Thursday, November 30, 2006

Façade Upkeep Proving Costly Surprise for Many Homeowners

New York Sun
BY GABRIELLE BIRKNER - Staff Reporter of the Sun
November 30, 2006

Amid the slew of cheerful cards and letters being sent out this holiday season, thousands of New Yorkers stand to receive at least one mailing they'd rather return to sender — a "Dear Homeowner" letter comprising a hefty bill.

With an approaching deadline to comply with a local law requiring mid- and high-rises to maintain their façades, many city cooperatives and condominiums are undergoing extensive exterior renovations. Often picking up the tab for that work, which commonly exceeds $1 million a building, are shareholders of co-ops and owners of condominium units.

A film producer and entrepreneur who six years ago bought a studio apartment on East 84th Street, Adam Riemer, recently received a letter from his cooperative board informing him that he'll be subject an assessment to cover extensive brick replacement work. "If the value of an apartment increases, and it keeps things safer for people walking below, I think it's fair — as long as it's not outrageous," he said.

Still, Mr. Riemer, 34, said he's dreading the forthcoming assessment bill, which he expects will be slipped under his door any day now.

Local Law 11 of 1998 requires all structures six stories or taller to commission architects or engineers to inspect their facades, and then file detailed reports to the New York City Department of Buildings every five years. The next deadline is February 21, 2007. This statute, which applies to about 12,000 residential and commercial buildings, superceded a less-comprehensive Local Law 10 of 1980 — passed after part of a Morningside Heights apartment building fell off, killing a Barnard College student.

The engineering reports can be labeled "Safe," "Unsafe," or "Safe With A Repair And Maintenance Plan." Buildings that are "Unsafe" must immediately erect scaffolding. Structures called "Safe With A Repair And Maintenance Plan" five years ago must have completed the planned façade amelioration by the February deadline.

"All year, buildings have been doing this work, and trying to finish it up before the cold weather, and before the reports are due," a senior vice president of the Real Estate Board of New York, Marolyn Davenport, said. "Millions and millions of dollars are going into façade restorations right now." Ms. Davenport, who is also the board president of her Brooklyn Heights cooperative, said architects, engineers, and construction managers already have a so much work that it has been hard for buildings to secure even a handful of bids.

In apartment towers that don't have adequate rainy-day reserves, governing boards can choose to finance the project, which can drive up monthly common charges, or to levy "assessments" on homeowners. The assessments can range from a one-time payment of several hundred dollars to monthly installments totaling tens of thousands of dollars.

Assessments depend on a variety of factors, including the size of the building, the extent of the necessary repairs, the cost of the materials needed to fix the damage, and how much contractors charge for labor.

"Since so many buildings are doing work at the same time, I wonder if contractors are overcharging, because they know they're not going to lose business," an owner of a two-bedroom condominium on West 100th Street, Jeremy Caplan, said.

Mr. Caplan, 31, has been subject to two assessments in as many years — the first assessment was levied about two years ago to repair the pre-war building's plumbing system; the second was imposed just recently to pay for façade work tied to the 1998 law. Letters placed under doors notified unit owners of forthcoming assessments, he said.

Combined, these charges are costing Mr. Caplan, a magazine writer, $300 a month in addition to his monthly maintenance. "It's definitely an added expense, and there's little you can do about," he said. "It seems like this is just part of owning an apartment in the city."

The president of a cooperative on East 67th Street, Bruce Lee, said exterior maintenance would likely force the board to assess tenants in the 80-unit building early next year, adding: "We know that there is going to be a charge, but don't yet know how much."

Mr. Lee, a 75-year-old author, said that leading up to the last five-year deadline, shareholders in his building owed an average of $6,000, which could be paid off in installments over three years. He said the law was a "necessary evil" because so many buildings would otherwise put off making major repairs to keep down costs for its residents. "If you're going to cut the budget, building maintenance is often the first thing to go," he said.

Apartment owners who are not able to afford the assessments may be able to negotiate a less-formidable payment structure with their building's board or management company. "If an elderly person on a fixed income came to us, we might let them pay it out over a longer period of time," a board member of a West 55th Street cooperative Iris Shorin, 64, a real estate broker with DJK Residential, said. "We'd certainly be kind, but we couldn't waive it altogether."

A shareholder of an Upper East Side cooperative, Albert Weil, 64, said the cost of exterior maintenance seems to have nearly doubled in the past five years. "Essentially, there are very few contractors who do this kind of work, and we're really at their mercy," Mr. Weil, an insurance broker whose building is drawing on its reserve funds to pay for the required work, said. "It's one of these situations, where if you don't like their bid, there are five or 10 other buildings that need work. These people have enough business."

The president of the Council of New York Cooperatives and Condominiums, Marc Luxemburg, told The New York Sun that the city's one-deadline-fits-all approach drives up labor costs. "It's called the law of supply and demand," he said. "There's no statutory limit to how much a contractor can charge."

To ease the burden on contractors facing a bottleneck of work, and on property owners picking up the tab, the council has been lobbying the New York City Department of Buildings for a staggered filing deadline. That has not materialized, but the buildings department did grant an extension of up to nine months for finishing façade work — provided that the delay won't cause a threat to public safety, and that the necessary paperwork was filed by November 21.

Buildings that have not requested extensions face code violations that could lead to fines and even imprisonment if they do not complete their façade work and file their reports.

There is a two-year filing window for reports, but a spokeswoman for the buildings department, Jennifer Givner, said she expects a "significant portion" of buildings to file very close to the deadline. "It doesn't seem like it should come as a surprise," Ms. Givner said. "It's not a new law, and we've done a lot of outreach, but still buildings tend to wait till the last minute."

Sunday, November 5, 2006

Common Costs for Upgrades

The New York Times
November 5, 2006

DECIDING how to raise money for improvements can be as contentious as agreeing on how much to spend.

Boards typically choose from four options, said Paul J. Herman, executive vice president and director of management for Brown Harris Stevens Residential Management, which oversees around 140 midsize Manhattan buildings.

The buildings can draw funds for the projects through reserves, assessments, refinancing the mortgage or taking out a line of credit. Shareholders, Mr. Herman said, are less likely to revolt over assessments for aesthetic or lifestyle upgrades like a renovated lobby or new gym than for “back of the house” improvements they can’t see or enjoy.

Mr. Herman listed ballpark costs for some common improvements; the ranges are approximate, depending on a building’s size and the desired bells and whistles.

Renovated lobby: $40,000 to $400,000 for a lobby 30 feet by 40 feet; $250,000 to $1,000,000 for a larger Park Avenue-style building. The low end might include new lighting, painting, carpets, artwork and some furniture. More money buys frills like ceiling treatments, moldings, windows and elegant furniture.

Playroom: Around $50,000 for a nice room if space configuration is necessary, or less for an existing room.

Gym: $100,000 to $200,000-plus (equipment could cost $30,000 alone)

Roof deck: $100,000-plus; need to replace a deteriorating roof first.

Roof replacement: $25,000 to $250,000, depending on size.

Boilers and burners: $100,000.

Elevators: $15,000 for refurbishing the interior; $100,000-plus for replacement.

Full-time doorman: $62,000 annually per unionized doorman; to cover all shifts, a building needs at least four. Security guards cost less and are expected to do less. TERI KARUSH ROGERS

Which Building Improvements Really Pay Off?

The New York Times
November 5, 2006

PEOPLE who bought their New York City apartments before the real estate boom have spent the last few years reveling as their investments ballooned. Lately, though, the euphoria has dimmed for some as civil wars have erupted over how — or whether — to spend money to improve their buildings.

On one side of the deepening schism are boom-era buyers seeking to spruce up their buildings to protect resale values and surround themselves with a level of grandeur commensurate with the size of their investment.

But some of their more tenured neighbors (a portion of whom continue to be branded themselves as “yuppie scum” or worse by the renters they displaced) resist fixing what doesn’t seem broken. Some also shrink from anteing up for what they consider frivolous plastic surgery on top of maintenance charges already swollen by the spiking costs of fuel, taxes and insurance.

“There’s always tension between those groups,” said Harriet Kaufman, a senior managing director at Warburg Realty. “People who’ve spent a lot of money really want a lot of amenities, and they have more money than the other owners. They want nicer hallways and lobbies, better uniforms, better services. But if you’ve been there for a while, you think, ‘This looks O.K. Why do I have to go spend money and get assessed every month for this? I’m happy.’ ”

As the two factions forge uneasy compromises, both must ponder the same questions: Once the broken boilers, leaky roofs and crumbling facades are repaired or replaced, which improvements will provide the biggest bang for the buck? And which will enhance owners’ quality of life while instilling an acquisitive gleam in a buyer’s eye?

Advice from real estate experts yields ammunition for both the have-enoughs and have-not-enoughs, while identifying some overlooked cheap thrills that cost little or nothing but reap big rewards.

Casting an eye toward resale values, brokers recommended attending to the urban version of curb appeal first.

“First impression is everything,” said Toni D. Haber, an executive vice president at Prudential Douglas Elliman.

In other words, “the lobby, the lobby, the lobby,” said Anthony vanEyck Miller, a vice president at Bellmarc Realty. “Even though the average buyer is not a designer and has not been trained in design or construction, they sense a good lobby in the same way you sense whether an apartment is nice or not. A lobby that hasn’t been renovated in 20 years and obviously has scuff marks is not fresh.”

A dingy lobby can deliver a death blow to a deal: “I’ve had people say to me, ‘This is a really nice apartment, but I can’t live in a building like this,’ ” said Margaret Furniss, a vice president at Stribling & Associates.

Still, an appealing lobby isn’t necessarily elaborate or quadruple-mint. If there is a doorman, he should have a proper desk; the lobby should be brightly lighted and recently painted; any awning leading into the lobby should look crisp and untattered and should clearly display the building’s address.

If the lobby lacks a doorman, the debate over hiring one can be both economic and status driven. A study to be published next summer in the University of Chicago Journal of Legal Studies found that even factoring in the higher monthly carrying charges, apartments in full- or part-time-doorman buildings sell for about 12 percent more than comparable dwellings in nondoorman buildings. One of the study’s authors, Jonathan J. Miller, president of the appraisal firm Miller Samuel, said he examined 100,000 transactions in more than 6,000 Manhattan buildings over two decades.

In smaller buildings, the cost of a doorman can significantly raise maintenance charges. “If you only have 50 apartments, how do you afford a doorman?” asked Rochelle Bass, an executive vice president at Bellmarc. “Is it worth having to spend $1,500 more a month?”

Gloria Sokolin, senior vice president of the Fox Residential Group, thinks so. She owns a seven-room apartment in a 30-unit building near Central Park in the West 70s with a part-time doorman and favors full-time doorman service because she believes it would increase her resale value, despite the additional $1,000 a month maintenance fee. “I could sell for an extra $700,000 to $1 million,” she said, using sales at comparable buildings on her street as a benchmark.

After tending to the lobby and hiring (or not) of a doorman, many buildings add the sorts of amenities found in newer developments. The most popular are gyms, followed by roof decks and/or playrooms, depending on available space and the particular demographics of a building’s residents. With more people choosing to raise families in the city, retrofitted basement playrooms are in vogue among buildings populated by young families and grandparents.

“A playroom is not terribly expensive if you find room for it,” Ms. Kaufman said. “It’s a very attractive thing, to have a place to go with parents and nannies.”

Done well, it can also serve as an entertaining or meeting space. When the Extell Development Corporation bought the Belnord, a prewar building on West 86th Street, where sprawling apartments with three to six bedrooms rent for $10,000 to $40,000 a month and surround a vast courtyard, the company converted a large chunk of ground-floor space into a daytime playroom in which the toys can be stowed behind cabinetry and the room transformed into an area for adult use.

But as developers have already discovered, the most popular amenity — measured in use by residents and demand by buyers — is a gym. In a city crammed with strivers who work out at 5 a.m. or midnight, such exercisers appreciate not having to don a coat, raise an umbrella or waste time treading to a treadmill (or to their squash or basketball courts).

“People want the convenience even if they belong to a gym,” said Gary Barnett, president of Extell, a condominium developer whose long résumé of gym-laden buildings includes the Orion near Times Square as well as the Avery and the Rushmore, now under construction on Riverside Boulevard in the West 60s.

Still, Ms. Kaufman said: “There are gyms and there are gyms. I think you have to stay with the feeling of the building. If you’re in an average nice building, you’re not going to put in a $500,000 gym, but people are happy to have a little fitness room with a TV.”

On the other hand, warned Jonathan Phillips, a vice president at Halstead Property, those little fitness rooms can become outdated fast. “You’re looking at equipment models from five years ago, and it’s such a snobbery-driven thing,” he said.

When it comes to roof decks, it appears that Manhattanites would rather work out than chill out.

“We show apartments in buildings that have lovely roof gardens that are very charming and seductive, but there’s never anybody there, while there’s always people in the gym,” observed Roberta L. Golubock, a senior vice president at Sotheby’s International Realty.

This phenomenon can be most acute in buildings where many residents own weekend homes. Yet while it won’t necessarily close a deal, brokers said, a rooftop terrace exerts an almost gravitational pull for buyers who can’t afford private terraces or who never had the opportunity to underutilize a roof deck. “It’s wonderful to have and people use it at the beginning, but they don’t get the use you would think,” said Phyllis J. Pezenik, the director of residential sales a DJK Residential.

In one prewar co-op building on West 81st Street, a block from Central Park, discussions about a roof deck began five years ago at the behest of the board president, who persuaded others that property values in the building would rise by 15 percent if the building’s black tar roof — with open south-facing views of the Museum of Natural History, Central Park and Midtown Manhattan — could be converted into outdoor space.

This campaign “built a groundswell of support,” recalled Larry J. Wente, a principal of GWK Architects in Manhattan and the board member who led the roof deck committee. But the project was delayed for several years by more essential and costly work, including repointing the exterior.

The planning for the lushly planted and expensively furnished roof deck finally started a year ago. The $259,000 project (budgeted at $288,000) took two months to complete, with funds coming from the building’s reserves.

Yet despite positive feedback from shareholders since the deck opened in July, only a few use it. “Usually, there were two or three people up there on a summer night in perfect weather,” said Mr. Wente, who noted that the building is now considering adding a gym on the ground floor or in the basement. So far, none of the 120 apartments have been sold, leaving the value-added theory untested.

Mr. Miller, whose appraisal firm has been hired by boards to help prioritize projects, voiced skepticism about the value of a roof deck or any standalone luxury upgrade. One or two “à la carte” amenities “seldom have an impact” on values, he said.

“It’s the package of amenities that a building offers that is inherent in the value of the building,” he said.

As they consider the Big Three amenities (gyms, roof decks and playrooms), buildings also address the ever-present desire for more storage.

“When it comes to what New Yorkers really need and complain about not having, it’s always space, and they can never have enough of it,” Mr. Phillips said. “Most of all, they need space for all the things they don’t really need.”

Some buildings continue to perfect themselves through additions like wine cellars, centrally filtered water, central air-conditioning and soundproofed windows. After the blackout three years ago, some buildings even considered installing generators.

“A lot of buildings looked at that, but I wouldn’t say a lot of buildings did it,” said Paul J. Herman, the executive vice president and director of management at Brown Harris Stevens Residential Management. “It’s noisy and dirty and an expensive proposition. It might cost $250,000 for a 100-unit building just to power the water and elevators.”

There are far cheaper frills to be had, like a clean and cozy laundry room with potted plants, chairs and a bookshelf “library” where residents can exchange books.

There are also some measures a building can take to increase resale values without spending a dime, including liberalizing house rules to allow washer/dryers in apartments, permitting pets, allowing strollers to be parked outside front doors and easing down-payment restrictions from 50 or even 100 percent to a more standard 20 or 25 percent.

But the most overlooked cheap fix of all may be teaching staff members to be nice to others.

“It is amazing that more boards, supers and managing agents are not aware of this issue,” said Mr. Miller of Bellmarc. At an open house on the Upper East Side a few months ago, “one of the doormen had a temper tantrum when my buyers didn’t realize they had to sign in at the desk. He reduced the wife to tears, and her husband and I were consoling her in the elevator.”

While that is an extreme example, Mr. Miller said: “It costs the board absolutely nothing to train staff not to shout into walkie-talkies as they march across the lobbies, or keep staff from yelling at each other and having loud conversations. I have even heard them use vulgarity. If a client arrives first and hears this, especially when you’re asking them to part with over a million bucks, this is not a good image.”

Of course, in established condos and co-ops, any improvement requires the board to come to a decision and then implement it. The typically glacial pace of progress may protect conservative pre-boomers for a while, but even one strong personality can tip the balance.

“Many board members act like little lambs going to the slaughter,” Ms. Bass said. “They follow whoever takes the lead.”

When residents clash, “sometimes there’s a real problem that sort of creates some bad feeling in the building,” said Suzel Stampleman, a senior associate broker at Bellmarc. Usually, boards “end up doing not as much as the new people would like and more than the older people would like.”

In the end, as Ms. Kaufman of Warburg observed: “It’s just a question of numbers. The new people will prevail as they outnumber the old people.”

Piotr Redlinski for The New York Times

VIEW OF THE PARK Shareholders in a co-op on West 81st Street decided to spend $259,000 to build a roof deck on their building expecting property values to rise.

Nancy Boszhardt

The rooftop about a year ago.