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A Plan Grows in Brooklyn

Nestled in the midst of a landmarked section of Brooklyn Heights, N.Y., on the street Moonstruck star Cher meandered through after her night at the opera, sits 81-87 Columbia Heights. Shareholders say the 58-unit co-op’s pleasant apartments and the surrrounding tree-lined sidewalks, waterfront edge, and sweeping views of downtown Manhattan were key components in their decisions to buy. Now, even more distinctions line the horizon.

An $850,000 capital improvement plan is slated to kick off this spring. Predicted to span from two to five years, the project includes a completely new roof and roof deck, brick repointing, and fire escape refurbishing in the first phase. The second phase will feature parapet and cornice work, plumbing and electrical upgrades, window sealing, boiler replacement, and public area improvements – quite an undertaking for even the most seasoned building owner. What could have prompted this seven-member board to develop such an ambitious plan?

“[It was] a realization that we wanted to make sure the building’s physical future was well laid out so we would not have any surprises for shareholders down the line,” says Michael Thurman, the board president. “I run under the assumption that we are their employees, that we run their affairs.”

The idea for a long-term capital improvement plan was born in 2001. That’s when a new board was elected for this 88-year-old building, a former hotel, mostly made up of one-bedroom units that were ideal for singles, young couples, and retirees. The roof had leaked a bit here and there and some other repairs seemed constant. So the board had an engineering company inspect the property and formulate a plan for needed improvements. With survey in hand, the members met with shareholders, explained the needed scope of the work, and began providing updates in their monthly newsletter. Since the board deemed the work necessary, not optional, the shareholders did not vote.

But the board needed to find financing. “That’s the hard part,” says Marc Luxemburg, president of the Council of New York Cooperatives & Condominiums and a partner at the law firm Snow, Becker & Krauss. “I think most boards have at least a general understanding of what needs to be done in the building.” However because of financing – a daunting task – knowing what needs to be done and carrying it out are two entirely different matters.

Board treasurer Mary D’Ambrosio notes the co-op started with $300,000 in its reserve account. It refinanced the building’s $500,000 mortgage at 8.1 percent to an $850,000 mortgage at 6.13 percent with $490,000 due after 15 years. The board also raised maintenance, which averages between $400 and $500 per month, by 5.5 percent. All combined, the board managed to bring total available funds to $750,000, enough to cover almost the entire project.

The co-op may also eventually apply assessments to shareholders.
Steve Varone, president of Rand Engineering & Architecture, the firm Columbia Heights chose to oversee phase one, notes that although capital plans may seem cost-prohibitive, in the long run they save a co-op money.

For example, patching a roof each year for four years can cost four times the amount it would take to fix it correctly the first time, considering potential damage to apartments and the building’s structure. Columbia Height’s phase one work is estimated to cost the co-op from $450,000 to $550,000.
The building’s location in a landmarked district poses another challenge.

Before work can begin at the property, before the job can even be bid out to contractors, the co-op must obtain approval from the New York City Landmarks Commission. Joseph Humman, project manager for Rand, is handling the approval process for Columbia Heights and is confident the project will begin in the spring as scheduled. The Landmark Commission’s website, however, warns that while permission is not necessary for ordinary repairs, penalties can be severe if proper permission is not obtained for a project requiring a Department of Buildings permit. Therefore, experts stress the importance of knowing of and obtaining all approvals before beginning capital work in a landmark area.

In addition to approvals and regardless of a building’s location, a board “should have knowledge of all apartment issues,” Humman notes. For example, leak surveys are ideal for identifying potential water infiltration, which is critical if you hope to avoid unpleasant surprises during work. Diligent superintendents, such as the one at Columbia Heights, can be great sources of information for such items, he says.

Speaking of unpleasant surprises, Varone notes that his firm usually includes a 15 to 20 percent contingency allowance as a line item in the capital improvement budget in case of unforeseen expenses. “The typical building does not have all the funds to do what they need to do, ideally,” he says. “It’s a balancing act of available funds and important items.” At the time of its refinancing, Columbia Heights also secured a $500,000 credit line it can tap into if needed.

This building is unique in even more ways. Built as two separate structures, the six-floor walkup is now officially one property but still has two separate entrances and lobbies as well as two boilers. Yet, residents say, this is all part of its charm. And although the entire scope of the improvements is already laid out, only the first phase is in place at this time. “We’re taking it step by step,” D’Ambrosio says. “The rest of the work will be reviewed and scheduled next fall.”

After all, notes board president Thurman, priorities change. Two years from now, hallway upgrades might not seem so important, or it may be too difficult to agree on new décor. While the board gets along well, which so far has allowed plans to progress nicely, “there’s still lots of discussion. Seven people, seven different opinions,” he says. But, “in general, the board is pretty much in agreement that we’re moving forward, and these kinds of things have to take place at some time.”

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