Frank Lovece in Board Operations on July 30, 2013
The Underlying Truth
By this time, the 10-year underlying mortgage had matured. So, in October 2012, the board refinanced. Because of historically low interest rates, it was able to take out a new mortgage that was $1.1 million larger than the previous one, without substantially raising its monthly payments. The new $7.6 million mortgage has a 3.59 percent interest rate, compared to the previous rate of about 5.5 percent.
At the same time, the building took out a $2 million line of credit with a floating interest rate. The additional cash flow has allowed the building to take on several major projects without dipping into its reserves. "It was a way of doing the projects with little impact to the building," says co-op board president Burt Spiegel.
The building updated the elevators first. But the road to a smooth ride was paved with a grueling work schedule. For nearly a year, one elevator was constantly out of service. The board sent residents updates in the building's bimonthly newsletter and Spiegel sent monthly letters as needed. Announcements were posted in common areas to keep residents up-to-date.
"Communication is key. The more you talk to them, the more they know and the more they leave you alone," says Shechter. But there are always "some people who you'll never make happy," he observes.
The elevators were replaced with new motors, controls and cabs. Perhaps most significantly, the new motors use a permanent magnet technology and don't need a generator to convert from AC current to DC, reducing the building's electrical bill. They're also pretty. To come up with the new design for the elevators, the board set up a design committee, gathering input from residents.
The result is a much lovelier ride. The old elevators were slow, bumpy, and had dreary Formica walls. The new ones have granite floors, a marble trim and frosted glass panels and provide a smooth, fast ride. All three now descend to the basement. "It's just really nice," said Shechter. "The residents are happy. They're impressed."
Lesson learned: By refinancing at a lower interest rate, co-ops can get money for capital improvements without significantly impacting your debt service, raising the monthly maintenance or imposing assessments.
Photo by Carol J. Ott
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