The Hole Story: How a Co-op Turned Basement Disaster into Apartments

That was the story told in "What Lies Beneath?" (May 2010). Gil Neary (above), the co-op board's president and a long-time Chelsea real estate broker, spoke with Habitat about the eventual outcome. After both literal and figurative upheaval — including a lawsuit by a group of disgruntled shareholders — five units were added to the building. Each sold for close to the asking price, with sales ranging from $529,000 to $635,000.

The project, which took four years as opposed to the year-and-a-half originally anticipated, occurred just as the real estate market crashed. With that in mind, what was the process of selling the new, additional units like?

We advertised them and put them out to all the other brokers and encouraged agents to come show them. They were not one hundred percent finished, and we did that to save ourselves some money on the construction. Also, the spaces are a little bit unusual and we figured people would want to do their own work, so they were marketed as unique open spaces. The big selling features are: they face into the garden — and only a few apartments face completely into the garden — and it's very quiet, it smells good, and it's green.

For how much did the apartments sell?

We sold our super's apartment [to help finance the project] for under $1 million and we initially thought we'd sell it for over $1.2 million. But then the market recovered a little bit so by the time the new units were finished, we were able to raise the prices back up. As we made them more finished, we also raised the prices.

You had hoped to make a profit of about $1 million, right?

It turns out we didn't do that. But we also ended up doing many additional improvements that we would have had to do eventually anyway. We [now] have better fire exits on the 24th Street side of the building, some extra drainage, some electrical upgrades and gas-service upgrades.

How long did it take from when the apartments went on the market to when they sold?

Well, that's a funny question, because we had them all on the market for a long time before the construction was completed. But we weren't sweating it because we knew that as they got more complete, they would sell. Surprisingly, people weren't as visionary as we thought and weren't willing to buy them before the kitchens and bathrooms were finished.

Some shareholders filed a lawsuit against the co-op board, the architect, the construction company and the management company related to the project's excessive noise and dust. Has that been resolved?

No, unfortunately. We would like it to be, but they haven't been able to come to an agreement even though the project's been done for a while. My impression is that the vast majority of people in the building understood that this was a one-time project and that there was a little pain that we had to deal with. What's that saying? "When you're up to your ass in alligators, it's hard to remember you were supposed to be draining the swamp." Some people like the battle better than the conclusion.

Any final thoughts?

It's a big picture project. In the short run, it didn't work out as well as we would have liked. We would have liked to not be having a lawsuit between our neighbors and for there to have been more of a big profit, so the building would have had more cash reserves. [But] in the long run, it seems like a win-win. The co-op has more structural stability, a lot of upgrades to the building, and additional maintenance income for the rest of its life. We have some nice new neighbors, we have some additional income coming in to the building, and, in general, people are happy that it's done. 

For more, see our Site Map or join our Archive >>