A Loan Again, Naturally: Three Boards Score in Non-Mortgage Situations
Oct. 2, 2012 — Boards borrow money. They have to, what with Local Law 11 requirements, aging buildings and rising costs. But where do they find the money? Creative boards look in creative places. When faced with needed repairs, for instance, a Howard Beach condo in Queens first tried an assessment and then, realizing the costs were too heavy for many unit-owners, found a way to refinance an existing loan (never an easy task for a condo). A Nassau County co-op board is seeking a combination of measures: a grant from the New York State Energy and Research Authority (NYSERDA), possible assessments, and some money from the local government. In part one of this two-part guide to refinancing creatively, we told you about three co-op boards who worked out great mortgages. Now we'll clue you in on three co-op and condo boards who worked out great loans.
THE CONDO LOAN
Patchogue Homes Condo 1, 85-09 151st St., Howard Beach, Queens, 150 units
THE NEED Local Law 11 work (defects in façade), a new roof, elevator and terrace repairs, and a new boiler were all necessary.
AMOUNT RAISED AND LOAN DETAILS Last year, the condo took out a 10-year self-liquidating loan for $1.1 million at 5.7 percent interest; it also refinanced a $550,000 loan the condo obtained five years ago.
LENDER AND/OR LOAN BROKER Capital One. Both condo loans were negotiated with the assistance of Saturn Realty, a mortgage broker introduced to the board by manager Pam Delorme, president of Delkap Management. Getting a loan for a condo, in which the common charges are put up as collateral, is not typically an easy task, observes Delorme, but she had worked with both Saturn Realty and Capital One previously to obtain such loans. (In 1984, Delorme won a Habitat "Management Achievement Award" for being the first person to obtain a condo loan on Long Island.)
Five years ago, says Bernie Fisch, the condo's treasurer, Delorme arranged a $550,000 loan for the property, which was needed to pay for required Local Law 11 work. Sometime last year, defects in the façade were exacerbated by a hurricane, and the board passed an assessment to pay for repairs. Seeing the assessment payments — "quite a lot of money," recalls Delorme — as a burden on the unit-owners, the board members subsequently decided to refinance their condo's five-year-old loan. Once they obtained the refinanced loan — at 5.7 percent annually, a lower interest rate than previously — they gained additional money for repairs, and what remained of the assessments was rolled into the loan.
THE PERSONAL LOAN
The Howard Cooperative, Lindenwood, Queens, 80 units
THE NEED The windows needed to be repaired or replaced.
AMOUNT RAISED AND LOAN DETAILS $125,000
Needing money for a window project, this co-op seemed to have two choices: a mortgage or an assessment. Then, one of the shareholders offered a third possibility: a personal loan, which she would make to the cooperative, at the prevailing low interest rates. An attorney drafted the necessary documents, the board approved the deal, and the Howard Cooperative was in the money. "I felt that this was better than taking out a mortgage on the cooperative," says the shareholder, who adds that there are no bank fees or prepayment penalties with her loan. "If they want to pay it off in full at any time, they can. It's easier." Although managing agents report other personal-loan-to-cooperative situations (a $75,000 loan in Far Rockaway, for instance), most admit it is not a common way to raise money.
THE NYSERDA GRANT
Flower View Garden Apartments, Floral Park, Nassau County, Long Island (27 buildings), 270 units
THE NEED $1.5 million in roof and lighting repairs/replacements, and other energy savings, plus an additional undetermined amount for the windows.
AMOUNT RAISED AND LOAN DETAILS The property is still in the exploratory phase, meeting with NYSERDA and its partner, Bright Power, which completed the paperwork for NYSERDA and is doing the energy audit. So far, the board has saved a projected $45,000 by sharing repairs on a fence that partially sits on municipal property.
LENDER NYSERDA
Elizabeth LaManna, the board president of this co-op, says there have been "many, many" requests by shareholders for window repairs. "So you can understand that that is a grand cost," says LaManna. "Either we have to go with assessment or to take out of our reserve fund. We have an extremely healthy reserve fund, but that would just about wipe it out because we're talking about over a million dollars [of work]." The board learned about energy benchmarking practices in New York City and thought, says LaManna, "if we had a company come in, we could learn about how energy inefficient we are," and go about correcting it.
Also, notes Peter Lehr, director of management at Kaled Management, the property's manager, "If we can show a 15 percent savings in energy, we will be eligible for a [$250,000] NYSERDA grant." The board members also looked into other grants (Con Ed was one), although none of them panned out. With two years left on the mortgage, the co-op is also thinking about refinancing at the current low rates.
Photographs by Jennifer Wu
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