MANAGEMENT COMPANY FINDS $$ FOR CO-OPS
BY ROBERT GRANT, DIVERSIFIED PROPERTY MANAGEMENT
Diversified Property Management has successfully negotiated with several lenders to provide loans to buyers in cooperatives that do not meet normal lending criteria established by Fannie Mae.
These lenders obtained two waivers from the FNMA guidelines. The first waiver is from the lending restriction due to the low number of owner occupants. The second waiver is from the restriction that the pro-rata share of the underlying mortgage does not exceed 30% of the appraised or market value of the apartment.
In Dara Gardens, a 534-unit cooperative in Kew Garden Hills, the holder of unsold shares (an investor group) owns 398 unsold apartments (74.5%). Their underlying mortgage exceeds $16 million and has a high pro-rata share of that mortgage which averages $30,000 per apartment. This is about 80% of the market value of a one bedroom apartment. Despite this, DPM found lenders who will make loans to new buyers at prevailing interest rates with a 10% down payment.
In Crestwood Bayview, a 78-unit cooperative in Bay Ridge Brooklyn, the original sponsor owns 80% of the units. The underlying mortgage is $2.5 million. The pro-rata share averages more than $32,000 per apartment which exceeds 30% of the appraised or market value. Again, DPM found lenders who will make loans to new buyers.
Shareholders who couldn’t sell their apartments and felt "trapped" because their sponsor or holder of unsold shares stopped selling can now begin to advertise their units for sale knowing that end-loans are available.
Equally important is that boards in such buildings can now pressure their sponsors to sell through the same end-loan financing programs. Sponsors and investor groups can no longer hide behind the argument that if they sell, they would have to hold the note themselves.
Finding lenders who could obtain these two waivers from FNMA lending guidelines for shareholders in such cooperatives has been a major goal of Diversified Property.