Page 6 - NY Cooperator July 2019

6 THE COOPERATOR —JULY 2019 COOPERATOR.COM COOPERATOR.COM A s members of Congress currently debate the issue of climate change down in Wash- ington, New York City is already implementing its own Green New Deal—and the real estate industry will feel its impact On April 18, the City Council passed the Climate Mobilization Act, Curbed reported, a package of bills aimed at combating the threat of climate change that was expected to be signed into law by New York City Mayor Bill de Blasio. A major aspect of the legislation is the requirement of all large- and medium-sized buildings to reduce greenhouse gas emis- sions 40 percent by the year 2030, and 80 percent by 2050. Landlords who don’t comply with the necessary upgrades will be fined. “The Climate Mobilization Act is a down payment on the future of New York City — one that ensures we lead the way in the ever-growing fight against climate change,” said Councilman Costa Constantinides, a sponsor of the legislation, in a statement. “Today \\\[April 18\\\], we sent that message to the world by enacting the boldest mandate to reduce carbon emissions, tackling one of the biggest drivers of climate change. Our legislation represents over two years of engagement with the various communities, industries and everyday New Yorkers impacted by climate change.” One key part of the legislation, Introduction 1253-C, “would mandate that buildings do not emit greenhouse gases at levels higher than the limits set in the legislation. The limits are set based on the occupancy group of the building and are calculated to require emis- sions reductions from the highest emitting 20% of buildings in each occupancy group for the first compliance date beginning in 2024, and the highest emitting 75% of buildings in each occupancy group for the second compliance date beginning in 2030.” According to Curbed , under the legislation, buildings that measure more than 25,000 square feet would be responsible for retrofits (such as new windows and insulation) to achieve energy efficiency. Other property types such as houses of worship, hospitals, low- and middle-income co-ops, and Cooperator.com From A lthough co-ops make up roughly 80 percent of the available-for-purchase housing stock in New York City, buyers often face this common dilemma when apartment hunting: should they seek a co-op, or a condo? Many factors come into play in this decision. But increasingly, especially for first-time buy- ers, condominiums may be the preferred choice. Instead of ownership of shares in a corpora- tion and the granting of a proprietary lease that are typical of co-ops, condominiums are real property—and come with less financial scrutiny and requirements. Despite condo prices being roughly 20 percent higher than for equivalent co-op units, condos may also require a smaller down payment. So before you take that plunge, here are some things to consider. Financial Requirements Cash requirements differ between co-op and condominium purchases in three main areas: down payments, required cash reserves, and closing costs. The down payment required for a condominium generally has more to do with the percentage permitted by bank financing than any other factor. In a co-op, though, the board may require a larger percentage down payment than an equivalent condominium unit would command. Let’s look at a typical scenario. A two-bedroom co-op unit is listed for sale at $1,000,000. The co-op board requires a minimum down payment of 25 percent, or $250,000. An equivalent two-bedroom condominium unit is listed for sale at $1,200,000. The condominium associa- tion does not have any financing restrictions, and financing is available for up to 90 percent of the purchase price. The down payment required for purchase would be $120,000. Even at 80 percent financing, a down payment of $240,000 would be $10,000 less than that required for the less expensive co-op. Co-ops also often require that the purchaser has a certain amount of liquid cash on hand to demonstrate the ability to continue to pay maintenance and co-op mortgage, should he or she become unemployed. That level of cash may be anywhere from one to two years of combined mortgage and maintenance. Assuming typical co-op maintenance for a two-bedroom apart- ment of approximately $1,200 per month, and a mortgage payment of approximately $3,950 per month ($750,000 mortgage at four percent for 25 years), total monthly carrying costs would be $5,150 per month, which indicates a potential cash liquidity requirement of as much as $123,600. Added to the down payment requirement of 25 percent (and it could be as high as 50 percent), the total cash needed for purchase would be $373,600, which is more than three times needed to purchase the condo, pre-closing costs. Though the co-op appears less expensive, the overall cash necessary to buy it might make it unattainable. Debt-to-Income Ratio Another consideration for co-op qualification is the debt-to-income ratio. According to Nick Visit Cooperator.com for related news, articles and videos. Co-op, or Condo? Comparing Financing, Debt-to-Income Ratio, & Flexibility: What Buyers Need to Know BY AJ SIDRANSKY A s reported by the Commercial Observer in January of this year, Elliott Management Corporation and GFI Capital Resources Group acquired the Parker New York hotel for $420 million, with hopes to renovate and add 67 condominium units to the hotel’s existing 729 rooms. The new apartments will be available starting at $1.5 million—a relatively low price point for Manhattan’s ‘Billionaires Row,’ an area known for its ultra-luxury high-rises (It’s also where hedge fund billionaire Ken Griffin recently bought what is considered the most expensive home in the United States, to the tune of $238 million). The Parker’s comparatively modest pricing may be prescient. According to a recent estimate by real estate appraiser Jonathan Miller, over 40 percent of the condo units on Billionaires’ Row currently remain unsold, said the New York Post . And these vacancies aren’t all in brand-new, just-finished buildings; sales at One57, the city’s first supertall residential skyscraper, launched in 2014, yet 48 of its 132 units linger on the market. Somewhere between $5 billion and $7 bil- lion worth of available inventory remains unoccupied among six other nearby buildings, some with vacancy rates as high as 80 percent. Real estate agent Dolly Lenz told the New York Post that she blamed the slump on exorbitant prices, and also cited construction, financing, marketing, and developers’ contracts as factors: “When people come here from other parts of the country and from around the world, the first thing they want to see is Billionaires’ Row. We toured them through the properties but many felt they were too pricey for the market — $7,000, $8,000 and $10,000 a square foot.” Gimme Shelter Anemic condo sales aren’t the only issue on Billionaires’ Row; the people living in the area are dealing with another sensitive, citywide issue. In late April, as reported by 6sqft , Manhattan Supreme Court Judge Alexander Tisch ap- proved Mayor Bill de Blasio’s plan to open a homeless shelter at the converted Park Savoy Hotel on 158 West 58th Street. Locals rallied via the West 58th Street Coalition in objection to the shelter, alleging public safety concerns and a lack of environmental review. In a statement on its Facebook page last year, the opposition group posted: “While we under- Champagne Problems Report: Real Estate Setbacks Afflict Billionaires’ Row BY MIKE ODENTHAL NYC OK’s Bill Requiring Buildings to Reduce Greenhouse Gas Emissions The Legislation Would Reportedly Affect Market-Rate Condos and Co-ops BY DAVID CHIU continued on page 7 continued on page 7 continued on page 7