The High Cost of Anonymity
Oct. 20, 2016 — Should your board approve apartment purchases by LLCs?
In our annual attorneys issue, coming in November, we’ll give boards legal advice on a wide array of issues, including whether it’s wise to allow Limited Liability Companies to purchase apartments in your building. The protection of an LLC, also known as a shell company, is favored by many celebrities, foreign investors and other one-percenters who treasure their anonymity. But it leaves boards in limbo because it often makes it impossible to know the identity of the purchaser.
Now for a counter-intuitive fact. StreetEasy has been tracking LLC purchases for a decade, and it reports that apartments purchased in Manhattan by LLC’s experienced an appreciation rate of 26.1 percent, lower than the borough-wide rate of 31 percent, according to StreetEasy Price Indices.
In Brooklyn, the median resale price of all homes purchased by an LLC between 2005 and 2015 actually declined by 5.6 percent, compared to a gain of 19.5 percent among all homes in the borough in the same period. Anonymity, it turns out, doesn’t come cheap.