Owners May Fly To Co-ops
by PETER GRANTFrustrated landlords are threatening to get out of the rental business altogether and turn their buildings into cooperatives in the wake of yesterday's rent deal in Albany.
NY Daily News, June 17, 1997
With dreams of rent deregulation dashed, many apartment building owners said the only way to make a profit from their properties was to convert them to co-ops.
Landlords said this is now possible because apartment sales are booming, creating a hot market for co-ops.
Francis Greenburger, a landlord who was one of the city's largest co-op converters in the 1980s, said he is considering converting about 20 Manhattan buildings.
"It's now less attractive to hold them as rentals and more attractive to make them co-ops," said Greenburger, who converted about 10,000 apartments during the 1980s.
Many owners had been holding back on conversion plans to see whether rent regulations would be scrapped.
But they're dusting off their plans now that Gov. Pataki and Senate Majority Leader Joe Bruno failed to achieve vacancy decontrol, which would have removed apartments from regulation as occupants moved out.
"It doesn't make sense not to convert any halfway decent building," said a landlord who asked to remain anonymous.
Converting a building is very expensive, time-consuming and often controversial. But by doing so, a landlord achieves the equivalent of vacancy decontrol.
Rental apartments in converted buildings are only governed by rent regulations as long as they are occupied. Once they become vacant they either get sold or can be rented at market rates.
During the real estate boom of the 1980s, thousands of landlords used conversions as a way of freeing their buildings from rent regulation. In 1987 alone, 893 co-op offering plans affecting 44,847 apartments were filed with the attorney general's office.
In the recession of the early 1990s, however, the co-op market collapsed and the pace of conversions slowed to a crawl. Only three conversion plans were submitted to the attorney general in 1995 and 1996.
But co-op sales have begun to accelerate again as a growing number of professionals decide to buy rather than rent.
Real estate experts predict that another wave of conversions will soon follow. "For buyers of apartment buildings, co-op conversion is coming back into vogue," said East Side broker Paul Massey.
"A lot of landlords were waking up to the fact this morning that they're going to have to live with rent laws for the indefinite future," said Stuart Saft, chairman of the Council of New York Cooperatives. "They'll now consider conversions as the best way to liquidate their investments."