Newsletter #144    Acrobat file    Return to archive    Newsletter #146

350 BLEECKER STREET NEWSLETTER #145
November 19, 2001

The annual shareholders meeting took place November 13, 2001, from 7:30 PM until 10:30 PM. This newsletter is a summary of the meeting, although the summary is not in the same sequence as the actual events. Among the activities and issues discussed:

ELECTION HELD

There were 12 candidates for the 7 board positions. Originally there were 13 candidates, but Cynthia Spry withdrew her candidacy. All 7 board members were re-elected. 16,500 shares voted, out of the 17,222 total, representing 131 out of the original 137 apartments, a 96% participation rate. Over half the shares were voted by proxy. About 30 shareholders, including 10 of the original 13 candidates, attended the meeting. Note that Ken Newman has 4,042 shares.

The totals were:

OBJECTIONS TO THE MEETING

          1.     a complete shareholder list with everyone's current address
          2.     all board minutes from October 1999 through the present
          3.     copies of documents sent to all shareholders that he allegedly didn't receive

The meeting proceeded until the proxies could be totaled. When they were totaled (not the actual votes, just the shares represented by proxy), it was discovered that Susan Kim held proxies for over half the total shares in the co-op (over 9,000 shares out of 17,222). Under New York law, postponing an annual shareholder meeting is up to the shareholders, not the board. Susan requested that those present advise her on what action to take, via a confidential straw poll.

Cards were handed out, and the confidential poll showed that 26 out of 32 shareholders present wanted the meeting to continue as scheduled. Susan accepted this guidance and voted the proxies to continue the meeting.

TUDOR REALTY

Mary Francis Shaughnessy and David Goodman introduced themselves and made a brief presentation about Tudor Realty, our managing agent since February 1, 2001. Tudor manages over 60 other buildings. Paul Morton could not be present because he was at another co-op's annual meeting. David and Mary Francis emphasized that if anyone has any concerns not addressed promptly by Paul, he/she can always call David or Mary Francis at 212 557 3600. They are all accessible by e-mail, too:

ACCOUNTING FIRM

Richard Sauerwald, CPA, of Marin and Montanye, introduced himself. His firm has been our CPA's since January 2000. Richard addressed some issues mentioned in a letter from Rick Montanye dated November 10, 2001 that was handed out at the meeting and attached to this Newsletter.

APARTMENT VALUES

Al Del Vecchio, using information detailed in the web site, www.350bleecker.com/policy/sales.html reported that apartment values per share seem to have risen 24% in 1 year. The most recent apartment sale (8/14/01) was for $2,897 per share, and the oldest sale within 12 months (9/27/2000) was for $2,343 per share. The oldest sale within 2 years was for $1,598 per share (9/15/1999), so the price rise over 2 years was 81%. No apartment sales have closed since the September 11 WTC tragedy so its effects, if any, are unknown.

CONSTRUCTION

Jim Kafadar reported that the waterproofing, brick pointing, roofing project is now over. The Design Board (Mary Sculley and Valerie Coster) reviewed the landscape architect's plans for the Bleecker Street planters, and requested a second opinion from another landscape designer. When the second set of plans is complete, it will be distributed to all shareholders for their comments and suggestions.

If you'd like to join the Design Board, please contact Mary Sculley, apartment LJ, 212 741 0530.

GARAGE NEGOTIATION

Susan Kim reported that Ken Newman (having repeatedly declined professional neutral mediation) wanted the co-op's attorneys to do all negotiations only with Ken's attorneys. Ken will not negotiate directly with the board members. Through the co-op's attorneys, the board requested that the:

          1.     store lease be changed so that no food, bars, restaurants are allowed
          2.     real estate tax increase cap of 12% be eliminated, since real estate taxes have almost doubled since 1985
          3.     store rent rise with the Consumer Price Index instead of staying frozen for 59 more years at $86,000
          4.     garage profits be split 50:50 up to the limit of the 80/20 tax rule

Susan noted that Ken sued the co-op, not the other way around. The board sees litigation only as a last resort.

Several shareholders at the meeting asked Ken repeatedly for his highest and best offer, but Ken declined to articulate one.

Ken's offer dated October 30th, which he sent to the shareholders, wasn't updated. The co-op's lawyers called Ken's attorney to negotiate, but there hasn't been any response.

FINANCIAL REPORT

Mark Lilien gave out the treasurer's report, which is attached. Marylou Moravec, the treasurer, had to be out of town that evening. Questions were raised about the feasibility of refinancing the co-op's $3.5 million 7.82% mortgage, since interest rates declined recently. Unfortunately, our mortgage agreement will not allow prepayment at all until 2003.

A question was asked about whether the maintenance fee would be raised in 2002, since it has been $4.65 for 4 years. The board creates the budget in consultation with the managing agent and the CPA firm in December, so this information is unknown.

LOBBY ART

A confidential straw poll was taken regarding art in the lobby, to help guide the Design Board. 14 people voted for art (but not the art we currently have), 2 people voted for no art, and 7 people voted for picture #1, while 7 others favored picture #2. It was unclear what some people meant by "picture #1" and "picture #2", but the prevailing guess was that the larger painting is #1, and the smaller painting is #2.

ELECTION MODERATED BY ARMANDA SQUADRILLI

Based on the outstanding results of her "Meet the candidates night", the board requested that Armanda Squadrilli (apartment 1HJ) moderate the candidate presentations and their question/answer session. Armanda graciously consented, and the session went according to the procedure outlined in Newsletter #144.

THANK YOU!

The board members thanked Laura Herbert and Jim Kafadar for supplying the refreshments.

Apartments for Sale

Date: 11/12/2001
From: Marylou Moravec, Treasurer
Re: Financial Report

CASH POSITION

We budgeted the year to end with $112,000 cash. We are projected to end with that amount or slightly higher, by about $6,000. There will be a detailed update for the figures ended October 31 when we receive Tudor's monthly report in a few days. The detailed update will be posted on the web site. If we show this in the newsletter each month it adds about 2 pages. How many people would also like this in the Newsletter each month? (Show of hands)

We ended September with $280,000 cash. We ended October with $230,000 cash, which is $50,000 less. That is because we made a quarterly real estate tax payment in October. We do not pay our real estate taxes one-twelfth each month. Instead we pay them in large chunks only a few times a year. Most months our cash position rises, but in "real estate tax months" our cash position falls. The next real estate tax month is December.

BANK REQUIREMENT

Our bank requires that we end December with $96,000 cash. As stated before, we will probably end with 17% to 24% more than that required figure. If we end below the $96,000 requirement, we'll have 180 days to make up for the shortfall.

Since 1995 we ended each year with several hundred thousand dollars. We had this extra money because we needed it for the roof replacement, boiler replacement, waterproofing, etc. that cost over $1 million. Since the major construction project is over, we budgeted to end the year with a more modest amount.

HOW MUCH CASH SHOULD WE KEEP ON-HAND?

Sometimes people wonder, "What is the right amount of cash to keep on-hand, in case of an unexpected emergency?"

Unfortunately, there is no perfect answer to this. Some boards keep very little cash on hand because they'd like to keep the maintenance as low as possible. We budgeted to end the year at $112,000, but our average cash on hand, year round, has usually been more than double that figure. In the year 2001, we've usually had at least 2.8 months of cash maintenance on-hand at all times, at least $225,000. Since our shareholders are very prompt in their payments (usually the shareholders are less than $5,000 overdue at any time), the 2.8 months of cash on-hand might be considered reasonable by many people.

We pay real estate taxes in December, which is why our end-of-year figure is so low. The end of December is often the lowest point of the year because of the real estate tax payment.

KEN'S LEGAL FEES

Everyone is concerned about Ken's demand for $270,000 in legal fees. The bank offered to lend us up to $500,000 at about 6% interest. If we need to borrow this money, each $100,000 borrowed would cost a 100-share apartment owner $34.84 interest per year, which is tax-deductible, and the $100,000 principal can be added to our mortgage when it is renewed 4 years from now. If we wanted to pay off the loan over 4 years, the cost would be $163.64 per 100-share apartment, per year, which is partially tax-deductible.

Of course, this borrowing may not be necessary if there is an out-of-court settlement with Ken. If the $270,000 amount is challenged in court, a judge will decide if the amount is reasonable. It may be reduced substantially.

If we win the garage, the maintenance on a 100-share apartment will go down by $659 per year.

2001 EXPENSES COMPARED TO YEAR 2000 EXPENSES

Other than garage legal fees and major construction, Year 2001 expenses are projected to be around $1,159,000, a 5% increase. In Year 2000, those same expenses were $1,101,000. Some of the major differences are projected to be:

          1.     Utilities, up $28,000 (+29%)
          2.     Labor and payroll taxes, up $12,000 (+6%)
          3.     Real estate, city and state taxes, up $10,000 (+3%)
          4.     Auditing, up $4,800 (+69%)
          5.     Managing agent fee, down $13,000 (-27%)

UTILITY COSTS

$13,447 of the 2001 utility costs were expenses carried over from 2000, but not paid in 2000. Additionally, the board hired Herbert Hirschfeld, an engineer suggested by the co-op association, who will report shortly on whether everyone in the building can all save significant dollars by changing to a master electric metering plan. New York State may subsidize half the cost of this changeover. Furthermore, at least one of our main water meters is clearly defective. Later this month, the City will replace it.

RENT ON THE COMMERCIAL SPACE (STORES AND GARAGE)

Our projections do not include additional moneys owed by Ken Newman for rent on the stores and garage. Under the terms of the commercial lease, additional rent is payable based on certain operating cost increases each year, such as labor and utilities. Ken has not paid, and was not billed, at least $18,875 for these increases in the year 2000, for example. Nor has he been billed for increases in the year 2001. An audit review is being done to see if the formula used for these increases has been applied correctly. The board will not bill Ken for the increases until the audit review is complete, since the actual amounts owed from previous years may have been materially understated.

In other words, the board may be advised that Ken actually owes the building over $100,000 in back rent increases, in addition to the $114,900 already discovered. Until this issue is clarified, the board does not want to send Ken a bill. This should be clarified in the next few weeks.

Marin
  & Montanye LLP

November 10, 2001

Marin
  & Montanye LLP

November 8, 2001

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