New York's Cooperative and Condominium Community

Habitat Magazine October 2020 free digital issue

HABITAT

BRICKS & BUCKS

BUILDING PROJECTS IN NYC CO-OPS/CONDOS

Chelsea Condo Board Flips Apartment, Pockets $650,000

Bill Morris in Bricks & Bucks on March 18, 2020

Chelsea, Manhattan

Chelsea condo board, right of first refusal, flipping apartment.

Frank Arends helped his Chelsea condo board turn a quick $650,000 profit.

March 18, 2020

Frank Arends was serving on the board of his 350-unit Chelsea condominium last year when his downstairs neighbor came to him seeking advice. The neighbor wanted to sell his apartment, quickly, and since Arends has worked as a real-estate broker in New York for the past 15 years, the neighbor hoped Arends could give him some insight on the apartment’s value and the conditions of the current market.

Arends, 68, did a little research and pegged the value of the 10th-floor apartment, with sweeping views of Hudson Yards, at $1.6 million, maybe a little more. “He wanted to sell it fast,” Arends recalls, “but I told him the market is very slow right now, and apartments usually sit for about 100 days. I asked him why he had to sell so fast.”

The answer was that the neighbor was moving to Thailand, and he needed money to buy an apartment there before someone else snapped it up. He revealed that an investor had offered him $1.1 million for his condo in Chelsea. Then the man submitted a sale application to the condo board for a low-ball $999,000, possibly as an incentive to buyers who would avoid the “mansion tax” that kicks in on homes priced at $1 million and up.

“If ever there was a time for a condo board to exercise its right of first refusal, this was it,” says Arends, a native of the Netherlands who worked as a model and a forklift salesman before diving into the shark tank of New York City real estate. “I went to the board and said it’s worthwhile to get a short-term loan and buy the apartment, even if we have to keep it on the market for six months. We should do this because we want to keep the prices of apartments up. If somebody's selling an apartment off, then everybody will be affected by it. No buyer will want to pay more than the last comparable sale.”

The condo board liked the idea and asked its property manager, Jared Mosery of FirstService Residential, to check into financing possibilities. Mosery came back with an offer for an $850,000 line of credit from FirstService’s financial wing. By dipping into its reserve fund, the board would be able to buy the apartment without assessing unit-owners or raising their common charges. But before the deal could go through, a majority of unit-owners had to approve the loan.

“That’s always difficult,” Arends says, “because people only pay attention when something affects them personally. We had a meeting and it was back and forth, and it got kind of heated because people were angry at the seller. Why the hell would he do that? Of course, everybody can do whatever they want. That’s why you buy a condo.”

 After tempers cooled, a majority of the unit-owners approved the loan. Two months after the loan closing, a resident in the building bought the apartment for $1.65 million – meaning that by flipping the unit, the condo association had enriched itself by $651,000.

To avoid any conflict of interest, Arends accepted no commission for his role in the transaction. His reward was a sense of satisfaction. “It was a big deal for the building,” he says. “They didn’t have to fix the apartment or even paint it. It was a win-win. I’ve sold my apartment since then, but I was happy I could leave this as my legacy.”

He’s still scratching his head over one aspect of the deal: “I can’t believe a person would throw away so much money.”

PRINCIPAL PLAYERS – PROPERTY MANAGER: FirstService Residential. LENDER: FirstService Financial.

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