Unsold Apartments to Yield Larger, Fancier Units
Rachelle Garbarine - The New York Times
A developer is renovating 80 apartments that it bought in January in a 208-unit building on the Upper East Side of Manhattan and combining at least 15 units.
The builder, Essex Capital Partners Ltd., is to invest $30,000 to $95,000 to upgrade each of the one-and two-bedroom units, with 593 to 981 square feet, at 200 East 90th Street. The combined apartments are being reshaped to create three-and four-bedroom units with 1,264 to 2,052 square feet, as well as one with up to five bedrooms and 3,600 square feet.
Financing for the $16.5 million project, including the acquisition of the units, is coming from investors, lending institutions and the developer. Essex Capital buys and develops underperforming residential and commercial properties along the East Coast.
The company, with offices in Manhattan and Washington, bought the units, as well as 7,500 square feet of retail space, in the 18-year-old building at Third Avenue, which was converted from rental to a co-op in 1988. Forty-four units were sold through 1990, when the market declined sharply, and the rest were rented. Eight years and three owners later, an additional 84 had been sold.
The seller of the remaining unsold units was a financial institution that took back the apartments in an uncontested foreclosure from the previous owners. The previous owners had improved the lobby and common areas, but their plan, also to upgrade and combine units, was cut short.
Peter Hauspurg, chairman of Eastern Consolidated Properties, a real estate investment banking company, said it was unusual to find a large block of units available because as a result of the boom-and-bust-cycle of the late 1980’s, most have been sold.
“But there are deals that were bandaged together, only to crash again,” Mr. Hauspurg added, noting that the deal could work if the units were purchased and improved at a price lower than what it would cost to build new ones.
That was a factor in buying the units, a move that the president of Essex Capital, Mitchell B. Rutter, said “represented an opportunity to buy a building within a building in a good location.”
Because most of the units are or will soon be vacant, Mr. Rutter said, he will not have difficulty renovating and selling them. Another factor is that the 29-story building is a co-op, but its rules are similar to those of a condominium. Owners can buy and sell units without board approval and have more flexibility in subleasing them. That, along with upgrading and combining units, will make the project more competitive, he said.
“We are hopeful, and all indications are positive, that everything Essex Capital plans to do will be carried out,” the secretary of the co-op board, Eric M. Dessen, said. “It would increase the value of all the apartments and bring stability to the building.”
Meryl Sacks, a senior account executive at Charles H. Greenthal Management, which manages the building, said, “An active sales program is the last piece of the puzzle.”
The building has been down this road before. In its life as a co-op, sales have been hampered by factors like the recession and the changing ownership of the unsold units. Despite that, the finances remained stable because the rental income was sufficient to cover operating costs, Ms. Sacks said.
Mr. Rutter said the difference with his plan was that it is well capitalized, allowing Essex Capital to invest more money in the units and sell them at a higher price.
What brokers say is on Essex Capital’s side is timing, because demand is outstripping supply, especially for larger units and those with high-quality finishes. “Buyers today are not looking as much for location as they are space and or good quality apartments,” said Diane M. Ramirez, executive sales director at the Halstead Property Company, a large brokerage firm.
The 80 units will have kitchens with granite countertops and bathrooms with marble floors and walls. Asking prices are $175,000 to $317,000 for the smaller units and $565,000 to $950,000 for the combined units. The agents expect the five-bedroom unit to cost $1.2 million to $1.6 million.
By comparison, the Real Estate Board of new York recorded the median sales price at the end of last year for co-ops in postwar East Side buildings at $162,000 for one bedroom, $439,000 for two bedrooms, $650,000 for three bedrooms and $1.69 million for those with four or more bedrooms.
Monthly fees, including real estate taxes, at 200 East 90th Street are $543 to $2,247. Those for the biggest unit are estimated at $3,584. In the three weeks since sales started, contracts are pending on 14 apartments, said Aimee Mandossian, director of sales and marketing.