Swig Burris converts co-op to condominium

Real Estate Weekly, March 24, 1999

Real estate developers Kent M. Swig and David A. Burns have announced the transition of an Upper East Side cooperative building into a condominium, the first such transfer to occur in Manhattan.

In July 1997, under a bankruptcy plan of reorganization, Swig Burris Equities, LLC purchased 110 of the 197 cooperative apartments located at 401 East 89th Street. With interim financing provided by Credit Suisse First Boston Mortgage Capital Corporation, Swig Burris Equities, with partners MacDonald & CIE and William and Arthur Zeckendorf, purchased and then paid down the existing underlying mortgage, which totaled over $14 million (including penalties and interest) to $8.5 million, in exchange for Swig Burris Equities receiving title to the 110 cooperative apartments. In addition, a reserve fund of $1.5 million was created to make needed capital improvements to the infrastructure of the building and to refurbish the lobby, corridors and other common areas.

Working with its legal counsel, cooperative and condominium law specialist Steven A. Kirschenbaum, a partner at Hartman & Craven LLP in New York, Swig Burris Equities created a plan which permitted each shareholder to convert his/her cooperative apartment to a condominium form of ownership. Having residents own their apartments under a deed was of principal interest to Memorial Sloan-Kettering Hospital, which owns 49 apartments at 401 East 89th Street. Instituting this plan permitted Memorial to take advantage of its tax exempt status and avoid paying the annual real estate taxes attributable to its units, a significant savings per year.

"The condominium form of ownership now provides great flexibility to all those who live in the building, while also accommodating Memorial Sloan-Kettering's desired form of ownership," noted Swig and Burris, principals of Swig Burris Equities, LLC. "We are most pleased to have completed this complicated transaction."

In April 1998, the $8.5 million First Boston mortgage was refinanced with Astoria Federal Savings Bank to provide for 15-year financing at extremely favorable market rates. A key provision of the Astoria financing permitted the paydown of the proportionate share of the mortgage for each cooperative apartment converting to a condominium and release of the mortgage lien, as required upon the first conveyance of a condominium unit.

On January 5th, Memorial Sloan-Kettering Hospital closed on the conversion of its 49 apartments to condominium status. This is the first time this type of conversion has occurred in Manhattan.

In addition, Swig Burris Equities and the managing agent for the building, BHS Management, LLC, an affiliate of Brown Harris Stevens, has supervised a complete physical rehabilitation of the interior and exterior of the property. This renovation includes new corridors, wall finishes and lighting, as well as plans for a new lobby and new elevator finishes.

Swig Burris Equities, LLC is a real estate development, investment and management firm based in New York City with offices in San Francisco. The firm is an active purchaser and developer of prime residential and commercial buildings, as well as operating companies and securities.