Bankruptcy 20 Bayard Street, in the Burg

The sponsor (and its principals as guarantors) are in hock for a $17,000,000 mortgage covering the 37 units and 40 parking spaces left unsold. The sponsor apparently owes money elsewhere, too.

The sponsor has been renting, or trying to rent, the unsold units since October 2008. The rent income probably isn't covering the CCs and debt service, and the sponsor can't carry the shortfall, hence the bankruptcy.

any more to come?

Sounds like there will be more of these filings to come. Place your bets...

So sad but true.

http://therealdeal.com/newyork/articles/karl-fisher-designed-20-bayard-condo-in-williamsburg-files-for-chapter-11

Looks awfully close to the bqe to me.

This sort of illustrates the problem of the new developments, I think. I would guess that to clear the inventory, sell all the units in the building, the price would have to have been significantly lower which would have bankrupted the project causing losses to developer obviously and the lender. Therefore, they stopped sales when they got enough gullible people to get to 50% (and I suppose 50% was a magic number to allow purchasers to get financing...?) rather than lower prices to sell more (the remaining 50%). They were apparently hoping rents would generate enough cash to cover debt maintanence, but ultimately even that strategy failed. The upshot is that the early buyers paid too much, that if a building isn't selling briskly so that it is selling out, then the buyer is taking a big risk that the later units will be sold at a much lower price or that the building will fail. Does that make sense?

What does it mean for the building though? If the developer still owns half the units, does the bankruptcy affect the occupants(wether ownwers or renters)?
I imagine chapter 11 is an attempt to stiff a bunch of creditors to get to keep the building. I just don't see how that will fly.

See http://www.habitatmag.com/publication_content/2008_december/featured_articles_from_our_print_magazine/condo_sponsor_defaults

Oh, this sponsor owns 60% of the units. Their PCI is more than that.

It seems like this move is much worse for the owners than just handing the building back to the lender in a simple default, like GS did with the Forte. It will be interesting to see if this dick move pays off for the sponsor.

se folks (esp you bears, a shout out and double wink to the bears) this is an actual real event in a sizable building in a hood with a lot of similar stuff in the pipeline...not just a forecast...so I am surprised we aren't seeing a bit more "talk" about it..

by the way,,,,this ought to be perceived as bad news for all the bid developments in the hood

It'll work out in the end. If you want a shiny new condo -- which means you don't care who owns the other units, how many are rented out, etc. -- then it's a risk you take.

Here's an old story about a last-bust bankruptcy: http://www.nytimes.com/1992/12/06/realestate/postings-3-lincoln-center-japanese-take-title-to-312-condos.html

jim, the hard-core bears understand the importance of the bankruptcies in the other boroughs, but many (not all, of course, we have our other-area fans) are really waiting for the manhattan defaults.

JimSE,

Its not that close to the BQE.

seems like big news to me but Im also surprised how little attention it gets.

It is a significant event and, along with the foreclosure proceedings at Warehouse 11, a harbinger of things to come for other developments who continue to price units at inflated levels. Look at what is selling in w'burg the best: smaller, well constructed buildings in prime areas priced well: 69, 70 and 72 Berry come to mind. A bottom is forming and those nimble and brave enough stand to pick up some great bargains. One caveat about any of the buildings facing McCarren Park: the klieg lights blazing to 11pm all but obscure your view and flood your units with light. And one specific anecdote about 20 Bayard: we looked there last fall and have to say we were treated so rudely by the broker we simply walked out mid-sentence. Pissy sales tactics are an instant red flag that you are being shown overpriced properties.

Too bad though, it was (is) actually a nice buidling. I sleep well at night knowing I backed out of signing a contract at Warehouse 11!!

This is evidence for those who preach patience in waiting to see how the great NYC RE bubble unwinds. It looks like they closed half of the building or so pre-Lehman and have now had one closing in the last 15 months. The rental strategy carried them for a while but in the end wasn't a long term solution, so finally the development is bankrupt.

If this is a model for (or at least an example of) how stuck a developer needs to be, and for how long, before the capital structure finally tips over, then I'm not surprised that we have seen relatively few Ch 11 and/or foreclosure situations to date. However, the clock continues to tick and when I follow new developments I see few that seem to be moving enough units to work their way out of their problems in any kind of reasonable time frame (i.e., inside 2 years or so at current sales rates). Something will have to give, and that something is much more likely to be lenders' patience or asking prices than it is a price rally that bails out all these new developments.

Apologies - no sooner did I suggest that they had sold half the building or so but I saw NWT's post about 37 units being unsold. So they sold 40%-ish in 2008 and were stuck with the rest for a year and a half before the situation came apart.

W'Burg in bed with the mayor & media outlets.

sidelinesitter: he legal system moves unbelievably slowly here in NY. As such, pressures which come thru that channel take a long time to take effect.

Sidelinesitter. I totally agree. Over at Edge NSP etc they are engaged in wishful rose-colored thinking,,,,and hoping enough buyers will buy into it, but if buyers don't buy into at a decent clip, then something will have to give, and those who did buy into it will find they paid too much, or worse. (Somebody/something somewhere down the finance providing line isn't properly marking to market loans, or taking sufficient reserves, and are using valuations based on insufficient sales volume...my view, anyway.....and I don't know how many others are complicit in this fiction. )

By the way, "lender's patience" may be a charitable way of putting it. Lenders are probably complicit in this game.

lenders are definitely scared too. they dont need to own more RE.if the market stays like this for a couple more months I think were going to see alot more of this. loans will need to be refinanced and the banks just arent gonna do it. allthough i guess thats when the govt will step in again

hey marco looks like you hit the nail on the head:

http://therealdeal.com/newyork/articles/inability-to-refinance-pushed-20-bayard-designed-by-karl-fischer-into-bankruptcy-court-documents-show

anybody know this condo still has water linkage and why the new sponsor is still asking those inflated prices?