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March 2, 2009

Co-op of the Day: 111 Hicks Street, #8N

111-Hicks-Street-Brooklyn-0309.jpg
For a decently laid-out, two-bed, two-bath apartment in a prewar elevator building, Apartment 8N at 111 Hicks Street in Brooklyn Heights looked priced to sell to us at $650,000 until we noticed the cumbersome monthyl maintenance of $1,665. After all, this is equivalent to a $750,000 apartment with a maintenance of $1,100 or so. Think it'll sell?
111 Hicks Street, #8N [Douglas Elliman] GMAP P*Shark




Posted by Brownstoner at 12:40 PM | Comments (32)
Categories: Brooklyn Heights, Co-ops

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Comments

Monthly maintenance that is the same as the rent for a 1-bedroom apartment is called "cumbersome"? That's a great euphemism.

I'd say paying 2/3 of a million dollars for a boring apartment in a behemoth building is "cumbersome" to say the least.

Posted by: tybur6 at March 2, 2009 12:48 PM

Ouch, that is a LOT of maintenance. Maintenance fees like that strengthen the case for buying houses or renting.

Posted by: TownhouseLady at March 2, 2009 12:50 PM

wow that maintenance is ridiculous!
the apt is cute - but the bldg is huuuuuge - not really my thing

Posted by: gemini10 at March 2, 2009 12:51 PM

Nice building, nice pad. Maintenance is a dealbreaker.

Posted by: SnarkSlope at March 2, 2009 1:00 PM

I saw those after the conversion. Tiny apts. This one seems tiny also for a 2BR. No views either it seems.

Posted by: denton at March 2, 2009 1:01 PM

Either I've been dienfranchised or the voting machine is broken.

Posted by: dittoburg at March 2, 2009 1:17 PM

Non merci! That maintenance is only going to go up...total deal breaker here. Significant reduction in the 20% range in our opinion for such a cumbersome maintenance.

Posted by: pierre de taille at March 2, 2009 1:48 PM

I saw these apts. They are pretty tiny but the roof deck is amazing. Tourists would pay $25 to go up there.

Posted by: l12 at March 2, 2009 2:23 PM

it's so obnoxious when they so blatantly use photoshop to sun drench the windows to the max to mask terrible views.

*r*

Posted by: PitbullNYC at March 2, 2009 2:24 PM

Every apartment I've ever seen in the old St. George - yes, it's that building - appealed to me until I did my spread sheet and factored in the real cost of that maintenance. It's a shame. I'm sure the maintenance is high to cover the cost of the loan that the building must have had to take out to do the conversion and renovations. But I would have expected it to drop at this point if the board had refinanced. Anyone know what the deal is behind the financials of this otherwise appealing building?

Posted by: BrooklynSteve at March 2, 2009 2:39 PM

Every apartment I've ever seen in the old St. George - yes, it's that building - appealed to me until I did my spread sheet and factored in the real cost of that maintenance. It's a shame. I'm sure the maintenance is high to cover the cost of the loan that the building must have had to take out to do the conversion and renovations. But I would have expected it to drop at this point if the board had refinanced. Anyone know what the deal is behind the financials of this otherwise appealing building?

Posted by: BrooklynSteve at March 2, 2009 2:40 PM


TWENTY-THOUSAND DOLLARS per year... BEFORE your mortgage... the mortgage itself is silly, but this is crazy talk.

Posted by: tybur6 at March 2, 2009 2:53 PM

supposedly there is a certain expensive building in brooklyn heights that caters to wealthy devil worshippers (im being serious btw) ala rosemary's baby style was on the UES or something. it could explain the high maintenance fees! who knows! im losin' it today.

*r*

Posted by: PitbullNYC at March 2, 2009 3:01 PM

They must have really interesting coop board meetings.

Posted by: SnarkSlope at March 2, 2009 3:10 PM

"supposedly there is a certain expensive building in brooklyn heights that caters to wealthy devil worshippers"

That's odd...I've never noticed any New Jersey hockey fans in the neighbourhood.

Posted by: Biff Champion at March 2, 2009 3:22 PM

ha clearly Biff is British with the use of our in neighbor
hahahaha

Posted by: gemini10 at March 2, 2009 3:26 PM

Oh, so that's why they canceled my contract (Monday Links comment) on that condo. They found out I worshiped the Rangers!

Posted by: TownhouseLady at March 2, 2009 3:29 PM

My homeland is showing...

Posted by: Biff Champion at March 2, 2009 3:34 PM

THL, I thought there were only range (and other appliance) worshippers on this site!

Posted by: Biff Champion at March 2, 2009 3:35 PM

"it's so obnoxious when they so blatantly use photoshop to sun drench the windows to the max to mask terrible views."

Yes, awfully bright yet foggy day out there . . .

Posted by: Nomi at March 2, 2009 3:39 PM

What are you actually paying for with "maintenance"? It seems to vary dramatically from building to building and BrooklynSteve suspected above a large loan for conversion but wouldn't this be covered out of the monies received for sales?

In such a case, would you be paying down the capital cost of the loan (so that the maintenance goes down over time) or just the interest - which might be subject to some hefty increases if rates rise.

On the other hand, what would you expect the lowest and average maintenance charge to be for a place this size?

Posted by: the chicken at March 2, 2009 3:42 PM

Maintenance includes the underlying mortgage, R/E taxes, services, utilites, (usually except ind. elec), prof fees. Mortgage may have been interest-only and then ballooned; also may have been refi'd to pay for capital projects.

Average maintenance for a full-service coop is now about $1.50 share/month (close to the suare footage). Real estate taxes went up 13% this year, energy costs have gone up abotu 40% over the past two years.

Posted by: BH76 at March 2, 2009 3:55 PM

Thanks for the info BH76.
What is the underlying mortgage for? Let's say I own the whole building. Then I get bored of it and sell it to the tenants. Do they not take out their own mortgages for their own shares? If interest rates skyrocket (not inconceivable in the next few years), it's going to kill any coop with a substantial mortgage.

Are there any rules regarding how much the underlying mortgage can be limited to or is it just down to the board and how much the bank is willing to lend?

Posted by: the chicken at March 2, 2009 4:10 PM

chicken -- The cooperative corporation owns the building; shareholders buy shares that give them right ot proprietary lease for specific unit. A sponsor sells the shares -- not the building. This building's sponsor may have left it with a bad mortgage, or it may have needed a big capital expenditure financed through a mortgage. The maintainance here is high as it is a big building (usually that helps spread the pain).

The mortgage is the bank's assesment of the vlaue of the building, and the banks will factor % resident owners (more is better), reserve funds, arrearages -- everything. Coop mortages are generally 7-10 years in length -- no more.

Posted by: BH76 at March 2, 2009 4:56 PM

This is a nice old Art Deco building. The roof terrace is simply unbelievable. The thing for a buyer to do if they are looking at various co-op buildings is to compare the "debt per share" ratio. In other words how much debt, both mortgage and underlying mortgage, will you be servicing per share. A similar apartment with lower maintenance but higher price may work out to be the same.
Obviously if the maintenance on this apartment were $900 the sale price (and hence your mortgage) would be a lot more. For those with good incomes, but not much savings, something like this would make sense in tems of making the down payment. The old St George has a lot of amenities including a pool and health club membership that comes free with ownership. 8th floor windows must have noce views even if they face Brooklyn and it is a full-service building. definitely not for the frugal but then buying in Brooklyn Heights is not a bargain.

Posted by: sam at March 2, 2009 5:03 PM

The Chicken,

I might be able to answer this as well. From what I heard, the following is an example of condo/co-op conversion that previously had no mortgages as a rental building:

Let's say there is a landlord, who wants to sell %70 of his/her building (100 units; cost of building before the conversion is $10M). He/she has 2 options:

- Convert to condos. Sell %70 apartments (70 units) at $100K each. Money in his/her pocket = $7M + rental of remaining 30 units.
- Convert to a co-op. Get an underlying mortgage of $7.5M and run with it. Sell %70 apartments (70 units) at $50K. Money in his/her pocket = $11M + rental of remaining 30 units.

Obviously, most landlords went with the second option. While the landlord (a.k.a. sponsor) might have pocketed up to %100 of the underlying mortgage funds, as a shareholder of the co-op, he/she only has to worry about %30 of it.

Posted by: Gravis at March 2, 2009 5:31 PM

Gravis,
your analyis is a little simplistic.
when an owner wishes to convert a building to a co-op, the process generally has high costs. For one thing, the Attorney General will wish to see all DOB violations addressed, then rent-regulated tenants need to be given buy-outs, then the building's common spaces such as the entry, lobby, hallways etc generally need to be updated as NYC rent-regulated buildings often look like something out of the Soviet Gulag. All of these expenses, plus the cost of acquiring the property generally represent the bulk of the underlying mortgage. There is really little difference between paying your own mortgage interest and the corporation's mortgage interest. Market prices reflect the large or small debt service to the underlying mortgage. Co-ops are not evil tools of Satan, they are sophisticated mechanisms insuring high-quality residential units to sophisticated city dwellers. I am a big booster of co-ops. I think they are a product of NY and they work exceptionally well in NY.

Posted by: sam at March 2, 2009 7:59 PM

It's very easy for cc's to get out of hand. For our little building, taxes and fuel costs over the past two years pushed it up 25%...and we refi'd during that time, too. Another big cost for full service buildings is staffing. Doormen, porters, handymen etc. are all unionized, and you can't lay them off or cut their pay--their pay/benefits go up, too. This little apt. has a great layout, but it won't sell at this price.

Posted by: Bolder at March 2, 2009 8:51 PM

Someday we'll have a Brooklyn Heights co-op of the day thread without 90% of the comments relating to the absurdly high maintenance.

Not sure when that day will ever be, but you have to figure the law of averages will win out eventually.

Posted by: BoerumHill at March 2, 2009 10:50 PM

thanks again guys.

Wow - this could lead to a pretty f-ed up situation. I understood the basic differences between coops and condos but this adds a whole new dimension to it.

To draw an analogy to my day job, buying a cheap coop without considering the corporations finances seems akin to buying a stock on a low P/E without considering the balance sheet. ie People didn't particularly care on the way up but once you enter a shaky market they care an awful lot.

Posted by: the chicken at March 3, 2009 2:19 AM

Someday we'll have a Brooklyn Heights co-op of the day without an absurdly high maintenance.

Posted by: SnarkSlope at March 3, 2009 10:16 AM

Sam,

"your analyis is a little simplistic"
Yes, it was intentional since I didn't feel like going into details. I just pointed out one reason why some underlying mortgages are much bigger than the conversion cost.

"I am a big booster of co-ops"
Me too. I own one now and plan to buy one more next year.

Posted by: Gravis at March 3, 2009 10:29 AM

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