Sheldon Gartenstein, a senior vice president at the National Cooperative Bank, is matter-of-fact about the refinanced loan he handled recently for the 74-unit cooperative at 760 West End Avenue. “This particular co-op needed capital improvement funding of about a million dollars,” he recalls. “They entered into a new loan that allowed for a cashout of that million while at the same time reducing their monthly payments.”

Boards borrow money. They have to, what with Local Law 11 requirements, aging buildings, and rising costs. But where do they find the money? Creative boards look in different places. When faced with needed repairs, for instance, a Howard Beach condo in Queens first tried an assessment and then, realizing that the costs were too heavy for many unit-owners, found a way to refinance an existing loan (never an easy task for a condo).

Another co-op, this one in Nassau County, is seeking a combination of measures: a grant from the New York State Energy and Research Authority (NYSERDA), possibly assessments, and some money from the local government. “We try to be creative in our financing,” says Elizabeth LaManna, president of the six-member board.

Creativity is the name of the game. And there are some that get quite inventive – like the co-op that found a bank willing to give a 30-year mortgage that can be renegotiated every five years, or the cooperative that has an interest-only mortgage that suits its needs perfectly. In still another co-op, the board found a shareholder willing to front the property thousands of dollars at a very low interest rate. There are a number of benefits to such loans – chief among them, no prepayment penalty – but there is a drawback: they are not easy to come by.

All of the boards discussed in the following pages did what responsible boards typically do: played with the numbers, looked at the ability of their shareholders/unit-owners to pay (assessments, loans, or whatever), and asked themselves and their professional advisers, “What works best for us?”

CONDO LOAN

BUILDING Patchogue Homes Condo 1, 150 units, Howard Beach, Queens

THE NEED Local Law 11 work (defects in façade), a new roof, elevator and terrace repairs, and a new boiler were all necessary.

AMOUNT RAISED AND LOAN DETAILS The condo took out a 10-year self-liquidating loan for $1.1 million at 5.7 percent interest.

LENDER AND/OR MORTGAGE BROKER The lender was Capital One. Both condo loans were negotiated with the assistance of Saturn Realty, a mortgage broker introduced to the board by manager Pam Delorme, president of Delkap. Getting a loan for a condo, in which the common charges are put up as collateral, is not typically an easy task, observes Delorme, but she had worked with both Saturn Realty and Capital One previously to obtain such loans. (In 1984, Delorme won an industry award for being the first person to obtain a condo loan in Long Island.)

BACKSTORY Five years ago, says Bernie Fisch, the condo’s treasurer, Delorme arranged a $550,000 loan for the property, which was needed to pay for required Local Law 11 work. Sometime last year, defects in the façade were exacerbated by a hurricane, and the board passed an assessment to pay for repairs. Seeing the assessment payments – “quite a lot of money,” recalls Delorme – as a burden on the unit-owners, the board members subsequently decided to refinance their condo’s five-year-old loan. Once they obtained the refinanced loan – at 5.7 percent annually, a lower interest rate than previously – they gained additional money for repairs, and what remained of the assessments was rolled back into the budget.

10-YEAR LOAN

BUILDING The Garrison Apartments, 29 units, Harlem, Manhattan

THE NEED The building needed a great deal of work: façades, windows, electrical upgrades, new laundry, sidewalk, back yard, courtyard, and the roof.

AMOUNT RAISED AND LOAN DETAILS The co-op obtained $1.6 million loan at 4.75 percent interest, plus a revolving credit line of $500,000. The loan had a 10-year term, amortizing over 30 years.

LENDER AND/OR MORTGAGE BROKER The lender was NCB; the broker was Patrick Niland, principal of the First Funding Group.

BACKSTORY Often described as the first African-American co-op, this building was built in 1910 and converted in 1929; it is six stories high, originally with four apartments per floor (Adam Clayton Powell Sr. was a resident at one time). Constructed as a grand residence, the building saw its apartments broken up over the years into smaller units. Nonetheless, apartments were still selling at prices ranging from $400,000 to over $800,000 when First Funding’s Patrick Niland was hired. He worked with board president Dakota Pippins to develop a financing plan and attended several shareholder meetings at which the five-member board discussed different financing options with the shareholders. The meetings, says Niland, “were contentious, with lots of different opinions. There were people who had lived in the building for a long, long time, many of whom were on a fixed income, and they were very vocal. They didn’t want to see their maintenance going up, and really didn’t see the need for a lot of the work that was proposed. Then there were people who were more recent purchasers, who had paid a lot for their units and were disturbed at the deterioration of the building, and were also focused on maintaining and protecting their investment. They were not interested in doing things in installments, in less than high-quality, top-notch work. There was a lot of infighting over what should be done. It took a great deal of orchestrating on the part of the president to get all these people to agree.” Niland and the treasurer worked closely together; she was “extraordinarily helpful. Between the president and the treasurer, they were able to finesse an agreement,” the broker observes. One important factor: because they didn’t have an existing loan in place, they would have had to pay the city’s recording tax – $60,000 in this instance. They avoided it by going with NCB, which is exempt from that tax and offered them the best loan.

PERSONAL LOAN

BUILDING The Howard Cooperative, 80 units, Lindenwood, Queens

THE NEED The windows needed to be repaired or replaced.

AMOUNT RAISED AND LOAN DETAILS A personal loan from one shareholder for $125,000, 10-year term, five percent interest rate.

BACKSTORY Needing money for a window project, this co-op seemed to have two choices: a mortgage or an assessment. Then, one of the shareholders offered a third possibility: a personal loan, which she would make to the cooperative, at the prevailing low interest rates. An attorney drafted the necessary documents, the board approved the deal, and the Howard Cooperative was in the money. “I felt that this was better than taking out a mortgage on the cooperative,” says the shareholder, who adds that there are no bank fees or prepayment penalties with her loan. “If they want to pay it off in full at any time, they can. It’s easier.” Although managing agents report other personal-loan-to-cooperative situations (a $75,000 loan in Far Rockaway, for instance), most admit it is not a common way to raise money.

“5-5-5-5-5” LOAN

BUILDING 99-15 66th Avenue, 53 units, Rego Park, Queens

NEED Among the issues: Local Law 11 work, new security cameras, a new roof, a new boiler, new fencing around the front, new front doors, and the underlying financing coming due.

AMOUNT RAISED AND LOAN DETAILS $1 million. Rollover every five years with no additional fees, 30-year amortization, interest rate adjust at 2.25 percent over five-year T-bill, with 9 percent cap over 25 years.

LENDER AND/OR MORTGAGE BROKER Flushing Savings Bank

BACKSTORY The so-called “5-5-5-5-5 plan” gave the board more flexibility than a traditional 30-year loan. Every five years, the rate adjusts and the board has the option to get out of the deal with no penalty. The co-op hit on the idea in an unusual way. “I was getting tired of every five to seven years refinancing and spending $50,000 in expenses,” recalls Isaac Fuchs, the board president. “I’m in the limousine business. One of the people that I drive once in a while does mortgages in the city. And I was talking to him and told him, ‘I am tired of spending $50,000 every few years, throwing it out the window to refinance. Everyone gets their cut and the building pays for it.’ He told me that we could get a long-term mortgage. Flushing had the ‘5-5-5-5-5 plan,’ which seemed to make sense, especially with today’s low interest rates.”

INTEREST-ONLY LOAN

BUILDING Northridge Co-op Section 3, 400 units, Jackson Heights, Queens

THE NEED Extensive Local Law 11 work (new roofs, new parapets) and elevator repairs were required.

AMOUNT RAISED AND LOAN DETAILS

New $2.5 million loan, 3.7 percent interest-only, two-year term, to expire at same time as current $10 million, 5.76 percent interest-only loan.

LENDER AND/OR MORTGAGE BROKER The lender was Wells Fargo; Richard Cohen, at Saturn Realty, was the broker.

BACKSTORY When Pamela Delorme, principal at Delkap and the building’s manager, reported how much work was needed in this co-op, the board solicited proposals from different banks. Wells Fargo offered a new $2.5 million loan, 3.7 percent interest-only, two-year term, that would expire at same time as the current $10 million, 5.76 percent interest-only loan. Says Delorme: “My theory is that you’ll always have a mortgage because you’ll always have work to do. The days of paying it off are gone. At the end of the term, they just refinance again.”

NYSERDA GRANT

BUILDING Flower View Gardens, (27 buildings), 270 units, Floral Park, Queens

THE NEED $1.6 million for lighting repairs/replacements, replacing eight boilers, insulating walls, installing door sweeps, upgrading heating controls, blowing insulation into the walls of units, and insulating attic crawl spaces and hot water pipes.

AMOUNT RAISED AND LOAN DETAILS The property expects to get a $185,000 grant from the New York State Energy Research and Development Authority (NYSERDA). According to Greg Sherman, a vice president at Bright Power, which completed the paperwork for NYSERDA and performed the co-op’s energy audit, the chance of getting the grant is excellent.

LENDER AND/OR MORTGAGE BROKER NYSERDA

BACKSTORY Elizabeth LaManna, president of this co-op, says that the board hopes to save a great deal on energy. Sherman predicts that the grant will be approved in October, and adds that the energy measures “will save the property $136,000 a year, which represents 29 percent of their current energy settings, lopping off a third, roughly, of their energy bill per year. We also do life-cycle savings. It’s a simple payback of 11.8 years, and a total life-cycle savings of $521,000 over the estimated life of all the measures.” The money will be paid out in two installments once the work is under way next year. Where will the co-op get the additional money needed to reach its goal of $1.6 million? According to Peter Lehr, director of management at Kaled Management, the property’s manager, with two years left on the mortgage, the co-op is thinking about refinancing at the current low rates and also passing a special assessment.