This case study details the financial challenges and solutions for a Cooperative (Coop) located at 150 Joralemon Street. The Coop comprises 88 residential and 3 commercial units. Its governance is overseen by a seven-member board. The Coop also owns three commercial units and one super unit.

In 2022, the building, a landmarked structure with a terracotta facade, faced significant issues due to LL111 inspections. These inspections necessitated a substantial facade restoration project to correct structural deficiencies. Initially, the project was budgeted at $2.1 million, including contingencies. However, more thorough inspections revealed the need for steel structural corrections on the Northeast facade and other change orders on the remaining facades, causing the project cost to escalate significantly to $3.5 million.

Initial Challenges & Needs

The Coop held an existing Apple Bank loan of $3.8 million at a 4.6% interest rate, scheduled to mature in 2032. At the time these challenges arose, the loan was in its third year of a ten-year term. To secure additional financing for the critical facade restoration, the Coop needed to refinance this loan. A major hurdle was the 3% prepayment penalty associated with the existing loan, which could amount to a potential penalty of $114,000. Furthermore, an increased loan size would incur an additional mortgage recording tax of $102,000.

Solutions & Services Provided by The Andrews Organization

The Andrews Organization, a leading real estate management company in NYC with over 30 years of experience , is known for its professional, reliable, experienced, community-oriented, and client-focused approach. Their expertise was crucial in navigating the Coop's complex financial situation. The solutions and services provided included:

• Optimizing Prepayment Costs: To minimize the significant prepayment penalty, The Andrews Organization suggested two key strategies:

  • Utilize the Coop's once-per-year 10% of principal penalty-free prepayment option.

  • Delay the refinance until September 2025 to enter a lower 2% prepayment window.

• Leveraging Lender Competition: The Andrews Organization made multiple inquiries to various lenders to secure a $7.5 million loan, along with a $500,000 to $750,000 line of credit. Initially, two banks provided appealing proposals with spreads of 170 to 180 basis points above the ten-year treasury. By strategically pitting these two banks against one another, The Andrews Organization successfully leveraged the proposals down to 150 basis points over the ten-year treasury.

• Strategic Use of Prior Relationships: The Coop, as a former NCB stakeholder, had sufficient shares to avoid over $102,000 in mortgage recording tax if they refinanced with NCB. The Andrews Organization skillfully used this information by informing Apple Bank of this potential saving. This strategic move prompted Apple Bank to counter by offering to waive all prepayment penalty fees if the Coop chose to stay with them for the refinance.

Outcomes & Results

As of the current assessment, the board is actively considering both refinancing options. Their intent is to apply in July 2025 with a September 2025 closing. The strategic interventions by The Andrews Organization have yielded significant potential financial benefits for the Coop:

• Annual Savings from Rate Spread: The decrease in the rate spread alone is projected to provide annual savings of $22,500 from the initial bids.

• Refinancing with Apple Bank: If the Coop refinances with Apple, they will save the $76,000 prepayment penalty, a direct result of The Andrews Organization's negotiations and leveraging of relationships. However, they will still incur mortgage tax.

• Refinancing with NCB: If the Coop chooses to refinance with NCB, they will incur the $76,000 penalty to Apple. However, they will save $102,000 from mortgage tax, resulting in a net savings of $26,000.

This case study exemplifies The Andrews Organization's commitment to providing comprehensive management packages tailored to specific building needs. Their ability to manage daily building operations, budgeting and financial analysis , and provide expert guidance on capital project oversight has been instrumental in navigating this complex financial challenge for the 150 Joralemon Street Coop, demonstrating their "Strength, Reliability, Service".