New York's Cooperative and Condominium Community
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Keeping project costs down is a hard task – and can be even more complicated in a limited equity building.
During your years on the board, what achievement are you most proud of?
My most gratifying achievement and the biggest challenge are one and the same. When I got on the board in 2018, we were dealing with the city’s mandate to deal with elevator locks. We had 28 elevators that were nearly 70 years old, and we’re what they call a skip-stop building, where the elevator stops on every other floor, and we also had swing doors. We decided to take on a major project to have the elevators stop on every floor and replace the swing doors with sliding ones. That project started at $8 million, but with a building of this age there’s lead and asbestos abatement and other work that has to happen. Between the legal, engineering and added construction expenses, we ended up at nearly $12 million.
That’s quite a case of sticker shock.
We were a limited-equity co-op and the board was averse to having debt, so it only borrowed $2.5 million. We had about $4 million in the reserves, and we had been collecting an $1.8 million assessment after we self-financed a dual-fuel plant in 2016, so it would have been tight, but we probably could have swung it. But once we started having the cost overruns, I said: “There’s no way we’re going to be able to levy a big enough assessment to pay these obligations because that would bankrupt our shareholders. And vendors aren’t going to wait beyond 90 to 120 days, and they’re going to place liens on the property.”
The urgency of needing the capital made me realize that I had to convince the community that we had to start selling apartments on the open market and impose a very stringent 25% flip tax, because we couldn’t afford to tie up capital purchasing back shares. For example, we were paying over $300,000 to buy back a three-bedroom apartment, but until that apartment sold, we didn’t have that cash flow. But people here feel a deep sense of responsibility to remain an affordable co-op and were staunchly opposed to going market-rate.
So it was going to be a very hard sell?
We had several meetings in our community room where we gave PowerPoint presentations, disseminated data to back up our argument and broke down the numbers for people. A lot of our legacy shareholders really did not want to support this, but ultimately between the meetings, the website we set up and going door-to-door and speaking to people, we were able to get the votes. A similar initiative to go market-rate failed back in 2003, when the board got only 20% approval. This time, out of 726 votes, 602 were cast in favor. That was in 2019, and we’ve since raised over $7 million in sales.
That’s quite a success story. What do you see as your biggest financial challenge going forward?
I think there is a war on co-ops. Our co-op is still relatively affordable compared to market rates in the neighborhood, and we believe we’re providing a space for people to enter into building equity in New York City. However, now that we’re facing these carbon-reduction requirements and Cycle 9 of FISP repairs — which seems like it’s going to cost at least twice as much as Cycle 8 — we’re asking ourselves how we can borrow and not get into unsustainable debt.
Have you come up with any answers?
We’re trying to be practical. We realize that given the age of our complex, some of the infrastructure will not only need to be repaired but either restored or replaced, and we’re leaning towards borrowing $25 million before the end of the year. Our last maintenance increase was 2.4%, but that’s going to drastically change, because there’s really no other way to meet these financial obligations.
I’m a little discombobulated because I’m trying to figure out how I’m going to tell shareholders. We might be in The New York Times with some revolt here at Queensview, but I think if we take the data-driven approach we took for open-market sales, have the meetings and lay it out for people, we can convince them this is what has to happen to keep us in compliance and keep us moving forward. We’ve had a lot on our plate, but we’ve made great strides, and I think we’re on the right path.
Board treasurer (7 months)
Queensview, 21-66 33rd Road,
Years of board service: 5
Year Built: 1950
Operating budget: $9.8 million
Current assessment: Yes
Maintenance increase: 2.4% in 2021
Property management: FirstService Residential
Accountant: Czarnowski & Beer
Attorney: Norris McLaughlin
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