To buy in New York’s most covetable prewar buildings, you have to open your books to your neighbors and sit for a persnickety co-op interview. Until a few years ago, that grueling process had a cozy outcome: Because a co-op has no deed, no paperwork would be filed with the city. You could spend millions, and your employees, your ex, and “Page Six” would have a tough time finding out about it.
That all changed in 2006, when Albany finally wised up and required that co-op sales be listed as public records. Suddenly, you couldn’t keep that purchase secret. The urge to hide never went away, however, and lately, high-end buyers think they’ve found a new way to be discreet. They are asking co-ops to break a long-standing rule and allow them to buy under corporate entities, typically LLCs, to maintain their privacy.
Co-ops don’t love this, and they don’t often allow it, but some do—typically on a case-by-case basis. (A number of LLCs own space in the residential section of the Pierre, and this and other hotel co-ops seem to be leading the trend.) Attorney Stuart Saft, who chairs the Council of New York Cooperatives & Condominiums, notes that if maintenance is overdue, collecting from a corporate entity can be tricky, because it can transfer its assets to another entity or simply dissolve. “If a board were to think that this was just another way for owners to insulate themselves, they’re certainly not going to want to do that,” says Gumley Haft’s Daniel Wollman. He says he’s recently seen a large LLC deal go through, though. (When co-ops say no, says Saft, the next best thing is buying through a trust, which boards have been more willing to countenance. One Fifth Avenue co-op duplex was sold this way last month for $25 million, and Saft says he’s been dealing with one such request a week these days, up from a few a year.)
Well-off individuals are used to structuring their investments this way, says Stribling’s Kirk Henckels, adding that they also have been upset by websites like StreetEasy.com and PropertyShark.com, which have stoked a hunger for information about other people’s transactions.
Why now? In part, it’s because buyers today have another option: avoiding co-ops altogether. The past decade’s chic buildings, like 15 Central Park West, are condos, and most of those are perfectly content with corporate purchases. Broker Michele Kleier tells the story of one of her clients, an American financier living in Europe spending $25 million to $30 million, who had “very prewar taste.” Off to Park and Fifth Avenues they went, where a few apartments piqued his interest—until he floated the idea of an LLC. “It limited our search,” she says. “He’s going to be converted to a condo buyer.” Co-op sellers may not like secrets—but they don’t like losing super-wealthy buyers, either.