London Terrace Towers Co-op Board Gets a Pleasant Surprise

Surprises are not uncommon when it comes to maintaining buildings in New York City. What is uncommon is how some co-op and condo boards manage to get residents on board with the need and the means to pay for unexpected – and unexpectedly expensive – repairs.

Consider the seven-member board at London Terrace Towers, a 700-unit co-op in four ornate brick buildings that opened in Chelsea in 1930. An original architect’s report estimated that it would cost $3 million to complete repairs in the current cycle of the city’s mandatory Facade Inspection and Safety Program, formerly known as Local Law 11. But when the co-op brought in the veteran property manager Brendan Keany, he instantly saw that the original estimate was way off target.

“Based on his familiarity with Local Law 11, Brendan felt that, for a building of our size and complexity, there were things that were not taken into account by the architect,” says board president Matthew Klein. “The biggest was the terra cotta.”

The board then brought in Howard L. Zimmerman Architects & Engineers, which did a thorough survey of the four towers and concurred with Keany’s opinion – and, for good measure, discovered that the concrete slabs on the terraces were also compromised. That discovery meant that the parapet walls would have to be removed while the slabs are repaired. The estimated cost mushroomed to $15 million. How to break the news?

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“We needed to get the shareholders on board,” Klein says. “The first thing we did was get all the details from Howard Zimmerman, then we had a shareholder town hall meeting with him and his team, who showed many photographs and gave a PowerPoint presentation. The engineers were there to answer questions. We videotaped the meeting and sent it to shareholders who couldn’t attend. We made a pledge that we would not change the appearance of these iconic buildings, and the shareholders realized we were spending money to shore up the structure.”

It didn’t hurt that the town hall meeting was held last summer, when the condominium collapse in Surfside, Fla., was bringing heightened awareness of the importance of structural integrity.

“When a board has to tell shareholders or unit-owners they have to spend more money, I tell them to let us be the bearer of bad news,” says Howard Zimmerman, founder and principal at his eponymous firm. “They can’t explain why the cost went up as well as we can.”

A large part of the explanation was that the city’s Department of Buildings has tightened its regulations on the maintenance of terra cotta. Old methods of patching are no longer acceptable. The high cost of replacements – and the scarcity of terra cotta suppliers – led Zimmerman to recommend that the board use pre-cast stone, which is lighter, cheaper and more durable. An even bigger consideration, according to Zimmerman, is that its availability won’t slow down the job and add to the cost. After the town hall meeting, he says, “Nobody was happy, but at least they saw that there were real problems that have to be addressed.”

Now came the hardest question: how to pay the $15 million tab? After exploring numerous options, the board decided to refinance its underlying amortizing mortgage with an interest-only mortgage from Bank of America. The $80 million loan carries a tantalizing 2.3% interest rate, which will allow the board to pull out $25 million for capital repairs – without raising maintenance or levying an assessment. The loan will also feed the reserve fund.

“The most important thing for our board,” Klein says, “was making sure that this building was safe and that it kept its iconic look. Then came not putting a financial burden on shareholders. I think we got all three.”

In a city known for unpleasant surprises, that qualifies as an uncommonly pleasant one. 

PRINCIPAL PLAYERS – PROPERTY MANAGER: Douglas Elliman Property Management. ARCHITECT: Howard L. Zimmerman Architects & Engineers. CONTRACTOR: Starcel Waterproofing & Restoration.