For many people, being able to buy an apartment or townhouse in New York City is a financial stretch, especially when interest rates are on the rise. Plus co-ops typically require ample cash reserves on top of a down payment. So it’s important to first factor closing costs into your total output and then to make all best efforts to reduce that amount.
As you may be aware, certain legislation was passed in 2019 significantly limiting the ability of building owners to convert their buildings to condominiums by requiring, among other things, such owners to sell at least fifty one percent (51%) of units to bona fide tenants in occupancy.
These days the term “senior living” is not limited to retirement communities and nursing homes. Independent living developments now cater to healthy, active, self-sufficient residents and in dignified settings that emphasize wellness.
Starr Associates is proud to announce that its own Evelyn D’Angelo, partner, has joined the faculty of Brooklyn Law School as an Adjunct Professor of Law.
On May 24, 2022, the Honorable Barry E. Warhit (NYS Sup. Ct., Westchester County) issued what may be the first Supreme Court decision concerning the validity of condominium board electronic voting requirements under June 17, 2020 amendments to the Not-For-Profit Corporation Law (NPCL). In granting respondents’ motion to dismiss a petition challenging such voting requirements, the Court ruled that a condominium board was permitted to “require shareholders to use a pre-designated email address for proxy voting, to authenticate such email address prior to the meeting, and that such requirement was reasonable as a matter of law.”
If the aim of Hedgerow Exclusive Properties is to mimic the tales of opulence and opposition that make up its namesake book, “Philistines at the Hedgerow,” the upstart brokerage appears to be succeeding.
The past several years have been extremely challenging for condominium developers. From pausing construction and sales efforts and shifting into virtual tours and closings; to navigating new filing procedures, labor shortages and supply chain issues; and more recently, dealing with rate hikes and an up-and-down housing market; condominium developers have been put through the ringer.
Here are 7 tips to get the best possible interest rate on your mortgage in a difficult housing
market. Shopping for the perfect home can be fun. Shopping for the perfect mortgage rate? Not so
much.
For many people, being able to buy an apartment or townhouse in New York City is a financial stretch, especially when interest rates are on the rise. Plus co-ops typically require ample cash reserves on top of a down payment. So it’s important to first factor closing costs into your total output and then to make all best efforts to reduce that amount.
Depending on the type of property you are buying, closing costs can run from 2 to 4 percent of the purchase price—more like 5 percent for brand-new condos. (Read Brick’s closing costs guide for a breakdown.) That’s a possible $40,000 in closing costs for a $1 million co-op or $50,000 on a new condo construction.
Because closing costs are highest for brand-new developments, simply limiting your search to existing buildings can help shave off a percentage point or two off the bat.
Otherwise, brokers and attorneys can help mine opportunities to lower certain fees and taxes at the bargaining table.
“A knowledgeable broker with lots of experience can guide buyers to negotiate and take advantage of all the available savings,” says Kayla Lee, a real estate agent at Serhant. “Whether it’s a buyers’ market, slow market, or the project is down to the last few units, there are often opportunities to negotiate closing costs.” (And remember: The seller pays your broker’s fee too!)
Read the following to be an informed and empowered buyer.
The mansion tax kicks in at $1 million, triggering a 1 percent tax for the buyer. At $2 million, the tax goes up to 2 percent, rising in stages until it reaches 4.15 percent on units at $25 million or more
“Buyers can avoid or at least reduce paying this tax by sticking to properties that are below the different thresholds,” Lee says. “For example, that $950,000 vs. $1.05 million property has a larger difference than meets the eye.” Go with the former and you can save $10,000 at closing. Likewise for a $1.99 million vs. $2.05 million loft.
You might be able to convince a seller to lower the asking price in a soft market, but not if there are other buyers lined up behind you. Just don’t expect to convince a seller to pay it for you—the math never adds up.
Besides having a higher price tag, a newly built condo comes with higher closing costs than your average co-op. That’s because buying directly from the developer (or sponsor of a brand new co-op) means paying as much as 1.825 percent of the purchase price in transfer taxes imposed by the city and state to the tune of $18,250 on a $1 million condo (not to mention other costs some developers heap on to help run the building).
Lee’s advice? Buy an almost-new (pre-owned) unit instead. “When it’s a resale, the seller takes on various closing costs, including transfer taxes and the seller’s attorney fees, which are usually passed on to the buyers for NYC new construction.”
That said, in a soft market, you might convince some developers to cover at least some of these taxes.
Shaun Pappas, a partner at Starr Associates, says concessions have begun to creep back into the market with the high-interest rate environment. “Sponsors are more aggressive with the negotiations and are offering certain incentives to purchasers, such as free common charges for a year, transfer taxes paid on behalf of purchasers, and interest-rate buy-downs for a period of time.”
Daniel Gershburg, an attorney with Konner Gershburg Melnick Darouvar, says the negotiability of closing costs often depends on how well sales in the building are going. Specifically, for a building’s plans to be declared “effective” (or officially approved by the state Attorney General’s office), the condo needs to reach a certain percentage of sales.
Along those lines, Vickey Barron, a broker at Compass (who has represented many luxury developments), offers this tip: “Buy when the developers need a sale to meet the 15 percent occupancy rate for a pre-construction plan to be deemed effective or at the tail end of the sell-out when they have mentally moved on to their next building.”
Condo and townhouse buyers who take out a mortgage must pay a state and city mortgage tax of 1.925 percent on loans over $500,000 or 1.8 percent for loans under $500,000 (note the tax is based on the loan amount, not the purchase price).
But get this: If the seller has an outstanding balance on the original mortgage, you might be able to use a little-known tool called a purchase consolidation extension and modification agreement, or “purchase CEMA.” This legal maneuver involves combining the seller’s mortgage with the buyer’s mortgage and then modifying the terms to current rates.
You’ll need to work with an attorney to suss out the details. “A purchase CEMA can be the most effective way to save on closing costs, but the circumstances of your deal have to line up correctly in order to use it,” Pappas says. “The seller must have a high enough principal amount left on the mortgage to make it worthwhile. Both seller’s and buyer’s banks have to agree to it. And if all goes, depending on the loan amounts, there is the potential to save tens of thousands of dollars.”
For example, if the seller has an $800,000 mortgage balance and the buyer is getting a $1,000,000 mortgage, then doing a purchase CEMA can save around $15,400 in mortgage taxes. Bear in mind you may have to deduct $1,000 to $2,000 in extra fees to achieve those savings, but still.
And Pappas says most sponsor sales involve a purchase CEMA as part of the negotiations, which can help make buying a brand-new condo more doable.
New condo developers may be willing to pay buyers a closing credit rather than reduce the asking price of their units.
Gershburg says he’s aware of a building where the developer is offering a $500,000 concession on a $4 million cash purchase (it happens!); $200,000 is being offered to cover the closing costs and the rest is a closing credit.
This way the sponsor can get the sale without bringing down the purchase price and negatively impacting prices for other units. Call it big-picture bargaining.
Finally, assuming the apartment fits within your budget—and the savings aren’t canceled out by covering the developer’s closing costs—buying into a building with a heavy tax abatement can significantly lower the cost of your monthlies for years to come.
Just be sure you can afford the monthly taxes once that abatement period runs out lest you end up having to sell it—and start the closing cost cycle all over again.
In 2022, spiking interest rates, inflation and a war in the Ukraine brought considerable change to commercial real estate and the U.S. economy overall. With interest rates and values eventually stabilizing, and all stakeholders rethinking the highest and best use of their property and capital, this year promises to be an interesting one, too. Here are 10 trends likely to shape the events and transactions of 2023.
In U.S. cities that zone commercial real estate, developers are prodding city councils to consider rezoning some districts to residential, said Shaun Pappas, a partner at Starr Associates LLP.
This trend has been underway for some time in Manhattan. Pappas believes it will become a greater movement as commercial vacancies increase and residential real estate continues being squeezed. With the housing market stifled by rising mortgage rates, creating more housing development opportunity could ease home prices.
Almost 40 percent of U.S. greenhouse gas emissions derive from building construction and operation, said Eve Picker, crowdfunding platform SmallChange.co founder & CEO. Developers and property managers must ensure building efficiency and sustainability, or risk being ignored by tenants and financiers alike.
“The new normal isn’t just about embracing ‘green,’ it’s about avoiding ‘red,’” Picker said. “If your operational or development costs start to show up in that color from a maintenance or climate risk standpoint, you’ve got no hope of being in the black.”
As companies look to rebound from the pandemic, tax credits and incentives should play an even more vital role in launching projects, said Nancy Cox, partner and real estate industry leader for Top 50 accounting firm The Bonadio Group. To maximize profits, CRE execs will need to consider Low-Income Housing Tax Credits, Qualified Opportunity Zones and Historic and Brownfield Tax Credits, she said.
In the coming year, commercial real estate buyers and sellers will encounter a more stable market likely to furnish buyers with greater options, said Tomas Sulichin, president of the commercial division at RelatedISG Realty. The market, he believes, will be characterized by a slight increase in inventory.
“In the past years, buyers and tenants have been at the hands of owners and landlords,” he said. “We will soon see a market stabilization. These are all good signs of a healthy real estate market, which is cyclical.”
Commercial real estate owners will aim to ink golden anchor tenants to long-term leases, Pappas said. “There’s a big push for long-term leases with significantly established tenants in restaurant spaces, technology or other types of ‘experience’ leasing, such as large fitness centers and spas,” he noted.
“I see commercial landlords looking for those types of tenants that are established and sacrificing significant rent or providing significant tenant allowances so they can lock in long-term leases.”
With high interest rates producing elevated cap rates and declining asset values, there will be insistence on higher returns on real estate investments than on alternatives providing less risk and more liquidity. “Illiquidity demands a premium, and that’s become more and more apparent as rates rise,” said Ran Eliasof, founder & managing partner of Northwind Group.
“We’ll see more transaction volume take place in 2023,” he continued. “Some lenders will force the hands of borrowers to make the transactions a reality, and there’ll be refis of deals done four years ago…not everyone will walk away happy.”
Prospects for office real estate will continue to be clouded, with occupancies lower and office tenants re-evaluating their needs in the face of remote work.
“It may get worse before it gets better; that trend will hold,” said Mitch Rosen, managing director and head of real estate for New York City-based Yieldstreet. “I think there’s somewhat a race to the bottom on price for some of the more inferior buildings. You’re not competing anymore on what the tenants are looking for. You’re competing on dollars. There are tenants for that appeal, but not high enough quality or quantity.”
The pandemic deepened economic pressures and social inequalities existing before COVID-19, leading Americans to seek greater access to amenities, activities or job opportunities nearer their homes.
“The idea of the 15-minute city, where you can do all things you need to do within 15 minutes, has taken off since the pandemic,” said Karin Brandt, founder & CEO of coUrbanize, a community engagement platform for real estate development.
ESG’s impact on real estate will be reflected in an increase in brownfield cleanups. In New York State, for example, the Brownfield Cleanup Program incentivizes the remediation and redevelopment of eligible contaminated properties by letting taxpayers reduce their taxable income by the cost of eligible cleanup expenses in the year they’re incurred.
“The credit is for between 22 and 50 percent of qualified remediation project costs and/or 10 to 22 percent of eligible construction costs,” Cox explained. “The credit percentage varies based on the version of the program the project qualifies for and the level of contamination.”
The credit can be claimed for various time lengths depending on credit component following the issuance of a certificate of completion by the New York State Department of Environmental Conservation.
Some forget, Rosen said, that there is still plenty of dry powder in real estate that will need to be invested in the next 24 months, referring to the “tens and hundreds of billions” raised in 2021 and 2022.
“It will be a flight to quality, better assets, better markets,” he said. “If you own superior assets the liquidity should be better than in tertiary markets and poorer assets. A rising tide lifts all ships. The first to see that investment will be the better-quality assets.”
As you may be aware, certain legislation was passed in 2019 significantly limiting the ability of building owners to convert their buildings to condominiums by requiring, among other things, such owners to sell at least fifty one percent (51%) of units to bona fide tenants in occupancy. Assembly Bill A8809/Senate Bill S8564, which was signed on December 16, 2022 by New York Governor Kathy Hochul and becomes effective 90 days from the date of signing, revises those requirements specifically for condominium conversion projects which meet the following criteria: (i) the building contains five or fewer units, and (ii) the building owner offers the unit that they or their immediate family member have occupied for at least two years. With regard to such buildings, the offering plan may be declared effective upon the execution and delivery of written purchase agreements for at least fifteen percent (15%) of all dwelling units in the building subscribed for by bona fide tenants in occupancy or bona fide purchasers who represent that they intend that they or one or more members of their immediate family occupy the dwelling unit when it becomes vacant. Our firm is in communication with the Department of Law to obtain clarification regarding the application of this new legislation to projects in which the building owner is an entity.
This is an encouraging development, since the unanimous passage of this legislation and its signing into law by our governor suggests that our lawmakers and governor are reconsidering at least some of the onerous burdens on building owners’ rights to convert to condominium ownership caused by the 2019 legislation. As such, we are hopeful that this is the first step in correcting the 2019 legislation and promoting the condominium conversion market. If you would like to further discuss this update to the legislation, please contact Shaun W. Pappas, Esq. at 212-620-2684 or spappas@starr-lawfirm.com.
– Monthly rent can run $6,000 to over $15,000 for a studio and $7,000 to over $20,000 for a one bedroom
– The cost includes 24/7 hospitality services, housekeeping, access to amenities, and group activities
These days the term “senior living” is not limited to retirement communities and nursing homes. Independent living developments now cater to healthy, active, self-sufficient residents and in dignified settings that emphasize wellness.
The concept isn’t exactly new. But modern iterations swap golf courses and Bingo for a full slate of daily activities—educational, cultural, and otherwise. And this being New York City, the idea is getting upscale treatment with a handful of luxe independent living communities.
Still, navigating the senior living space in NYC can be confusing. For starters, developments tend to offer different levels of care—independent, assisted/enhanced, and memory care—all under one roof.
Perceptions of traditional facilities can be an obstacle to understanding modern senior living residences. “This is often the first conversation we have with prospective residents,” says Rocco Bertini, executive director of The Watermark at Brooklyn Heights.
Shaun Pappas, a partner at NYC law firm Starr Associates who works with developers of luxury residential properties as well as hospitality groups, agrees there’s confusion on all sides.
“One of the biggest distinctions is that these new senior living residences are presented as a community of similarly aged individuals living together with different types of amenities and activities. However, they typically do not provide medical treatment or oversight, though they may offer a certain quality of life and health initiatives. It is less about ‘care’ and more about ‘community’ and ‘wellness,'” he says.
Brick dug deep to answer common questions so you know what to expect and can make informed decisions in exploring your options.
Imagine no longer having to deal with household chores and routine maintenance while living in a private apartment and remaining independent in going about the day. You’ll also have convenient access to amenities, services, and scheduled group activities that make life easier and more enjoyable. (More on those below.)
And even though these places are designed to offer everything on site, residents stay connected to the surrounding community and all the city has to offer through partnerships with museums, schools, and other organizations. Want tickets to the opera or theater? A concierge is there to help. Meeting a friend for lunch across town? Transportation is available.
Senior living residences are geared toward people (we see you Baby Boomers!) who are looking to maintain a certain lifestyle and don’t require round-the-clock medical care and advanced support at skilled nursing homes.
That said, many senior developments offer independent living as well as assisted living (for people who need personal care with daily tasks such as getting dressed and managing medication) and memory care (for residents with Alzheimer’s or other forms of dementia). Residents can transition to another level as needed, without having to move to a new development or even a new unit (though memory care residents have enhanced units on designated floors.)
And because these buildings are licensed by the state as assisted living facilities, they provide a similar level of care as nursing homes, says Joanna Mansfield, registered nurse and general manager of Coterie Hudson Yards. They also tend to make up the difference by outsourcing medical and emergency care services that are made available to residents as needed.
At Coterie, for example, concierge emergency provider Sollis Health has offices in the building. Sunrise East 56 has contracted Northwell Health to give residents access to an attending physician. One resident named Allen says, “Northwell’s expertise made it easy for me to transition under their care. I use it for all my medical needs now and have dropped most of my other specialists.”
The individual units are unfurnished, come with a private bath, and look just like regular apartments.
There’s usually a variety of floor plans for studios and one-bedroom units with either kitchenettes or full kitchens. Newer developments sometimes have two and three bedrooms and even penthouses.
As with all residential buildings in NYC, the design ranges from pre- and post war conversions to brand-new high rises.
It helps to have an understanding of the potential fees and costs to avoid sticker shock—suffice to say that rents are steep.
That’s especially true for the brand-new upscale communities cropping up across the city. “These developers have identified an affluent aging community and are creating a niche,” Pappas says.
Independent living studios tend to start at around $6,500 per month and two bedrooms can top out at close to $40,000 per month, with lots of wiggle room in between those figures depending on the type and location of the building.
Units at even established senior residences like Atria West 86, which opened 20 years ago, start at $8,300 per month.
Shared units will typically be charged an additional fee. For example, The Watermark charges a second occupancy fee of $1,495 a month.
Generally speaking, the monthly rent covers utilities, weekly housekeeping/linen service, and maintenance, plus 24/7 hospitality and the use of all amenities. Most (if not all) buildings in NYC include a fitness center, indoor swimming pool, library, salon, and transportation (on-demand cars or scheduled vans) within the city.
A daily schedule of activities—tai chi, writing workshops, wine tastings, you name it—is baked into the rent as well.
Three meals per day are also included, often created by chefs in stylish settings, though cocktails are on you (other beverages are free).
Some places charge a one-time membership or introductory fee on top of the rent, so be sure to inquire about that. For example, Brookdale Battery Park City charges a one-time community fee to new members, equal to one month’s rent, but that is transferable to all Brookdale communities across the country.
Other services (such as at an on-site salon or spa) will be a la carte, as are catered meals for private gatherings. “Families love to congregate here for holidays and special occasions and avoid having their loved one travel in lousy weather,” Mansfield says.
Leases are usually month to month. Refund policies vary. Bertini says The Watermark will refund a prorated portion to anyone leaving other than the last day of the month and with 30-days’ notice in writing of termination. Brookdale has a similar policy but requires a 60-day written notice.
Deposits are generally required to hold a unit; whether these are refundable depends on the building. (The Watermark has a fully refundable $5,000 deposit to hold a unit for 30 days.)
The answer is no. As with any rental, you’ll be expected to pay out of pocket, though most places accept credit cards so you can rack up points.
Residents often use money from selling a home to cover the costs or rely on retirement savings, pensions, investments, or private loans. Note that long-term care insurance and life insurance policies sometimes cover assisted living and memory care but not independent living, unless some level of personal care is being provided.
As always, it’s wise to work with your financial advisor to figure out a realistic budget and identify ways to cover costs.
Start by calling to schedule an appointment rather than just dropping by, and find out in advance how long you are invited to stay.
At Atria Senior Living locations (Atria Forest Hills, Atria Riverdale, and Atria West 86), visitors are encouraged to “attend an art class…join us for hors d’oeuvres…experience the community.”
Other buildings Brick spoke to invite people to sample a meal or tour the dining options along with viewing different types of units and all the amenities.
The number of visitors is no longer restricted due to Covid but masks may still be required.
This depends on the property, but the majority tend to accept pets and some even offer dog-walking services (for a fee).
Across the board, these communities provide 24-hour surveillance in addition to a full-time attendant or security officer manning the entrance.
Wearable medical alert systems are usually offered to each resident.
Finally, it’s worth asking about preventive safety measures in regard to Covid and other communicable health risks.
Starr Associates is proud to announce that its own Evelyn D’Angelo, partner, has joined the faculty of Brooklyn Law School as an Adjunct Professor of Law.
Professor D’Angelo will be teaching a course entitled Law of Co-ops, Condos, & HOAs during the spring 2023 semester, which will examine the law of condominiums, cooperative corporations, and homeowners associations, with an emphasis on the practical considerations that influence developers, owners, and governing boards. Topics to be explored include government regulation of the development process including the role of the New York State Attorney General, sales, and leases, building operational considerations, and the rights and obligations of developers (in their role as sponsors), governing boards, and unit owners.
Ms. D’Angelo practices in the firm’s development and offering plan group, boasting nearly 10 years of experience handling complex residential, commercial, and mixed-use developments, including the preparation and filing of offering plans, the creation of condominiums, co-ops, and HOAs, contract negotiations, and other related real estate transactions. She joined the firm in 2013.
Ms. D’Angelo graduated with honors from Brooklyn Law School, where she was published in the prestigious Brooklyn Law Review and was a member of the esteemed Moot Court Honor Society. In addition, Ms. D’Angelo holds a B.A. from the University of Notre Dame and an M.A. from Bowling Green State University.
On May 24, 2022, the Honorable Barry E. Warhit (NYS Sup. Ct., Westchester County) issued what may be the first Supreme Court decision concerning the validity of condominium board electronic voting requirements under June 17, 2020 amendments to the Not-For-Profit Corporation Law (NPCL). In granting respondents’ motion to dismiss a petition challenging such voting requirements, the Court ruled that a condominium board was permitted to “require shareholders to use a pre-designated email address for proxy voting, to authenticate such email address prior to the meeting, and that such requirement was reasonable as a matter of law.”
In The Lifesavers Building Homeowners Group, et al. v. Board of Managers of the Landmark Condominium et al. (Index No. 67545/2021), a group of unit owners in the 190 residential unit Landmark Condominium located in Port Chester (the “Condominium”), challenged the purported re-election of certain respondents to the Condominium’s Board of Directors (the “Board”). As explained by the Court, petitioners challenged the validity of a November 3, 2021 election, alleging that, “by e-mails disseminated October 20, 2021, the respondents improperly imposed new electronic proxy voting procedures with an email verification requirement”, according to which unit owners had to (i) authenticate e-mail addresses to be used for voting in the election and (ii) submit proxies using an electronic form sent directly to the accountant responsible for tabulating the results-of the election. Rather than comply, petitioners collected paper proxies and attempted to submit them as attachments to unauthenticated email addresses, which they argue complies with the Condominium’s By-Laws. Those proxies were not counted during the November 3, 2021 election. Respondents determined that a there was no quorum at that meeting and that the members of the Board would therefore
continue to serve for another year.
The Board moved to dismiss, arguing that the proxies were defective and that the new electronic proxy voting procedures were authorized by amendments to NPCL §603, enacted in response to the COVID pandemic, and permitting the Board in its sole discretion to conduct electronic meetings and to implement “reasonable measures” verify that each person participating electronically ls a member or a proxy of a (former NPCL §603(a)).
In deciding the motion to dismiss, the Court agreed with the respondent’s argument that the NPCL 603(a) amendment authorized the Board to requite shareholders to use a pre- designated e-mail address for proxy voting, to authentic such e-mail address prior to the meeting, and that the requirement was reasonable as a matter of law. As amended and quoted by the Court, NPCL §603(a) provides as follows:
Meetings of members may be held at such place, within or without this state, as may be fixed by or under the by-laws, or, if not so fixed, as determined by the board of directors. For the duration of the state disaster emergency declared by executive order two hundred two that began on March Seventh, two thousand twenty, the board of directors may, in its sole discretion, determine that meetings of members be held partially or solely by means of electronic communication, the electronic service and/or platform by which the meeting is held shall be the place of the meeting for purposes of this article if a meeting is held solely by means of electronic communication. Meetings conducted partially or solely by means of electronic communications in reliance upon this paragraph, and any member’s electronic participation in such meetings shall be subject to those guidelines and procedures as the board adopts, provided the board shall implement reasonable measures to: (1) verify that each person participating electronically is a member or a proxy of a member; (2) provide each member participating electronically with a reasonable opportunity to participate in the meeting, including an opportunity to propose, object to, and vote upon a specific action to be taken by the members, and to see, read or hear the proceedings of the meeting substantially concurrently with those proceedings; and (3) record and maintain a record of any votes or other actions taken by electronic communication at the meeting.
(see NPCL 603(a)). To the extent the “reasonableness” of the measures implemented by the board was challenged, it was protected by the business judgment rule, which prevented further Judicial scrutiny of the Board’s electronic voting procedures. In granting respondents’ motion to dismiss, the Court took particular note of the fact that petitioners did not even attempt to utilize the e-mail verification procedure. COVID-related electronic communications provisions appear increasingly accepted as the new normal in a broadening range of different circumstances. To the extent that trend continues, it becomes increasingly important to adapt to such changes. Here, the Court’s decision may further signal that growing trend.
* David is Senior Counsel at Starr Associates LLP and a member of the firm’s litigation department. He can be reached at dtyler@starr-lawfirm.com or (212) 620-2694.
If the aim of Hedgerow Exclusive Properties is to mimic the tales of opulence and opposition that make up its namesake book, “Philistines at the Hedgerow,” the upstart brokerage appears to be succeeding.
Author Steven Gaines’ 1998 work chronicles the millionaires and billionaires who have long made the Hamptons a playground for the ultra-rich, the ever-present clashes between new money and the establishment, and the brokers who orchestrate it all.
Hedgerow, a two-year-old brokerage that has carved out its niche by zeroing in on ultra-luxury properties, could not have planted its flag at a more opportune time. Co-founded by Preston Kaye and Gary Cooper, Hedgerow arrived in the Hamptons in 2020 along with a wave of wealthy Manhattanites in search of a second home as the pandemic locked down New York City.
Sales activity in the Hamptons exploded from 343 homes purchased in the first quarter to 433 in the second, 607 in the third and a whopping 803 in the fourth, according to data from appraisal firm Miller Samuel. Prices also skyrocketed. By the fourth quarter of 2020, home prices were up
55 percent year-over-year.
But those figures are averages across all segments of the market, and Hedgerow isn’t concerned with average homes. The brokerage has emerged as one of the top players on the East End, selling over $650 million worth of homes in its first two years, one luxury estate at a time.
“Their firm has certainly disrupted the balance of power in that high-end, both on- and off-market segment of the market,” said Compass’ Christopher Covert, the listing agent for a waterfront mansion at 35 Potato Road in Sagaponack that went for $46.5 million in May to a buyer represented by Hedgerow. “Whatever they’re doing seems to be working.”
Of the 10 priciest homes sold in the Hamptons last year, Hedgerow handled four: a $59.5 million oceanfront estate at 70 Further Lane in East Hampton; another at 442 Further Lane that went for $55 million; former HFZ Capital principal Nir Meir’s mansion at 40 Meadow Lane in Southampton, which sold to Robert Kraft, owner of the New England Patriots, for $43 million; and the off-market sale of a 5-acre parcel at 260 and 264 Jobs Lane in Bridgehampton for $38 million.
“Just the idea of building a model that laser-beams on that 1 percent niche, really expensive luxury. That’s the model,” said Ed Bruehl, a broker with local firm Saunders and Associates. “If you guys are kicking ass and making money, I’m stoked for you.”
Coastal clashes
This year, Hedgerow was involved in the second most expensive sale in Hamptons history: $118.5 million for a 21-acre compound at 70 and 71 Cobb Road in Water Mill. That transaction became the subject of a lawsuit against the sellers by rival Nest Seekers, which claimed it was wrongfully cut out of its commission on the co-exclusive deal. Hedgerow was not named as a defendant in the suit, which sources said stemmed at least in part from a dispute over promotional materials for the supposedly off-market listing.
Unlike its competitors, Hedgerow doesn’t spend much on marketing or technology, operating largely through the contacts and connections held by its fewer than 20 licensed agents.
“It’s an old-school mentality,” said Shaun Pappas, a partner at real estate law firm Starr Associates. “People want the anonymity, they don’t want the broadcasting. They’re going there to escape the heat, the visibility of New York or wherever they’re coming from.”
Hedgerow’s primary competitor is probably Bespoke Real Estate, the eight-year-old, Water Mill-based brokerage co-founded by brothers Zach and Cody Vichinsky, which, like Hedgerow, exclusively deals in luxury properties (those priced at $10 million and above).
A 6-foot-3 former college hockey player, Hedgerow co-founder Kaye first came to the Hamptons as an agent with Bespoke in 2016, but was fired in 2019 after a dispute with a co-worker, according to a lawsuit brought against him by Bespoke a few months before Hedgerow’s launch.
Bespoke alleged that Kaye had taken confidential documents with him, and in some instances deleted them, but the suit was voluntarily dismissed last November.
“The lawsuit was about alleged theft of trade secrets, not about anything else,” an attorney for Hedgerow said in a statement. “It was brought to stop competition and had no merit.” Bespoke declined to comment.
Few in the area seem to know anything about Hedgerow’s other co-founder, Cooper. Nest Seekers CEO Eddie Shapiro called him the “ghost of the Hamptons,” but emphasized that anyone who handles luxury listings in the area will almost certainly encounter him.
“It’s a very small sandbox,” Shapiro said.
In an email, Brown Harris Stevens’ Shannan North described Hedgerow as “a hybrid of a boutique service model yet a player with the bigger companies.”
In May, Kaye and Cooper were joined by a third partner, Terry Cohen, a veteran agent who has transacted over $2.5 billion dollars of real estate and brought over her four-person team from Saunders and Associates.
Cohen has spent much of her career at boutique firms that eventually grew into larger operations, starting at Allan Schneider Associates, which National Realty Trust scooped up in 2006, then joining Saunders the year it debuted in 2008. Saunders, too, has since grown into a sizable firm with dozens of agents across five Hamptons offices.
“Less is more,” Cohen told The Real Deal in June. “We always have to be dynamic, and you can be dynamic when you’re small. It’s hard to be dynamic when you’re so large.”
Cohen’s arrival at Hedgerow “brings some gravitas and almost some legitimacy, that this is a firm, and not just two partners,” Compass’ Covert said.
Trials to come
Breaking into the Hamptons can be difficult. Some firms have been established on the East End for decades, with a small number of top agents responsible for orchestrating many of their deals.
Hedgerow’s leaders “already had the track record, and they had the relationships,” said Geoff Gifkins, a regional manager at Nest Seekers. “I think they’d already done the hard work.”
But even in the Hamptons, it’s not all sunshine and beaches forever.
With inventory depleted and mortgage rates higher, some buyers have begun pulling out. Listing inventory in the luxury segment was down 34 percent annually in the first quarter of the year. Transactions fell 23 percent in the same period, according to Miller Samuel.
Hedgerow, which otherwise declined to comment for this story, says it’s not concerned.
“Contrary to current headlines, we continue to see pioneering trades across all segments of the Hamptons’ marketplace,” Kaye said in a statement.
For a brokerage that has only ever existed in a historic housing boom, it’s possible the Hamptons’ modern-day philistines have yet to face their first true test.
“It doesn’t mean that they can’t be successful, but it’s going to be a much more difficult market as opposed to the prior market, which was essentially order-taking,” said Miller Samuel’s Jonathan Miller. “The demand was insatiable.”
https://therealdeal.com/2022/08/10/luxury-brokerage-hedgerow-faces-its-toughest-challenge-yet/
The past several years have been extremely challenging for condominium developers. From pausing construction and sales efforts and shifting into virtual tours and closings; to navigating new filing procedures, labor shortages and supply chain issues; and more recently, dealing with rate hikes and an up-and-down housing market; condominium developers have been put through the ringer.
As a real estate law firm that focuses heavily on condominium work on behalf of sponsors and lenders, Starr Associates LLP has identified several key issues and areas of the practice that every condo developer needs to know as they finish out the year. At Starr, we find that developers that best understand the many technical hurdles they face—and the strategies they can deploy from the onset—are better equipped and more likely to see their projects come to fruition without issue and with better results.
If you have any questions regarding the below mentioned items, please feel free to give our attorneys a call to discuss potential solutions to ensure your project and team is well-informed and best-prepared during the remainder of the year.
1. The Attorney General’s “Relief Period” is Still in Effect for Offering Plans
As a result of the COVID-19 pandemic, the Office of the Attorney General’s (“AG”) had implemented temporary guidelines relating to filings made with their office. These guidelines have been termed the “Relief Period,” and as of today are still in effect. In fact, the last COVID-19 guidance from the AG’s office was circulated over a year ago. Given the important timeframes and deadlines contained within an offering plan, this lack of information has no doubt made navigating the AG’s office more challenging than ever. Knowing the current state of affairs makes having the right condominium counsel vital.
2. Taking Advantage of Tax Incentives Available to Non-Profit Leases
Sections 420-a and 420-b of the New York State Real Property Tax Law authorize exemption from real property taxes of real property owned by certain nonprofit organizations. The leasehold condominium structure has become a popular and efficient way for landlords and nonprofit entities to create a way in which the nonprofit would qualify for the benefit in a case where it would otherwise not. It should also be noted that The Department of Finance recently provided guidance on a newer and more streamlined approach to the process. These transactions are extremely complex and careful considerations must be made by tenants, landlords, and lenders.
3. Marketing Out of State Projects to NY Buyers
Have you started developing outside of New York? If so, the New York State AG’s Cooperative Policy Statement #12 (“CPS-12”), makes it easier for developers of out-of-state projects to sell to New Yorkers.
The CPS-12, which applies to condominiums, cooperatives, timeshares and homeowners associations allows for an exemption from the usual compliance requirements for registrations of projects located outside of New York State but marketed to New Yorkers who are physically located in-state. To qualify for the exemption, the project must comply with—and be registered with—the situs state of the project and such state must have laws in place for the protection of purchasers akin to those of New York.
4. Make the Most of Your Mixed-Use Property
Many developers are unaware that many mixed-use buildings throughout NYC are structured as a condominium regime. Whether it is to establish separate ownership between a restaurateur and hotelier, finance a portion but not all of a property, or perhaps to capture ICAP benefits on the commercial space only, creating a condominium becomes an essential part of the transaction. These are just a few of situations we see day to day, but there is not much we have not seen in our 20 years at Starr. Make sure you are seeing all the possibilities.
5. Are Condominium Conversions Coming Back?
Since the passage of the Housing Stability and Tenant Protection Act in 2019, a Part 23 condominium conversion of an occupied building has become virtually obsolete. With the new requirement that a non-eviction plan may not be declared effective until 51% of the tenants in occupancy agree to buy, as opposed to the previous threshold of 15% of tenants in occupancy and bona
fide purchasers with an intent to reside has made a conversion nearly impossible. However, given the AG’s openness to have direct communication with firms like ours, we believe there is relief guidance on the horizon.
6. Local Law 97 Implications on Condominiums and Cooperatives
Local Law 97 was enacted in 2019 as a part of the Climate Mobilization Act to reduce the carbon emissions of buildings in New York. Under this groundbreaking law, most properties over 25,000 square feet will be required to limit their building’s carbon emission to meet new energy efficiency and greenhouse gas emissions limits by 2024, with stricter limits coming into effect in 2030. Local Law 97 applies to Cooperatives and Condominiums, so it is important to ensure that your project contains the necessary safeguards and provisions to satisfy these future requirements to avoid the fine of “$268 per metric ton of emissions over the limit.” As the required retrofits may take extensive time to deploy, developers will need to start as soon as possible to avoid the financial penalty of Local Law 97.
Shopping for the perfect home can be fun. Shopping for the perfect mortgage rate? Not so much.
A fast-moving housing market means borrowers need to take extra care. At the very least, you’ll want to double-check your housing budget and keep a close eye on the market as rates move. Some borrowers may also want to consider new bidding and borrowing strategies to help keep the rate they pay down—if not quite to the level it might have been six months ago, when
mortgage rates were still near record lows.
“It’s not a time for the faint of heart to be buying a home,” says Matt Hackett, operations manager at Equity Now, a direct mortgage lender.
While there’s no bringing back the record-low mortgage market of 2021, here are seven tips for making the most of a difficult market:
1. Double-check your budget
Higher mortgage rates don’t just mean home buyers pay more. They could mean you’ll be able to borrow less. If you set your housing budget in late 2021, it might be time for a reset.
In one of the sharpest run-ups in memory, 30-year mortgage rates jumped from around 3.5% in January to well over 5% in May. That equates to an additional 17% surge in home prices, according to Greg McBride, chief financial analyst for Bankrate.com. (Note: Bankrate is a commercial partner of Buy Side from WSJ)
If, say, for instance, you were targeting a monthly principal-and-interest payment of $4,000 when rates were 3.5%, you could have afforded a loan in the range of $675,000. But at 5.5%, you could only afford to borrow $525.000.
If you’re running the numbers at various rates using online calculators, remember you have to figure in your downpayment and closing costs, plus ongoing expenses of taxes, insurance and maintenance costs. One rule of thumb is to assume you will have to set aside 1% of your home’s value every year to pay for upkeep.
2. Make a habit of checking rates each week
Once you know what you can spend, you’ll want to make sure rates don’t move on you again, putting further strain on your budget. If you’re trying to make a purchase, you should check in with lenders at least once each week, according to mortgage brokers.
Weekly rate movements are typically less than 0.05%, although in this year’s fast-moving market they have reached 0.25% or more, according to Mike Tassone, co-founder of Own Up, a mortgage broker.
Your mortgage broker or loan officer can keep you in the loop. You can also monitor the action yourself: You can find daily average rates in The Wall Street Journal’s markets data section, while weekly ones are published by loan guarantors Fannie Mae and Freddie Mac.
Another tip is to follow the yield on the 10-year Treasury note (ticker symbol: TNX), which lenders use as the peg to price 30-year mortgages (since relatively few borrowers keep mortgages for the full 30-year term.) “As the yield goes up, mortgage rates tend to go up. As the yield goes down, mortgage rates tend to go down,” says Cameron Cook, a senior wholesale mortgage broker with CSI Mortgage Design by Cameron in Lone Tree, Colo.
3. Consider a mortgage contingency
Once you get to the bidding stage, you want to make sure nothing can upend your deal.
One way to create a little wiggle room is to ask for a mortgage contingency in your purchase agreement. These contract clauses (which also must be agreed to by the seller) can give you an out if, say, rising rates make it no longer possible to purchase the house with 80% financing, or if mortgage rates move outside a certain range.
“This might make it easier to sleep at night,” says Shaun Pappas, a partner with Starr Associates, a real estate law firm in New York.
Still, he points out there is a risk: “In a hot seller’s market, many sellers will look at non-contingent deals over contingent, even if the price for the contingent deal is a little better. Sellers want firm deals with no way to cancel.”
4. Tighten your rate lock
Once you pick a lender and begin the process of applying for a loan, you should be able to “lock” the rate in place, protecting you from further increases. And there are additional steps you can take to make sure there are no surprises.
Typically a mortgage lender offers a rate lock after your initial loan application has been received but before it’s submitted for underwriting. Most rates are locked for between 30 to 90 days with some longer-rate lock periods offered to accommodate things like delayed closings or new construction. However, if you do not close during the rate lock period, and the rate lock
expires, your rate will begin to float and be subject to daily rate changes.
One option is to extend your rate lock. It will cost you though. A typical mortgage rate lock extension costs about 0.5% of the total loan amount and can be extended for up to 120 days, says Pappas.
What if rates actually go down? You can also add a float-down provision to your loan which will allow you take advantage of any decline, as long as the new, lower rate meets a certain threshold. Usually it must be at least a quarter point below your original rate. But again, there’s typically a fee associated with this as well.
While most lenders offer a rate lock as a matter of course, if yours doesn’t you should definitely be proactive, according to Maura Ann Dowling, a certified financial planner and faculty member in the finance department of Bryant University in Smithfield, R.I.. “Locking in a rate is always a good idea as soon as you begin a mortgage relationship,” she says. “Then, if rates move up, you are protected.”
5. Think beyond the 30-year mortgage
It’s not hard to see why homeowners love the security of a 30-year mortgage. But if you are looking to lower your interest rate, sacrificing a little peace of mind can lead to substantial savings.
With an adjustable rate mortgage, or ARM, the initial interest rate is fixed for a period of time. After that, the rate applied on the outstanding balance resets periodically, based on prevailing market rates. The most common introductory ARM terms are five, seven and 10 years.
Because you’re are taking on future interest-rate risk as an ARM borrower, you’ll receive better rates during the initial, fixed period of the loan than you would with a 30-year mortgage. In recent years ARMs haven’t looked that attractive: With 30-year mortgage rates near historic lows, there wasn’t much room for these loans to shave off what borrowers were paying. In recent months as rates climbed, the gap has widened.
Homebuyers who switch from a 30-year loan to a 5/1 ARM (with a fixed rate of five years) can now expect to lower their rate roughly 1 to 1.25 percentage points, based on data from Freddie Mac. That’s a difference of about $300 a month on a $400,000 loan.
Of course, with a five-year floating rate loan, you could end up paying more if rates are even higher in the future. But that’s only a real worry if you plan to remain in your home longer than five years. Most homeowners with 30-year mortgages keep them for less than 10 years.
6. Pay for mortgage points
Another way to get a lower mortgage rate is to pay your lender for it. In the mortgage world, this is known as “buying points.”
Typically you can lower your rate by one-quarter percentage point for every 1% of the loan’s total value that you pay upfront to the lender. When rates were low several months ago, relatively few borrowers chose to buy points. But, as The Wall Street Journal newsroom recently reported, the option exploded in popularity as mortgage rates rose.
Because of the big upfront cost, points make the most sense when you plan to stay in your house more than a few years. For instance, a borrower offered a 5.5% rate on a $400,000 mortgage could lower the rate to 5% by paying $8,000 at the outset. The move could save the borrower more than $45,000 if they stayed in the home for a decade, according to Bankrate.com’s mortgage calculator. But they would come out behind if they moved out before year five.
In other words, if you can spare the cash, points can be a great way to save money in the long run. Just make sure you are willing to stick it out. “If you end up selling your home before you anticipate, the buy down is less attractive because the cost upfront could be more than the overall savings,” says Pappas.
7. Time your mortgage decision based on your own needs
The biggest mistake you could make is to rush to make a purchase you truly can’t afford because you’re afraid rates could climb. “In these situations, it’s better to pause your search than to get into a precarious financial situation,” says Jerimiah Taylor, vice president of real estate and mortgage services at OJO Labs, a real estate company.
If you can afford the payment at current rates on the home you want to buy, it’s probably foolish to hold off in the hope that 2021’s rates will return, say mortgage experts.
Do your best to put forward a strong offer. In the current climate, that means making clear to the seller that the new interest-rate environment hasn’t blown up your budget: “Make sure that you indicate that you have been pre-qualified for that offer,” says Dottie Herman, vice chair of real estate brokerage Douglas Elliman.
If you’ve found a home you want and the numbers work, should you hold off for a better rate or move forward? ”It’s hard to bet on the market and wait for rates to decrease, because they could increase instead,” says Jodi Hall, president of Nationwide Mortgage Bankers. It’s OK to tune out the current collective lamenting about rising rates and buy the home you want and can afford.
https://www.wsj.com/buyside/personal-finance/mortgage-rates-tips 01653595262?mod=wsjcbs_article
Our team has had the pleasure of working with Starr Associates on our project at 150 Rivington Street. The entire Starr team was a tremendous asset to the success of our project. Through very challenging times, Starr Associates came through time and time again. It is an honor to work with everyone at Starr!
I have known Allan Starr for many years and worked with him on many projects. He has always exceeded my expectations. He not only knows the ins and outs of the law, but knows how to make the whole process easy and quick. I’ve found him to possess an incredibly astute legal mind, combined with a common sense approach that always accomplishes my goals. He’s not only a gentleman and a friend, but a brilliant lawyer.
It has been an absolute pleasure working with Allan Starr and Samantha Sheeber over the past twelve years. They are not only the utmost professionals, but also wonderful people who I have grown to love like family. I trust them with all of my new development projects and private clients, and we support each other in our business and personal lives. Starr Associates LLP has always been there for me and my clients and I would recommend them as highly as I recommend anyone.
Allan and I have worked together for decades; along the way, I have worked with Samantha Sheeber, Andrea Roschelle, John Rodriguez and Erica Starr and have always been pleased with their quick and accurate responses. They have worked with us on closings (with great and efficient results), restatements of stale plans, amendments and other assorted AG requirements, always on a timely and cost-effective basis.
“Working with Starr has been great on three condo projects in Manhattan to date. The accessibility and direct attention of the partners is unsurpassed. Allan and Sam have the interests of the owner at heart and make every effort to protect our interests in a responsible and defensible manner. Their practical approach and deep knowledge of the offering plan process and requirements of the AG office combine to make a highly effective and efficient package. At the associate level they have good support as well. The closing office has to be the best in NY – never a failed closing in 15 years. We are repeat customers and will be going forward.”
“Samantha Sheeber is a partner in making transactions successful. She’s resourceful, respected, smart, funny as hell, and is swift to constantly embarrass us (and clients) because she sees the end while we all muddle in the middle. She saves time. She is selfless and fast and conscientious. She’s loyal to the notion of selflessly getting stuff done. She cultivates great talent. And she makes the process fun, even when she is mad at us for asking the same impossible question 11 times hoping for a new result (a solution for which — by the way — she often discovers).”
“As an active developer in New York City, Magnum Real Estate Group is proud to have partnered with Starr Associates, LLP as our legal counsel in 5 significant projects valued at approximately $800 million. Over the last 5 years, Starr has provided us with exceptional advice on condominium Offering Plans and related transactions. Partner Samantha Sheeber, Esq. and her team have professionally guided us, and provided creative and effective solutions when needed.”
“I have had the fortunate opportunity, over the past 16 years, to work with Allan Starr and Samantha Sheeber who I consider to be experts in the field of real estate law. They, together with their team, have a deep understanding of Attorney General Offering Plan registrations and continually seek to identify creative solutions to complicated issues. Their level of integrity and commitment are unwavering no matter how large or small a project. I completely endorse Starr Associates LLP and look forward to our mutual continued success.”
“Starr Associates’ specialty in the creation and representation of condominiums is unmatched. Their knowledge, experience and professionalism in the office condominium sector is best-in-class. Starr Associates’ hard work and expertise has been critical to the success of our firm’s office condominium projects.”
“Starr Associates have been our condominium attorneys for many years. Their counsel goes well beyond just drafting the condominium documents, which of course they do extremely well. They also represent us and our brand with condominium unit purchasers, and with our lenders and partners on condominium related matters. We have always found Starr’s attorneys to be professional, responsive and cost-conscious.”