White Plains Co-op Takes Advantage of Low Interest Rates

The co-op at 512 Mamaroneck Avenue in White Plains is a charming, 90-year-old Tudor-style building with 17 residential units and a pair of commercial units. Six years ago, when Garthchester Realty took over the management of the property, the co-op wanted to undertake several aggressive capital projects. But there was a problem. 

“They needed money,” says Jay Mendel, president of Garthchester. “Back then, the co-op got a credit line with the National Cooperative Bank. With that money they paid their outstanding bills and started all the necessary restoration work.” 

The line of credit was $450,000 with an interest rate of 6.25 percent. First, the leaky side and front brick facades had to be repointed. Next came new windows with aluminum frames. “We used the manufacturer Crystal Windows in Queens,” says site manager Jim Fabris of Garthchester. “It’s convenient because they’re close by. If you need replacements, it will only take about half an hour.” 

The crowning achievement was a beautiful new facade. All the wood and the Tudor beams were replaced, and the stucco was painted. “The facade was a big project,” says board president Phil Grimaldi. “We needed scaffolding and sidewalk sheds. The scaffolding was about as expensive as the actual work. All together, these capital projects cost about $350,000. The rest, about $100,000, went into our reserve fund.” 

The building is now beautiful and water-tight, but Mendel was not happy with the co-op’s financial situation. “The problem with this credit line is that the interest rate is currently 6.25 percent, and that’s too high,” he says. “They owe $450,000 on the existing credit line and were paying interest only. That debt would’ve never gone away.” In addition, the co-op had bought one of the two commercial units on the ground floor, which resulted in another debt to the previous owner with 5 percent interest. 

“I’ve been doing this for 40 years, and in my recollection the interest rates have never been lower,” says Mendel. “Now they were paying a 6.25 percent on their line of credit with no amortization, and 5 percent on another debt. Why are we not refinancing the whole thing and getting an amortizing loan? So we went to Midtown Financial, a mortgage broker, and they found the best deal for us – a $575,000 first mortgage with Valley National Bank at 3.875 percent.” 

This kind of refinancing made sense because the co-op did not have an underlying mortgage. For buildings that already have a mortgage, refinancing does not always make sense, despite the low interest rates. “It depends on what the pre-payment penalty would be on the existing mortgage,” says Mendel. “If you’re only three to five years into your mortgage and you have a yield-maintenance formula, it will not be beneficial to refinance. But if the mortgage is on the last year or two, it’s probably beneficial.” 

The 512 Mamaroneck Avenue co-op will close its new mortgage in January. “Once we close the refinancing, we will pay off all our credit,” says Grimaldi. “There will be about $100,000 left over, which we can put into our reserve fund. In addition to that loan, we’re also getting a $150,00 line of credit.” 

With the new cheaper money, the co-op is thinking of attacking even more projects. “The parapet wall might have to be rebuilt,” says Grimaldi. “There is a retaining wall in the back which we might have to redo, it’s buckling. And we might do new carpeting. We have to discuss it, but now we have the money to do it.” 

PRINCIPAL PLAYERS – PROPERTY MANAGER: Garthchester Realty. MORTGAGE BROKER: Midtown Financial. LENDER: Valley National Bank. BRICK REPOINTER: Allstate Restoration. FACADE REPAIRS: Rose Restoration. WINDOW MANUFACTURER: Crystal Windows.