Residential Realities June 2011
June 30, 2011: Summer Bummer--Concern for the Second Act of 2011
That Queasy Feeling
We’re a week or so into silly season. Rather than chilling out after a tough winter, we may experience a chilling effect. As reported in the Wall Street Journal yesterday, significant job lay-offs are coming to the financial industry. There have been rumblings about this development for a few weeks and it sounds like the ax is about to fall all over downtown Manhattan. For better or worse, the real estate economy in New York City is closely tied to Wall Street and always will be. If things go south for our beloved movers and shakers, there will be an almost immediate impact on real estate sales. All in all, New York has fared much better than the rest of the nation. That being said, a shower of pink slips will no doubt put the brakes on an already fragile real estate recovery.
June 24, 2011: Do You Know Who I am?--A Few Thoughts on a Tricky Process
The Indignity of the Board Package
It’s hard to imagine a scenario in which you would allow ten to twelve strangers to review the intimate details of your personal and financial life. But that’s exactly what happens when a purchaser submits a co-op Board package for review.
An Unexpected Life Lesson
Many years ago, the manager of Lee Lighting, a high-end interior design store on the east side, related a wonderful story. While he was waiting on a customer, a well known and easily recognizable celebrity came in who expected immediate attention. When attention was not given, the person interrupted the ongoing conversation. The manager stopped her and said, “I’ll be with you in a minute.” A few minutes later, the same interruption and the same response. Finally, the frustrated celebrity could take it no longer and interrupted once again: “Excuse me, do you know who I am?” Without missing a beat, the manager responded with a feigned store announcement: “Attention customers, could you help, there is someone here who doesn’t know who she is…”
When Who You Are Doesn’t Matter
Yes, there are well connected individuals and sympathetic Boards where exceptions are made and special treatment is afforded to the co-op applicants. When that happens, it’s the anomaly and not the ordinary course of business. The co-op application process is the ultimate airport screening device where the purchaser lets it all hang out for all to see. There’s no negotiation over deliverables and it’s a golden opportunity for the powerless (that is, the folks processing the application at the managing agent) to have jurisdiction over the powerful. It is part and parcel of the fabric of New York City and it will never change.
As I learned recently, no matter how hard you try to explain the Byzantine quality of the Board package process and the attendant anxieties that always arise therewith, it is difficult for the uninitiated to appreciate the degree of absurdity and complexity that can arise during the experience. All involved should bear that disconnect in mind once the offer is accepted...
For more on this, see "How to Avoid a Board Turn Down".
June 22, 2011--Fear and Loathing in Albany: Rent Stabilization is Extended...
Brushing Up My Shakespeare
As is said in the Scottish play, “The deed is done.” And so, the saga known as extending rent regulation is over for the immediate future. Threshold rent for deregulating vacant apartments was increased to $2,500.00 from $2,000.00, and the annual income threshold was increased to $200,000.00 for two consecutive years from $175,000.00. But this improvement comes with a price tag. Among other things, a two percent cap on property taxes was the quid pro quo for getting the deal done. It was unclear from the reporting how long of an extension was agreed to, but final details will follow.
The Tail Wags the Dog
Although the vast majority of regulated apartments are located in New York City, the situs of power over decisions impacting such regulation lies nowhere near the five boroughs. Think Binghamton. In truth, only 10,000 apartments have been deregulated since luxury decontrol came into existence in the early nineties. Considering that north of 1,000,000 apartments are subject to some sort of rent control, by the numbers, that’s not a lot of deregulated apartments. As pointed out in in the Post last week, citing a study by Thomas DiNapoli, the New York State Controller, 64% of all apartments in New York City are under some form of rent regulation. That being said, it’s annoying that New York City has no real power base in Albany and no leverage. Begging and pleading is never a good negotiating posture.
June 17, 2011--A Rodney Dangerfield Moment for Rent Stabilization
New York City Gets No Respect
In March, when I first wrote about the Kabuki dance in Albany over the extension of rent stabilization, I knew it would be quite a show--and the Legislature did not disappoint. Yes, there is a philosophical argument over whether there is still a need for rents to be regulated, but there is no political will to ever address that larger issue…So on with the show.
A Lesson in Negotiation
Those in the Legislature and their industry supporters advocating for tax incentives and other benefits for landlords and developers are in a very good position. By inaction, they have allowed the law to expire, ratcheting up the anxiety levels of the 1.4 million apartment dwellers, who hold their collective breath while their fate is being decided. With the pressure mounting, the seemingly powerless New York City contingent will have no choice but to go along with the give backs in order to get a slightly improved version of rent regulation extended. You can visualize the “nudge, nudge, wink, wink” action that must be taking place from those who want the scourge of rent protection to go away forever. With the Governor threatening to keep folks in Albany until this issue gets resolved (an unthinkable punishment), something will happen shortly.
June 11, 2011--Dude Has His Day in Court
Banks Behaving Badly
An article in today’s Wall Street Journal, by Matt Wirz, entitled "Hipster Battles Funds" profiles the David and Goliath adventure of Nate Thoma, a disgruntled small WAMU investor from Astoria, Queens, whose court appearance and eloquent argument persuaded a Delaware bankruptcy court judge to launch an investigation of hedge fund trading in certain of the bank’s securities sold in the aftermath of the bankruptcy filing. At the end of the day, nothing really changed as a result of his admirable efforts, he just delayed the inevitable. A brilliant court performance, but as we know, the House always wins…