Paula Chin in Legal/Financial on December 19, 2017
Since they were built half a century ago, the 1,800 units in the massive Bay Terrace Cooperative in northeastern Queens have been under a 99-year land-lease. That’s an unconventional arrangement in which a co-op owns the building but only leases the land it sits on. With about 40 years left on their lease, shareholders were already feeling the pinch – banks were growing more skittish about offering loans, and the complex was facing the prospect of precipitous rent hikes after the lease expires. There was even the possibility that the owner of the land, Cord Meyer Development, would terminate the lease and force the co-op to move out.
Negotiations dragged on for a dozen years, but efforts by the nine sections of the co-op to buy the land always fell through. Until now. Under a recently announced deal, all nine sections are purchasing their parcels, making Bay Terrace the first co-op in Queens to do so.
“After working on this for 12 years, I never thought we’d reach an agreement,” says Warren Schreiber, the board president at Section 1. “This is a milestone that will secure the future for thousands of residents. It’s a huge, huge deal.”
The exact terms of the purchase have not been disclosed, but Geoffrey Mazel, a partner in the law firm of Hankin & Mazel who represents five of the sections, says Bay Terrace is paying about $30 million in all for the combined parcels.
Section 7 had been in especially critical condition, with an $11 million balloon payment on its existing $12 million mortgage coming due in 2020. “Our shareholders would have had to come up with that money and still not own the land under us,” says board president Gerry Carter. But with the purchase deal under its belt, the board was able to secure a new loan that allows it not only to pay off both its existing mortgage and Cord Meyer, but also save money. “We’re paying $30,000 less every year,” Carter says. “As a board member, I’m used to receiving all kinds of complaints, but when I announced this deal at a shareholder meeting, I got applause.”
The financials were even more favorable for Section 5. The co-op, which has an undeveloped parcel of land on its property, swapped that parcel for ownership of the rest of the land under them. “Cord Meyer had offered us a buyout price as well, but we felt it made more sense to give up the parcel rather than impose a large, permanent debt on the co-op,” says board president David Baron, a principal at Metro Management, which oversees three sections at Bay Terrace. Cord Meyer is happy, too. “It’s 130,000 square feet of open space, about one-fifth of the section’s total property,” says Anthony Colletti, the company’s chief operating officer. “We’re going to build 36 townhomes on it.”
Since the deal closed, there have been plenty of kudos all around. “Yes,” says Joseph Davi, president of Section 2, “we had assemblymen and councilmen pitching for us and trying to find a happy medium, but I have to hand it to Cord Meyer, who really made a good-faith effort for this to happen.”
Mazel agrees, but he also praises all nine boards at Bay Terrace. “Everyone was just trying to do the right things for thousands of people,” he says. “In my 30-year career, this is one of the greatest things I’ve been part of.”
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