If real estate dealmaking in New York is like cocaine, this is crack
Auctioneer Matthew Mannion (center) with Adam Plotch (bottom left) at the law offices ofAxelrod, Fingerhut & Dennis in Midtown (Photography by Paul Dilakian/The Real Deal)
Dec 04, 2023 , By Keith Larson
If you knew nothing about a co-op, would you buy it?
The co-op might have a squatter. It could be a hoarder’s den. It might be rent-regulated. It probably needs hundreds of thousands of dollars in renovations. But there’s a chance you could double your investment.
Adam Plotch is willing to take the risk. He plays the real estate blood sport on the courthouse steps, where participants trade barbs and vie for foreclosed units as lost passersby ask for directions to divorce or criminal court.
If real estate dealmaking in New York is like cocaine, this is crack.
The co-op auctions are the end result of a type of foreclosure that happens without a judge. Such foreclosures are becoming increasingly common, since they take months instead of years, and they are happening to Manhattan trophy properties as well as smaller units in the Bronx or Queens. The small ones, with more risk and more drama, attract a different breed of investor.
“It’s the better movie,” said real estate attorney Adam Leitman Bailey, who represents co-op buildings and lenders.
The Federal Reserve Board started raising interest rates in March 2022, eroding the value of commercial real estate. Now property owners are struggling to make capital calls, while lenders are stuck carrying debt costs.
Lenders issued foreclosure notices on 62 mezzanine and other high-risk loans this year through October, more than double last year’s total, a Wall Street Journal analysis found. These include Sharif El-Gamal’s Margaritaville Hotel in Times Square and Harry Macklowe’s personal units at 432 Park Avenue, the ultra-luxury condo tower he helped develop.
The deals at co-op auctions can yield just tens of thousands of dollars in returns. But the courthouse regulars want to get in on the same distressed conditions as the deeper-pocketed players. The stakes are high, the dollar figures low.
