Paula Chin in Legal/Financial on April 22, 2019
When Leonard Barish of John B. Lovett & Associates began managing 865 UN Plaza in 2016, he was greeted by a trio of vexing problems. First, the red-brick facade of the 16-story pre-war luxury condominium in the Turtle Bay neighborhood was in need of serious repair. Second, many of the 87 unit-owners were months behind on their common charges. And third, roughly half of them – a mix of United Nations employees, professionals, lawyers, and investors – live out of town or overseas. Reaching them was no easy feat. But eventually, through dogged legwork, Barish started collecting the arrears.
It was then time for condo board and manager to turn their attention to the overdue facade repairs, which amounted to nearly $20,000 for each unit. Wiping out the condo’s $400,000 reserve fund wasn’t an acceptable option. Nor was imposing a punishing assessment, since unit-owners were already paying a 10 percent fee put in place in 2018 to bulk up the reserves depleted by a roof replacement.
Board and management negotiated a seven-year construction loan for the full amount of the facade repairs, but a unit-owner vote fell far short of the two-thirds supermajority required for approval. So the board set up a subcommittee and encouraged residents to join. “We’d already gotten unit-owners involved when we invited them to come with us when we met with contractors,” says board president Akhilesh Singh. “Transparency was very important, and we tried to open things up and get everyone’s input from the very beginning.”
Two committee members, both of whom work in finance, quickly brainstormed a three-pronged plan. The board would use its reserves to help finance the project, then replenish the fund through a two-year assessment – in effect, lending owners 27 percent of the total project cost interest-free. For the remaining 73 percent of the needed funds, owners would have the option of paying 10 percent, 37 percent, or 100 percent of it up front. The balance would be financed by the loan. The more people paid on the front end, the less money the condo would have to borrow.
Unit-owners who front their full share will pay a $198 monthly assessment for the reserves for two years, while owners who choose the minimum 10 percent will pay that amount, plus an additional $173 a month for the loan for seven years. To soften the sting, the current assessment for the roof repair would be suspended while the reserve loan is being repaid. “It’s a plan that accommodates people’s different abilities to pay,” says Barish. “It had something for everybody.”
Unit-owners were sent notices outlining the plan and told that a second meeting would be held in December. This time, the board got the votes it needed to greenlight the loan – including some 10 percent by proxy. What remained to be seen, though, was just how much unit-owners would ante up. “We figured a lot of them would be willing to pay their whole share up front in order to avoid the finance charges,” Singh says.
The board was right on the money. A detailed notice was promptly sent out, explaining that unit-owners had six weeks to respond, that those who failed to respond would default to the 37 percent option, and that the money was due on March 1. As expected, most chose to pay everything up front. “And we got $600,000 total,” says Barish, “which means we need just $500,000 for the loan.”
The condo board is now negotiating a loan from the National Cooperative Bank, and Barish expects the facade repairs, which are scheduled to begin soon, will be finished before the end of the year. Easy as one, two, three – thanks to the dedication and creativity of the board, the committee, and management.
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