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FDIC re-finances Queens co-op complex.

After a two-year search for financing - testimony to New York City's tight mortgage market - the 749-unit Celtic Park Apartments cooperative in Sunnyside, Queens, recently refinanced the entire balance of its existing $7.65 million building mortgage for five years at substantially under a 7 percent interest rate.

The refinancing was accomplished, says Edward Braverman, attorney to the Celtic Park Apartments co-op, at a time when many New York City co-op corporations are experiencing mortgage refinancing difficulties. This, in turn, is squeezing hundreds of New Yorkers in the co-op apartment market - both buyers and sellers.

The refinancing, Braverman explained, creates a climate that will facilitate apartment sales and purchases at the complex, and help the co-op move ahead on planned elevator and roof renovations.

The mortgage was provided by the Federal Deposit Insurance Corporation, which, under the terms of an original mortgage document, was bound by a renewal option. The option required the FDIC, as the mortgagee, to provide the new loan at a rate equivalent to the current five-year Treasury bill rate plus 175 basis points. The interest rate was fixed at the end of September at 6.52 percent, and this will reduce the coop's mortgage interest payments by $300,000 a year, according to Braverman, who specializes in the co-op market and represents some 80 co-op boards.

He noted that the refinancing was accomplished despite sponsor ownership of a number of units: 58 percent of the apartments have been sold and 42 percent of the units are held by the sponsor. The development was converted eight years ago.

"In recent years, apartment sales at Celtic Park had virtually come to a halt," Braverman explained, "because lenders were not willing to make end loans to potential apartment buyers until the existing building mortgage had been extended."

Though the Celtic Park co-op complex, appraised at over $26 million, had never defaulted or been late on a mortgage payment, and had $2 million in the bank and substantial yearly operating surpluses, neither banks nor other lenders were eager to provide it with a co-op building mortgage, Braverman observed. The Celtic Park building mortgage was due to expire this year on October 1, but during its search for financing, the co-op board had found itself confronted by a narrow, unfavorable mortgage market. The co-op's attorney explains that "when a sizable number of apartments in a co-op development are owned by the conversion sponsor or investors, opportunities for refinancing the development's mortgage invariably are so tight as to be almost non-existent."

Meanwhile, as part of an ongoing maintenance program, the Celtic Park directors had decided to renovate the 25 elevators and rooftops in the complex and would have liked to finance the projected $2 million expense, Braverman said, adding that this too was impacted by market conditions. "Now, however," he continued, "the board probably won't have to seek financing for the renovations, and will instead be able to pay for it by using the $300,000 a year savings on interest payments under the new FDIC mortgage."

The FDIC had acquired the expired mortgage when it took over the defunct Seamen's Savings Bank a few years ago. In 1983, Seamen's had given Celtic Park a $7.65 million non-amortizing mortgage for five years and then rolled it over in 1988 for another five years at a 10.44 percent interest rate.

The Celtic Park Apartments complex was developed 60 years ago, and comprises 25 six-story brick buildings on a landscaped site. It includes 28 studios and 474 one-bedroom, 215 two-bedroom and 32 three-bedroom apartments. plus a few professional apartments.
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Title Annotation:Federal Deposit Insurance Corporation, Celtic Park Apartments cooperative in Sunnyside, Queens, New York
Publication:Real Estate Weekly
Date:Nov 17, 1993
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