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SSLL
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Discussion Starter · #1 · (Edited)
From: http://www.nytimes.com/2006/04/30/nyregion/30condos.html?pagewanted=all
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As New York Apartments Become Condos, Tenants Are Stuck in the Middle

Keith Bedford for The New York Times
The 50-story, 852-apartment Sheffield on West 57th Street is among the buildings in the city being converted into condominiums.

By JOSH BARBANEL
Published: April 30, 2006
At Manhattan House, the first and perhaps the grandest white brick building on the Upper East Side, every day seems to be moving day. One by one, scores of residents, most of them affluent and many of them elderly, are packing up their things and moving on — and not willingly.

The building, a block-square rental complex with five 20-story towers, where Grace Kelly and Benny Goodman once rented, is being turned into a condominium in the most expensive rental-to-condo conversion to date, valued at perhaps $1.1 billion, according to the proposed offering plan.

It is one of more than 60 pending condominium conversion projects in Manhattan listed by the New York State attorney general's office, involving more than 7,000 condominium units.

These projects, the first large wave of condominium conversions in New York in 20 years, are cutting into the supply of rental apartments, driving rents higher, and ushering in a wrenching period of uncertainty for many existing tenants.

In the 1980's, tenants facing condo conversion banded together and negotiated large discounts from developers on the sale prices of their individual apartments, and became condo owners.

But now, with rent stabilization laws weakened, landlords are taking a tougher stand, evicting market-rate tenants and offering only tiny discounts on the sale prices to rent-stabilized tenants, who are allowed to continue renting after a conversion.

Tenants say they are being rushed out so that the new purchasers can sell the apartments at the highest possible prices, and then pay off their mortgages.

"People are so frightened in this building," said Gail Amsterdam, who lives in Manhattan House and is trying to keep her mother and uncle in their market-rate apartments when their leases expire. "I don't understand why nobody is standing up for elderly people who cannot stand up for themselves."

Landlords defend the changes by saying that they are obeying the law, and that they have the right to convert buildings.

"If people are unhappy with the change, I can't help that," said N. Richard Kalikow, one of the buyers of Manhattan House. "They have rights. We have rights. Everybody is going to pursue their rights. This is a free country."

Although soaring condo prices feature prominently in dinner conversation, New York remains a renter city. Three-quarters of all households in Manhattan rent.

About half of the apartments being converted are in a handful of large buildings. Among them are Manhattan House, on East 66th Street and Second Avenue with 583 apartments; the 50-story Sheffield with 852 apartments on West 57th Street; River Terrace with 410 apartments on East 72nd Street and the East River; and 25 Broad Street, a landmark former office tower in the financial district, with 345 apartments. Many of these buildings were sold last year, some at record prices.

The rights of market-rate tenants in conversions is to some extent uncharted territory, despite a law adopted in the 1980's devised to give both market-rate and stabilized tenants bargaining power in conversions.

Although market-rate tenants in condo conversions are not usually entitled to renew their leases, owners are not permitted to empty buildings of market-rate tenants before a conversion plan is filed, or to evict or impose exorbitant rent increases on them after the conversion take place.

But, owners say, they are allowed to evict market-rate tenants during the time a conversion plan works its way through the approval process. Tenant lawyers are challenging this interpretation in a series of eviction cases pending in Housing Court. At the same time, tenants are lobbying elected officials for help.

At Manhattan House, two developers, Mr. Kalikow and Jeremiah O'Connor, paid $623 million, an average of more than $1 million per apartment, and obtained more than $750 million in financing to buy and upgrade the building, and cover their conversion costs.

The price was the highest paid for a Manhattan rental complex, according to brokers. But Mr. Kalikow said the price was not too high, and he disputed contentions by tenants that the project's high cost put him under pressure to harass tenants and empty the building.

Mr. Kalikow said that even if the broader market remained flat, he expected prices at Manhattan House to rise over time because of the shortage of high-quality condominiums on the East Side.

Their filings with the attorney general show that they expect to receive about $1,500 a square foot for the condominiums, or about $1.5 million for a typical one-bedroom unit, though an analysis by Standard & Poor's estimated that prices will average about 20 percent less.

He plans to refurbish the building, restoring the casement windows that were included in the original modernist design, and installing central air conditioning in each apartment, he said. Although Mr. Kalikow said he converted more than 7,000 apartments during the 1980's, this is his first project during the current wave of conversions.

In the last few months, more than 60 tenants have moved out, and according to a list circulated by tenants in mid-April, another 16 were to move out by the end of April. Four others were being vacated after renters had died.

Most days, boxes and sofas are wheeled down to trucks backed into loading bays, next to the tulips and daffodils blooming in the garden on East 65th Street near Second Avenue. Passenger elevators are often backed up, tenants say, as the freight elevators are overloaded.

"Are you staying or leaving?" one elderly man asked another in the elevator, and received a resigned shrug in response.

Eve W. Paul, a lawyer and former general counsel to the Planned Parenthood Federation of America, said her $4,450-a-month apartment has a lease that runs out in two months, and she is troubled by the idea of moving because the apartment is a link to her late husband, who developed a brain tumor after they moved in four years ago, and then died.

"We did everything together," said Ms. Paul, who is in her 70's. "It feels very wrenching to have to leave all of the things that we chose together."

Tenants forced to find new places are facing a shortage of good rentals. When Peggy Johnson, an advertising executive, moved out of the Sheffield on West 57th Street last month, she had to pay $200 more a month for an apartment with "60 percent of the space," she said.

The vacancy rate in Manhattan rental apartments fell from a peak of 3.8 percent in 2002, to 1.5 percent last year, and then fell again in March to 0.75 percent, according to figures calculated by Citi Habitats.

"It is a great time to be a landlord," said Jack Levy, senior managing director of Rose Associates, which manages 30,000 apartments.

Rents had lagged in the last few years, even as condominium prices climbed higher and higher. Builders turned planned rental projects into condominiums and even long-term owners of rental buildings, like the New York Life Insurance Company, which built Manhattan House in 1951 and owned it until last year, decided to sell at the high prices offered by condo-converters.

Some tenants are refusing to look for new places and are fighting instead. At Manhattan House, several hundred tenants put money into a legal fund, and have hired David Rozenholc, a tenant lawyer who specializes in battling developers on behalf of holdout tenants.

Samuel J. Himmelstein and Kevin R. McConnell, the lawyers for tenants at the Sheffield, cited legislative memos from the 1980's that suggest that the Legislature intended to protect market-rate tenants, along with other tenants throughout the conversion process.

"They have depopulated the building by telling people you have to move," said Nancy Rovelli, an insurance broker who heads the tenants association at the Sheffield and is facing an eviction hearing in May.

Kent Swig, a principal in the group that purchased the Sheffield for $418 million and 25 Broad Street for more than $200 million, both last year, declined to discuss any pending litigation. He said he would like to negotiate with the tenants, but under state law he was barred from doing so until a conversion plan was approved.

"The law puts everybody at a disadvantage because it prevents communication," he said.

At Manhattan House, Patricia Lynch, a writer and former television news producer, thought she would be protected during a conversion because she had lived in a rent-stabilized apartment in the building since 1975. She pays about $2,000 a month for a two-bedroom unit with a fireplace and a small balcony.

But after the building was sold, Ms. Lynch received a notice that her lease would not be renewed. The new building owners said that she was not entitled to a rent-stabilized lease because she lived in Southampton, where she has a country house and keeps her car, rather than in the Manhattan apartment, which she contends is her main residence.

She has put together a thick packet of documents — voting, tax and jury records and even a letter from the Southampton assessor — to support her contention that her primary residence was at Manhattan House.

She also said that other tenants had received similar notices.

"This is a really stupid allegation but stupidity isn't what it's about," she said. "It's about malicious harassment that will cost me money to defend."

The landlord, Mr. Kalikow, said that he was acting within his rights.

Ms. Amsterdam, who runs an executive search business and whose own Manhattan House apartment is rent-stabilized, found that the developer for the conversion in her building has provided no special consideration for elderly tenants.

Her mother, Elizabeth, 89, and her uncle, Martin Burwick, 96, moved into separate market-rate apartments in the building, so they could be near her. Her mother received a notice offering her a lease renewal at $4,400 per month, 63 percent above her rent of $2,700, what she said was well above market-rate rents for apartments in the neighborhood.

In order to stay, she would have to agree to be relocated to another apartment in the building on 15 days notice. Her daughter has compiled a thick file of letters to elected officials, but few answers.

Her uncle, Mr. Burwick, who has round-the-clock nursing care paid for by Medicaid, was not offered a lease extension. He has been told that he must leave his apartment by June 30. Mr. Kalikow said he was not aware of the case.

Ms. Amsterdam plans to fight any move to evict her uncle. But in the conflict between market forces and sentimental attachment, Ms. Paul has surrendered to the market. Last week she told her neighbors that she was resigning from the tenants group and would soon be moving out.
 

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That is an interesting article. I don't think the same thing is happening where I live;
at least to that extent. I believe there are laws regulating how much notice you
have to give tenants, and it is quite long for long term residents. In the building I
live, some people have lived here 30 years, and they would have to be given a
very long notice. Condo-isation here has been good on several levels, and a side effect is it has freed up much rental apartment space downtown.
 

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A B C
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Yup this is exactly what's happening in Boston. Developers build nothing but high-cost condos that most of the people in Boston can't afford and ignoring the pleas of those that can't afford it. Existing rental units are getting more expensive because of gentrification. People can't understand that while building more condos can lower the price of housing, there is no point since the prices never go low enough to be affordable.
 

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Live and Let Live
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So True

I would love to see nice towers that have 3bd units in the 200K range-maybe in the high 100s..instead of 800K+. Its just not healthy. All they are doing is creating highrise gated communities.
 

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SSLL
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Discussion Starter · #5 ·
I think the problem I've encountered is that as DarkFenX said, there aren't that many rental buildings built, and most of the new construction is condos. Plus, with this condoization, it's moving a lot of the lower- to mid-income earners suburban-way.
 

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New construction in KC isn't at near the pace of other cities, so often times apartments are turned into condos. The other thing done a lot around here is turning a former office, or warehouse building into condos or lofts.

It's good anytime more people will be living in the urban core, I just want to see more new construction.
 

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It's not quite the same problem in Miami (in the sense of poor residents being kicked out because they can't afford to buy), because the poor residents are usually gone due to soaring rental prices long before the building goes condo anyway.

The major problem here is that the condo market (specifically, tiny one-bedroom units) is likely to become wildly overbuilt, with investor-owners being forced to rent them out for WAY less than the mortgage payments and monthly condo fees for the unit (and a possible long-term trend of falling prices for that one specific segment of the resale market). That's the main reason why large corporate-run apartment complexes targeted towards professionals have almost all "gone condo" -- they see their market drying up, with most of their target market likely to end up renting condos instead.

The people likely to have the biggest problem in Miami are highly-paid transient contractors who want a nice place to live for a few months, with no long-term commitment. Big corporate-run complexes yawn, charge higher fees to make up for the higher cost of dealing with such tenants, and let them rent the big two-story 3b+den/2.5b model with private double garage. Individual investors, in stark contrast, tend to get REALLY bent out of shape and freaked out about the prospect of leasing one of their condos (that they're paying astronomical amounts of money to own and technically losing money every month) to someone who just wants it for a few months... and might not even know exactly how long "a few months" is really likely to be. Big complexes can deal with it, because they know that in the long term, the law of averages is on their side. Individual condo owners can't do that, because they literally own just a few units whose mortgages and fees ALL need to be paid every month, and 2 or 3 months of vacancy could literally bankrupt (or at least seriously diminish their savings and cash reserves) those owners.
 

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In Toronto their are plenty of condos from 100K to 7 million, everywhere in the city and suburbs, so all parts of the market is taken care of from high income to affordable housing.

I doubt, in most U.S. cities, you can buy a highrise downtown condo for 150K -200K as you can in T.O. I don't really know the reason why they don't build more affordable condo's U.S. cities.
 

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"Patricia Lynch, a writer and former television news producer, thought she would be protected during a conversion because she had lived in a rent-stabilized apartment in the building since 1975. She pays about $2,000 a month for a two-bedroom unit with a fireplace and a small balcony.

But after the building was sold, Ms. Lynch received a notice that her lease would not be renewed. The new building owners said that she was not entitled to a rent-stabilized lease because she lived in Southampton, where she has a country house and keeps her car, rather than in the Manhattan apartment, which she contends is her main residence."



Um....something tells me, that if you can afford even $2k USD per month in rent, AND have a country home in Southhampton, then you are not the intednded recipient of a rent stabilization program.

What's the point of maintaining a system of affordable rent, if A: it isn't affordable, and B: is basically used by rich people??????




We have a bit of condo conversion from old rental buildings in Toronto, but the city only approves the ones that do not affect much truly "affordable" units. And when it happens, the rents being paid aren't really any different than the mortgage payments that would be required to purchase your unit (in other words, not even close to NYC rents or condo purchase prices).

But it really doesn't matter much in Toronto, because you can get a brand new condo (complete with stainless appliances and granite countertops) for $100k USD. The demand for converted rental apartments really isn't there.






KGB
 

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I have a question. What is the difference between an apartment and a condominium? Is a condominium just more expensive?
 

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A condominium is owned; an apartment is rented. Having a condo is equal to "buying a house" in a multi-unit structure. Condos are unaffordable for many people due to the massive down payment required to obtain them, and the monthly mortgage payments, which at retail price is often higher than rent.

Yes, it is a problem in Texas. A huge problem, considering urban housing is very rare to start with.
 

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Joi Bangla
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An apartment is something you rent but never really own while a condo is more like a house where you actually buy the unit.
 

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make it so...
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eulogy said:
I have a question. What is the difference between an apartment and a condominium? Is a condominium just more expensive?

they are pretty much the same thing exept you buy a condo where as apartments are only for rent.

edit: from what i hear, resale on condos is pretty crappy.
 

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In Australia we call them all apartments, regardless of whether they are owed or rented.

Can the new individual owners decide to rent out "condo"? Is so, is it then called an apartment?
 

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NailZ said:
In Australia we call them all apartments, regardless of whether they are owed or rented.

Can the new individual owners decide to rent out "condo"? Is so, is it then called an apartment?
I think most condos are actually too small to rent out an apartment.
 

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You all seem to be confused.

An apartment is a type of housing unit.

A condominium is a type of housing ownership.






KGB
 

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NailZ said:
In Australia we call them all apartments, regardless of whether they are owed or rented.

Can the new individual owners decide to rent out "condo"? Is so, is it then called an apartment?
The closest term we have to condo would be "owner occupied".

The only distinction between a rented and owned apartmenthere is what the purchaser decides to do with the apartment once they buy it.
 

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You can buy a condo, then rent it out to a tenant, but in many cases the monthly mortgage payments, condo association fees, taxes, and insurance are more (sometimes a LOT more) than you can realistically expect to collect in rent payments from a tenant.

The problem with condo resale (especially if you plan to "flip" the condo -- buying it, with the intent of reselling it immediately in the hope that it will gain lots of value between the time you put down the 5-20% deposit and time time you actually purchase it a year or two later) is that you're dealing with something that's basically a commodity. You're competing for buyers with dozens, or hundreds, of others who have units that are almost exactly the same as yours.

Another problem with condos: the bigger the condo association, the more likely it's firmly under the control of paranoid risk-averse lawyers whose values deviate rather sharply from those of normal resident-owners. Especially if much of the building is investor-owned. Case in point: if a hurricane destroys half of your roof, you put a tarp over it, clean up the mess, and get on with life until it gets properly fixed in 1-5 months. In contrast, the people in charge of a condo association might decide that the building's damage exposes it to unacceptable risk of legal liability should a visitor be injured and decide to force everyone to leave the building for months until they deem it to be properly fixed (this HAS happened in Florida). Or refuse to allow owners access to their units after a hurricane (to recover belongings, try to mitigate further damage, etc) to avoid the risk of getting sued if someone were to get hurt.

IMHO, Co-ops are FAR superior if you need to live in a multi-resident building as your primary residence. In purely investment/financial terms they're crappy investments that are hard to sell and don't gain as much value over time as a condo... but in return for giving up some potential long-term investment profit, you gain a higher quality of life because co-ops are overwhelmingly biased in favor of resident-owners over investor-owners, and don't usually get tangled up as badly by the kinds of "we might get sued" paranoia that condos do. Plus, most co-ops offer something condos don't -- control over who your neighbors are, and a determination to ensure that new residents share the existing residents' values. Unfortunately, banks hate co-ops with a passion, precisely because of their non-liquidity (particularly when non-resident-owners are involved, like a bank with a foreclosed unit). But if I were a developer planning to build a multiunit building where I myself intended to live for a long time, I'd be very inclined to go with co-op organization over condo
 

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Basically we have three types of flats in Germany:

- Condos

- Apartements

- Apartements of a cooperative society, where you have to buy some shares of the society in order to rent one of their flats (at the same time you own a small part of the society and get the money incl. interest back after moving out).

For Hamburg I wouldn't say that Condoization is a problem, but gentrification. The apartements don't change to Condos, but the rents are getting higher.

And personally I would prefer to live in a co-op flat. The rents are a bit cheaper than on the free market and the flats are well-maintained. All I would need is some thousand euros investment capital (depending on the size of the flat(.
 
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