Brownstoner posted a property at 111 Hicks as their co-op of the day and remarked on the INCREDIBLY HIGH MAINTAINENCE in the building.
At first glance, we were wondering what a 1,320-square-foot apartment in Brooklyn Heights was doing on the market for only $625,000. Then we notice the monthly maintenance of $1,975 and it all made sense. Other than that, there are high ceilings, big windows and new appliances in the plus column and a low floor in the minus column. The building also has the added benefit of housing the Eastern Athletic Club and possessing a killer views from the common roofdeck. Anyone know why the maintenance is so bad in this building?
A commenter on B'stoner directed folks to the 111 Hicks website where it's explained:
Our Operating Budget
A common question asked by shareholders concerns the maintenance fees – what do we spend them on? The maintenance fees pay the costs in our operating budget, including payments on the underlying mortgage, real estate taxes, staff payroll, electricity, fuel, administration, insurance, repairs, and so forth. In addition to maintenance fees, the rent payments that we receive from the health club and restaurant also go toward paying our expenses. Our total operating budget is over $4 million per year. As you can see, real estate taxes and mortgage payments represent major portions of our costs. Just as with payments on any type of residence (house, condo, co-op) these two payments are tax-deductible and you can claim a portion of your maintenance fees as a deduction on your annual income tax return.
Like any household, we have to pay monthly bills for the mortgage, taxes, electricity, supplies, and so on, in addition to our other expenses such as administration and payroll. The only way we can do that effectively is to collect the maintenance payments in a timely manner so that money is available to pay bills. This is why it's important to pay your maintenance on time each month. If we can't pay bills on time, we incur additional, unnecessary fees.
Our Underlying Mortgage
Another question shareholders often ask concerns our underlying mortgage – what is it, and how is it structured? When the St. George was originally converted to a co-op, the amount borrowed was $11.5 million and the mortgage had a balloon payment plan (a typical approach for commercial real estate). The mortgage was re-financed in the late 1990s, again as a balloon mortgage, and with an increase in the amount owed in order to build up our reserve fund. The current mortgage is due in 2008. At that time the outstanding principal will be about $8.75 million.
During the volatile economic conditions in the US in 2002 and 2003, mortgage interest rates dropped dramatically. Many householders nationwide, including many of our own co-op shareholders, refinanced their individual mortgages to take advantage of the lower interest rates. During this time, we did not refinance our underlying mortgage because the pre-payment penalties involved in refinancing would have been uneconomical and would negate any benefits of a lower interest rate.