The Problem With High-End Co-ops? Could Be the Co-op Board.

The Manhattan luxury home market saw just one co-op sale in the last two weeks while 12 condo units sold, according to new data from Olshan Realty. Though co-ops have traditionally undersold condos in the borough for over a decade, Donna Olshan, the president of Olshan Realty, called the stat “alarming,” claiming that it’s further evidence that powerful co-op boards are a turn-off for high-end buyers. 

“Condos are more expensive," Olshan tells Crain's, "but you can get in and out of the asset without a condo board breathing down your neck.” 

In the luxury market, buyers often make anonymous purchases of condo apartments through a limited liability company or a trust, but that’s not possible with co-op boards that need to approve all the buyers in a building. 

Some co-op buildings also don’t allow financing, and selling a co-op requires the owner to work with the board to find an appropriate buyer and sale price. The boards also can decide whether an apartment can be sublet and when any renovation in a particular unit can happen. 

“Owners want to be able to make decisions without a group of nine people deciding whether it’s feasible or not,” Olshan says.

In the early 1900s acceptance into the right co-op building in Manhattan was a status symbol because of their exclusivity and co-op boards' right to reject purchase applications without giving a reason — provided the board acts in good faith and in the interest of the corporation. 

In the past two decades, however, the glitzy co-op buildings that used to attract celebrities, politicians and high-powered businesspeople seem to have lost their luster. In the early 2000s luxury condo projects such as 15 Central Park West began to attract wealthy buyers looking for a simpler route to a home purchase. 

Many newly constructed condo buildings in Manhattan also offer amenities — squash courts, gyms, pools, restaurants, terraces— that existing co-op buildings cannot match. Case in point: the new condo at 109 E. 79th St. on the co-op-heavy Upper East Side, which has been moving in buyers who paid more than $10 million for apartments amid slowing luxury sales, according to public records. And the 31-unit building, which began marketing in the thick of the pandemic, appears nearly sold out, Crain's reports.

Among the attractions are a squash court, a library and a Pilates studio. And the absence of a co-op board.