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THE PROPOSAL

The Board of the 77 Bleecker Street Corp. is proposing that shareholders implement a

Capital Contribution Fee 

tied to future apartment purchases.

 

CAPITAL CONTRIBUTION 101

A Capital Contribution Fee is a one-time charge to a new owner associated with the transfer of title on a property that is part of a condo, co-op or homeowner’s association.  It is paid at closing by the buyer and is ear-marked for the corporation’s Reserve Fund to fund future capital expenditures.

Standard practice is to calculate the fee as a percentage of the purchase price.

Studies show that such a fee is likely to have a positive effect on property values over time, improve quality of life and help provide peace of mind to owners.

 
 
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A building in top condition generates higher sale prices.

 
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A building with upgraded infrastructure and amenities is more enjoyable to live in and provides a more pleasant experience for its residents, their families and their guests.

Strong financials, including reserves that are available for both mandatory and discretionary capital projects, benefits sellers, who receive a higher price for their unit. Current residents and buyers, both of whom will enjoy a higher-quality built environment, can be assured in the knowledge that a steady source of revenue to defray the cost of future upgrades is in place.


“The New York Times reported about eight years ago that approximately 50% of the co-ops in New York City have a transfer fee. Based on my experience, I think the number is far higher.”
- stuart saft, holland & knight llp, partner, real estate practice leader

How is a Capital Contribution Fee different from a ‘Flip Tax’ or a ‘Transfer Fee’?

A ‘Flip Tax’ is a fee paid by a seller on a housing co-op transaction. In the ‘70s, when conversions were ubiquitous, existing residents (renters) were usually offered an inside discounted price to purchase an apartment at the time of conversion. Many opted to immediately turn around and sell their apartments at the new market price after the building converted to a co-op, realizing a significant profit.

Thus, the term ‘Flip Tax’ came into use.

A ‘Flip Tax’ is actually the same thing as a Transfer Fee, payable to the co-op upon the sale of an apartment. Co-ops use Transfer Fees as a way to increase revenue and strengthen fiscal health.

A Capital Contribution Fee is a fee paid by a buyer on a housing co-op transaction.  It is a fee to join the cooperative and is added to the buyer’s property cost basis.

 
 

THE CASE

 
 
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A Capital Contribution Fee creates an additional stable revenue stream in perpetuity.

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A 3% Capital Contribution Fee would considerably strengthen our co-op's finances.

 
 
Capital Contribution Fee Revenue Potential

“A transfer fee is definitely a great thing! It gives a co-op's financials some heft. It's important that the buyer see serious financials and a transfer fee shows a commitment to buttressing reserves.”
- john carhart, corcoran group, 77 bleecker st. shareholder
 
 

 
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There are two budgets.
 
 

Operating Budget

Used to fund recurring and day-to-day expenses that keep the building running. Main revenue source is shareholder monthly maintenance.

 
 
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Capital Budget

Used to fund infrastructure replacement and medium to long-term projects that: comply with local ordinances; maintain and increase property values; and improve quality of life.

Revenue would be significant enough to build our capital reserves.

 
 
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CAPITAL PROJECTS

 

Over the past 10 years, mandatory (infrastructure) capital improvement projects have consumed nearly

$5,000,000

These projects will become more frequent, more complex and more expensive.

During the same period of time, we have only spent

$100,000

on discretionary (amenities) capital improvement projects.

Projects under consideration.
 
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1. Windows Replacement

2. New Mercer Street Service Entrance

3. New Bleecker Street Entrance and Lobby

4. Courtyard Landscaping

5. New Amenities

6. Hallway Renovations

These projects can change our lives.
 
 
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WHAT'S IN IT FOR US?

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WE ARE BEHIND OTHER CO-OPS IN OUR NEIGHBORHOOD.

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This proposal is to enact a 3% Capital Contribution Fee.


“In my experience, buyers in Manhattan expect some sort of transfer-related fee. They understand that expenses, especially taxes, are always increasing and revenue sources are limited. Without a transfer fee, maintenance increases and assessments have to shoulder the entire burden.”
- lisa weiner koenig, halstead

 
 

WHAT DO OUR FELLOW SHAREHOLDERS THINK?

Our latest June 2018 shareholder survey indicated high support for a "YES" vote.

When asked: ”What is your view regarding enacting a Capital Contribution Fee as a funding source?”

 
 
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HOW DOES THE VOTE WORK?

According to the language of our Proprietary Lease, a supermajority representing 2/3 of the outstanding shares of the corporation is needed to amend the lease.

The vote on this matter will be by affirmative written consent. Votes in favor of enacting a change to the Proprietary Lease allowing for a 3% CAPITAL CONTRIBUTION FEE will continue to be collected until that threshold is reached.

In order to allow sales-in-progress to be unaffected, there will be a six month window after the change is enacted, during which all transfers are exempt from the new fee.

To read a detailed explanation and the actual language change being proposed, please click VOTE below.

Presented by:

The 77 Bleecker Street Corp. Capital Contribution Working Group

Beth Gottlieb: Chairperson
Ken Rogers
Susan Eastman
Bruce Jaeger
Ed Maher