250 MERCER STREET CO-OP please help me with some advice/opinions.

Finally, can someone just simply say, "hey, it is a normal, if not pretty good co-op, and not to worry" lol...guess, I am looking to aleviate any remorse I may have later...

I don't know the specifics on that building/its property lease but to comment broadly on reviewing financials .... 2 things: 1 - it is comparable to viewing the balance sheet of other investments and 2 - a good lawyer should be very helpful in this issue.

When you look at the balance sheet of any company, you look at expenses vs. revenue. So, is the building running at a loss every year? What types of improvements have been made/need to be made? What is the historical method of paying for expenditures - do they often levy an assessment or do they usually take money from the reserves? Neither if necessarily right or wrong but both must be evaluated per the building and its own financial situation. ie: if the reserve fund is low, they shouldn't be raiding it.

Read the minutes from board meetings - what do people argue/debate over? What issues keep coming up? Is there any history of litigation?

Our lawyer reviewed multiple financials with us before we bought our most recent place. He was able to give perspective ("well, you see this a lot" vs. "this is a red flag") which was really helpful. My spouse and I both work in finance and we refused to bid on any property unless we reviewed the financials. A few brokers complained but we really didn't care.

Good luck!

Hopefully 30years will comment on your thread, that's really his bailiwick.
My less informed opinion, based on our search for an apartment in that neighborhood 8 years ago:
It's a nice full service building, the location is very nice, some of the layouts are weird, BUT the maintenance is very high. At the time you could rent a similar apartment for maybe a $1,000 more than the monthly maintenance, and the prices reflected it. The other thing I remember is that subletting is very easy ( unlimited ) which was a positive for us, but may be a negative if you want that stable coop feel.
We got cold feet, so didn't do a full due diligence on exactly why the maintenance was so high. I was not aware the building had a land lease. If this is true, I would run away.

You need a serious, RE attorney--not one who dabbles in RE. From your questions you are clearly not in a position to assess the building or complete "due diligence" on your own.

101 W23 has resolved its land lease problems with a temporary fix and is nothing most people would be willing to get involved with as risk is high.

I do not know the building you mention, but if it has a land lease, then the market for resale will be extremely constricted because most people (myself included) will not touch a land lease coop.

You do not go over financials "as many times as possible." That makes no sense. Your attorney looks them over and has a CPA review them if necessary. They don't change minute to minute. You get the last couple years of financials and have them reviewed. Minutes are reviewed by your attorney after you reach a tentative agreement with the seller on price and before you sign a contract.

I cannot emphasize enough, especially if you are considering a land lease building, that you need a qualified attorney to counsel you through this. You are possibly walking through a mine field and asking to be told "it'll all be alright" in light of the post you put up is whistling in the dark. You need counsel--not reassurance.

Firstly, I have never heard of 250 Mercer being a land lease Coop, and I've been dealing with the building for over 20 years. Secondly, it is virtually impossible for it to be a land lease Coop since it is a Cond-op (the real version: not a Coop with Condo rules, but a building with 2 Condo units: the Commercial Unit and the Residential Unit, and then the Residential Unit is owned as a residential housing corporation). The only things I can think of are that for some odd reason the initial Proprietary Leases end in 2034 instead of 99 years after the 1986 conversion, or you are seeing a report about some lease of the commercial property portion of the building.

OTOH, I will say that 250 Mercer has historically fared poorly in market turn downs. I remember in the early and even mid to late 90's, units were VERY hard to sell due to the high maintenance from the underlying mortgage the Coop holds. i turned down several 1 br's at under $100,000 because even though units were selling for $125,000 to $150,000 at the time, you never knew which 3 of the 20 units which were on the market were going to sell, and there seemed little rhyme nor reason that some sold and others didn't.

____________________

David Goldsmith
DG Neary Realty

Right, not a land-lease. Just a plain old cond-op as 30yrs described.

Current ads say maintenance is 70% mortgage interest and RE taxes. In 1985, when the apartments were first being sold, the sponsor's ads had it as 67%.

Forgot to add, the 10/7/1985 issue of NY Mag had 15 full-page ads for new co-ops and condos. 250 Mercer was the only one that mentioned maintenance/CCs, with the deductible figure in bold print. An uphill battle back then, too.

I may be way, way off base but I believe buildings that were built as non-residential and later converted to residential all have high monthly maintenance fees. I think 250 Mercer was not originally a residential building.

the current maintenance is 70.1% deductible, is that a good thing or bad thing?

Thank you for bringing to my attention that the maintenance was 67% deductible in 1985, and in 2008 it was 70.1% deductible, however what is the significance in knowing this?

It would seem it can be interpreted in 2 ways:
Good: cuz, you always want a high percentage of your maintenance deductible
Bad: cuz, they maybe taking out more debt/mortgages (albeit interest only) thus having a higher ratio of deductible expenses vs. non-deductible expenses....

Would welcome & appreciate any comments/opinions/advice...

The only meaning is that property taxes have risen faster than other operating costs such as utilities, staff salaries and professional fees. The salient point here is that the maintenance is very high, which as 30-years mentioned makes the apartments hard to sell in the best of times, and even harder to sell in down markets.

We almost bought there and I don't think it's a land lease either. At that time it did have some landmark violations which could potentially delay approval on any work (particular if you are getting outdoor space.) I think these may have been resolved since then. I don't think the lobby/overall building is as nice as the price per SF some of the larger units were asking. Seemed very dormy/motelly to me at times (we went to see it several times.) Not sure the building was in the best financial condition either but we never got far enough to conduct full due diligence. Is the scaffolding still up?

from what i've seen, most stable, sold over 80%, coops, the maintenance is 50% or less tax deductable. when it's more, then the maintenance is higher. this usually points to a large underlying mortgage and could also point to some major financial issues that the coop experienced in the past.

i lived in this building from '01 - '08. it was my first purchase and i loved living there. the building is well run, financials are solid, maintenance expensive. in the seven years i lived there they had one increase of ~6%.

i would say that once the NYU 'green energy' project is complete and they re-do the plaza/park on the West side of Mercer the surrounding area it will be more beautiful than ever. that project has been dragging on for 3 years and it has kind of depressed the vibe of that block, which is usually very funky and full of life. assuming nothing has drastically changed with the building's financials, i would recommend 250 Mercer, you will like it there. NOHOHO.

scoots, very good points, but do you really work in finance? a balance sheet shows assets and liabilities, whereas it's the income statement that shows revenues and expenses.

snow21--SNAP! Maybe Scoots works for Citigroup. Scoots: can we please have our money back?

It would seem that the main problem which many have chimed in to comment on is HIGH MAINTENANCE at 250 Mercer. Below is a general overview of the maintenance at 250 Mercer Street...
Can you guys comment as to whether it is high or average or below(unlikely) market?

1000sqft 1bd = $1,655/month
900sqft 1bd = $1,400/month
500sqft studio = $978/month

gee, I just love 250 Mercer's location, which is why I am finding it hard to let go...
But, from what I can see, in comparison to many co-ops in manhattan, the maintenance is pretty much on par with many, if not, it is just slightly higher... Keeping that in mind, said property has a 70.1% deductibility as compared to other co-ops which are at 50%-58% which makes 250 mercer that much more attractive...

would appreciate any comments/advice...

I'd say the maintenance is a tad high relative to comps in area (some more, some less) but the comps I am aware of are full service very well maintained buildings with extremely solid financials. I don't know 250 Mercer. If it is such a building, then just on the face of things maintenance is only a bit above the high end for the area.

its definitely full service. huge staff, lots of service, and a huge private storage area for all shareholders - the size of a small attic. the maintenance is a little higher than avg, but at least there is a good level of ammenities.

the building is nice. I thought about buying there but be mindful of the different buildings the make up the complex. Some buildings have more issues then others. I prefer the one that faces broadway. Noisier but its former factory so you can pretty much do what ever you want in the interior.

60 east 8th street with larger staff, the maintenance is lower.

Hi Superlun

I've been looking at real estate a long time, I find quite generally that condos run an average of 1.10 per sq ft cc/tax and for coops 1.60 psf (doormen buildings). Many will dispute these figures or offer different opinions but when I am looking at properties, I will stick to this average and will adjust my valuation of an apartment (price per sq ft I would pay) on the difference this extra monthly cost would represent to me on my monthly mortgage payment.

As for the examples you provided, I would say;

1000sqft 1bd = $1,655/month 1.65 per sq ft is not high for a coop
900sqft 1bd = $1,400/month 1.55 per sq ft is not high for a coop
500sqft studio = $978/month 1.95 per sq ft IS high for a coop, by $200 per month additional costs.