I laughed when I read two stories in yesterday’s Times.
The first involved a property in Manhattan that had been rented out to a gallery. The rent was $1.8 million per year. The gallery didn’t have the money for a security deposit, so it put up a painting as collateral.
Last year, the gallery went out of business, and had to give up its lease.
From the following, I’m guessing the landlord isn’t too upset:
The settlement agreement at the gallery has some unusual provisions that just might stoke the imagination of some buyers looking to display their art collections. Mr. Salander [lessee] gave Mr. Rosen [lessor] a painting, “La Femme aux Chiens” by Édouard Manet, in lieu of a security deposit. Under the agreement, the owners will return the painting so that it can be auctioned off, in part, to pay some of nearly $1 million in back rent.
The owners, who bought the mansion in 2004 for $15.65 million, have listed the property for sale – for $75 million.
The other story was in the same vein.
Last year, someone put down a 10% deposit on the $8.5 million penthouse condo at 111 Central Park North, which was then under construction.
The buyer thought that he would be able to flip the property, for a profit, prior to closing. (During the past several years, developers have forbidden buyers from assigning the right to buy to other people, to keep this sort of thing from happening, but in this case, the developer approved.)
Well, the speculator wasn’t able to find a buyer. At least not at the $12 million he tried to get for it.
The contract holders did not find a buyer. With the market uncertain, the buyers walked away from the contract and their 10 percent deposit — or $850,000, according to several people briefed on the sale.
Yes, you read that right, he lost $850,000.
And the developer?
… [A]ll was not lost. [The sales agent] called a customer whom she had taken through the penthouse in December and again in January. He came back a few hours later and made an offer.
After a day of negotiation the deal was done, and within the week the contract was signed, for $8 million.
So, the developer made $850,000 from the deposit, sold the unit for $500,000 less than before … and pocketed $350,000.
That’s a good paycheck for a day’s work.
Takeaway from this story?
Put as little money down as possible, if buying a home or renting an apartment.
Source: A Gain for the Luxury Market – By Josh Barbanel, The New York Times
Also: Still Coming Out Ahead – Also By Josh Barbanel, The New York Times