I am reviewing a co-op apartment building’s financial statements and it gets really confusing. The management office says they report losses or deficits because they operate as a not-for-profit entity. They refinanced their 2 balloon mortgages with high interest (7.7% rate) into a smaller interest (5.8%) fixed-rate mortgage but from $10 mil to $15 mil amounts to capitalize and fund renovations (i.e. window replacement for entire building in 2005 $1.5 mil) and boosted the reserve funds to over $2 million. But this is done at the cost of putting the building and the co-op shareholders into more deficit. Is it smart financing, or irresponsible fiscal management? The building is a luxury apt and looks well maintained with nearly 100% owner occupancy. Should I be worried or glad?
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