Does montlhly maintenance provide a good benchmark for fair prices?

my thoghts... where does the $2,000 in maintenance cost go to? if a rent stabilized building (albeit not so nicely located and that received the land for free from the government and doesn't pay property taxes) rents for that money... but that building is still full service (24/7 doorman ... live in super...).

how much of that maintenance cost goes to pay the mortgage portion for the land? property taxes are paid apart by the owner, so it couldn't be it. labor should be about the same... just wondering.

admin,

i'm actually not sure about how the maintenance fee specifically is arrived at ... all interesting questions... would it affect your answer to the question?

i just hypothetically came up with $2,000 maintenance to contrast/compare with say another unit that has a $1,000 maintenance, or a $1,500 maintenace -- I guess putting aside the maintenance per se, let's focus on the number of shares allocated to each of the units ... let's say Unit A corresponds to 50 shares, and Unit B corresonds to 75 shares ... Does this automatically provide a strong claim that the fair asking price of B is exactly 150% of whatever the fair market value of A is?

Another way of posing the question is to ask if all the little things to go into decreasing or increasing the value of a unit, i.e., higher floor, better light, are built into the allocation of shares already... i.e., would identical units on the same line, but perhaps on different floors, which presumably would get slightly different prices... would (or should) these units have slightly different allocations of shares that reflect this slight superiority of one unit over another?

and if two units don't differ from each other in terms of number of shares allocated, even though they are very different apartments, can you look at the equal number of shares to make the point that after all is said and done, if it is clear that the FMV of the first is $600K, for example, then automatically you can say FMV for the second is (or should be) $600K also

millerfluffy, no to "But ultimately, can you look to "maintenance" i.e., share allocation, as a firm benchmark of value, almost as if it were a one-to-one, direct correlation to objective fair market value?"

Share allocation was done on the basis of several factors, specified in the boilerplate of the offering plan. Then the sponsor would hire an independent third party in the RE business to state that that share allocation reflected current relative values. That was to prevent the sponsor from skewing allocations to favor an apartment or a line of apartments that she knew she'd end up owning more of post-conversion.

Those allocations reflected relative values *at the time of conversion*. If one-bedrooms were easier to unload than two-bedrooms back then, you might see one-bedrooms weighted more heavily than they might've been five years earlier or later.

Or you might see a one-bedroom on the second floor with the same number of shares as a smaller one-bedroom on the 12th floor. It may have turned out later that buyers valued views more than size, so resales would favor the 12th-floor apartment.

You often see allocations that don't reflect what buyers will pay for. E.g., in my building, the shares increase in lock-step from the 2nd floor to the 12th, but in several lines the river views open up above the sixth floor. Insider sales at conversion didn't reflect that, but subsequent sales have.

Note that condition of individual apartments wasn't a factor in allocating shares. 8A with 200 shares might've been a wreck, while 7A with 199 shares was renovated, but the original insider buyers paid for 200 and 199 shares regardless. If both sold a few years later, the prices might vary a lot.

I think your idea is interesting but in the reality of the market place will not be terribly helpful other than as a point of departure for pricing. Shares are allocated when the building goes coop. In some cases that can be nearly 100 years ago. Views change over time and what was expansive views of a river commanding a premium worthy of allocating more shares in 1950 may be a view of a brick wall today. Similarly, tastes and preferences change in what people deem deisireable in a place in terms of layout; yet when originally allocated, sq/ft may have been the only basis ignoring layout. In addition, all layouts are not created equal even if the sq/ftage is exactly the same. A unit with a 20 foot long entry corridor versus another with identical sq/ftage where there is a second bedroom instead of a bowling alley length corridor are not equal apartments.

The formula you propose also does not take into account current condition of the units: estate sale requiring rewiring, new plumbing, new floors and total gutting versus 6 month old high end renovation are very different apartments

I guess what I'm saying is that I wouldn't get too hung up on maintenance fees within a building. And between different buildings a comparison of only maintenance fees is apples and giraffes for the most part.

"my thoghts... where does the $2,000 in maintenance cost go to? if a rent stabilized building (albeit not so nicely located and that received the land for free from the government and doesn't pay property taxes) rents for that money... but that building is still full service (24/7 doorman ... live in super...).

how much of that maintenance cost goes to pay the mortgage portion for the land? property taxes are paid apart by the owner, so it couldn't be it. labor should be about the same... just wondering."

I don't think any of these factors has anything to do with this particular issue (i.e. the OP's thesis)

I think kw and NWT have pretty much summed up the situation. What I'll add is:

a) In theory, your thesis should be true since share allocation SHOULD be ad valorum, but see the above 2 posts as to why it often doesn't
b) Some Sponsors over allocated shares ON PURPOSE to lines where they knew all or almost all of the insiders were going to buy and under allocated shares to lines with more vacant units and/or where they thought insiders were not going to buy. This is because it yielded more money from insider sales and both made it easier to carry unsold units and also made them worth more when the Sponsor was going to sell his. If I remember correctly, a good example of this was at 111 Fourth Avenue when the top floor or 1 floor down had a dropped ceiling (made ceiling height something like 10 feet instead of 14), and the Sponsor knew he was going to own most of that floor for some reason, so he used it as a reason for lower share counts on that floor. So you had units with the same layout and much better views with lower mtc than say the 5 or so floors. And it was simple to rip out that dropped ceiling and end up with the same ceiling height in the end anyway.
c) Some buildings just have odd share allocations. Examples: 300 West 23rd Street, where the mtc on TWO studios is lewss than the mtc on ONE 1 br, and across the street at Chelsea Gardens where first floor 2 br / 1 baths have a mtc close to top floor studios.

"But ultimately, can you look to "maintenance" i.e., share allocation, as a firm benchmark of value, almost as if it were a one-to-one, direct correlation to objective fair market value? "

I say no, because maintenance/shares might have a minimum value. You might have the smallest apartment by far, 5 square feet, and the smallest share of heat costs and all that, but you will still have significant shares allocated, because you still use the hallways and the front door and whatever. Twice the apartment size shouldn't be exactly twice as much.