Downward spiral. Stanley Greenberg likens life at Le Havre co-op in Beechhurst, Queens, to a roller coaster ride. It began on a high note in the 1950s, when legendary developer Bill Levitt, the creator of Levittown on Long Island, erected 32 nine-story buildings overlooking the East River and Little Bay and surrounded them with amenities that included swimming pools; basketball, handball and tennis courts; an ice-skating rink; even a sandy beach.
After Levitt sold the property in the 1960s, years of decline set in and the roller coaster headed down, says Greenberg, who rented an apartment at Le Havre in 1972 and served as the inaugural board’s treasurer after the 1,024-unit complex was converted to a co-op in 1984. The sponsor addressed some of the infrastructure problems, but the cinder block buildings were plagued by leaks from the roofs, windows and walls.
A refi to the rescue. In 2005, the board signed a whopping $53 million, 30-year mortgage with National Cooperative Bank (NCB), which provided the cash to repair facades, replace windows and roofs, repave parking lots. Greenberg arranged for the first five years of the loan to be interest only, which allowed the board to make the long-overdue repairs without jacking up monthly maintenance. The roller coaster was on its way back up.
“Once we completed that work, there were no more leaks,” says Greenberg, a certified public accountant who became president of the self-managed co-op’s board in 2011. But capital projects kept coming. They included repairing the drainage systems and sidewalks that cracked during the freeze-and-thaw cycles of an underground water table, switching the 32 boilers from oil to natural gas, converting to LED lighting, installing video intercoms, enhancing security cameras. Then something clicked.
Aha moment. “Last summer,” Greenberg recalls, “I was talking to our attorney, Geoff Mazel, and he told me how low the interest rates had become. He put me in touch with Ed Howe at NCB, and I told him my main concern was the prepayment penalty on our mortgage, which had run half of its 30-year amortization. I learned that the penalty was 1% of the balance, which came out to about $440,000. That was palatable. We worked to get it below 1%.”
Better yet, the interest rate on the new loan would go from 5.58% to 3.52%, a significant drop. Next question: How big should the loan be? “I decided I wanted to go back to the original amount of $53 million so we could tackle our 10-year capital improvement projections,” Greenberg says. “Nothing lasts forever.”
Stroke of genius. The co-op’s capital improvement fund is fed by an ongoing assessment that’s baked into the monthly maintenance. Greenberg decided that, despite the lower interest rates, shareholders should continue to pay as though they were servicing the old debt. Greenberg then created what he calls a “major major capital improvement fund” of $8 million from the $53 million – which will be fed by the monthly savings on debt service. “It’s not going to affect shareholders,” he says. “Everything’s going to stay the same.” Well, not quite. In 10 years, the $8 million major major capital improvement fund will mushroom to $22 million – at no added cost to shareholders.
New challenges await. Greenberg doesn’t foresee any problem finding ways to spend the windfall. All 32 elevators will soon need to be modernized. The roofs will need to be replaced again in about 10 years. Local Law 11 facade inspections and repairs are looming in a few years. Energy-saving retrofits will likely be required before 2024 under the city’s stringent Climate Mobilization Act. On and on it goes. This co-op, unlike so many others, is ready.
“We just closed on the loan, and I feel great,” Greenberg says with evident pride. “The roller coaster is back on the upswing.”