Assessments vs. Maintenance increases and the Demographic Time Bomb
Hi All,
As board president of a 57 unit co-op in the Bronx, we have really made some changes over the last few years. Much of the heavy lifting remains and as we start to plan, a heated debate has come to a head in our co-op which may impact many co-ops city wide. Read below; let me know your thoughts.
Our Metrics:
Our co-op: 1986
Units: 57
Units still owned by sponsor: 29
Leaving 28 units in purchasing shareholder hands.
The majority of the purchasing shareholders, originally purchased apartments from the sponsor over the last 20 years at considerable discount – we are talking about 3&4 bedroom apartments with 2 Bathrooms and terraces for under than 250K. Our maintance charges have always been low, considering original offering plan common charges, lack of increased, and neighbourhood (Riverdale) comparison. Consequently the building has not been maintained at the highest standard.
I purchased in 2008 and joined the board several years ago, becoming president last year. We implemented a new storage amenity, and remediated a garage where some people didn’t pay monthly charges. We also had our first capital assessment last year and a capital assessment this year to support ongoing capital work. Operationally we have seen three years of positive net income.
Now we have some major work to do, facades, elevator (already in planning), roof, terrace work, and plumbing. The Board of the co-op are thinking about implementing a rather large monthly assessment that would raise $125-150K next year. The largest assessment charge would be $214 a month on one apartment – the remaining apartments would pay $120 - $198 – depending on how many shares.
We have no ability to refinance until 2013 due to our loan provisions signed 9 years ago. We have a small credit line, which NCB has indicated they would increase, but not on the scale we need, they suggested assessments.
Our plan is public within the building, and we have received support from some shareholders.
But we have an issue – Demographic time bomb –
The average age of our purchasing shareholders is approximately 60.3 years old.
Many of our co-op residents are original purchasers from 20+ years ago, and are now in retirement or close to it. Even if they have the ability to pay, these shareholders are not happy, and feel new board members are trying to make the building “fancy”. We have received the speech “this is the way it’s been forever” from many, especially shareholder who indicated that they have no intention of selling, and therefore may not realize the appreciation.
We explained in detail about how we are boosting value, and that the assessments are capital calls for the corporation raising funds from all members to increase the satisfaction, safety, and enjoyment for all shareholders and to meet regulatory requirements.
Alas we have gone as far as to have several local realtors speak to residents – about what other buildings have done, but continue to receive pushback.
I am worried, and want to hear your thoughts. We have a beautiful building, great location, and wonderfully oversized apartments. The potential here is a diamond!
But with the demographic age increasing, the ability to raise funds is becoming challenged. We have no turnover from sponsor or purchasing shareholders (No apartment are listed today for sale, last sale was in 2008). Additionally, installing amenities that will increase our value have become contentious (for example: We may install a playground area, missing for more than 30 years, this would attract new families to our large apartments, and increase the satisfaction for some with kids). But no interest. Let’s not even go down the road of new windows, hallways, or lobby.
The board is split, and yet we are so close to realizing some of our potential, what do you think as co-op members, board members, managing agents, and interested parties?