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MetLife forges unusual MCI plan.

You can't please everyone, the saying goes, but Metropolitan Life, the largest rent-stabilized owner in Manhattan,is certainly trying.

In a plan that has the approval of the state's regulated housing body, Met would give tenants the option to be excluded from a $70.7 million rewiring slated for its 89-building Stuyvesant Town residential development on the East side.

The rent-stabilized complex has seven-to eight-year waiting lists despite the fact that it is not wired for air-conditioning or other major electrical appliances.

But when Met announced its plan to do the major capital improvement (MCI) that would finally allow for air conditioning, some tenants on fixed-incomes said they could not afford the increase, estimated at between $50 and $90 per month depending on apartment size. Others said they had been without air conditioning for so long that they could live without it.

Met's unusual solution? Put it to a vote. Do you want the choice to have a choice? The vote came back that the majority of tenants did want the ability to decide whether or not to have their apartment rewired. The Division of Housing and Community Renewal condoned the "opting in" process.

Met then drafted a plan and submitted it to DHCR. According to the proposal, those that "opt out" of rewiring will pay no additional rent increase; those who choose the rewiring or "opt in" will pay a subsequent major capital improvement (MCI) rent increase. Tenants who opt in would not be expected to make up for those who opted out.

Met also proposed a conversion to submetering. The rent would be reduced by an amount roughly equal to the tenant's electrical bill and tenants would pay their electric bill separately. The owner would continue to purchase the electricity at a bulk rate and, they say, deliver it to tenants at a savings.

But there is a catch. Last week, DHCR, in an official response to many of MetLife's questions on the plan, said the cost of submetering installation, estimated at $5.4 million, cannot be recovered through a major capital improvement increase. In other words, they cannot pass the expense on to those residents who elect rewiring. In addition, it said, if Met proceeds with the submetering, "no profit should accrue to the owner" for administering the service.

Met contends that since it will be passing savings on to the tenants through the bulk purchase of electricity, the cost of submetering installation should be included in the MCI.

In the response to MetLife's queries, DHCR raised some of its own questions for Met to answer like whether or not tenants that opt out can opt out of being submetered.

So will Met proceed with its revolutionary choice plan? Timothy Ring, spokesperson for the owner, said they will take another look at the proposal and "evaluate the economics."

"We've been through a lot over the last several months," Ring said.

In the meantime, Ring said, they are happy DHCR agrees with the plan that was hammered out with the help of Senator Roy Goodman and Assemblyman Steven Sanders.

"We've pleased that DHCR has approved of the plan that we've come up with," Ring said. "We're gratified that we can proceed with the plan in such a way that takes in the personal preferences of each resident."

Sherwin Belkin, a partner with Belkin, Burden, Wenig and Goldman, which is representing Metropolitan Life, said DHCR is having to address many submetering issues that it has never encountered before.

"This is the first true submetering case," Belkin said.

The official response addressed to Belkin, however, states that DHCR "recognizes this as a unique application" and that any approvals are not intended to establish precedent for further cases that come before the agency.

Gary Turk, counsel to the Division of Housing and Community Renewal, said the project is "so unique." In addition to the development's size and layout, this is the first time that a re-wiring is being submitted for approval as an MCI together with an application to convert from mastering to submetering, and the first time DHCR has considered the conversion of master metering to sub metering for regulated property. This is also the first time "opting in" has been used.

Turk agreed that this case is an educational process for the agency.

While DHCR so far approves of MetLife's strategy, the owner will still have to complete the major capital improvement application processes.
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Title Annotation:Metropolitan Life Insurance Co.; major capital improvement
Author:Fitzgerald, Therese
Publication:Real Estate Weekly
Date:Jul 8, 1992
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