Why Should Shareholders Care if the Sponsor Keeps Apartments?

In the very loose credit market that has now ended, it might have seemed like sponsor-controlled co-ops weren’t really such a bad thing — after all, if the building is comfortable to live in, who cares that the sponsor is running a free market rental business with half the apartments, or controlling the building finances?  Now that we are in an era of extremely tight credit, banks will have much more stringent policies about lending in co-ops, preferring to see over 50% of units owner-occupied.

When shareholders cannot sell or refinance their apartments, the sponsor is causing very direct harm to shareholders.


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