Upper East Side Stuff Coop decline

Basically coop boards will have to loosen their requirements and clearly articulate them.

I am guessing biggest impact will be lowering down-payment requirements and post close liquidity requirements which is certainly possible.

Getting board to loosen the "old money" requirement will not happen any time soon. Of course, it is interesting that Gloria Vanderbilt did not have much money left relative to the fame and stories about her wealth. Wonder how many of the board members in the stuffy "formerly?" prestigious coops do not have that money left relative to what they want the new comers to have.

Sorry for the type in the title

stuff = stuffy

Another one about Sutton place.

http://www.avenuemagazine.com/sutton-place-no-buyers/

The old blue hairs who live in these places would sooner die than lower their standards. Luxury retailers long ago figured out that the way to boost sales was to be transparent, which is why Tiffany has $1m products available online with a clear price. But the average person in these buildings isn't in the business of selling and would rather die with dignity intact than allow financing or foreigners or people with unpronouncable names or celebrities or people with school aged kids or... Besides, real estate in NYC always goes up.

Gloria Vanderbilt’s building (30 Beekman Place) is perfect illustration of what you describe. Note that they did raise max financing to 75% and sellers still cannot give the apartments away. Check out the one currently in contract (4B). In contract at $599,000, significantly below 2007 recorded sale price of $725,000. Watching this one with interest for the coop board price protection issue.

The article seems to dance around a few issues and it seems that the broker is grasping a bit while trying to explain it. The broker seems to point at the building standards for buyers but also the specific features of the apartment while explaining the failure to sell. It seems that either the broker or the owner dramatically misunderstood the market, and presumably the apartment that Mr. Blavatnik purchased was more appealing (or perhaps he overpaid). I would be interested in what the author and broker would characterize as new money. There are certainly people in that building who earned their own money.

Most illiquid assets trade at a discount but it's a complicated dynamic in these coop buildings because many people place a value on that illiquidity and the relative stability it creates.

I also note that the price has dropped another $9mm on that apartment and I suspect that it has a ways to go still before it will find a buyer.

I think "exclusivity" used to be a "feature" and now it's a "bug" for a lot of these buildings. Of course if a bunch of young celebrities bought in one of them that could change overnight. Look how it's done for 220 Central Park South.

I thought 834 Fifth was all about money pure and simple; I wasn’t aware that building cared where it came from. The stuffy coops that are really hurting are the ones populated by old money that has run out. Not particularly special apartments; just run of the mill Carnegie Hill, Sutton Place and Beekman Place
coops.

Large foot print, park view and lime stone facade is what 5th Avenue is selling but there is condo competition now from 220 Cps and 520 Park Avenue . And you do not need approval to get in.

I think location is very desirable for 5th Avenue Park facing. I do not think foreign money will get approved easily which is probably 50 percent of the money for more than $25mm apartments.

And you're certainly not going to get away with parking dirty money (although a big chunk of that went away when they diminished the anonymity of high dollar LLC purchases on Real Estate).

I don't know about 834 5th specifically, but a decent number of Coops really used to be like country clubs - as opposed to being largely pro-forma, your reference letters needed to be from "the right people" or you weren't getting in no matter how much money you had.

After leaving office no one wanted Nixon:
https://observer.com/2016/05/celebrity-rejects/

My grandmother told me numerous times that these spectacular Fifth Avenue and Park Avenue coops went for as low as $200,000 in the late 70's and early 80's when New York City (particularly Manhattan) was in serious disarray (remember "Ford to New York, Drop Dead"?). Is this true? I can't imagine this spectacular residence could have been purchased for such a paltry sum. I know one would have to be really old now to have purchased back then, but it would be interesting to surmise that many who have been in residence in these homes since that time might not have such great liquid reserves as they require from potential new owners. But with the cost of maintenance, I imagine they still have to be quite wealthy.

You could also buy a townhouse for $100,000.

$200k was quite a bit of money in the early 70s. I remember when I had a listing on Beekman a few years ago, a few interesting characters in well-worn jewels and ratty mink coats would stop in on the open house for a peek. Relics from an Edith Wharton novel whose fortunes appeared to be on the decline, most accompanied by a granddaughter to steady them.

We've done a handful of deals in what I call the Park Avenue corridor. In my recent experience, if you've got the money and traditional employment you'll get into most of these buildings, with some exceptions of course. Most of the so-called blue hair old money class is gone. That doesn't mean that aging baby boomers don't want to 'protect' their little island co-op. These co-ops were much more country clubesque in 70s and 80s when the previous generation was still in control.

New York in the 70s and 80s was quite an interesting place. I used to say better, but I think that was coming more from a nostalgic perspective than a practical one. Watch taxi driver that sort of sums it up.

Keith Burkhardt
TBG

I'm sure that most coops would admit most people provided they have a steady traditional job and don't have anything weird in their backgrounds and aren't buying too cheaply and and and....

But I also sense some reverse Grouchoism in the formerly-ritzy buildings: "we would never accept any shareholder who's willing to live here."

My mother always taught me, "if you have to ask, you can't afford it." I have asked a few times, and the selling agents either didn't know what the required qualifications were or weren't willing to share anything terribly specific. After a few enquiries, I decided to wait for townhouse owners to get real on pricing instead.

there is another 20~30 years until most of the old farts are gone

Re/ Gloria V, my impression is she gave away most of her $ while she was still living.

Although it would be next to impossible to get all the shareholders to transact at the same time, there are probably buildings which would get more selling as buildings than the sum of individual units at this point.

@30 yrs - working on it! Our building has some celebrated NY debutantes from the late 50's (and one in the penthouse from the 30's!). They occupy the largest apartments with maintenance that is rather obscene; those who will be able to afford to buy their apartments when they enter the next world (their husbands have already gone) will almost certainly prefer new development condos or coops in other parts of the city. That is when the rubber will meet the road for our building. I love our building, but I fear its day is done simply because it is coop. Time will tell.

There was recently a Park Ave co-op building where the owners pulled the current listings and sold the entire building to a developer. The price per unit was higher than anything they were getting from recent sales.

At the same time, I'd suggest that there's a substantial lack of knowledge about how the truly rich (who these units are aimed at) live, when you have a statement (in the Avenue article) like "They want the kids to sit on a barstool counter and watch Mommy or the maid cook". *Maids* do not cook dinner. *Cooks* do, and if your maid is cooking dinner, you do not have the sort of life that needs 8000 square feet on Fifth or Park.

I think a lot of coops will get condo like valuation if they drop board interview, have clear financial and liquidity requirements, and transparent renovation policy. For financial requirements they can probably have 25-30 percent.

To add my experience: Our co-op requires a full board package, but has the managing agent do board approvals and there is no interview. There is also unlimited subletting from day 1. Since being approved by our "board" in less than a week, we have lived in our co-op for more than 5 years. During that time, our maintenance has never increased and the financials remain in fantastic shape. Additionally, the ease of sale has made it so two of the same units on lower floors (that are not in as good of shape as ours) sold in less than a week for 200k more than we paid after a short bidding war. In closing, our building is a good example of a streamlined co-op that maximizes value for sellers because it is not "uppity".

Great. Are you able to share the building address?

Would love to know the address of that co-op. But I would add that many people prefer co-ops because it gives you an added few layers of, let's call it quality of life protection, that you don't get in a condo.

I agree the process to get into a co-op needs to be modernized. The archaic board packages, and the completely clumsy online portals do no one any good. But change comes hard in New York City.

Keith Burkhardt
TBG

As an aside, I've noticed the decorating district appears to be moving to Flatiron.

Hey all, I really don't want to out myself so don't want to give exact address. It is not the most high-end building, but is a solid pre-war building. FT Doorman/great staff, great outside management company, ranges from studios to 2BR's, with one combined into a 4BR and a couple of penthouses with a lot of outdoor space. It is in the East 40's.

I think I know. If my guess the correct, surprised at the penthouse. East 40s is very convenient area but recently out of favor a little. Probably the best value in Manhattan.

300 Mercer: There are a ton of new developments that have either gone up or are going up in the East 40's (high 30's). Good schools and because of that development, I can see them perhaps putting in some more high-end commercial on that sleepy area of 1st avenue between 34th and 41st.

I think there is a bit of to each their own here, and I agree with Keith that there remains, and will remain, a significant swath of the population that prefers the screening and order that coops can impose but condos cannot. And, the tradeoff of a lower entry price to a lower exit price is meaningless over the long haul, particularly when those most inclined toward the structure and order that coops can impose are likely later on in years. While some of the coop rules and financial rules will fade, the coop model will continue to have a significant place in NY for wealthy folks to live.

I am one of those sorts that is likely aging into the coop generation, after nearly 20 years in my current condo loft. Despite the fact that our building has had virtually no turnover -- only 2 of the 9 units have changed hands since 2003, and four are owned by original purchasers when the building was made into "luxury" lofts in 1987 -- and even though the owners all are quite well-off, we have the opposite problem to nosy neighbors and overbearing coop boards. No one wants to be on the condo board, or take responsibility for maintaining and improving the building. Literally, no one other than the board members show up to unit owner meetings, to the extent we have them. Although we had never until this year had a pied a terre or investor purchaser, 4 of the 9 units are now owned by west coast residents, 2 are rented, and one has been occupied for years by a relative of its famous owner. The only two owners that primarily live in their units also have second homes, and thus even those owners are around no more than 75% of the time.

I am beginning to long for coop boards that do not allow renters and non-resident owners, and blue haired ladies who ensure that every inch of the lobby is scrubbed with a toothbrush. Maybe one of those ladies will buy one of our units and seek to impose some order by running for condo president. That role is empty, because no one wants it.

nyc_sport,
I think that's more of a "small building" problem than a "coop vs condo" problem.

Good dream until such an SOB really show up and ruin your life one day

Sport, You can get your managing agent to do a visit once a week and pay extra. For 5k extra per year, you can easily get that.

I agree with 300 that attention to your building is something you can probably outsource.

Condo or coop, the unit/apartment owners need to excercise oversight over the managing agent and the board of directors. I would advise anyone who is in a building where nobody cares except them to cut their losses and move on.

Totally agree with mcr - I would say buildings need to institute policies to insure board turnover, but in a lot of buildings that would just result in vacancies. People buy in small coops, take no active role in the building, and then are surprised when "shit happens."

We are very lucky to have many people in our small coop non doorman building participate as they believe it is their home. You do need at least 2 shareholders involved. One of the attractions of small buildings is privacy, limited traffic and easy access to the board for Reno etc.

https://www.brickunderground.com/buy/the-brick-underground-podcast-building-management

300 points out some of the positives of a small building that is self managed or for that matter professionally managed. As someone who's done a number of deals in such buildings, it does become an issue when you need to sell and there are no board minutes or properly kept finances. Depending on the buyer and their attorney this can really create a headache.

Keith Burkhardt
TBG

Financials have to be professionally kept. There is leeway regarding minutes.

Another point is that many condos today are acting like coops by requiring the same type of onerous application process/package--even though their ability to turn down anyone is exceedingly limited (generally to exercising a first right of refusal to purchase). But they can still make the process arduous--and this includes for renting units as well.

Last year I looked at 30+ coops in the $1.2M-$2M range and in several ran into boards requiring unreasonable financial requirements (2X-3X cash liquidity, not including 401K, etc). I think this was fine when apartments in NY sold for $200K in the 1980s, but not at today's prices. So in essence with a 75% downpayment and good income I could not "buy in" without $5M in the bank. Of course when the blue haired inhabitants of these buildings try to sell, their apartments languish at below market prices.

I feel like some coops would never accept anyone who would be willing to move I to their building.

*into their building.

Notice my Groucho Marx comments lately?

These coops are full of corruption and discrimination

Ernest, I agree, the application process for most condos is ridiculous. And I still believe there's got to be more efficient way to deal with application entry into a co-op. Not too long ago, we had to buy a hand truck to be able to get a co-op package to the managing agent. Yes, buyer had a fairly complex financial picture. But this was still ridiculous.

Keith Burkhardt

https://therealdeal.com/2019/08/29/ex-bear-stearns-ceo-james-cayne-demands-co-op-records-after-board-rejects-3-buyers/

Besides the Board shenanigans costing millions, how about the price drop in the building: https://streeteasy.com/sale/1172199

Brokers changed the listing from 6A to just 6 to avoid a more than 50% price chop listing history.

Grapefruit - I experienced similar. Go to brooklyn. More upside and on trend for a reason.

Hilarious re: ex-CEO of Bear. No sympathy.

Check out 7A1 price chop at River House; cannot give those apartments away. But, on a positive note, there was no price protection issue with 30 Beekman Place 4B (2019 sale closed at 17% below 2007 closing price), so there’s that!

River House 15C even sadder - closed for 3.2 in 11/08, now on the market for 2.475 (has been on the market 299 days and counting).

If anyone is genuinely interested in a building of this genre, the due diligence I recommend is scrutinizing the financials and board minutes. The take away from the board minutes is not going to be what is actually in those minutes, but rather the identities of the board members. With said identities in hand, see what you can find out about the board members through publicly available data (simple Google search is good place to start) and see if these are people you could see yourself living with. I would also pay attention to ages of board members; a number of these buildings are in transition where younger professionals of diverse backgrounds are replacing Old Guard WASPs. Note that you can only get to this level of detail in the due diligence phase after you have made an offer. It will be virtually impossible to get salient information through other means. Finally, if the financials show an underlying mortgage on the coop, I recommend pulling that document off of ACRIS to see current mortgage as well as trends over time. One of the many listings of this genre might be a fit for you, might not. With my personal preference structure, I feel like there is value to be had in many listings in these buildings, but not everybody values the same things about them that I do. For me, it is all about location; locations that I value are dominated by these buildings; if I had been able to get new construction in my desired location at a price point that made sense for me, that is what I would have done.

I think it will be interesting to see what happens to location preferences as the market recedes. Historically as the market gets overheated buyers venture into secondary locations for slim discounts off prime locations and in weak markets require much bigger discounts to transact. During this last market peak prices in secondary (and worse) locations soared (compared to historically) especially in some really marginal areas in Brooklyn and The Bronx. Now, we may see that some of these changes are permanent as some of the neighborhoods have really changed in character. But we may also see people waking up from the fog of bidding wars, shaking their heads and saying "What were people thinking paying kind of prices in this neighborhood?" and requiring huge discounts to pull the trigger in some areas which were "hot" yesterday.
This may actually help some of these coops: not in absolute numbers, but relative to a bunch of these condos which got away with selling based on views, amenities, etc when they are in meh locations relative to the general neighborhood they are considered to be in (example: the long standing "West of 3rd Avenue" premium on the UES which I think largely eroded as so many condos were built East of that). In the thread I posted yesterday about Jennifer Lawrence penthouse at 400 East 67th St the first comment was "Kind of an armpit location."

Now the crooks not only doing QE, but under the protection of FASAB 56 in legislation. We might not need another three rounds of QE like last time to create a bigger bubble.