Having commercial tenants in a mixed-use residential Condominium or Cooperative building was good business in the past. Apartment owners enjoyed the convenience of having a gym, cafe, doctor's office or dry cleaner shop in their building. This added to the attractiveness of the building and added to the value of the residential units.
As a result of the Covid 19 pandemic, retail tenants delinquent on their rent and dues payments to the building boards have caused condo and coop homeowners to see a drop in value of their homes and their common charges have been going up to cover the shortfall in income.
When retail stores and shops anchoring residential buildings stopped paying rent to their commercial landlords, the landlords stopped paying dues to condo and coop boards.
Those buildings, many of them new developments, had come to rely on that income to cover as much as 15% of their annual budgets.
According to Leni Morrison Cummins, a New York real estate attorney at the law firm Cozen O'Connor “If you have 15% of the building not paying that means the other 85% has to pick that up”. This scenario has made if difficult for homeowners and developers trying to sell their units. Cummins adds “When someone goes to sell their unit, one of the questions is: What's the current common charges? “If you have a higher number than the rest of the market it's going to lower the property value”.
It's gotten tough with an increase in liens put on commercial units by condo and coop boards and in some cases it has now escalated into foreclosure law suits. There are unfortunately increasing examples of this possible trend that affects commercial landlords and homeowners alike.
According to David Putro, a senior vice president at Morningstar which tracks commercial mortgage backed securities deals “the weakness in securitized commercial loans has been occurring equally among national chains, boutique stores and mom and pop shops”. Putro also points out that “While the shutdown did not help, he attributed the retail sector woes to more systemic issues such as extremely high rent that pre dates Covid 19”.
For coop boards, the best solution is to negotiate an agreement with the retail tenants that can keep them afloat. The last thing a board wants is a vacancy and no income.
Vacant retail space is a huge stumbling block for perspective buyers whether it's a coop or condo.
If you are interested in selling your property or you know someone who is planning to sell their Brooklyn or New York property, whether a single family residential property, an apartment building, a commercial property, mixed use, multi family, coop or condo, vacant land or a development opportunity, call us. You will be very happy that you did.
We always bring our clients the top market price for their property and provide exceptional personalized service from initial consultation to closing.
Accord Real Estate Group
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