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The trouble with small condos and a new billion-dollar development in the Bronx—real estate news

Liability, NYC, Other, Real Estate Developments, Real Estate Legality

Disarray at 40 East 72nd Street in recent months has put a spotlight on the risks of buying into a small condo building. While there are risks associated with any type of real estate purchase, three condominium owners in this prewar building who paid $11 million each now face a financial headache as the project’s sponsor, a Greek shipping magnate, asserts the condo is insolvent. The other three units in the building have remained unsold, placing a major strain on maintenance costs—with unpaid building staff quitting en masse. Although many large condo projects have large quantities of unsold unites, it is generally easier to convert these units to rentals in a bigger building and the overall risk of ownership is more heavily diluted. Although failures as acute as those at 40 East 72nd are uncommon, a collapse in maintenance for a condominium will have a sharply negative effect on the value of the property, gravely threatening the overall investment. [1]

In brighter real estate news, Brookfield properties revealed plans for a $950 million development in the Bronx along the Harlem River—with 1350 new apartments planned as well as a new park. The four-acre site was acquired for $165 million in 2018 and thirty percent of the new units will have below-market rent in conjunction with the Affordable New York initiative. The first phase of the project is expected to be completed by 2021, with construction already underway. [2]

[1] Flynn, J. (November 2019) Nightmare on E. 72nd Street raises question: Are small condos risky? from The Real Deal Accessed November 27 2019

[2] Deffenbaugh, R. (November 2019) First look at Brookfield’s $950M Mott Haven development from Crain’s NY Accessed November 27 2019

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