If you’re looking to buy a home in the competitive real estate market of Manhattan, a sponsor unit might just be what you are looking for. Berkshire Hathaway HomeServices New York Properties’ President Ellie Johnson invites you to an intimate conversation with one of New York City’s super brokers and a 30-year industry veteran, Reba Miller, to talk about the benefits of these apartment “units,” as they are usually referred to in the industry.
ELLIE JOHNSON: Reba, can you tell us what a sponsor unit is?
REBA MILLER: A sponsor unit is a residence that is owned by the original titleholder (usually the landlord or developer), who is responsible for converting the rental apartment building into a condominium or a co-op building that is offered for sale.
In New York City, many rental apartment buildings were converted to condominiums or co-ops in the 1980’s and at the time of conversion, the existing tenants had the option to purchase their unit or continue renting. For those residents who continued renting and eventually moved out of their apartments, the units revert back to the owner of the building and the sponsor can continue renting the unit (usually at higher market rent) and/or sell the unit. If the sponsor decides to sell the unit, then it is designated as a sponsor unit.
A great example of this is The Revere Condominium at 400 East 54th Street, which my team at Berkshire Hathaway HomeServices New York Properties is currently representing. In this case, the original sponsor has offered newly-renovated custom finishes to these beautiful homes, making the offering a special one. One of the unique features of this building is that several of the one and two-bedroom units are located on the top floors, providing sensational views that typically would only be found in penthouse units.
EJ: What does purchasing a sponsor unit mean for a perspective buyer?
RM: One of many great attributes is that there is no board approval required, which for most buyers – especially if you are not familiar with the process – could be daunting and quite possibly the number one reason preventing someone from becoming a home owner in Manhattan. This means far less paperwork, which often includes having to reveal financials, provide reference letters and participate in an in-person interview.
EJ: I understand that there is more flexibility with financing when buying a sponsor unit. Is this correct?
RM: Yes, that’s correct. One distinction I usually like to call out between sponsor units and new development units is the lower down payments associated with sponsor units. For example, sponsor units like The Revere require a 10 percent down payment. A new development, which can often take years to close, requires multiple down payments that ultimately add up to 25 percent of the purchase price that is held until closing.
EJ: It sounds like the perfect opportunity for a first-time buyer. Who else should be looking for a sponsor unit?
RM: The beauty of a sponsor unit is that it opens up the door for various buyers – corporate purchasers, pied-à-terre buyers, LLCs, Trust, etc. These buyers, who are often searching for flexibility, are ideal for sponsor condos.
EJ: The sponsor unit sounds like a unique and rare jewel. How can a consumer find such a jewel?
RM: It is definitely not easy for a consumer to pinpoint these sponsor units. In order to find an opportunity like this, you need great brokerage representation and an excellent sales executive, someone with experience who understands the history of New York co-ops and condominiums. Having an advocate with tremendous experience is a great added value. This individual will get tips for off-market sponsor units and can help get you to the front of the line. This professional should be proactive and if there’s a particular building that you are interested in, will find out who the exclusive broker is and connect with their team directly. They will have the inside scoop on what sponsor units are coming to market and when. Someone like me!
EJ: Anything to avoid with sponsor units?
RM: This is an important question. It’s crucial with all real estate purchases that you or someone on your behalf provides due diligence. Sponsor units are offered by prospectus only and this prospectus is governed by the Attorney General. It’s mandatory that the offering plan be updated annually with material and substantive changes so that the public knows what to expect from a sponsor unit.
However, treating the unit like a resale is still recommended in terms of the due diligence. The buildings that are over 50 percent sold are still desirable, but it’s important to review the financial structure of the building and the sponsor. It’s equally important to review the building itself – its systems, operation and management.
EJ: Reba, thank you for your time and this incredible behind-the-scenes conversation about sponsor units. Is there anything else, you would like to add to our conversation?
RM: Thank you, Ellie! It’s my pleasure. I really do enjoy the complexities of New York City real estate and I’m definitely no stranger to the intricate details of sponsor units – I have been in the business for more than 33 years and have represented over 23 conversion projects. I have designed sponsor homes to achieve the best possible layouts, which often means recreating an existing layout or even combining units that are next to one another. It really is rewarding for me to impart my knowledge on this topic, so I appreciate this opportunity.
For more information about Berkshire Hathaway HomeServices New York Properties, visit: https://www.bhhsnyproperties.com/