Dear 336 CPW Friends and Neighbors,
We are already through two months of the new year, and the building and co-op operations are in excellent shape. We are working to complete the audit of our 2015 financial results and year-end financial position. More on that will be available at the annual meeting.
To elaborate just a bit on 2016 operations – in which the budget is pitched at a maintenance level 2% below the 2015 level – we are substantially on budget in every major revenue and expense line item. Our cash operating result is running slightly ahead of budget before taking into account almost $35,000 of capital improvements accomplished in the first two months. Moreover, there is reason to anticipate 2016 will produce substantial flip tax revenues. In sum, the budget appears to be in very good shape after two months of operations, no doubt helped somewhat by the very mild winter we have enjoyed.
The Board is in the midst of three major projects. We hope to be able to have them ready at various times in the first half of 2016. In all events, we expect to be able to have a full discussion of all three at the annual meeting. Speaking of which, please mark your calendars and plan to attend. This year the meeting is scheduled to convene at 7 P.M. on Wednesday, May 4, 2016. The venue will be the Alexander Robertson School at 3 West 95th Street – as in recent years.
Project number 1 is an effort to obtain a complete inventory of all windows in the building. With the help of an outside window company, Sergio and our ad hoc window committee of the Board has done a methodical, comprehensive job of assessing every window in the building (all but four apartments cooperated with the survey), including their present condition, their need for repair or replacement, the timing or immediacy of that need and a very rough estimate of what repair or replacement might cost – on a very worst case basis. The purpose of the effort is to develop a plan for addressing these needs over an extended period of time in a manner that is least burdensome to both the co-op financial condition and the shareholders’ pocketbooks. We are making very good progress, and we believe we have the design of a plan that is prudent, fair and reasonable for all concerned. Please stay tuned.
Project number 2 is a new, up to date, technically sound proprietary lease that effectively addresses current needs and conditions. I have been telling shareholders for several years our proprietary lease is the legal and industry equivalent of a Model T Ford, when what we need is an all-wheel drive, multi-purpose, multi-passenger fuel-efficient current model vehicle. With the help of our counsel at Balber Pickard – specifically Eric Balber – we have finally got round to manufacturing the new, improved proprietary lease the board would be prepared to recommend to shareholders. It is still in the final stages of review and testing, but I am confident it will be ready for presentation to shareholders relatively soon. Briefly, as a very short preview of the case for making this change, over the past several years there have been many cases in which the Board needed to make judgments and factual determinations because the proprietary lease was either silent or ambiguous on a point. We will be trying to introduce some clarity and some definition in places where experience tells us there is a need for it.
Project number 3 is a possible refinancing of the building’s mortgage – which is $5 million in outstanding principal amount. Its final maturity is January 1, 2018 – just over 21 months from now. When we accomplished this financing for the building – back in December 2007 – it had a number of advantageous features. First, we consolidated three tranches of debt on the building which left us with no capacity to obtain any additional cash through external financing. Second, the co-op had no cash of its own and was facing projected major renovation costs in excess of $2 million. Third, the co-op had instituted a special assessment to pay for the renovation, of which approximately $900 thousand had been collected in 2007. The mortgage financing permitted a rebate to shareholders of approximately $160 thousand and termination of the remaining assessment that would otherwise have been collected in 2007 and 2008. After closing the mortgage financing in December 2007, the co-op had approximately $500 thousand in cash reserves plus a new $1.5 million line of credit at a rate of 25 basis points over Libor. We are now exploring what appears to be a very favorable opportunity to lengthen the life of the mortgage financing over an extended period (perhaps as long as 25 years) on terms that would be comparable to or better than the current terms with amortization that would reduce our indebtedness over time. More on this subject will also be forthcoming.
And finally, a personal note. Many will not remember it, but I first became deeply involved in building affairs 10 years ago when shareholders took interest in a personnel matter and sought to discuss it with the Board. A year later I, along with four other hardy, optimistic and somewhat naïve souls, stood for election to the Board in the spring of 2007. So began what for me has been for the most part – all things considered – a delightful and gratifying engagement with my friends and neighbors on the Board and at 336 CPW. But – if you are a Downton Abbey fan – or a fan of Seinfeld or the Simpsons – even the longest running, most enjoyable series will eventually have their conclusions. Mine is coming. Kathy and I have decided we will list our apartment for sale this spring – the place that has been our home for nearly half our entire lives and more than half our adult lives – and make our residence full time on Cape Cod. Whatever the timing and results of the sale process, if the Board and the shareholders will have me, I will stand for one more election in May and I will defer my Board service series finale until our projects are done and a proper transition of leadership is in place. Put differently, I do not intend to leave until I have properly handed over the “files and the tool boxes” I have kept and used these past 9 years. More on this later, but I wanted you to know. I will be around and look forward to talking with all of you on this and other subjects.
With very, very best regards and thanks for what has been a wonderful run.