05/19/2020
The market for sales of Unsold Sponsor Units blocks in New York has always been active in both “up” and “down” markets, and even today during the current “coronavirus” down market, we are reasonably busy completing several deals that were agreed upon 3-6 months ago, as well as starting a few new deals.
Unsold Sponsor Units are co-op or condo apartments that years after the conversion are still occupied by Rent Stabilized and Rent Controlled tenants. The cash flow (rent vs maintenance charges) from these apartments is usually either negative, or minimally positive.
The profit from investing in Unsold Sponsor Units blocks comes from sales of the apartments that have become deregulated upon their vacancies, and not from their rental cash flow.
Due to this lack of any meaningful cash flow regular banks would not finance purchases of Unsold Sponsor Unit blocks, and these blocks – of a small, or a large size, with a slight positive, or very negative cash flow - have always been purchased by investors for “all cash”.
Nowadays, when the investment value of regular multifamily (rental) buildings have decreased because of insufficient rent collections, the value of Unsold Sponsor Units (also occupied by RS and RC tenants) has not suffered too much.
And because the vacancies in Unsold Sponsor Unit blocks occur regularly - irrespective of the market condition (good or bad), or the cash flow (high or low) these blocks have in today’s market not only retained their appeal to investors, but in comparison with regular rental properties have become even more attractive.
