A venture has been put together by Jonathan Miller, the president and CEO of the real estate appraisal firm Miller Samuel in New York, Gerald Guterman, a property owner and Westwood Capital, an investment bank, to buy $1 billion in new residential condominium buildings from banks for conversion to rental properties.
The venture is called Condominium Recovery LLC, according to a Reuters article by Ilaina Jonas yesterday. Banks, it said, are reluctant to foreclose on loans and get property instead because it means that they have to book the loans as a loss and take a hit to their already wobbly bottom lines.
"Vacant condo project lenders are downright ostrich-like in the face of an unmitigated disaster," Daniel Alpert, managing Partner of Westwood Capital, said in a recent interview, referring to the widespread practice of banks extending loans instead of foreclosing on commercial real estate properties, the article continued, adding that Mr. "Guterman says banks would be better off selling their buildings to his group at a price that would support apartment investment, as opposed to the typically higher condo prices."
"The whole question is, especially after all of the reserves are gone, do you take the unlimited liability and run with it, or do you deal with someone who has credibility and has the funds, and sell it to them on a reasonable basis, which today is a rental basis?" Mr. Guterman said in the article.
The article maintained that "In Manhattan alone, about 6,500 condo units completed or near completion but have not been listed for sale" and that "Add to that new listings on the market, and that figure jumps to 8,500."
According to the article, "Condominium Recovery LLC is eyeing an average 10 percent return, and expects to hold the properties for about four years. Based on market conditions then, it could sell rentals as co-ops or condominiums. or it could create an apartment real estate investment trust."
"A condo apartment is a wonderful rental opportunity," Mr. Guterman told Reuters, adding that condos often have better finishes and details, and the rooms often are 15 percent larger on average than units built as rentals and they are often in better locations.
"You're generally in a much better location."
An article today by Candace Taylor at therealdeal.com said that Mr. Miller will not be involved in the development end of the business but will be conducting appraisals of properties.
The article, however, said that "not everyone in the industry is so sure" that "it's no different than consulting with a developer," quoting Reba Miller, the president of RPMiller & Associates, that "it's a conflict."
Earlier in his career, Mr. Guterman made many large conversions of condominium and cooperative properties, owned the former Stanhope Hotel at 995 Fifth Avenue and a collection of Old Master paintings.
The venture is called Condominium Recovery LLC, according to a Reuters article by Ilaina Jonas yesterday. Banks, it said, are reluctant to foreclose on loans and get property instead because it means that they have to book the loans as a loss and take a hit to their already wobbly bottom lines.
"Vacant condo project lenders are downright ostrich-like in the face of an unmitigated disaster," Daniel Alpert, managing Partner of Westwood Capital, said in a recent interview, referring to the widespread practice of banks extending loans instead of foreclosing on commercial real estate properties, the article continued, adding that Mr. "Guterman says banks would be better off selling their buildings to his group at a price that would support apartment investment, as opposed to the typically higher condo prices."
"The whole question is, especially after all of the reserves are gone, do you take the unlimited liability and run with it, or do you deal with someone who has credibility and has the funds, and sell it to them on a reasonable basis, which today is a rental basis?" Mr. Guterman said in the article.
The article maintained that "In Manhattan alone, about 6,500 condo units completed or near completion but have not been listed for sale" and that "Add to that new listings on the market, and that figure jumps to 8,500."
According to the article, "Condominium Recovery LLC is eyeing an average 10 percent return, and expects to hold the properties for about four years. Based on market conditions then, it could sell rentals as co-ops or condominiums. or it could create an apartment real estate investment trust."
"A condo apartment is a wonderful rental opportunity," Mr. Guterman told Reuters, adding that condos often have better finishes and details, and the rooms often are 15 percent larger on average than units built as rentals and they are often in better locations.
"You're generally in a much better location."
An article today by Candace Taylor at therealdeal.com said that Mr. Miller will not be involved in the development end of the business but will be conducting appraisals of properties.
The article, however, said that "not everyone in the industry is so sure" that "it's no different than consulting with a developer," quoting Reba Miller, the president of RPMiller & Associates, that "it's a conflict."
Earlier in his career, Mr. Guterman made many large conversions of condominium and cooperative properties, owned the former Stanhope Hotel at 995 Fifth Avenue and a collection of Old Master paintings.
Architecture Critic
Carter Horsley
Since 1997, Carter B. Horsley has been the editorial director of CityRealty. He began his journalistic career at The New York Times in 1961 where he spent 26 years as a reporter specializing in real estate & architectural news. In 1987, he became the architecture critic and real estate editor of The New York Post.
6sqft delivers the latest on real estate, architecture, and design, straight from New York City.
