Metro Newspaper: 1st Condo to Go Bust!
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Metro Newspaper: Marc Held, Partner, Held & Hines, LLP Quoted Re: 1st Condo to Go Bust!
Condo foreclosures up, more still ahead
Developers bailing, tenants never see planned luxuries
More to come?
Is there a coming wave of high-end condo building foreclosures? Yes, said Jonathan Miller, president of appraisal firm Miller Samuel. Unless changes are made in lending, “the prognosis is already known,” he added.
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For developers …
Lenders need to be more aggressive in offering financing for new developments, Miller said. “Lenders have been pulled back so far. They’re actually damaging the collateral that they’re trying to be conservative about.”
For buyers …
Financing for buyers in new buildings is difficult, especially since Freddie Mac and Fannie Mae started requiring buildings be 70 percent sold before it will guarantee a mortgage. “It’s a catch-22,” Miller said. “How do you jump from 20 to 70 percent? There’s just not going to be enough all-cash buyers.”
Lured by the promise of a 75-foot long lap pool, Pamela Flakowitz was set to plunge into the luxury condo market.
In 2007, she sank her life savings — and some of her parents’ — into a $565,000 studio in an unfinished Battery Park condo conversion.
She moved in a year ago. Today, the pool is a 35-foot wading pool that only exists on paper. Other areas of the building are still under construction.
It’s the first Manhattan building to go through foreclosure with units already sold, said Marc Held, a lawyer for Flakowitz and 46 others at 225 Rector Place.
“Unfortunately, it will be the first of many,” he said. “We are the textbook for New York City of what’s going to happen.”
Josiah Madar of NYU’s Furman Center for Real Estate and Urban Policy said they’ve tracked an increase in condo foreclosures increase over the last 18 months.
“The overall numbers are still pretty small, but given the number of new units coming online, it’s definitely worth watching,” he said.
Rector Square’s developer, who didn’t return calls for comment, defaulted on a $165 mortgage loan. A court receiver now rents out unsold units and oversees the building’s completion. Hallways remain uncarpeted and exposed lights hang from ceilings.
Things may soon improve: The lobby should be finished by the fall.
“I thought you never lose money in real estate,” Flakowitz, 39, said.
