Hey everyone, it's James at Yoreevo. I wanted to put together a screen share showing what I look for in an offering plan. This is a document that you or ideally your agent would review before you even submit an offer on a new development because there's a lot of important information and a lot of, a couple in particular, negative potential surprises. Most of the time the offering plan isn't even discussed until you have an accepted offer and it's delivered to your attorney. It's more of a check-the-box, part of the due diligence process. But you really should be reviewing it beforehand. So we're not really going to get into what an offering plan is, suffice it to say it's basically a prospectus for the building. It's very important. It describes what exactly the sponsor is selling and what you would be buying. If you want more details, we have this dedicated blog post here that can go into more detail. We can also answer any specific questions you have. But first, well let's just jump right to where do you actually find an offering plan. So the attorney general's website has most of the offering plans for buildings that were built in the last three to five years and the ones that are being built today. Obviously if you go to our offering plan blog post, you can find the link here to the attorney general's website. You can also just search for it. So there are two ways that you can search: you can either search by the building's name or by the offering plan number - the document number. So usually or theoretically, every time there should be the offering plan number in each listing's description. So we have a listing from 108 Leonard here and you can see it's CD. So if you always just search CD it'll pop up. So this one is (CD 16-0364). The building that we're using for this tutorial is 25 Park Row. This one does not actually have it, CD - nothing. But most of the time if you look for CD, that'll make sure you're getting the right building, the right offering plan. So you can do it one of two ways: you can either do 25 Park - well start with actually 108 Leonard. So we copy this. You usually have to take off the dash. There it is. And the offering plan itself will be on this documents tab. So we'll come back to this. So 25 Park Row - search for it. A lot of the times there will be multiple entries, I don't know why. But you want the one that has that Documents tab. So this one does have the Documents tab. If you click on the other two, they do not. So those are not the ones you want. So we go back here to the one with the Documents tab. There's some additional information here but it's not really that interesting. Everything you want here in Documents. So you'll see both the original offering plan and then you'll see any amendments that were filed subsequently. We are going to focus on the offering plan. I'm also going to show you one amendment to see what kind of things are disclosed in those but most of the information that we wanted are in the offering plan. So let's jump right to the offering plan, so here's the 25 Park Row offering plan. 574 pages, that's pretty typical. These are very long legal documents and you can see there is all sorts of stuff in here. What we want - well actually before we dive into that - we can just knock out this amendment here. Amendment is just what it sounds like. It's an amendment to the offering plan. It's basically updates. So this one in particular - most of them are not really interesting - this one is one that declared the offering effective. That basically means that the building is going to get built. The sponsor is committed to completing it. Sometimes it'll increase prices. Sometimes it'll tweak the floor plans a little bit. It's things like that. But getting back to the original offering plan you can see here, they are offering these pieces of property for sale. 110 apartments, 51 storage lockers, and 22 parking spaces. So we are going to jump right to what is referenced most commonly from the offering plan - the schedule item. So we go to page 59. Here's the schedule item. They all look like this. It lists out every apartment and those other pieces of the property that we went through. Every parking space and every storage locker as well. We're gonna focus on the apartments. So list every apartment and then a whole bunch of information about it. You most commonly hear this mentioned: the scheduling pricing. That means the original pricing that's listed in the Schedule A. So you can see every unit has a price and then all this other information about it. So if you ever want to get an apples-to-apples comparison of listing prices. Sometimes developers will drop prices on some units and not on others. The Schedule A is always what was expected at the very beginning. So it's a good way to level set those variations of the variability and discounts across on specific units, particularly if they're in the same line. So the most important part of this offering plan - well the Schedule A - and the thing that I think is the number one non-disclosed piece or partially-disclosed but not publicly or widely advertised piece of negative information that you find in offering plans, and I'm really amazed that they're even allowed to do it is that the advertised taxes will not be what you will actually pay. They will be understated so we're going to go through an example and show you how you find that. So in particular you can go back here. We're going to look at this unit number, 10A. So we have 10A you can see the advertised taxes are $1,884. We go over to the offering plan and line A is $1,884, the projected monthly real estate taxes. Okay, that matches great. What you want to do, well let's first back up and explain why there is a difference. What you'll see advertised is year one or the first year of condos operation. The problem with that is what they'll often do is they'll use a blended average for that year one. Let's take a simple example. Let's say the property taxes for the unit were $500 when it's under construction. It's not worth as much while it's under construction and then $1000 when it's complete. And it's going to be fixed right at the minute. It's going to be completed right the middle of the year. Well, they're going to say okay it's $500 for half the year. It's $1000 for half a year. So on average at $750. They would advertise $750 with property taxes. That's not really relevant or helpful because you will never pay $750 in taxes. You're only going to pay $1000 in taxes. So you need to look and make sure that they're advertising the fully complete building's taxes. So how do you do that? So remember up here you're looking at this $1,884. Want to follow this column down. Not always easy. So here it is actually pretty good and we're going to show the annual real estate taxes and you can see based on the accountant's estimate - which we'll get to - they are expecting the annual property taxes to be $3,012,291.
Okay so what we want do is we want go look at that. That estimate from the accountant and see what they are referring to exactly. So you write down this number, you take a note of it, $3,012,000 and then we are going to go to page 525. So here's the level from - it's actually a consulting and appraisal - so what they're doing is they're explaining their methodology,  blah blah blah. All we really care about is this right here. So you can see where is it here. It is our $3,012,000 and in this estimate they are estimating the building is complete for 90% of the year. So it's not actually showing the fully complete tax assessed value of the building. Down here they're assuming it's complete for 100% of the year and the taxes now go up to $3.5M
so basically they're understating the taxes by about 17%. Instead of that $1,884, you're realistically going to be paying about $2,200 in taxes. So this is really important. That's a material difference, I've seen much worse and actually most of the time they do play this game. They do advertise the year one taxes and you have to look and see what the year two taxes actually are. This is just an estimate. That's important to stress as well. This is just that consulting an appraisal firm's estimate of the values for the specific units and what the resulting tax bill would be. You won't know for sure until the building is complete. The tax lots are created and the city comes up with its estimated value for the unit and then the taxes flow from there. So most of it's almost guaranteed that these taxes will not be exactly $1,884 or $2,200. It's going to be something else. But even if this was spot on in terms of the estimates, the $1,884 would still never be paid. It would be that $2,200. So that's really important to make a big difference in the affordability and it's not a surprise you want to have after you have reached an accepted offer and obviously are excited about purchasing it. The other thing that's worth visiting is - 371 here - is Schedule B. This is the other side of your monthly expenses. This is looking at the the budget for the building. So you have your projected common charges, parking licenses, and then all the expenses. Not surprisingly but it balances $3.2M for each of these. It's not really too much to do here if you really want to dive into details. You can look at what they're assuming for each of these individual expenses but really just want to make sure that nothing's wildly out of what you would expect here. But it's a little harder to say oh yes electricity is actually going to be $950,000 instead of $843,000. It's hard to make that sort of assumption. And then the other thing I like to check is the closing costs. New development is a little of weird because
they can basically pass on whatever expenses they want to you. Most commonly and most widely known:  the transfer taxes and sponsors attorney. If you're buying a resale, the seller always pays the transfer taxes. They always pay for their attorney. So at least at the beginning of the negotiation they're going to expect to pay those. They are going to be some other odds and ends. And you can go through here and you can see what exactly they are expecting you to pay as the buyer. So this is just - they have all of the basics here as well. We have title insurance. We have mortgage recording tax, some examples. And you can see they should have an example in here somewhere. Yup here you go. And most of the time it's just transfer taxes, sponsors attorney, working capital contribution, or like two months of common charges. Sometimes you have to chip in for the super's apartment. Those are the main ones. But it doesn't mean that they can't ask for others. So for example I noticed in this one. Here it is. The share of the handicapped parking space. So I don't know exactly why. I guess because there's a parking garage they need to have a handicap parking space available and everyone chips in to have that available. I'm not sure but that's my best guess. So it says see Schedule A. So if we go back to Schedule A, and this can be like a good shortcut to see if there are any other expenses that you're going to be expected to pay - if there are any additional common uh columns here for closing costs. So over here allocation for the handicapped parking spot and you can see that each unit is supposed to chip in you know two grand for that parking space. Another example that I've seen there's a building in Long Island City it has a 421a tax abatement and they charge at least $3,000 to reimburse the sponsor for the fees associated with filing for the 421a. I've seen the same thing for the offering plan itself. You have to reimburse the sponsor for the the costs associated for filing the offering plan. So nothing stops them from asking for these things but they have to be disclosed in here and this is where you can find it. So there are a lot of other things in here. There are actually some other items that we mentioned in the blog post here. They're less likely to have some negative surprises so that's why i'm not going to go into the details. But if there's one thing you're walking away from this video with, I would say it's check your property taxes. If you're not sure, email me james@yoreevo.com. I'll check it out. I'll answer any other questions you have. Obviously caveating all this with, I'm not your attorney. Your attorney would double check all of this during due diligence. But if you want me to just take a spot check and see if everything looks right or wrong, I'm happy to. Again, james@yoreevo.com. I'll link to this blog post, as well as the attorney general's website, in the listing description. And that's it, if you have any questions just let me know. Thanks a lot, bye.