How to Match Building Needs with Shareholder Desires

The Challenge

We manage a 133-unit co-op in Brooklyn, on Ocean Parkway, that refinanced its underlying mortgage to get money for capital improvements. We received the preliminary estimates for the capital improvement work – about $3.5 million for the windows, roof, and façades. The shareholders also want new windows. But the board, with the refinancing and the cash it has on hand, has enough money for the roof and façade projects – about $1.4 million in cash – but not for the windows (another two million or so). The discussion was, “Do we take out another line of credit or a loan? Do we phase in the window project over a few years and just cash-flow it? Or should we special-assess for $1.1 million?”

The Solution

The good news is that the shareholders want the windows. One scenario is doing the windows all at once; another scenario is doing a phased-in program over three years. We’ve reviewed preliminary bids, and the plan is to phase in the window replacement over the next three years. It’s financially more feasible for the cooperative, so they don’t have to go out and obtain more financing or impose a large assessment.

The Lesson

There needs to be an understanding of what the building requires and what shareholders desire. The board has to balance that with the building’s financial needs and the needs of the building. If the board puts together a plan that addresses both of those items, and this plan is communicated, shareholders will buy in. Everyone wants to know that there’s a well thought-out plan to address the issues of their community.