It was 2013 when the board at Windsor Park, a 1,830-unit co-op in Bayside, Queens, began working with its property management team from Akam Associates on an update to their long-term strategic plan. Not a plan for the coming year, or even the year after that necessarily, but a big-picture plan for what the 20-building complex really needed, and the niceties it could benefit from, with the timing to be determined. “The real key was always, how are we going to fund these improvements?” says Larry Kinitsky, the board president since 1986. “We knew the cost was going to exceed $20 million.”
It wasn’t until 2016 that the board saw its opening. The 10-year Treasury note dropped to a new low, thereby driving bank lending rates low enough to enable Windsor Park to refinance its mortgage and pull out enough cash to pay for the entire $24 million plan. Work is now under way.
The Windsor Park board’s long view on capital improvements is rare among co-ops, but its approach is instructive in that it positioned the board to act only when the time was right. Indeed, at such a large co-op, that kind of thinking is crucial to keeping the operation running smoothly, Kitnitsky says, adding: “You have to have some metrics for decisions.”
But smaller co-ops can also benefit from long-term planning – as was the case at Fairview, a 424-unit co-op in Forest Hills, Queens. Since the board’s long-range goal in this case was to slash energy spending, the proactive property manager, Greg Carlson, president of Carlson Realty, has kept his eyes open for opportunities as they arose. Now, as its multi-phase energy projects wrap up, Fairview has managed to cut its fuel and electricity costs in half. And even more remarkably, neither co-op had to assess shareholders to accomplish their wish list.
Funding Through Refinancing
Windsor Park got the cash it needed for improvements by refinancing. The co-op held two mortgages, totaling $58 million. After refinancing, it had a single $89 million loan, pulling out $24 million for capital spending. Although the co-op incurred a prepayment penalty to exit the existing mortgages, it still came out ahead because of the terms of the loan: 3.3 percent, with interest-only payments for 15 years.
Phase 1 of the makeover began last November. It involves replacing all windows and air-conditioning units, and installing video intercoms in every apartment. “We wanted to have uniformity, so that when you looked at the building, every air conditioner would be in the same line, in the same windows,” Kinitsky says. “The residents were quite happy about that.”
Workers are going into each apartment and doing all of the installations in one day, says Michael Berenson, the president of Akam, in order to minimize the inconvenience for residents. The replacement of all 40 elevators is also included in this phase. That work began in July.
The amenities phase comes next. This fall, the co-op will break ground on a 5,700-square-foot fitness center, to be conveniently situated next to its Olympic-size swimming pool. The center will have an aerobic and spin room, plus weights and machines, Kinitsky says. Members will have access to personal trainers and about 25 classes a week. It’s scheduled to open next June.
“It’s going to be magnificent,” Berenson says. “We anticipate that having a state-of-the-art facility should enhance their property values. But we know it’s going to improve everybody’s quality of life.”
Those two positive outcomes are the guiding principles behind all Windsor Park board decisions. “In everything that we do, we ask, ‘Is this going to move our mission statement forward?’” Kinitsky says, adding that the strategic plan now under way “hits both of those things 100 percent.”
Finally, once all of the construction work is done, the phase Kinitsky calls “curb appeal” will begin, probably wrapping up in 2020. “It’s the finishing touches,” including sprucing up the lobbies and the landscaping on the co-op’s 46 acres.
Kinitsky credits Akam with keeping the board proactive and on track throughout the planning process. “They were extremely instrumental in giving us some of the discipline that we apply to the property, working with us to develop the strategic plan,” he says.
Wrestling With an Energy Hog
Greg Carlson, Fairview’s property manager, recognized as far back as 2008 that the co-op was spending far too much money on fuel – more than $1 million annually. The co-op’s oil-burning boiler was so old that parts had to be specially made when it broke down. And the original chiller was grossly inefficient, consuming significant steam and keeping the boiler running year-round.
Through his work as an executive with the Federation of New York Housing Cooperatives & Condominiums, Carlson was also hearing whispers that the city was planning to phase out the burning of No. 6 fuel oil. He figured the timing might be right to act on Fairview’s efficiency problems sooner rather than later and convert from oil to gas. “I saw the handwriting on the wall,” he says. “Because of that, we decided to do it before it got mandated.”
Working with the New York State Energy Research and Development Authority (NYSERDA), Carlson pursued an overall energy-reduction plan. After starting off with one vendor who proved unsatisfactory, Carlson switched to the EN-POWER Group, an energy engineering firm in White Plains, to help implement the plan.
Like most buildings constructed to 1960’s standards, Fairview was an “energy hog,” says Michael Scorrano, EN-POWER’s managing director and founder. “We looked at it,” he says, “and our eyes opened up wide, saying, ‘Gee there’s certainly a lot of opportunities to save money in this building.’”
The timing was ideal. The NYSERDA loan terms for multifamily properties were generous at the time, and Fairview financed $1.5 million at a rate of 2 percent. In addition, National Grid was eagerly looking to expand its capacity in the city at that time, so it extended generous incentives for Fairview’s conversion, and even brought the gas lines up 700 feet to the building property.
The co-op added two gas boiler burners that can also burn No. 2 oil, if necessary. It also installed a more efficient chiller, separate domestic hot water heaters, and all new interior and exterior lighting.
The fuel savings were an eye-opening $333,000 a year. “Because of that, we were able to finance a $1 million rehab to our six elevators,” Carlson says. “At that time, 2009 and 2010, contractors were hungry, so they were willing to take a three-year payout.”
Next, Carlson wanted to address the building’s electric costs. He had long thought that the easiest way to cut usage would be to replace the master metering system on the building with submetering. Every resident would then be responsible for paying for his or her own power use. “It’s a way of getting people to be more conscious of how much they’re using, maybe not to leave the television and lights on all day,” he says.
But try as he might, Carlson could not convince the board to go along. And without the board on his side, he knew he faced an uphill battle with residents. So he pursued alternatives. He had been talking with EN-POWER about cogeneration. When it came time to refinance the co-op’s mortgage in 2015, he persuaded the board to pull out enough cash to cover the roughly $1.5 million project (before rebates).
The cogenerator is capable of generating 1.4 million kilowatt hours of electricity annually. with an estimated annual energy cost savings of $160,000. “I had a board that understood this stuff and looked at the payback, which is a little over five years,” Carlson says.
Solar was next on the list. Carlson had been eying solar for years, but prices were so high that the payback period was too long to make it worthwhile. By 2016, prices had come down considerably, and there were numerous credits and tax abatements available. This time, the board agreed it was worth tapping into the co-op’s reserves for the roughly $200,000 installation of solar panels. With rebates and an estimated $11,000 annual energy savings, the payback period is seven to eight years.
“We were fortunate to have a very good group there,” says Scorrano of EN-POWER. “The board wanted to make this project happen, and they were already sold on the idea of energy efficiency and savings.”
Now, with the tie-in of the cogenerator to the building’s electric grid, Fairview can generate 60 percent of its own electricity – quite a turnaround for an “energy hog.” Carlson estimates that it will translate into annual energy savings of roughly $200,000, on top of the fuel savings. Those savings will keep existing shareholders happy. And the green improvements, he hopes, will make Fairview all the more attractive to younger buyers in the years ahead.