New York's Cooperative and Condominium Community

Habitat Magazine Business of Management 2021

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ARCHIVE ARTICLE

Savings Solutions: Tales from the Trenches

301 East 22nd Street, Manhattan

Controlling Steam

When things got too hot at the Gramercy, 301 East 22nd Street, residents knew how to cool their apartments off: open up the windows. However, this effective but inefficient method of temperature regulation was costing the 262-unit co-op big bucks in steam bills. Mel Hartman, former board president, and Steven Hirsch, managing agent at Goodstein Management, knew there had to be a better way to get the building's heating situation under control.

Leonard Powers, a steam analysis and maintenance company brought in to help save money, came up with a high-tech system that gives the building greater control over steam usage and energy efficiency. It was so successful, in fact, that Con Ed actually came by to investigate the building's marked drop in steam consumption.

The system modulates the building's heating valve by taking readings from a temperature sensor outside the building, 16 sensors installed inside apartments in the building (four apartments on four floors), and a sensor that measures the condensate temperature (the steam coming back from the apartments). A Baelz heat controller averages the readings and opens or closes the heating valve depending on the information.

Superintendent Bill Wiedemann can monitor the controller and make adjustments to the heating valve via his office computer. He can dial in from home, enabling him to respond quickly to residents' complaints on the weekend (before the new system was installed, the valve would have to be adjusted manually).

"The heating system needs to be viewed in its entirety," says Greg Fricke Jr., president of Leonard Powers. The building's mechanical operations - especially the vacuum pumps and heat traps - also have to be working correctly. "It's understanding how each component fits in and works together that allows us to achieve the kind of success we've had with these properties."

Fricke also meets with Wiedemann, Hartman, and Hirsch every quarter to go over the system's results and discuss any possible improvements. In addition to the computer readings, each building resident is surveyed during the heating season to determine the comfort level in his/her apartment. These surveys help determine where drafts might be coming from and try to trouble-shoot why some apartments have a greater variance in temperature.

The work first began over four years ago at the Gramercy, and has progressed in different stages. Fricke estimated that each phase of the work - the control panel and zone valve, the vacuum pumps, the new traps - cost anywhere from $10,000 to $20,000. But the co-op has cut down its steam consumption significantly, saving the co-op between 15 and 20 percent on its monthly steam bills.

Despite the rough winter New York has weathered, the residents at 301 East 22nd have been warm without wasting energy. "The steam usage is way down," Weidemann comments, "even though it's a lot colder."

-Michael Gwertzman

111-50 75th Road, Queens

Leasing roof rights

With Stuart Lattner's 80-unit co-op facing the prospect of increased insurance premiums (how much is still unclear) on top of an 18.5 tax hike, the board knew money needed to be raised. The Flushing property, actually two prewar buildings joined together, has been a cooperative for ten years, but this financial double-whammy was a new situation, made worse by the added costs of higher fuel prices in a colder-than-normal winter.

To raise cash, the board increased maintenance by 8.5 percent and also asked the managing agent, Residential Management, to look into refinancing the building's underlying mortgage. But Lattner, the treasurer of the seven-member board, then researched another idea: leasing partial roof rights.

T Mobile, a wireless phone carrier, had approached the management firm about renting part of the co-op's roof for antennas. The board was intrigued by the idea and Lattner became the point man. He spent three months talking with other area co-ops that had done it, making a list of the plusses and minuses. On the plus side was the income. On the minus side were two buildings reporting that the antenna installation had loosened brick, and another property complaining that the antenna company was coming to the roof too frequently. More significantly, the money would not come from shareholders, so it would count as "bad" income under Section 216 of the Internal Revenue Code.

In the end, the board felt the positives outweighed the negatives, signing with T Mobile for ten years at $1,800 a month. The mobile phone company requested 24-hour access, which the co-op allowed, but only if the superintendent were present. "They are not getting the roof rights," explains Lattner. "They are getting a small part of it. That way, if another company comes up, we have an opening."

- Tom Soter

 

Halston House, Westchester

Converting to Natural Gas

Halston House is a condominium complex, comprised of four buildings and 221 units on several acres of wooded areas, flowering trees and landscaped gardens in Westchester. Conveniently situated on Benedict Avenue, right off of Route 119, residents have easy access to all major highways and bridges.

Yet there was trouble in paradise: the building's electric bills were busting the budget. The board learned of a program offered by the New York State Energy Research and Development Authority (NYSERDA) to offer rebates and loans to convert from inefficient and expensive electric domestic hot water system to an economical and efficient, state-of-the-art-natural gas system. It hired an engineer to review options and offer suggestions on how to proceed.

On April 9, 2002, the board voted to proceed with the conversion, which then became one of two interwoven improvement projects. The gas conversion required running gas piping from Maple Avenue into all four of the buildings. At the same time, the condo continued the road paving and curbing replacement project already under way. Connecting the underground gas lines to the buildings required the destruction of some of the asphalt anyway, so it was an ideal time to do the road and curbing work.

"The board deliberated very carefully," reports Bob Beranger, the president. "We reviewed all aspects of the project including safety, efficiency, costs, and savings. By acting quickly, we will begin reducing our energy costs immediately. Our consulting engineer study indicates we will save at least $58,000 a year by switching to gas."

The board financed the initial investment of roughly $260,000 at an interest rate of 3.5 percent, minus a $95,600 rebate from NYSERDA. "The loan will be paid back from the savings generated by the new gas-based system, hopefully within five years," Beranger notes. "The new gas-based system has an expected useful life of fifteen years. Therefore, we anticipate that the conversion project will have no impact on the monthly operating or capital charges to unit-owners."

- Tom Soter

 

520-522 West 50th Street, Manhattan

Imposing Sublet Fees

Before Michael Marino joined the board of his 40-unit West 50th Street co-op four years ago, the building was not generating any money aside from maintenance fees. But the building's biggest problem was a board of directors dominated by investors and outsiders. "I was one of two people on the [seven-member] board who actually lived in the building," he recalls. "The majority of the board were subletting or investors. They didn't want a flip tax, they didn't want a sublet fee."

Marino envisioned a sublet fee as a way to help the co-op accomplish two things: generate revenue and keep down the number of sublettors in the building. Out of the 40 units, 24 were owner-occupied; 14 were sublet.

Two years after joining the board, Marino - now the president - took the first steps towards introducing a sublet fee. After gathering information from friends in other co-ops about their fees, the co-op's housing committee presented their findings to the board, and according to Marino, "left the seven of us to duke it out."

The board eventually passed a policy that required sublettors to go through the same screening process as a purchaser, although the potential sublettors only have to complete an application package half the size of the purchaser's. This process alone, Marino says, created an impediment for sublettors.

After a year with the sublet policy in place, the board then passed a sublet fee. The fee comes in two parts. There's a $250 charge every time a unit is sublet to a different tenant, and an eight percent monthly charge of the sublet unit's maintenance. Although the charge is pretty minimal for each unit - $50 to $75 depending on the apartment - it adds up to several hundred dollars each month. Marino estimates the building has earned nearly $6,000 over the last year strictly from the monthly fee; the $250 charge hasn't come into play yet.

While the sublet fee has paid some financial dividends to the building, certain provisions Marino pushed for were scuttled during negotiations. A time limit that would have only allowed shareholders to sublet their units for two out of five years wasn't passed, and he admits that the sublet fee isn't very popular with the sponsor and his investors. "I think if the board was going to turn again and it became predominantly investors, the first thing that would go would be the sublet policy," he admits. "It's more viewed as a deterrent or a nuisance than a moneymaking thing. But I think even the investors on the board, when they saw the amount of money, their eyes kind of opened up."

-Michael Gwertzman

 

 

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