This article first appeared in the September 2024 issues of Habitat Magazine.
FISP Financials
FEATURED EXPERT
Joshua Holzer
Senior Vice President, Maxwell-Kates
A condo on the Upper East Side had to borrow more money and reduce staff to pay for unexpected repairs to the front of the building, which had missing brick ties and required new masonry and additional brick ties.
It’s an all too common scenario: After a routine facade inspection, the board at a condo on the Upper East Side budgeted $550,000 for repairs on the front of the building, but once work began it was hit with unexpected surprises. What had been a half-million-dollar project had mushroomed into more than twice that. The question facing the board: Where will the funds come from?
What Lay Beneath
When the contractor began work on the face, it was found to be missing brick ties, the stabilizing metal bars that connect the inner and outer walls and prevent leaks. “Extensive inspections were required, and a specialized company was hired to use radar equipment to detect the presence of brick ties without removing each stone,” says Joshua Holzer, a senior vice president at Maxwell-Kates. The building, constructed in the late 1960s and converted in the early 1980s, was well beyond the statute of limitations for any recourse against the original developer. “The level of scrutiny mandated by the current facade inspection and safety program (FISP) likely uncovered issues that had been overlooked in previous evaluations,” he explains. As a result, new masonry needed to be installed and additional brick ties added.
Multisourcing
To manage the increased costs, the board relied on a variety of funding methods. “We had to borrow further money from another bank and refinance,” Holzer says. Fortunately, the contractor also offered a no-interest payment plan, a reprieve that allowed the board to pay smaller amounts monthly instead of large lump sums, easing the financial burden on residents. “This was crucial in managing cash flow,” he says. “Rather than having to pay $250,000 a month, the amount was reduced to $30,000, which helped for budgeting purposes.” So did strategic cost-cutting. The building was staffed 24 hours, but one of the cost-cutting strategies it took to help with budgeting was to reduce the staff to two full-time members working 9 to 5. “It was unfortunate, but it was something that we really had to do,” Holzer says. “It allowed us to contribute their salaries towards the additional exterior work.”
Holding It Together
The building had a sidewalk bridge for more than three years, which was itself a hefty cost. When budgeting for facade work, especially under local laws requiring close inspections, it’s crucial to consider additional costs beyond the repairs themselves. “If you’re going to borrow money, you want to anticipate the worst-case scenario,” Holzer says. When borrowing more money than initially estimated, it’s important to keep residents informed about increased costs. “Sometimes the price tag will scare the board, so you want to hold meetings to explain the issues and the necessary steps to address them,” he adds. Securing flexible payment plans with contractors and having access to credit can significantly ease the financial sting of these large projects. In addition, working with trusted contractors and engineers who understand the building’s specific needs and can offer favorable terms can make a significant difference in project management.
