When a building’s lone elevator goes out of commission, it can be a nightmare. A big issue can be financing the repairs. You’ve had experience with both of these challenges at an HDFC co-op in Hamilton Heights. Can you tell us about it?
Certainly. This HDFC’s elevator was very old and in need of modernization. In addition, the city is requiring different upgrades that are due in the next few years. So the board decided that it would be best to do the upgrades while replacing everything in the elevator except for the cab. But they didn’t have enough funds in their reserves, nor did they want to eliminate their reserves in order to accomplish that important project.
So they reached out to us. We’re a project management company as well as a finance company. We wanted to make sure that if they’re going to redo the elevator that all of the issues are addressed. So we brought in an elevator consultant to do a site visit with me to determine what the scope of work would be, and then to go out for competitive bids. Then we arranged for financing from a local bank.
How did you get the loan, and what were the terms?
We have relationships with a number of local banks, and one of them was able to provide the loan. Generally the amortization — the period over which the loan gets repaid — is 30 years, but the term of the loan is 10 years. In this particular case, the building chose to have a three-year term, which resulted in a lower interest rate, which is fixed for the term of the loan. So by having a three-year term rather than a 10-year term, they were able to get a lower interest rate. But of course, at the end of three years, the interest rate will be reset.
Did everything go smoothly after that?
Everything went smoothly as far as the repairs and the installation went, but when the building super, who was a very qualified, knowledgeable individual, inspected the elevator he was concerned about the alignment. He contacted the board president, who contacted me, and I arranged for the elevator consultant to come back and determine if there were any issues. We addressed the concerns of the super, and we did determine that everything was in order, the installation was fine and the alignment was correct.
In closing, what do boards need to remember so they can keep downtime to a minimum with a major elevator project like this?
What boards can learn from is that having a project manager adds a valued resource, because when there are issues, as came up in this particular case, the project manager was able to contact us, and we were able to bring in the correct engineer. So it wasn’t just bringing in a mechanic who did the work. We made sure that the appropriate expert engineer was brought in to do a proper assessment of the situation.
Barry Korn is the managing director of Barrett Capital Group.