building at 2 Fifth Avenue-Big Assessment

This bit o' gossip will certainly make me call clients at 2 Fifth, but I also question it. What in the name of all that is holy could cost $30 million? Is the building being repointed by Fortune 500 CEOs?

ali r.
DG Neary Realty

I know this guy who owns a contruction company and he says if you replaed every brick in the building it wouldn't cost 30 million.

Why wasn't this problem addressed earlier.

Could there be structural problems there.

Maybe they have to rebuild all the balconies. The building is the perfect age for this sort of issues.

I think the OP was misinformed. The co-op bought the land from the Rudins in 2005. They borrowed $31,000,000 to do so. It shouldn't be due for refinancing for several years.

NWT, it definitely makes more sense. I was trying to come up with a laundry list of work that would add up to S30 million, and wondered if they were going to clad the exterior with Anne Sacks tiles.

I heard that scaffolding will be there for at least five years.

Shades of 10 Gracie Square, if this is for real.

what happened at 10 Gracie Square?

WITH scores of stone blocks removed and replaced with plywood and others drilled or sawn, it looks like 10 Gracie Square is being unbuilt.

In fact that's close to what has happened: The steel in this unusual 1930 apartment house was not rustproofed, not even primed, and the co-op has had to replace the stone facade's severely rusted supports.

[more more more...]

http://www.nytimes.com/1992/11/01/realestate/streetscapes-10-gracie-square-under-a-most-elegant-facade-rust.html?pagewanted=all&src=pm

Didn't a couple of the white-brick buildings on lower 6th or 7th have to replace all their brick? One went from white to a sort of taupe color.

The rental at http://www.215east68.com/ is replacing its brick with terracotta.

why does this building have landmark status; it's so ugly.

NWT, back in the early 90s the Vermeer (77 Seventh Avenue, between 14th and 15th Streets) had its white brick facade replaced with taupe bricks. Here's the archived article on the Vermeer in particular, but an interesting read on white brick buildings in general:

http://www.nytimes.com/1992/03/08/realestate/streetscapes-the-vermeer-trouble-behind-the-elegant-facade.html?pagewanted=2&src=pm

According to that Times article, that Gracie Sq. restoration -- which was pretty extensive -- cost $175K in 1992. That's still not the equivalent of a $30 mm restoration today! Ageloff Towers, which is decades older, just did very extensive facade work and it was maybe $3 mm.

I think we are dealing with a rumor source that has no sense of scale, though I very much like the idea of an Ann Sacks building

ali r.
DG Neary Realty

This is no rumor.

I believe Adelaide Polsinelli may still be the President of the 2 5th Ave Bd. I bet she knows.

http://adelaidepolsinelli.vpweb.com/About-Me.html
"she has served as President of 2 Fifth Avenue since 1999, a 350-unit co-op building where she founded the Council of Board Presidents of Greenwich Village."

This was speculated about in the past: see, e.g., http://streeteasy.com/nyc/talk/discussion/20282-2-fifth-avenue Here's my read:
For Local Law 11 they did cursory inspections--and this cycle called for extensive probing, not just checks of the pointing. Water infiltration was detected that had affected infrastructure. The extent of damage was beyond what anyone imagined. The facade is literally crumbling in places, chunks have fallen off in others, and it is generally a mess. And the facade is simply enormous. So the job is bid out, but the bids are astronomical. Just erecting scaffolding on the scale needed will cost a king's ransom since it will have to be in place for 2 years I estimate. The board then re-bids the job because everyone is in shock. If the balconies are implicated then the entire board probably had coronaries.

For three years on here during discussion of this building I've said they have looming capital nightmares. You can literally tell by just looking at the deteriorating facade, tilting balconies, run down halls and elevators (I haven't seen them for a year, so maybe they redid those) that the building is showing more and more just how badly it has been maintained.

Without having hard facts, I can say that it must be a dreadful situation based on the fact that no progress has been made for over a year on the huge sections on facade that now have no brick and just a green temporary covering. I would love to hear from someone with the facts what exactly is going on there. The lack of transparency is in itself going to hurt values there, if it hasn't already started to.

There have been many sales recently. The facade appointing was already in progress before the sales - we went to the open house. I would think that these buyers checked on the facade situation. Even if there is no facade issue, beats me why people are paying 1200-1500 a sq ft for an ugly building with run-down corridoors.

But Kyle, they've had apartments(some expensive ones ) going into contract fairly quickly here. I would expect that any prospective buyer's attorney would have reviewed board minutes, which, I would think, reveal the problem/remedies/costs. So why are people still buying here?

there are a number of apartments in contract; let's see if they go to closing.

I had an open house for one of my exclusives and someone came by who has a freind that lives there and the cost to fix whatever is wrong is $30M and her friend is being assessed $80 thousand. She owns a one bedroom.

There seems to be an 8mm project that is supposed to complete this year. I wonder if the scope of this project has spun out of control.

http://www.phbcatalyst.com/index.php/projects/residential/62-2-fifth-avenue-facade-restoration-new-york-ny

I didn't see a date on catalyst project.

But it's gone from 8-30M; yes that's out of control.

The fact that sales are taking place is a testament to the fact that location is everything. And views are a close second.

Anybody know what're the "end loans" mentioned at http://www.twofifth.com? Maybe for some of the shareholders to finance their assessments?

2 yrs of scaffolding, re-bricking & terrace repair = $30M? yikes

I heard it was going to be five years of scaffolding.

The Evolution of the End Loan
http://cooperator.com/articles/249/1/The-Evolution-of-the-End-Loan/Page1.html

http://www.nytimes.com/1992/01/19/realestate/in-a-courthouse-co-ops-on-the-block.html

"Loans on co-ops are known as "share loans" or "end loans," although they are generically referred to as mortgages."

As a point of reference, I lived in a coop that was approx 12 stories high with approx 150' wide facade facing the street. The front was terracotta (more expensive to fix than white brick). The rear and side of the building, along with the front had extensive repairs for Local Law 11. The cost: about $2,000,000 over the 2.5 years of the project. Nightmare. It could have been better managed, some mistakes were likely made, but bottom line was that this can be a very, very, very expensive local law cycle to comply with. We may be about to enter Local Law 12's cycle, but 2 Fifth must be struggling to come into compliance with 11--no way did they ever pass that cycle given the outward appearance and fields of green all over the facade.

By comparison to my former place, 2 Fifth has no terracotta, but the length of the facade is easily 1000 linear feet when you trace all the nooks and crannied and realize there is no real "back" of the building that is just simple red brick. In addition, it is 21 stories, has balconies and terraces all over the place. The repair bill has got to be at least $5MM+. Could be double that. I think $30MM sounds a bit unrealistic though.

I was going to purchase an apt in this buliding until I was told the assesment was $142 per share... which meant that I would have to pay over 87K, since the seller completley ignored this I decided not to purchase the apt. Please be careful!! dont buy in this building unless the seller give you a break in the price!

Holy cow!
http://nymag.com/daily/intel/2011/05/behind_white_bricks_the_interi.html

NYMag: "...support beams that were erected with the building in 1951 needed mending. Each terrace must be replaced, and costly pipe scaffolding must be erected."

Isn't that exactly what I said 6 weeks ago in this very thread? I should go write for NYMag.

And kudos to Happyrenter for calling it 100% correctly also 13 months ago in the thread I cite above.

Good call, kylewest and all.

So, they'll need to borrow $40M (if lucky) for reconstruction, and they're already carrying $31M. That makes debt of $289 per share to be added onto purchase price.

I can't find share-counts of any of the currently-for-sale apartments, but maybe some can be interpolated from this: http://www.twofifth.com/thirty-seventh_ammend.htm

Since the Rudins still have ~20% of the shares, and are going through the same kind of mess at their 215E68th rental, they must be wishing Grandpa supervised construction a bit better 50 years ago.

I do not get it. There have been recent sales in the buildings at well north of $1200 per sq foot. Did the buyers not care to go through the minutes of the coop? Any recent owners care to comment?

Google "Square-Arch Realty" to see some data behind Credit Suisse's securitization of the 2005 $31M loan.

Adding in the upcoming $40M loan, the underlying debt per saleable ft² will be about $210.

It looks as if the market's saying that the co-op, riddled with problems as it is, is still worth ~$1,400 per ft²: $1,200 to the fleeing current owner who can no longer carry the freight, plus $210 in underlying debt.

For a buyer looking for both location and a prestige address, it can look like a deal.

A $40MM loan is not a viable option for 2 Fifth Avenue. It will have to be primarily paid for (if not entirely) with a special assessment. It is going to be a hefty special assessment, no doubt--even record breaking, potentially. I can be spread over 2-4 years, but it will have to be paid. Carrying $70MM is debt isn't viable in the longterm. Short term loans will be needed, perhaps while the assessment is in place collecting the vast sum, but I just don't see $40MM of long term debt being taken on. It would be insane. Can you imagine refinancing that loan if/when interest rates go up in the future!

Right, since they've already got the the $31M coming up for refinance in 2015.

It'll be interesting to see how they handle it.

Take #17O: http://streeteasy.com/nyc/sale/603705-coop-2-fifth-avenue-greenwich-village-new-york

02/08/2006 Previous Sale recorded for $1,500,000.
04/28/2011 Listed by Corcoran at $1,850,000.

It has 900 shares, and there're 245,500 shares total, so that's $147,000 for this owner or the next one to produce. Not fun but not horrific, since either party would have that just lying around waiting for an assessment to hit. I wonder if the seller would've been asking $2,000,000 if this hadn't happened.

I'm not very versed in financing beyond vanilla transactions. I'm curious how one pays for this assessment. For many owners, financing $100-200,000 is do-able. But I'm not sure a bank would offer special assessment financing. So do you take a home equity loan? Would the coop board allow that given the situation--it may have to change existing rules and ease up a little. So let me try to reason this out:
Sale price without special assessment: $1.2MM for one bedroom (30% down required = $360,000; mortgage=$840,000)
Now that s.a. will cost this buyer $100, sale price is reduced to $1.1MM (30% down required=$330,000; $30K saved on the downpayment that buyer would otherwise have to have paid if price hadn't been impacted by s.a.; put that $30,000 toward s.a. leaving $70K of s.a. still needing to be paid; mortgage = $740,000 if it is to include the amount required for special assessment).
But if you can't mortgage the s.a.--which I doubt you can--then you only get a mortgage for $680,000 and still need to come up with another $70K. Coop would have to allow you to get home equity loan of $70K which would reduce buyer's equity to $260,000 or the net equivalent of 23% down.

That is not crazy. Plenty of coops do 20% down. But not in this AAA location. Buildings in this area range from 30%-50% down.

It would seem 2 Fifth will have to make some decisions about this downpayment requirement if they are to keep the pool of buyers at the level that currently exists. If it doesn't ease equity requirements, then they will restrict the buyer pool from what it is now to those who can afford to pay cash for the s.a. at the same time the units are less attractive because of the years of construction and disruption that lie ahead.

For owners who have been there a long time, they have plenty of equity to tap into to pay this s.a. via a home equity loan if the building and banks agree to the loan. That is, so long as they aren't retired fixed-income owners. Lots of variables here.

The problem is solvable, but it will require lots of swallowing hard, biting bullets...pick your metaphor. Fascinating to watch this play out...

It's not just dollars and cents. Part of the attraction of purchasing in an established blue-chip coop is a certain comity. With $30M on the line and a fully deposed board, this is war! Who wants to buy into that?
Also, assuming the owners develop a plan and an agreement in the next year, it will take at least 3 years to do the work. To take the 17O example, the price includes a prefectly renovated apartment with a wraparound terrace in a fancy coop; it may be that in 5 years, but in the meantime there will be no terrace access, but rather scaffolding and workers.

Bingo, maly. Why would anyone in his right mind buy into this fiasco. Aside from the financial issues, it is going to be horribly unpleasant for years. Not only that, but one has to assume that a not insignificant number of owners, especially on the less-desirable north side of th building, will choose to sell or have to sell because they can't afford the assessment. The market could easily become flooded with units from the building.

And this is not the sort of work that adds up to big price increases for the apartments in the building. In the end, it will still be the ugly duckling of lower fifth avenue.

Maybe people are catching on.
http://streeteasy.com/nyc/sale/600273-coop-2-fifth-avenue-greenwich-village-new-york?email=true
STREETEASY HISTORY
01/19/2008
Previously Listed by Brown Harris Stevens at $4,075,000.
06/03/2008
Brown Harris Stevens Listing is no longer available. Last priced at $3,600,000.
04/15/2011
Listed by Ann Weintraub, Ltd. at $3,695,000.
05/30/2011
Price decreased by 5% to $3,495,000.

Interesting that 6 out of seven of the listed properties have been listed in the last 90 days--maybe within the last 30. It will be very interesting to see what happens. Highly unusual for properties to be listed as we head into summer...suggests to me that owners are anxious to get out and not willing to wait until fall when a sale is more realistic. By the end of June the market will die for 2 months as usual and the asking prices on these units are not fire sale level; many are aspirational. We'll see...

Confirmation:

http://www.thevillager.com/villager_423/majorfacade.html

Per Ali G., I guess we will be seeing some fortune 500 CEO's on the scaffolding soon

Totally off subject, except someone mentioned 10 Gracie Square. Check out the street view on this listing;

http://www.elliman.com/new-york-city/manhattan/upper-east-side/10-gracie-square--unit-maisonette/10-gracie-square/fqsmnzt

LOL!

From the article in New York Magazine http://nymag.com/daily/intel/2011/05/behind_white_bricks_the_interi.html

"... At issue is a $40 million renovation of the building’s façade that residents say could cost them anywhere from $90,000 to $300,000 each, depending on the size of their apartment ...

The saga began two years ago, when lower Fifth Avenue was shut down after bricks on the seventeenth floor of the building bulged and threatened to come loose. Like many buildings with glazed white bricks, residents of the 343-unit high rise, at the northwest corner of Washington Square Park, knew it would eventually have to replace the façade. But as engineers began to probe, it became clear that loose bricks were the least of the problems. Relieving angles were missing, ties were disintegrating, and support beams that were erected with the building in 1951 needed mending. Each terrace must be replaced, and costly pipe scaffolding must be erected ..."

http://www.nytimes.com/2011/10/04/nyregion/white-brick-buildings-begin-to-show-their-age.html?_r=1
Looks like 2 Fifth's current cost is a reported $31,000,000 for the facade and unspecified other work. Times says about $100,000 per owner on average. Wow.

wowza!!!!!!

Reminds of of that thread claiming older buildings were built better.

Does anyone know the status of the repairs or this assessment? The asking/transaction prices do not seem to be pricing in a huge assessment or long term structural issues, but maybe that's just Manhattan real estate for you ...

I would be interested in any current information regarding 2 fifth avenue and its restoration and assessments that are being made..is the work underway? is it currently scaffolded? Are there clear costs and scope of work estimates in place? Does the board seem to be functioning properly?

After 4 long years (and 2 years of construction) the scaffolding on Fifth Avenue below 8th Street is finally no more.

Story in today's paper about the $30,000,000 assessment to pay for the new facade: http://nyti.ms/Uzo3rD