A public notice that East River Housing is seeking to refinance its debt — first brought to our attention in the board’s newsletter last month — indicates that the coop will seek an additional $5 million line of credit for “anticipated repairs and maintenance.”
The coop’s annual financial report routinely includes a note by the auditors that East River has not conducted any study of the costs of future repairs and replacements. At last year’s annual meeting, General Manager Harold Jacob was asked about upcoming expenses and answered that he anticipated nothing beyond normal upkeep. So either something has come up in the meantime to warrant $5 million, or the money is expected to be needed for our operating budget.
The coop’s last refinancing was in 2012. At the time, the coop consolidated $15 million in existing debt and added $10 million for three major projects: the boiler upgrade, conversion from high pressure to low pressure, and local law 11 facade repairs. The boiler upgrade cost $3.5 million, local law 11 cost $2.6 million, and the low pressure conversion never happened. Of the remaining $3.9 million, $1.5 million was used to pay down our debt, and $2.4 million was held (accounting for most of the $3 million cash on hand as of June 30, 2014).
The 2012 mortgage was interest-only, meaning that the $1.5 million pay-down was the only money put towards the mortgage’s principal.
The coop’s strategy seems to be to keep maintenance costs down and avoid assessments by taking advantage of low interest rates and increasing our debt by more than 20%. That’s good news for those of us who don’t want to see our monthly expenses go up, but bad news for those of us planning to still be here a decade from now when rates won’t be so favorable and the cycle of borrowing breaks.
The board needs to shed some light on their strategy — and allow for a debate on its pros and cons — with a mid-year Q&A on the coop’s finances.
Last Thursday and Monday, two community forums were held to discuss the project. Representatives from the mayor’s office, the Parks Department, and the Department of Design and Construction gave presentations and answered questions (along with Cantonese, Mandarin, and Spanish interpreters).
Friends of Corlears Hook Park will be meeting this Wednesday to discuss various issues including leadership of the group moving forward, possible spring and summer programs, and an update on some of the behind-the-scenes work that has been occurring over the cold winter months.
