Getting into NYC’s strictest co-ops

Jun.June 01, 2011 05:25 PM

From left: 740 Park Avenue, 834 Fifth Avenue, 4 East 66th Street and 2 East 67th Street

Like mushrooms, glass-walled condos and fancy rentals with wine storage popped up with fury across the city in recent years, and seemed to fundamentally alter New York’s housing stock in the process.

No longer would the pinnacle of city living be the exclusive Uptown co-ops that had ruled the roost for decades, the trend seemed to suggest, but instead this new crop of buildings with impressive architecture and an A-to-Z range of luxuries. It didn’t hurt that they were a lot easier to get into.

Indeed, why would a buyer subject himself (or herself) to invasive co-op board packages and taxing interviews, the thinking went, when that buyer could get just as nice a home without having to trot out reference letters galore?

But then a funny thing happened when the recession hit: Many condos tanked in value, in part because their open-door policy was seen as exposing them to risks like job-challenged residents missing maintenance payments. Meanwhile, co-ops, whose residents are required to have deep cash reserves, generally weren’t so hard-hit.

That resiliency might explain why co-ops, for all the hoops they make buyers jump through, continue to be popular, says Michael Gross, author of “740 Park: The Story of the World’s Richest Apartment Building.”

In addition, the city’s co-ops “are still some of the best buildings, in terms of quality, layout and spaciousness,” says Gross, adding that they probably won’t be upstaged anytime soon. “They will survive this moment, I think, and hold their value for many, many years to come.”

That said, winning approval of the co-op boards at these country-club-type high-rises isn’t for the faint of heart: In addition to occasional controversial rejections (as anybody following the lawsuit by a former board president of the Dakota against that storied co-op’s board will know), most have strict rules.

Almost all of the city’s top co-ops, for example, ban subletters. Most frown on financing. Some require an interview of your four-legged friend and prohibit dogs from using front-of-the-building elevators, brokers say.

Complicating matters in buildings this elite (years ago, author Tom Wolfe deemed many of them “Good Buildings”) is the fact that many of the rules are unwritten.

Further, brokers seem to follow Fight Club rules when talking about these über-residences — one doesn’t talk about co-ops. Nonetheless, The Real Deal went inside the clubby world of the city’s priciest co-ops to determine some of the ground rules. This roundup is far from complete — standouts like 950 Fifth, packed with hoteliers and investment-bank chiefs, and 778 Park, where Brooke Astor had a duplex, are just as notorious but too hard to get good data on. Still, this list may shed a little light on a shadowy process.

1. 740 Park Avenue

The city’s ritziest co-ops are found on the Upper East Side, and Fifth Avenue, with its Central Park vistas, is generally where the most elite buildings stand. But 740 Park, a 19-story, 30-unit limestone co-op with a storied pedigree, may be the ne plus ultra when it comes to board requirements.

To wit: The “multiple,” which refers to how much in liquid assets a buyer must have on hand in order to be considered for admission into the co-op, is equal to at least four times the purchase price, according to Gross.

So the 740 Park duplex currently being marketed by Sotheby’s for $23 million, (which, to be fair, does have a walnut-paneled library and marble baths) would require a buyer to have $100 million in a bank account that he or she could withdraw on command.

Perhaps that rule is too strict; the unit has languished on the market for three years, with price chops along the way, according to StreetEasy, the real estate data service. (In 2008, the apartment, #45C, was listed for $35 million, which might have required cash reserves of close to $150 million.)

Still, the rule shows no sign of being relaxed, brokers say.

Also, the board may look askance at buyers who don’t run in banking circles, but instead news and entertainment ones. Home to John Rockefeller Jr., Saul Steinberg and Ron Perelman through the years, No. 740 has famously rejected Barbara and Barbra — Walters and Streisand — and Neil Sedaka as well, Gross reported.

2. 834 Fifth Avenue

Like at 740 Park, the presence of a Rockefeller may be a good tip-off that the walls of a co-op are not going to be easily breached, and 834 Fifth Avenue, a 15-unit limestone Art Deco gem where Laurance Rockefeller once lived, is no exception.

Besides the usual ban on mortgages, buyers have to shoulder a relatively hefty flip tax of 3 percent of the purchase price, or around $1 million on a $40 million spread, which is slightly higher than in other comparable Fifth Avenue buildings. At 960 Fifth, say, buyers fork over just 2 percent. In contrast, at any modest non-VIP Downtown co-op, that fee may be just 1 percent, or even tinier, because it’s based on a fixed dollar amount for each of the shares being purchased, brokers explain.

The building, which counts media mogul Rupert Murdoch and Jets owner Woody Johnson among its residents, also demands a soup-to-nuts list of assets from buyers, including antiques, paintings and retirement packages, with their values corroborated by insurers, so buyers can’t bluff, explains Laurence Kaiser of Key-Ventures, who has frequently worked as a broker there.

In fact, he’s sold #9-10A four times, he said, and his sale of #8B at No. 834 in the late 1970s was New York’s first $1 million deal. Since then, he says, requirements have become more specific, in part because then there weren’t as many millionaires. Now, he says, “somebody can be a millionaire one day and broke the next,” so co-ops, not just at this location, want more proof of liquidity.

In fact, when Rockefeller bought in, he probably had to provide a letter from whoever oversaw his trust fund at J.P. Morgan, Kaiser guesses, versus today, when he might have to produce a heavy stack of paperwork. “I think [back then] he might have needed just a smile,” Kaiser jokes.

At 834 Fifth, the sizable flip tax “guarantees that the roof is done, the flowers look beautiful, and the uniforms on the doormen are fresh,” Kaiser says. However, some rules are notably more lax than those of other top-flight buildings — dogs are actually allowed, for example.

3. 4 East 66th Street/845 Fifth Avenue

This dual-address, 12-story building, which was built in 1920 and features 16 apartments, was designed by ubiquitous Uptown architect J.E.R. Carpenter, who was known for his spacious rooms with lofty ceilings.

Carpenter’s imprimatur, along with that of also-celebrated architect Rosario Candela [see 2 East 67th Street], can be a sign that a building will have a high barrier to entry. One who did pass muster here was Howard Solomon, the chief executive of pharma giant Forest Laboratories, who bought a four-bedroom, seventh-floor unit with five wood-burning fireplaces for $25 million in 2003. (Solomon’s future fortunes, however, might be in question; in the wake of admitted drug marketing violations last year, Solomon is now in the crosshairs of Washington regulators, who say he must cease doing business with the government.) However, it’s hard to know what the criteria might be for him and others because apartments hit the market so infrequently.

Buying at No. 4 might also require some sleuthing skills. A unit belonging to Veronica Hearst, of the Hearst publishing empire, was lost to lenders in 2008, according to city records, after Hearst got into trouble with debt. Yet, further tangling the chain of ownership, one of those lenders, hedge fund New Stream Capital, filed for Chapter 11 in March.

4. 2 East 67th Street

Many buyers in rareified towers like this limestone 15-unit high-rise, built in 1928, bring more to the table than just fat bank statements. In fact, it’s not uncommon that some boast vast collections of luxuries such as Louis XVI armoires, say, or rows of Surrealist paintings.

Yet for a deal to happen, buyers need to show that they could hit up an ATM at any moment, so to speak, and pull out wads of cash — and not wait for an auction at Sotheby’s to unload that antique furniture, says Richard Steinberg, a broker with Warburg Realty, who declined to speak specifically about 2 East 67th Street but was commenting on these types of co-ops in general.

The key, then, is to have largesse that can be tapped easily if, say, a hedge fund collapses, which the recession proved could be the case. The finest co-op boards want to know that a buyer will be able to cover his monthly maintenance, which could be $10,000, no matter what kind of trouble blows in. “Picassos and jewelry really don’t count,” Steinberg says. “It’s not about net worth, but liquidity.”

Also at 2 East 67th Street, not only does a buyer need to be wealthy, but he also must part with some of his money for philanthropic causes, brokers explain.

Of course, it can’t hurt to have some intangibles going for you, like being related to a prominent family. Last year, Eduardo Safra, an heir to the Safra global banking fortune, bought a pair of adjacent units on the fourth floor of the building for a total of $18 million.

Still, Arthur Carter, the investment banker turned publisher on the building’s board, has been known to reject well-qualified candidates, including a friend of Carter’s ex-wife, actress Dixie Carter, according to reports. “This building is sort of impossible to get in, not only for you and me, but for rich people as well,” Gross says.

5. 770 Park Avenue

The board here has seven people, brokers say, which makes it slightly easier than the more autocratic buildings, because at least one’s offer will be subject to debate. But impeccable bank records are still key.

When buying in co-ops like this redbrick, Candela-designed confection at East 73rd Street, buyers are expected to pay entirely in cash, and not rely on a loan from a bank. Faced with competition from condos over the years, some respected co-ops have eased this rule somewhat, and now may allow mortgages for 50 percent of the purchase price, but those instances are still rare (scroll down for sidebar).

However, the co-ops on this list have not budged on that front, even if the wealthy crave the tax perks that come with a home loan, says Kirk Henckels, a broker with Stribling who often sells in these types of buildings. “I’m surprised some haven’t changed to allow for the tax deduction,” he says.

Certainly, if a buyer were to take out a typical $2 million loan to buy #10D, a five-bedroom, four-and-a-half-bath apartment currently listed for about $12 million, the savings generated because of that mortgage tax credit could be about $30,000 a year, or about four months of maintenance there.

But even when buyers don’t flinch about cash deals, problems can develop, like with the case of Hassan Nemazee, an Iranian investor and political fund-raiser who was busted last year for bank fraud and subsequently lost his apartment at No. 770 to federal prosecutors, city records show. It has not been sold yet, according to city records.

6. 812 Fifth Avenue

Not all that is posh is prewar; 812 Fifth Avenue, a 19-story, 30-unit building constructed in the 1960s (despite what its limestone façade might suggest), is also a coveted co-op, brokers say. Part of that can be explained by its East 62nd Street location, they add, which is tantalizingly close to Midtown.

Of course, No. 812, where Core is now listing a 17th-floor two-bedroom with 2,000 square feet of terraces for $12 million, requires buyers to plunk down cash, and cash alone, to make the cut.

But in a twist, the building, which was once home to former Vice President Nelson A. Rockefeller, does allow units to be used as pieds-à-terre, or essentially part-time crash pads, which the other co-ops on The Real Deal‘s list strongly forbid. Along the same lines, top co-ops, which for years have shunned subletting or made it extremely difficult to rent out apartments to nonresidents, are starting to discuss ways that it might responsibly work, says Stuart Saft, the attorney who heads the Council of New York Cooperatives & Condominiums.

“It’s been the big issue as of late,” says Saft, who suggests that more co-ops of different stripes might someday adopt a rule of thumb where shareholders can sublet for two years but only after living there for two years — and receiving approval from the co-op board, natch.

7. 820 Fifth Avenue

To understand how hard it can be to get into this 1916 co-op, which contains a “chauffeurs’ lounge” and whose 12 limestone-fronted stories contain just one unit a floor, consider the case of Jeff Blau, the president of the Related Companies.

Despite helping to run one of the country’s most successful real estate companies, Blau was rejected in 2009 when he tried to buy the apartment belonging to Ara Hovnanian, the homebuilder, for $31 million.

Perhaps inside offers had a better chance; that unit was later sold to neighbor Lily Safra, the mother of Eduardo Safra [see 2 East 67th Street] for $33 million. To finance that purchase, Safra, a Brazilian heiress, sold her penthouse apartment to Kenneth Griffin, a hedge-fund executive, for $40 million.

Another financier who calls 820 Fifth Avenue home is Nils Tcheyan, a director at the World Bank. In the end, whom you rub elbows with on the cocktail-party circuit might be the factor that puts you over the top (or perhaps dashes your hopes), brokers say.

Blau, whose employer is very close to Mayor Bloomberg, could have been sunk because he is too New York. In a twist, brokers say, co-ops sometimes like people who are far outside the city’s social orbits.

“I think in some of the buildings, if the buyer ran a bank in Missouri, and were nice and quiet, they would be better off,” Kaiser says. “They don’t have to know every person in the Social Register.”

8. 435 East 52nd Street

Far from Central Park’s leafy paths, River House, at 435 East 52nd Street, has held its own for years against Fifth Avenue’s castles.

Apartments in the 260-plus-unit, 1931 Art Deco building have wood-burning fireplaces and both butlers’ pantries and maids’ rooms, and many enjoy East River views. What it takes to buy here, where Henry Kissinger is a resident but Gloria Vanderbilt was rejected, is so particular, perhaps, it’s shrouded in secrecy, in what might be the tightest application of the Fight Club rule in Manhattan.

Indeed, Eva Mohr, a Sotheby’s broker who is marketing a four-bedroom there for $14.5 million, declined to provide any purchasing ground rules, even though her listing has been on the market for more than a year. “I just can’t talk about this building,” she said. “I’m really sorry.” Other units, like a five-bedroom with private elevator vestibule, listed at $15 million, have had an even tougher go of it, possibly because of the litmus test buyers must undergo; it has sat on the market for two years.

Still, there does seem to be enough demand to keep prices strong. In April, a two-bedroom sold for $4.775 million, according to StreetEasy, which was actually slightly more than its list price of $4.75 million.

In general, for this kind of elite building, debt levels can matter as much as salary, brokers say. “If somebody has a house in the Hamptons with a $1 million mortgage, but they make $5 million a year, the board won’t care. But if someone has many properties, with $30 million in debt, they will care,” says Inez Wade of Stribling, who frequently sells in Uptown co-ops. Buyers should clean up any liens in advance, she adds. “If there’s some kind of legal judgment, that would characterize them negatively.”

Additional reporting by Kaitlin Ugolik

Some co-ops now ‘easier’ to get into

By definition, there are no easy co-ops. Just assembling thick board packages is a tough task, even if the broker handles it. But a handful of Uptown co-ops may have gotten a touch easier to get into in the last few years, on account of the fact that they now allow buyers to finance their purchases with mortgages. Some buildings allow you to finance 40 percent of the purchase price, brokers say.

One that fits this bill, according to brokers who sell there, is 131 East 66th Street, at Lexington Avenue, which is a 12-story, 37-unit co-op where the apartments include prewar details like beamed ceilings and hardwood floors. The most expensive unit to close there recently, according to StreetEasy, was a five-bedroom that traded in 2009 whose last list price was $12.5 million.

However, cheaper units have come on the market, like a 725-square-foot one-bedroom (with a maintenance fee of $2,109) listed at $525,000. Sorry, bargain hunters, it currently has a signed contract.

Otherwise, some of the postwar co-ops on the side streets in the East 80s — 11 East 86th Street, a white-brick building with about 70 units, for instance — also will now allow buyers to purchase with mortgages, though they wouldn’t necessarily want to be known as being less exclusive than before, brokers add. “‘Easy’ is a strange word,” Kaiser says. “You have to put quotes around it.”

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