A 100-year-old NYC Condo building needed a facelift. The 10-story building had been converted to condos back in 1995. For the past few years, the board had been barely getting by with patchwork repairs to the elevator and roof. Unfortunately, they had no reserve funds to pay for the repairs.

No reserve funds?

The association’s reserve funds had recently been depleted to repair a major facade-related deficiency. Monthly dues were at the lower end of the range for comparable buildings only averaging $500 per month. Additionally, the board had recently imposed a monthly special assessment of $250 (average) in order to replenish their reserves.

Repairs piling up

A destructive storm was sparking more roof leaks and the board now had a serious decision to make. The roof needed a total replacement. The board was now needed to spend more than $750k to replace the roof. They knew that a $500k elevator replacement wasn’t far behind. And residents had been pushing for a common area renovation for years. Not only were these things a nuisance, but the market value of the units was also negatively impacted.

Get help

They turned to Arch Capital (can we say this?) to help them structure an alternative financing solution.  Arch helped them approach the project with a 5-step process.

Step 1.  Identify the scope of projects:

The board grouped the projects into 3 buckets:

  Total Cost Cost per Unit
Roof repair 750,000 10,000
Elevator replacement 500,000 6,667
Common area facelift 250,000 3,333
Totals 1,500,000 20,000

They understood that many unit owners were on fixed incomes and a special assessment of $10k would not be well received. It would be especially tough to sell knowing that an additional assessment of $6k – $10 would be coming soon.

Step 2. Identify financing alternatives

The elevator contractor offered financing terms but the general contractor for the roof and lobby work wanted payment in full. Arch helped develop an alternative matrix:

  Priority Financing Bank Loan
Roof repair High 3-years with contractor Yes
Elevator replacement Medium No Yes
Common area facelift Low No Yes

Before raising their hand for a loan, the board sought the advice of their counsel to determine if they had the legal authority able to borrow. Counsel advised them that the board need to get a vote of at least 50% of the unit owners.

Step 4. Communicate with unit owners

Arch helped the board prepare various financing scenarios.

      Per-unit monthly payments
  Total Cost Cost per Unit 5 year-term 10 year-term
Roof repair 750,000 10,000 $ 185 $100
Elevator replacement 500,000 6,667 $ 122 $  66
Common area facelift 250,000 3,333 $   62 $  34
Totals 1,500,000 20,000 $ 369 $ 200

They presented elevator and lobby renderings along with financing recommendations to the unit owners. They ultimately decided to try to obtain a solution that addressed all 3 projects into 1 loan for $1.5 million. The monthly principal and interest payments were projected to average around $200 per unit owner if they opted for the 10-year loan.

Step 5. Apply for the loan.

Arch prepared an executive summary for lenders to use to assess their interest in financing the project. Arch also assembled a complete loan package with included:

Loan Package:

  • Articles of incorporations
  • By-laws and amendments
  • Insurance and board information
  • Reserve study
  • Scope of the project
  • Unit owner roster
  • Financial info current and 3 years historical
  • Last 3 tax returns


Once lenders were identified, the board met to consider the terms that had been proposed. After choosing a lender, the underwriting process took several months. The bank’s counsel prepared closing documents that were reviewed by the Association’s counsel before the loan could close and fund.

The board decided to meet the debt service through a combination of a slight reduction in their reserve contribution since the roof and elevator were both new and a modest increase in monthly dues.

After the repairs were done, the market values immediately improved by over 30%. One unit owner’s value went from $1 million to $1.3 million virtually overnight. Their investment of $24,000 ($200 monthly dues over 10 years) had yielded an astonishing 1,250%. Not to mention, they loved coming into their new lobby and riding their safer and roomier new elevator.