponsor ownership for banks lending has always varied tremendously, so how do you pick the point where it effects shareholders borrowing if it's a moving target? In any case, my origianl point was to answer the question of
"I think the sponsor has to sell the unit once it is vacant."

vs.

"Sponsor definitely does not have to sell the apartment once it is vacant. In my building, the sponsor held on to the units for years, choosing to rent them. Just recently decided to sell a few, still renting out the others."

I could list more cases, but I think I've already proven my point.

30yrs - still do not quite understand your point - how many sponsors holding units been forced to sell?

nyc10023, re: "Violet", I was getting widowed sponsors mixed up (the mind is shot) and thinking of Viola Sommer, sponsor at the Sovereign on East 58th. Her obit's in the paper today.