On August 28, 2023 a
Exhibit,Appendix
was filed
involving a dispute between
The August Aichhorn Center For Adolescent Residential Care, Inc.,
and
for Other Matters - Sale or Finance of Religious/Not for Profit Property
in the District Court of New York County.
Preview
FILED: NEW YORK COUNTY CLERK 08/28/2023 06:53 PM INDEX NO. 158537/2023
NYSCEF DOC. NO. 17 RECEIVED NYSCEF: 08/28/2023
EXHIBIT A
FILED: NEW YORK COUNTY CLERK 08/28/2023 06:53 PM INDEX NO. 158537/2023
NYSCEF DOC. NO. 17 RECEIVED NYSCEF: 08/28/2023
August 24, 2023
RE: Current Market Conditions impacting:
23 West 106th Street
New York, NY 100225
Richard J. Shore, Esq.
Counsel
Nixon Peabody LLP
Tower 46
55 West 46th Street
New York, NY 10036-4120
Dear Mr. Shore:
I have received your inquiry requesting some information regarding current market conditions presently
impacting the property. It is my understanding that you want to see what important components
impacting market value, including cap rates have shifted in the lapse between the effective date of value
[contract date] of May 20, 2022 to the present date.
My studies and investigations have revealed substantial and relevant changes that are currently impacting
the present valuation of the property located at 23 West 106th Street, New York, NY 10025. The first
major issue affecting the value is the large increase in mortgage lending rates. Per Freddie Mac and other
media sources, the current 30-Year Fixed-Rate Mortgage is presently at its highest level in over twenty
years. The current rate for a 30-year fixed loan is 7.06 %. The same applies to a variety of commercial
lending options & rates where the current estimated rates for commercial loans can range from 9-15%
depending on terms, types of property, degree of risk etc. The rate on 5/19/2022, 1 day before the
retrospective effective date of value of 5/20/2022 was 5.25 %. This is an almost 20% increase.
Moreover, the higher interest rate results in a higher capitalization rate and a lower valuation of a
properties Net Operating Income, or NOI.
It is my professional opinion that this increase, along with the well-documented stricter credit
requirements, has caused a large demographic of commercial and residential borrowers to pause and
hesitate prior to final purchasing or borrowing decisions. This 20% increase is currently resulting in lower
offers to purchase for obvious reasons. This causes a present-day measurable diminution in value.
The second, very serious issue negatively impacting trends is the rapidly increasing construction costs in
terms of both labor and materials. This has been occurring steadily since the start of the COVID-19
pandemic and is continuing presently. Prior to the pandemic, our consulting business had advised
developers, lenders, land buyers, that the average cost to build excellent quality residential or commercial
structures, including hard and soft costs in NYC was around $350.00 per buildable foot. This is solely for
FILED: NEW YORK COUNTY CLERK 08/28/2023 06:53 PM INDEX NO. 158537/2023
NYSCEF DOC. NO. 17 RECEIVED NYSCEF: 08/28/2023
the NYC ararea, and not a national rate. We ar
are estimating only for the best, high-end luxury class in terms
of bo
both materials & finishes because that is the NYC st
standard that is required to attract buyers, tenants,
etc. and to conclude a sale with reasonable exposure of 3-6 month.
et
We are currently advising clients that the current es
estimated cost to build high-end commercial or
residential structures in $500 per buildable foot including hard and soft co
cost
sts. This is resulting in
declining land values occurring because of decreased profit margins. There are many medium to large
sized commercial and residential development sites that, because of the increased construction costs, have
depleted their allocated funding and have been abandoned.
This also af
affects the market in terms of most buyers, be
because of the increased construction and renovation
costs, are reluctant to embark on a renovation. This affects the valuation of improved and vacant
development si tes. As most commercial and residential purchasers and tenants want a high-end “turnkey”
site
property. So, unrenovated commercial and residential properties are experiencing profound marketing
challenges.
I am always available to discuss this important matter.
Michael Pavlakos
Senior Appraiser
NYS Certification # 45000005617 exp. 12/02/2023
Document Filed Date
August 28, 2023
Case Filing Date
August 28, 2023
Category
Other Matters - Sale or Finance of Religious/Not for Profit Property
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Preview
FILED: NEW YORK COUNTY CLERK 08/28/2023 06:53 PM INDEX NO. 158537/2023 NYSCEF DOC. NO. 17 RECEIVED NYSCEF: 08/28/2023 EXHIBIT A FILED: NEW YORK COUNTY CLERK 08/28/2023 06:53 PM INDEX NO. 158537/2023 NYSCEF DOC. NO. 17 RECEIVED NYSCEF: 08/28/2023 August 24, 2023 RE: Current Market Conditions impacting: 23 West 106th Street New York, NY 100225 Richard J. Shore, Esq. Counsel Nixon Peabody LLP Tower 46 55 West 46th Street New York, NY 10036-4120 Dear Mr. Shore: I have received your inquiry requesting some information regarding current market conditions presently impacting the property. It is my understanding that you want to see what important components impacting market value, including cap rates have shifted in the lapse between the effective date of value [contract date] of May 20, 2022 to the present date. My studies and investigations have revealed substantial and relevant changes that are currently impacting the present valuation of the property located at 23 West 106th Street, New York, NY 10025. The first major issue affecting the value is the large increase in mortgage lending rates. Per Freddie Mac and other media sources, the current 30-Year Fixed-Rate Mortgage is presently at its highest level in over twenty years. The current rate for a 30-year fixed loan is 7.06 %. The same applies to a variety of commercial lending options & rates where the current estimated rates for commercial loans can range from 9-15% depending on terms, types of property, degree of risk etc. The rate on 5/19/2022, 1 day before the retrospective effective date of value of 5/20/2022 was 5.25 %. This is an almost 20% increase. Moreover, the higher interest rate results in a higher capitalization rate and a lower valuation of a properties Net Operating Income, or NOI. It is my professional opinion that this increase, along with the well-documented stricter credit requirements, has caused a large demographic of commercial and residential borrowers to pause and hesitate prior to final purchasing or borrowing decisions. This 20% increase is currently resulting in lower offers to purchase for obvious reasons. This causes a present-day measurable diminution in value. The second, very serious issue negatively impacting trends is the rapidly increasing construction costs in terms of both labor and materials. This has been occurring steadily since the start of the COVID-19 pandemic and is continuing presently. Prior to the pandemic, our consulting business had advised developers, lenders, land buyers, that the average cost to build excellent quality residential or commercial structures, including hard and soft costs in NYC was around $350.00 per buildable foot. This is solely for FILED: NEW YORK COUNTY CLERK 08/28/2023 06:53 PM INDEX NO. 158537/2023 NYSCEF DOC. NO. 17 RECEIVED NYSCEF: 08/28/2023 the NYC ararea, and not a national rate. We ar are estimating only for the best, high-end luxury class in terms of bo both materials & finishes because that is the NYC st standard that is required to attract buyers, tenants, etc. and to conclude a sale with reasonable exposure of 3-6 month. et We are currently advising clients that the current es estimated cost to build high-end commercial or residential structures in $500 per buildable foot including hard and soft co cost sts. This is resulting in declining land values occurring because of decreased profit margins. There are many medium to large sized commercial and residential development sites that, because of the increased construction costs, have depleted their allocated funding and have been abandoned. This also af affects the market in terms of most buyers, be because of the increased construction and renovation costs, are reluctant to embark on a renovation. This affects the valuation of improved and vacant development si tes. As most commercial and residential purchasers and tenants want a high-end “turnkey” site property. So, unrenovated commercial and residential properties are experiencing profound marketing challenges. I am always available to discuss this important matter. Michael Pavlakos Senior Appraiser NYS Certification # 45000005617 exp. 12/02/2023