Page 35 - NY Cooperator Expo April 2019

COOPERATOR.COM THE COOPERATOR — APRIL 2019 35 100+ Years 380+ Buildings 1000s of Satisfied Owners, Residents and Boards | | l State-of-the-Art Financial Reporting l Responsiveness & Communication are Our Top Priorities l Leader in Technology & Compliance Tracking l Energy Auctions & Volume Purchasing to Reduce Building Costs l Long-Term Continuity of Managers & Systems l Greening NYC One Building at a Time Management for the Ages 675 Third Ave. New York, NY 10017 212-370-9200 ellimanpm.com info@ellimanpm.com RANKED #1 RESIDENTIAL MANAGEMENT COMPANY IN NYC EllimanRethink_V14_FINAL_v2.indd 1 3/11/19 12:04 PM ENGINEERING, ARCHITECTURE AND ENERGY CONSULTING Proudly Serving Higher Education Institutions WE HAVE NYC COVERED The Falcon Group is a unique, full-service Engineering, Architectural & Energy Consulting firm. Falcon’s primary focus is on existing facilities ranging from site, building envelope and energy improvements. Our full-service capabilities focus on your building’s specific needs. Falcon’s mission is to ensure each of our clients are held at the highest level of individualized service. ENGINEERING & ARCHITECTURE BUILDING ENVELOPE RESTORATION & FISP NYC SPECIAL INSPECTIONS MEP & ENERGY CONSULTING SERVICES 350 7th Avenue, Suite 2000 New York, NY 10001 www.falconengineering.com (800) 839.7740 any and all individual building systems, ment fi rm in New York City. “Typically, like elevators, plumbing lines, facades, accountants tell boards they should have and boilers. Remaining useful life can be three months’ operating expenses on determined for each individual system as hand in reserve. Th at’s the industry stan- well. Simply put, if a boiler has a typical dard. Buildings have to analyze the infra- useful life of 50 years, and your building’s structure of their properties, especially if boiler is 30 years old, one might assume the property is older. A boiler might cost that the boiler has a remaining useful life a $500,000 to replace. Th at may or may of about 20 years. Th at’s in a perfect world, of course. In the real world, that boiler – if well cared “stuff costs a fortune.” He explains that for – may have a remaining useful life of a lot of buildings work on a pay-as-you- more than 20 years. Alternatively, if the go system. In other words, “if we need boiler has not been well maintained, or to do a bunch of work, tell us – and we has some defect or atypical physical prob- lem, it may have already reached its useful residents and boards don’t see the value life and be one cold snap away from going of a building having a $1,000,000 reserve on the fritz. All that said, the end of useful life does adds enough value to the building. Many not necessarily mean that a particular sys- tem needs to be torn out and completely reserve funds are a selling point in the replaced. Imagine not only the cost, but co-op market. We believe residents would the perhaps impossible logistics of taking rather hold their own money than have down and rebuilding an entire façade! In- stead, when systems near the end of their estimated useful life, they can oft en be pair or improvement,, a co-op board gen- rebuilt, repaired or renewed. Upgrading erally has three choices,” explains Prisand. or refurbishing an elevator – while by no “Th ey can refi nance the underlying per- means cheap – is far less expensive than manent mortgage or secure a line of cred- replacing it with a brand-new one. Reserve Studies Th e fi rst step in determining the con- dition of your building systems and what from those tenants’ rent. Options one and your reserves should look like is to com- mission a reserve study. A reserve study, buildings don’t have commercial income generally completed by a licensed en- gineer or architect, surveys a building’s serve funds with fl ip taxes, but this source systems and estimates their remaining of capital isn’t dependable, since no one useful life, along with what major repairs knows when or if apartments will be sold.” for each system might need in order to extend that life and continue to function optimally. Jayson Prisand, a partner at the Pla- inview, New York-based accounting fi rm ing institution dedicated to fi nancing co- Prisand, Mellina, Unterlack & Co., de- scribes the way reserves are determined: into our loan documents that co-ops and “Sometimes it’s almost like you have to condos must maintain a minimum of 10 look backwards to fi gure out how much percent of their annual maintenance \\\[in money you will need. It’s planning. Short- term planning is where we generally con- sider one year’s operating budget to esti- mate maintenance or common charges. every fi ve years or so a co-op or condo do Th en there is a capital budget relative to a reserve study to determine what poten- what kind of long-term improvements tial work may need to be done in the en- have to be made to the property. Gener- ally, we suggest a fi ve-year plan for capital ingly by setting up a secondary reserve if budgeting, and that the co-op or condo necessary. We also suggest that both co- engage an engineer or other consultant to ops and condos increase maintenance or do a reserve study.” How Much Money Should be in Your Reserve Fund? “It’s very important to have adequate reserves,” says Daniel J. Wollman, CEO of Gumley Haft , a co-op and condo manage- not be three months of common charges.” Th e hard truth is, as Wollman says, will either assess, or take on debt. Many fund. As managers, we don’t think that brokers would disagree with us, as large the co-op hold it.” “When faced with a major capital re- it against the building; they can assess the shareholders; or if they commercial ten- ants, they can take funds from income two are generally more typical, as many fl ows. Another option is to increase re- Financing Reserves With respect to operating reserves, Harley Seligman, a Senior Vice President with National Cooperative Bank, a lend- operative buildings, says: “We have built reserve\\\]. Th at’s the basic minimum we think is necessary for a healthy building. For capital projects, we recommend that suing fi ve years, and plan for that accord- common charges every year by a least a few dollars, so that when there is an emer- gency, they have a fi nancial cushion.” As to whether to pay for potential work continued on page 48 See us at Booth 200 See us at Booth 2119