River Park Mutual: Proceed With Caution As You Consider Buying Older Condos and Co-ops

And what did you hear, my blue-eyed son?
And what did you hear, my darling young one?
I heard the sound of a thunder that roared out a warnin'
I heard the roar of a wave that could drown the whole world
I heard one hundred drummers whose hands were a-blazin'
I heard ten thousand whisperin' and nobody listenin'
I heard one person starve, I heard many people laughin'
Heard the song of a poet who died in the gutter
Heard the sound of a clown who cried in the alley
And it's a hard, it's a hard, it's a hard, it's a hard
And it's a hard rain's a-gonna fall.

—Bob Dylan, A Hard Rain’s Gonna Fall

Yesterday was a beautiful day, and my wife and some friends went with me to see Damn Yankees at Arena Stage in southwest Washington, DC, along the Potomac River waterfront. After lunch we walked the river walk and the new Wharf development. It is really a specular transformation. On our drive downtown we saw very few pedestrians in the city but several groups of armed National Guard soldiers standing around doing nothing. That is disconcerting. However, there was plenty of life going on at the Wharf development.

I always wanted a pied-a-terre in the city and think the District’s newly redeveloped southwest neighborhood would be a good place to start to look for one. There is a lovely mid-century modern Robert E. Goodman designed townhome and high-rise community just blocks from the waterfront called River Park Mutual. Built in 1962, by Reynolds Aluminum Corp. on urban renewal lands, it has the iconic so-called “barrel roof” townhomes. Several resale townhomes are for listed at pretty attractive prices compared to the rest of the city. They are very well-designed and represent an attractive piece of architectural history. But good sales pricing doesn’t tell the full story.

The development is now 63 years old and the infrastructure is aging. It is astounding, but the Association documents suggest that they spent $300,000 to replace just one aluminum barrel townhouse roof as a protype. And they project $150,000 per townhome or $9.6M total for the barrel roof replacement. Indeed, ironically, what makes the development  iconic, also makes the maintenance expensive and impractical. Of course, the maintenance and capital needs are not just a function of the barrel roofs. There are many other maintenance and capital  projects required down the road. The compact townhomes currently have HOA dues of about $2,875 a month, but that likely covers only half of the future needs. And it is an extra $185 a month to rent a parking space. The Association also charges extra for amenities like the gym and pool. So, even higher HOA fees are projected from here to far into the future, and they still aren’t nearly enough to cover the deferred maintenance needs of the development. The reserve study projects the Association will need $14M just for 2028  and almost $20M in about 2031, according to the accountants. As I see it, the only way to raise those funds likely will be some combination of higher HOA fees, another underlying mortgage (if they can get one,) or a future lump sum special assessment per unit in the perhaps hundred thousand plus dollar range depending on the size of the unit.

Guess what, the prices of the River Park Mutual high-rise units have already tanked and the townhomes are also deflating, albeit not as significantly. An unrenovated one bedroom high-rise unit, a commodity of sorts, is currently listed for $92 a square foot. You could have recently bought a one bedroom at River Park Mutual for under $65,000. In my judgment, it is likely that, rather than pay a six figure special assessment, the high-rise unit owners will more likely “mail in” their keys and co-op shares and walk away. Meanwhile, even now the HOA  delinquency rate (i.e., non-payment of dues by the owners) was 10.9% as of the end of 2024, and that was before DOGE layoffs, the District’s National Guard occupation, the nationwide condo sales collapse, and other bad stuff. I can only imagine it is even higher today. Delinquency over 5% usually precludes or at least impairs bank financing of the sale of units and issuance of an underlying mortgage at market rates. At some point, this can lead to insolvency and collapse. I am not saying River Park Mutual is there yet, but that is the direction in which it is heading.

River Park Mutual’s problems are not unique, just more extreme. When I was a young law firm partner around 1992 or so, I did some work for a client who wanted to develop a hotel in Georgetown. One of the things we did was visit the spectacular Georgetown waterfront development known as Washington Harbour, a 1986 mixed-use project on the Potomac River where Arthur Cotton Moore was the architect. It was the premier luxury development of its time, the mid-1980’s. I remember on that tour another architect wisely pointing out the post-modern ornamental “doodads” as he called them on the exterior facade and predicting there would be costly future maintenance. Well, now I see that condos in that project have HOA dues of over $5,440 a month, and the units are being listed in some cases for less than their 2013 sales price, and for what I deem half their otherwise likely market price if the fees were more in line with commercial reality.

Similarly, I recently purchased a modest 1968 condo constructed on Lake Union in Seattle, WA, which prior to my buy-in had about $115,000 of lump sum special assessments for my unit. We now facing a likely additional substantial assessment and individual unit owner expense to redo the building piping. But that was foreseen and at least considered in our offer. The HOA dues are high, but not out of this world. That is because the Seattle condo association faced the situation and taxed the unit owners. The lump sum costs are largely paid for or will be paid for soon. No one will be asking buyers to assume this future liability, because the future is now, and it is being handled by the Association.

River Park Mutual is a cooperative (“co-op”) and thus when you buy in you own a share of the development and get a license to use your property. Because of that, the health of the co-op is essential. If the co-op defers maintenance, at some point everything breaks down. Yet, when I reviewed the River Park Mutual documents, I saw that there is still a group of owners lobbying to reduce the HOA fees in the face of a reserve study calling for (at least double if not triple) HOA fee increases. Denial is not just a river. If the co-op fails, that means the owners lose their shares and become lessees of the new owner – be it the city, or a bank, or some developer/purchaser of the whole project for the reduced value.

Stuff happens. At River Park Mutual the A/C chiller broke last summer, years before it was expected, and had to be replaced. The multi-million dollar piping project done only a few years ago is leaking and will have to be replaced. Roofs and soffits need replacement. Elevators break down. Landscaping dies. Structural components of high-rise projects need maintenance or replacement. You don’t want to be another collapsing high-rise on the nightly news. If you don’t keep up, the property wears out. Soon, if not already, no lender will extend credit to buy. Sellers are limited to all cash buyers, and those kinds of buyers are more likely to do their due diligence.

So, it is buyer beware when it comes to buying aging condos and co-ops. If the HOA fees are too low, worry about deferred maintenance cost. If the HOA fees are high, look to see what additional maintenance and capital expenses are coming, and worry about what else can go wrong. Price those contingent costs into your purchase offer. And factor in the risks and uncertainties. Be conservative. These things seem to always cost more than you would think is likely. And think three times before you buy into an aging condominium or co-op building. What you don’t know can hurt you.