Smith Buss & Jacobs Closes Historic Financing in the midst of the Pandemic
Co-Op City, New York’s largest affordable housing complex, will stay affordable for another 30 years pursuant to a March 31st, 2020 loan agreement between Co-op City and the City of New York.
The Agreement provides One Million Dollars ($1,000,000), at zero percent interest, with the principal forgiven, conditioned upon the Cooperative’s agreement to remain in the Mitchell-Lama program for the 30 year term of the loan.
Co-op City, which is embarking upon a $150,000,000 capital improvement program, will use the loan proceeds to improve accessibility for the disabled to its buildings.
The HPD loan is subordinate to a $621,500,00 first mortgage from Wells Fargo. Closing the transaction with the City of New York required the consent of Wells Fargo, approval from NYS HCR, and consents and subordination agreements from HUD, SONYMA and NYC HDC. In addition, special limited indemnifications were negotiated with First American Title Insurance to resolve unique risks created by the temporary cessation of various governmental recording functions related to building loan agreements and the indexing and entering of mechanic’s liens, judgments and notices of pendency. All of these issues were resolved remotely due to the COVID-19 situation.
“The ability of all parties to work together for the public good was amazing”, said Jeffrey D. Buss, Riverbay’s General Counsel and a partner at SBJ. Mr. Buss also closed Co-op City’s previous $621,500,000 first mortgage with Wells Fargo.
While the deal gives SBJ’s clients at Co-Op City more security about their future, many other cooperatives, condominiums and building owners face growing uncertainty about theirs. New York State’s moratorium on evictions until June 20th, as well as HUD’s anticipated announcement next week regarding federally insured mortgages, will provide some temporary relief to individuals. However, these temporary solutions will also create a loss of income to building owners and lenders, as well as increased debt for individuals without the ability to pay, creating a new set of problems in the near future. According to Buss, one of the key lessons from the Co-Op City transaction is that all parties are in this together. “Cooperatives, condominiums and building owners should engage in discussions now with both lenders and governmental officials”, said Buss. SBJ, which is functioning at full capacity with a fully remote work force, stands ready to assist in the recovery with creative legal solutions.