Dear 336 CPW Friends and Neighbors,
I guess I need to own up to the fact that I have entered the clubhouse turn in my nearly 10-year run on the board and as your president. I have only five more meetings of the board. The plan is that the board and I will agree on the budget for 2017. At that point, the leadership baton will pass from my hand to those who will continue stewardship of the best interests and welfare of our building, our co-op and our community of shareholders, residents and staff. If you think I look forward to that December meeting, you are wrong. Two reasons.
First (and probably foremost), I have thoroughly enjoyed this service. Moreover, it truly is and should be service. One is in charge (as distinct from in service) only in the sense that whatever needs attention or fixing or mediating or planning or guiding or just plain work is in the portfolio you carry. It’s your responsibility. It’s your job. You work for the community of residents and shareholders, just like the superintendent and just like the managing agent. Ultimately, every broken toilet, every damaging leak, every disgruntled, unhappy shareholder (whatever the cause), every out-of-step staffer and every threatened capital repair is your problem. Notwithstanding all that, it’s been a very enjoyable and personally enriching experience I wouldn’t trade for anything. I am going to miss it – as well as missing all of you.
Second, we have a very full agenda of projects yet to accomplish in this last half of 2016, and I want to see it all done before closing the book on my service. The major projects include the window program described at the annual meeting, the new and improved proprietary lease and the removal and restoration of the sidewalk around the building, which is both necessary and long overdue. More on these in a minute.
This year the co-op is going to have one of its best years financially (if not the best in memory). There are two principal reasons for this. The first is the one that we always cite in reviewing the financial performance of the co-op: The board, the managing agent and especially the superintendent and the staff have continued their rigorous and relentless efforts to control costs, to eliminate waste and to find ever more efficient ways to accomplish large and small maintenance tasks that must be addressed. Everyone involved conserves and protects our shared co-op funds as if they were their own. These efforts continue to pay real and substantial dividends for all of us.
Transfer fees are the second reason for this year’s financial success. We have already received more than $200 thousand in transfer fees in the first half, and there is reason to anticipate we could see another $40 or $50 thousand in the second half. This will leave us with extremely healthy cash reserves that are even more substantial than reported at the annual meeting. It will also leave us in a very strong position to deal with unanticipated major capital repairs coming out of the next cycle of the Local Law 11 report that will have to be prepared and submitted in 2017. Although we have no reason to believe anything major will come from that, we know how common surprises in that realm can be.
We achieved one other major accomplishment in the first half of 2016. We refinanced the mortgage on the building. The old, interest-only mortgage was due January 1, 2018. We had been monitoring rates and looking for opportunities that would eliminate the risk of rising interest rates, which many have been predicting for some time. We were approached by a broker this spring with a new product and – more importantly – a new lender (Principal Insurance of Des Moines, Iowa), both of which appeared attractive. Cutting a long story short, we closed on the refinancing of our old mortgage with a new 25-year fully amortizing mortgage of $5.25 million (which included most of the transaction costs). Our new interest rate is fixed at 3.54% per annum, contrasting with the old rate of 5.41%. In simple terms, this means we have a fixed interest rate that will remain in place for 25 years. For the life of the mortgage we have level monthly debt service payments that exceed our current monthly debt-service payments by only about $4,000 (which is about the amount of the reduction in maintenance charges we instituted with the 2% reduction for 2016). Finally, at the end of the life of the mortgage (July 2041) the building will have no debt at all, and by summer of 2018 our indebtedness will be lower than it was with the old mortgage. In short, this was a very good deal.
So what is left to be done?
Briefly, I mentioned the sidewalk around the building. We have contracted with a cement contractor to replace the sidewalk around the entire building. This should be completed by the end of August. We have also commissioned a design that permits the board to consider installing planting beds at the front of the building bordered with granite curbing and steel fencing, similar to what can be observed at the front of a number of Central Park West buildings down the street. This feature will require further board discussion and, if authorized, permitting, pricing and contracting before it could be completed. It will undoubtedly be a subject of discussion at the July board meeting.
I am very optimistic that by early fall we will have reached consensus on the board to propose the window program in conjunction with a new and improved proprietary lease for shareholder consideration and, I hope, approval. Work remains to be done on these, so I will not say too much. However, what I can say is this. First, we need to rationalize and organize and prioritize the deferred maintenance contingency associated with the windows in the building to achieve two objectives. The first is to relieve shareholders of the uncertainty of this potential liability, both individually and as a group. The second is to allocate it fairly and reasonably over the entire shareholder body in a way that eliminates the possibility of an unexpected, unwelcome and potentially unfair imposition on any single shareholder. The board is prepared to dedicate resources to this project in order to assist in achieving these objectives.
Even less need be said about the proprietary lease. It is literally ancient. With due respect to its authors back in the co-op conversion days, it is truly a Model T Ford of instruments and needs to be updated into a new century. Shareholders have been largely – and happily – unaware of the many traps and pitfalls it threatened to impose on us over the years. Fortunately we managed to avoid most of them. However, it is time to fix it, and I am hopeful that this is a project we can complete before I leave. I am also hopeful we can do it with a minimum of extraordinary expense by utilizing the resources (including legal) we have in the building to carry the lion’s share of the design and drafting burden. I think we can.
If all goes according to plan, we will be offering several methods of communication and discussion with shareholders in the fall preparatory to asking for a vote on these two major projects. We hope you will give us your attention and your thoughtful and engaged reactions to our efforts on your behalf. Please stay tuned.
One last word about Sergio and the staff. Actually two.
Earlier this year the board approved the renovation and upgrading of what was formerly the staff locker room. It is now a combination lounge, locker room, shower and bathroom. It is largely if not totally complete at this point. It was done completely in house by Sergio and the “guys.” As such, the expense was minimized to the greatest extent possible. More to the point, however, our staff now has an “R & R” venue that is a kind of club room. It gives them a decent quality environment in which to enjoy breaks, change clothes for shift changes and clean up from whatever. It may not be quite on the level of a country club, but it should enhance morale and it should tell the “guys” how much we value their service and their loyalty to the 336 community. As we certainly do.
That brings me to my final point. Sergio and the staff are dedicated to serving in a way which I think is unique among co-op buildings in New York. They do so much for us. They treat the building and the community as if it were their own home and family. I am hoping we will continue doing the same where they are concerned. They contribute as much to the value of our co-op as does anyone or anything else. That contribution deserves our special cultivation and husbandry.
Enjoy the rest of the summer. I look forward to our conversations in the fall.
With best regards,