Saturday, June 7, 2014

What makes an apartment worth $20,000,000? Or more?


At the moment, there are more than 100 apartments for sale in New York with price tags at or above $20,000,000. 

Many are in the new midtown buildings that spring up almost daily as builders play their endless game of mine's taller than yours.

Each of these gigantic, thousand-foot-and-more obelisks is surrounded by a cloud of buzz as fluffy as the clouds it pierces.
157 East 57th Street,
architectural rendering
(Daily News, MARCHMADE)

The buzz, which helps jack up the price, typically involves an expensive marketing campaign and a lot of press about its starchitect (it's always a starchitect) along with the Russian oligarchs, the hedge fund managers and the movie stars who are paying stratospheric sums to live in it.  

But if you buy one, besides an address that makes people hate you at the same time they’re angling for invitations to it, what do you actually get for your $20,000,000+?

One57, that is, 157 West 57th Street, is the 90-story (Wikipedia says it's actually only 75, but it's being marketed as 90) condominium that began the transformation of a not particularly exciting stretch of office buildings into what’s now known as Billionaire’s Row.   

Central Park and Canada
It offers a truly spectacular view of all of Central Park at once, through walls that are made entirely of glass.  

To the south, you see the city skyline—all of that, too, along with both rivers.

You get hotel services from the Park Hyatt.  

You get proximity to lots of places to spend the rest of your money, like Bergdorf's and Barney's and David Webb and other shops so expensive and exclusive nobody even knows their names.

Fifth Avenue near 52nd Street
You do not get outdoor space.  You do not get a private entrance; unless you’re in one of the full-floor apartments you will share a hall.   

You do get walk-in closets, marble bathtubs and separate showers in the bathrooms, lighting with dimmer switches, brand name fixtures and hardware, a washer and dryer and an intercom system to reach the concierge.  

You will share, along with  the Russian oligarchs and the hedge fund guys and the movie stars and whoever it was who paid a mere $6,000,000 for the little one-bedroom down on the 39th floor (definitely Not Our Kind, Dear, the poor thing), a fitness center, yoga studio, indoor pool, private dining, catering kitchen, library with billiards table, screening and performance room "and more," the ad says.  You can have a pet, and onsite parking is available.

Onsite parking would be pretty cool.

One of several choices for the first of three courses on the $76 
prix fixe menu at Le Bernardin, an easy walk from Billionaire's Row.
But on the other hand, if you live in a $20,000,000+ apartment, getting the car is probably your driver’s problem, not yours.

For this kind of money downtown, in an older loft building for example, what you get is different.

These buildings generally have too few units to support a doorman, but then those who buy these properties prefer not to have a doorman anyway.  Doormen talk.

Besides, you will in all likelihood get a whole lot more square footage.  In a property of that size, there is room for your own staff person who will, among other things, open the door for you. 

Downtown penthouse roof 
with hot tub (Warburg photo)
You have a much better chance of getting outdoor space.  A whole lot of outdoor space.  Sometimes enough for a lap pool, certainly enough for a hot tub, and you won’t have to share either of them with some Russian oligarch or hedgie or movie star you don’t even know. 

You can have your own private screening room.  You can have a private steam room big enough for yourself and five friends.

You will not get hotel service or onsite parking, but there are some very nice hotels and parking garages nearby. 

You will not get a spectacular view of Central Park or the city, but you will have a lovely view of the flowers and trees in your own roof garden.

The screening room in a 
downtown penthouse
For a very good reason, you may well have a painfully unpretentious, small, rather dusty vestibule instead of anything that could be called a lobby. 

This is because people who live in these buildings like to keep it a secret that there are trillions of dollars worth of art upstairs.  A lobby that looks like the building is still a warehouse full of old machine parts is one way to get this effect.

(It's just possible there is some reverse snobbery involved here as well.)

As I said, it’s different. 

So mull it over.  Think about your priorities. 

And let me know as soon as you decide where to spend your $20,000,000.  (Or more.)

Any questions?  E-mail or call me (cstimpson@stribling.com, 917-991-9549) and I’ll either have answers or know where to get them.

Sunday, May 18, 2014

8 in 10 Manhattan home sales all cash? Nope. Not even close.


Recently the Washington Post ran an article that offered some very discouraging information for buyers of Manhattan real estate. (8 in 10 Manhattan home sales are all-cash)

Fortunately, it's far from the truth.

Only 36% of Manhattan co-op sales (co-ops represent 60% of all sales) are all cash, as per Jonathan Miller, president and CEO of Miller Samuel Real Estate Appraisers and Consultants.

A full 64% of Manhattan co-op sales are financed.

The overall figure for all-cash sales in Manhattan is 45%, Miller says.   


This is still a high proportion compared to the way things used to be.  Sometime back before the flood, when I was in real estate school getting my salesperson’s license, our teacher told us that 99% of our deals would involve financing.

No more.

When the market’s tight and there is competition among buyers, the buyer who can pay all cash is the one who gets the property.  And mega-wealthy foreign investors are often looking for a place in the US to park their cash, as it may be safer here than elsewhere. 

This does not, however, mean that financing does not occur frequently.  

Let me repeat: a full 64% of co-op sales are financed. 

So you’re by no means automatically shut out of the game if you must finance. 

Just be sure you talk to a reliable bank or mortgage broker before you start looking for your new home so you have a good idea of what kind of financing you can get.  

And of course, remember that the qualifications of the building you want to buy in also have to be strong.  Not every bank will lend in every building.  There are a number of factors that can make a building unattractive to a bank.

Also, while the strongest offers are indeed all cash and the next strongest involve financing (the less the better) but are not contingent on it, do not ever make an offer that’s not contingent on financing unless you are absolutely sure either that you’re going to get it or that you can close without it.  

A good lawyer can write a rider to a contract that protects you in case the building doesn't measure up or the bank changes its mind at the last minute.  (That's why they get the big bucks.)

Yes, it does occasionally happen that buyers must default because of lack of funding, and no, sellers do not return their 10% deposits when this happens.

But can you still finance a new home?  Yes, of course. Just be careful.

As for the Washington Post?  They should have called Miller before they ran the article.

Any questions?  E-mail or call me, cstimpson@stribling.com, 917-991-9549, and I’ll either know the answers or will get them for you.

Thursday, April 24, 2014

Combining apartments: Need another bedroom or two? How about the ones next door?


As you may have heard (over and over again), there are very, very few apartments for sale in Manhattan.  

Need a bigger apartment?  Too bad.  There aren't any.  So more and more, people are buying the apartment next door and combining it with the one they already have. 

Some may even buy the apartment beyond the one next door as well, or the one on the other side of theirs, or upstairs, or downstairs.  I’ve seen combinations of as many as four units.

This can be a satisfactory arrangement for all concerned.

The people next door may be motivated to sell by the prospect of getting a higher-than-market price for theirs, as they hold all the negotiating chips.  

The buyers pay a premium, but they get the additional space with considerably less hassle than they’d have if they sold their current apartment and bought another larger one, assuming they could even find another larger one.

Plus, there's synergy in a combination.  

Jonathan Miller's Combinations: Creating a Larger Manhattan Co-op or Condo says that the more square feet involved, the higher the price per square foot, or in Miller’s words, “1 + 1 = 2.5.”   So the combination is worth more than its components would be worth separately.

Miller is president of Miller Samuel Inc. Real Estate Appraisers and Consultants, and the universally acknowledged best source of information on  Manhattan real estate.

The value of the smaller apartment in a combination is increased even more if it’s in the back of the building, gets less light, or has other disadvantages.  

Now it’s part of a nice big apartment in the front of the building with plenty of light.  If it’s turned into, say, a master suite, the lack of light may become an advantage. 

Some combinations work more gracefully than others.  Here’s what to watch out for:

If you’re thinking about converting one of the kitchens to a bathroom, check with a plumber well in advance to make sure the waste line in the kitchen will accommodate a toilet. 

If a bathroom is to become a laundry room, remember you’ll have to either vent the dryer or get a dryer that does not require venting.

If you want to move or add plumbing, especially if you’re thinking about converting a closet to a powder room or laundry room, be aware that most buildings do not allow wet rooms over dry rooms.  

The room directly below the closet you’re thinking of converting is also a closet.  Leaks happen.  Nobody likes leaks, especially leaks into closets.  Closets are where people keep things they particularly don’t want to get wet. 

Be aware that your maintenance may be disproportionately high.  As of course you know, maintenance in a co-op (I’m dealing mostly with co-ops as they comprise the lion’s share of ownable residential real estate in New York) is based on the number of shares attached to the apartment in a co-op.  

From the many offering plans I’ve looked at, it appears that an apartment gets a certain base number of shares just for existing as a discrete unit.  Then more shares are added for higher floors, balconies, fireplaces, etc.   

After you combine, you have the base number of shares for two or more apartments instead of just one.  

Thus your new three bedroom apartment may have significantly more shares—and thus significantly higher maintenance—than a three bedroom in the same building that’s not a combination.  

Of course you will play with the floor plans, which should be in your co-op or condo’s offering plan. 

If you’re combining two or, especially, more than two one-bedroom apartments, you may have to do significant reconfiguring in order to have a living room that’s big enough to be in proportion to the size of the new space. 

Make sure the new living room will be facing the street, not a brick wall or an airshaft (a courtyard in real estate language).  

Check for lot line windows in the new apartment (these are windows that legally don’t exist, as they will be lost if another building goes up next door).  

Note that thick black lines in floor plans indicate walls that can’t be removed—either they’re holding up the building or they house plumbing risers or something else too important or difficult to change.

The fewer obvious seams between the apartments, the better.  The combinations that work best, and are most valuable for resale, are those where you can’t tell where the division was originally.  

Be aware that an architect may have better ideas for arranging the space than you will, but be absolutely sure you hire an architect who has combined apartments in the past and is familiar with co-ops.

There are also legal issues to be addressed, such as what to do about the stock certificates, and what impact the combination will have on the building's certificate of occupancy.  

Miller suggests keeping the stock certificates separate, to give the owners and the co-op more flexibility.  

But if you keep them separate,  you may have to re-separate the two apartments, restore a kitchen, put up a wall or two, or whatever, when you ultimately sell.  

Talk about what to do with the stock certificates with your lawyer and of course your co-op board and or managing agent.  

If possible, talk to someone in your building who has already done a combination.

By the way, even if you’ve owned your apartment for many years, you will need co-op board approval to buy a second one in the building.  You will most likely have to go through the same process you did the first time.  For a condo, you will still probably have to get a waiver of the right of first refusal.

Any questions?  E-mail cstimpson@stribling.com or call 917-991-9549.  I'll either answer them or know where to get the answers.

Thursday, April 17, 2014

Yes, rent is very high in New York. But it's a lot higher in Los Angeles,* and that's not counting the car.



More years ago than I care to admit, when I was a very young advertising copywriter in Los Angeles, I needed to borrow money to buy a used Volkswagen.
 
I had been taking the bus to work from the north end of Van Nuys, where rent was cheap, to Wilshire Boulevard, where the ad agency was cheap.                                                                                                             
It was sometimes said that this was a great agency if your parents could afford to send you there.  At the time it was considered the best in the world.  I wasn't about to seek a better salary elsewhere.

But after a year of spending three hours a day commuting, including half an hour walking to and from the bus stop on Victory Boulevard and twenty minutes waiting for a connecting bus at Hollywood and Highland, I was finally earning enough to buy a small, inexpensive car.  

The bank reluctantly gave me the loan.  They were reluctant because my rent was too high--23.5% of my salary.  

The rule then was that your rent should be no more than 20% of your salary.  They wanted me to live someplace even cheaper.

Today in Los Angeles, median rent is now a horror-inducing 47% of median income, or exactly double what the bank thought was too high for me years ago, according to a recent article in The New York Times (In Many Cities, Rent is Rising Out of Reach of Middle Class). 

And in Los Angeles, you also have to pay for a used Volkswagen, a new Maserati, or something in between.  Then, after you pay for the car, you have to pay to park it, to insure it, to put gas in it, to change its oil, rotate its tires, and on and on.  Cars are expensive.

The magic proportion for a landlord is now 30% or less (re less: fat chance for most).  That’s what a landlord wants to see when you fill out an application to rent an apartment.

The Times, citing an analysis done for the paper by a real estate website, says there are 90--90!--U.S. cities where the median rent, not including utilities, is more than 30% of median income.  Los Angeles is at the top of the list.

Presumably, people moved in when their rent was no more than 30% of their incomes, thus satisfying the landlord, but then their rent went up and their incomes didn’t.

New York ranks tenth on the list, with median rent at 39.5% of median income.  

But our position is artificially high to my way of thinking, as New York is the ONLY city on the list where you don’t have to have the added expense of a car.  (Try living in LA without one, as I did for a year. Or in San Diego, or Flagstaff, or Hattiesburg, Mississippi.)

California is over-represented in the top twenty, with nine cities.  New York state has only two, us and Ithaca.

So yes, if you’re renting in New York, you definitely have a right to complain.  But you’d have a right to complain a lot louder if you lived in LA, or any of the other eight cities where rent takes more of your income than it does here.  Not to mention the car.

E-mail or call me any time if you have any questions about real estate, or just want to discuss. cstimpson@stribling.com, 917-991-9549 

*Several people have pointed out to me that this headline is not strictly accurate.  They're right. In absolute dollars, rent is probably higher in New York.  It's as a percentage of income that the rent is higher in LA.

Friday, March 14, 2014

The less-than-fabulous truth about some of those fabulous condos in the sky.


The longer I stay in the real estate business, the more jaded I get.

Most people walking into a $50,000,000 apartment on a floor high enough to have a view of Montauk would say oh my god, this view is fantastic! 

I can walk into the same apartment and say oh my god, these floors are awful.

This is exactly what I did yesterday.  The floors really were awful.  They looked cheap.  They were warping and separating. 

Of course, it is true that whoever buys an apartment like this is probably going to think of it as raw space, ready for demolition and a complete redo, regardless of the floors.

But still.

Somebody planning to spend $50,000,000 on an apartment is going to notice a thing like that.

The beauty of a view of Montauk--or any other view--is significantly diminished if you’re standing on a really awful floor, especially when you’re expected to pay more than $13,000 for a single square foot of it.

Another apartment I saw recently for a mere $17,000,000 was--no kidding, seriously--the ugliest place I have ever been.  

The original space was probably lovely when the building was built, but what the current owner has done to it is obscene.  I can’t even describe it.  

Every square inch of wall in every room was covered with something hideous and jarring.

In yet a third property with a price well into eight figures, the view from the living room was very nice, but the direct, head-on view from the tub in the master bath as well as the bed in the master bedroom was of the huge black condo building across the street.

And vice versa.  

There’s nothing the owner can do about that except maybe put up some curtains (the walls of those rooms are basically all glass), but it will be interesting to see if the final selling price is anywhere near the asking price.

Another apartment, same price range, had floors of polished concrete. Polished concrete floors were popular about fifteen years ago; these had been laid circa 2012.  

Can you imagine what it cost to put those in? Can you imagine what it will cost to replace them with something friendlier?

I once showed a famous and very witty writer an apartment with polished concrete floors.  She said she wouldn't live on concrete floors unless she was sentenced to them.

The moral of my story is, don’t wish for some fabulous trillion-dollar apartment.  What you’re living in right now may very well be nicer in many respects. 

But if you ever plan to sell it, here’s some advice:

Have as much fun as you want with the furniture (you can always store it and rent something less fun but more universally appealing to stage the property when it’s time to sell), but keep the walls, floor, kitchen and bathrooms as neutral as possible.  

If there’s some major flaw, such as a window with a brick wall view, consider covering that window and hanging a picture in its place.   

And if there’s one thing you shouldn’t stint on, it’s the floor.  Get the best quality you can.   

Any questions?  E-mail or call cstimpson@stribling.com or call 917-991-9549 and we'll talk.

Friday, February 21, 2014

The co-op board interview: Think of it as a small social gathering at, say, Buckingham Palace.


Part 7 of a series

Remember, if only for those 45 minutes to an hour, the board members have a great deal of power over your future.   

They can reject you for any legal* reason they want, and they don't have to tell you what that reason is.  So be very, very respectful.

Keep in mind that the vast majority of co-op board members are decent, sane, reasonable people whose primary motive in their capacity as board members is to preserve their investments and to live in their homes in peace and quiet.  


So the best course is to smile and be pleasant, but leave your sparkling, witty side at home.  Being the life of the party may not endear you to the board members.  They are considering you as a potential co-resident of the building, not as a friend or party guest. 


And nobody has ever been rejected for being boring.


Do not bring along anyone who is not invited—definitely not your broker or attorney.  If they have asked for your children or your dog or anyone else who will live in the apartment to attend, bring them, but ONLY if they’ve been asked.

Dress in business clothes; for men, a jacket and tie, if not a suit, are a good idea.  If it’s on the weekend, wear what you would wear for casual Friday in the office.

When you walk in, wait to be invited to sit down.  If nobody remembers to invite you, pick out a spot and say, “May I sit here?”

If offered coffee or tea, accept only if others are having some.  If offered a glass of wine, smile and decline, unless everyone else in the room is drinking.  Then have one glass.  Sip it slowly.

While for some co-ops, the board interview is simply a chance to welcome the new resident to the building, tell him what days the trash is picked up, etc., for others it’s a chance to ask a lot of questions**.  

Answer them honestly, but don’t say more than you have to, and don’t answer any questions you haven’t been asked. 

In the unlikely event that a board member asks an offensive question, answer calmly, as best you can.  

If you’re asked a question you're willing to risk losing the apartment over in order not to answer, just say politely, “I’m sorry, that’s something I’d rather not discuss.”  It’s entirely possible that at least some of the other board members will also consider the question inappropriate

Under no circumstances should you take anything personally, or get defensive.  Just stay serene and pleasant, no matter what.

If you’re asked about renovations, it’s best to say you want to live in the apartment for a while before making any changes other than redoing the floors and painting, assuming this is true. (It’s an excellent idea, in any case, and I recommend it strongly.) 

On the other hand, if the apartment is currently uninhabitable, of course your architect is, or will be, working on plans which you will be submitting to the board as soon as they’re ready.  

If you ever plan to sublet your apartment, this is NOT the time to mention it.  If asked, you have no plans to do so (which should be the truth anyway, at this point, or you wouldn't be buying a co-op).


Avoid asking questions yourself. “When are you going to redo the lobby?” carries the implication that you don’t like the lobby.  If asked, the safest response is to say you don't have any questions.  

If  given the opportunity, talk about how much you love the apartment and how you have always wanted to live in the building, but do not assume you will be living there. 

At the end of the interview, you can say something like, “It’s been a real pleasure meeting you.  I hope we’ll be neighbors.”  Do not ask how soon you can move in.

What happens now?

As soon as your broker hears from the managing agent that you are approved (usually within the next day or so), your attorney and the seller’s attorney will set up a closing time, date and place with the managing agent. 

24 hours or fewer before the closing, you will walk through the apartment with your broker and the seller’s broker and make sure everything is as it’s supposed to be.  

You’ll turn on all the appliances and make sure they work, check all the closets and the refrigerator, and make sure they’re all empty.  

If anything is amiss, the seller and/or the seller’s broker must take care of it before the closing (you’d be surprised how many refrigerators I’ve had to empty out!) 

Your attorney will explain to you exactly what happens at the closing, but briefly, a lot of checks will cross the table, documents will be signed, and at the end you will be given the keys to your new home.  

Take your keys and your partner, pick up a bottle of Champagne and a couple of glasses, and go sit on the floor and celebrate.

And if I’m your broker, we will pick a date for me to take you out for a lovely celebratory dinner.

On the other hand, if somehow you have been rejected, it’s okay for the brokers to ask the managing agent if there’s any more information you could provide that might help.  It’s also okay for the seller to talk to somebody on the board and try to get a fix on the problem.  These tactics may or may not work.

If they don’t, you get your 10% of the purchase price back.  

And look at it this way: you didn’t want to live with those nasty people anyway.  You and your broker will now proceed to find something just as good, maybe better.  


And you will.  You have my word. 


Any questions?  E-mail me at cstimpson@stribling.com or call 917-991-9549 for answers or just to talk real estate.

*The law prohibits discrimination on the basis of gender, race, religion, sexual orientation, family/marital status and occupation, among other things.  Find a complete list here: New York State Division of Human Rights Fair Housing Guide or ask your attorney. 

** An article in Brick Underground gives you an idea of the possibilities:  9 curveball co-op board interview questions and how to answer them.





Thursday, February 13, 2014

Board application packages: More fun than a root canal, but not much.


Part 6 of a series

I will not lie to you.  The application process for a co-op is painfully invasive.  And lately, the same goes for condos.

Think of your broker as a local anesthetic*.  He will make the pain go away, or at least most of it, but you will still be involved, and you will know what’s going on.

Don’t forget, everyone who lives in a co-op or condo has gone through this process.  

And because your neighbors have met the financial requirements of your co-op, they are not likely to default on their maintenance charges, leaving you and your more solvent neighbors to pick up the slack. 


It's the predominance of co-ops, with their stringent financial requirements, that has kept New York from having the huge number of foreclosures that other parts of the country have seen.  

So this whole Byzantine, complex, invasive process is definitely in your best interests as an owner.

Today, board application packages for condos are almost--often exactly--the same as those for co-ops**.  If the condo board doesn’t like your board package (condo boards don't normally interview applicants), their only recourse is to buy the condo themselves at the contract price.  They can't turn you down, but they still want the information.

The only way out is to buy in a new building (developers don't care; they just want your money) or to buy a house.  All cash.  If you want to finance, you will find that the banks are also nosy.  So are rental landlords.

Here’s what happens:

Once your offer has been accepted and a contract has been sent to your attorney, your attorney will do his due diligence on the property.  

In all likelihood the seller's broker will continue to show the property until the contract is signed, and by law, any and all offers must be presented to the seller. So move through this part of the process with all deliberate speed.

Your attorney will read the two most recent years' financial statements and the offering plan and all its amendments, which either the seller’s broker or the seller’s attorney will have sent him. 

He will also go to the office of the managing agent for the co-op and read the minutes of the meetings of the co-op board (you can go along if you want; these are almost never sent out).  

By the time he's through, he should know everything there is to know about the co-op.

At the same time, he and the seller’s attorney will be negotiating the contract—the closing date and various other provisions which he will discuss with you.

While he’s doing this, you will be having any inspections done (definitely if you’re buying a house, and a good idea if you’re buying in a small loft building or an apartment in a townhouse) and bringing your architect in if you’re planning to do work.  

Your broker will set up appointments, be present, and generally hold your hand through all of this.

When the contract is ready, you will go over it with your attorney, sign it and give your attorney a check for 10 per cent of the purchase price to be held in escrow until the closing, when it becomes part of the purchase price.

Now you’re committed, and as soon as the seller countersigns, he is also committed. The property will no longer be shown, and offers will not be considered.

Your 10% deposit will be returned to you if your contract is contingent on financing and you can’t get financing (your attorney will explain the ins and outs of this—it’s complicated) or if you’re buying a co-op and your application is rejected by the board.

Which brings us to the board application.

First, you and your broker put together the board package.

This is where you will be VERY GLAD you have a broker.  All you have to do is give him the information.  He will collect the materials from you, get them typed if necessary, assemble them in the correct order, check all the numbers and the arithmentic to make sure they’re accurate, make sure the reference letters are appropriate and will serve their purpose, make sure the package is complete, put the whole thing together with dividers labeling each section, write a cover letter and make the necessary number of copies. 

It will look beautiful, and as impressive as we can make it while staying within the boundaries of truth.  We pride ourselves on our board packages.

A typical package includes an application form to be filled out with personal information—your name and address, your attorney’s name and contact information, plus information about your employment, your supervisor’s contact information, your employment history, where you were educated, names of personal references, names of business references, bank and credit references, etc. 

Then there’s a financial statement that includes all sources of income, all projected costs, all assets and liabilities. You’ll be asked for two years’ income tax returns, personal reference letters, business reference letters, an employer reference letter and a bank reference letter, bank statements and other statements to support the financial statement, and various other items depending on the co-op.

All of this has to be done within ten days of the contract signing, or within a given time period after a co-op loan commitment letter has been issued by your lender.  (This is specified in the contract.)

When the board package is ready and the seller's broker has seen it and is happy with it, your broker will send it to the managing agent. 

Now you and your broker wait for a while.  If you're buying a condo, the next step is for the managing agent to obtain the signatures of the condo's board of managers on a waiver of the right of first refusal, after which a closing can be scheduled.

If it's a co-op....   


NEXT:  The board interview.  

Any questions?  e-mail me at cstimpson@stribling.com or call 917-991-9549.  I'll be happy to answer them.

*I was about to say novocaine, but it turns out dentists haven't actually used novocaine in more than thirty years, as per "Directions in Dentistry," a blog by Dennis Calcaterra, DDS, of Orange, CT.


** See "Condos Steal a Page (or 20) From Co-ops"