HOW TO RUN YOUR BUILDING!

Carol Ott: Welcome to Inside Track, a conversation with New York's leading property management executives. I'm Carol Ott with Habitat Magazine, and my guest today is Melissa Cafaro, director of management at Halstead Management. As a board member, one of the most upsetting events is when your long-term property manager retires, and one of the most challenging events is when your building starts working with the new management company. Relationships are hard to build, and when they last, they're very painful to lose. So I wanted to ask you, being in the property management business, you obviously have dealt with both situations.

Can you share your experiences and what management did to ease these transitions? 

Melissa Cafiero: Yes, of course. As you pointed out, these relationships really are partnerships and as it relates to the management of the building, they are a marriage. So when it does not work out, there's a lot of tears. In order to ensure that continuity of service it's most important, rather than just putting in a body, finding the right person for the relationship, and it's a matchmaking event.

Carol Ott: Give me an idea of how you do that. 

Melissa Cafiero: First, we have to ask a lot of questions to see what the priorities and the culture of the board, the building, the staff, is so that we can reflect on who in our staff best resembles those goals. 

Carol Ott: Give me an idea of the kind of questions. It's a little bit like speed dating.

Melissa Cafiero: Yes. 

Carol Ott: And I'm wondering if the board has been reflective enough to know really what their character is. 

Melissa Cafiero: Sure. So some of it is general stuff in terms of their priorities, projects underway, their focus on financial items, their focus on staff issues. Do they have staff issues?

Do they have resident issues? Do they have turmoil among the board? How does the board like to work? Are they very active and collaborative or are they hands off and just want really good tight reporting back? Usually that will prompt additional conversation, whether it's about the people in the building, maybe the resident manager or superintendent.

They'll reflect on issues they've had before. I also usually ask what they liked most about their former manager or even a more former manager and what they liked the least, or what they thought could use the greatest improvement. Usually that'll prompt something like we loved John. But his writing was not great and we had to edit a lot of the communications outward.

So at that point, I can think about who I believe is a really effective communicator, has a writing style that will impress the board and then build on those points. 

Carol Ott: So let me ask you, the typical management model, certainly for as long as I've been with Habitat Magazine, has been where an agent is assigned to a building and the relationship really falls on that one person's shoulders.

Which to me seems like a pretty risky model, given all the work that it takes to secure the business from the management side. What's your thoughts on that? 

Melissa Cafiero: We agree. It's just not a one person job. It simply is not. In 2024 when there's a much greater expectation in terms of expertise and when you're carrying a portfolio where you've gotta share your time with your other partners on other buildings, it's just not possible.

So we've really adapted our model to a team format. 

Carol Ott: How does that work? 

Melissa Cafiero: So we have a senior managing director who oversees a team of portfolio managers and is involved on a high level and directly interfacing with the board, as well as the manager. Here we have five managing directors overseeing a total of 35 managers. So you can do the math on how that works out. The account executive property manager is handling all the day to day. They're dealing with the residents of the building. They're dealing with contractors, the staff on more of the routine items. And then they collaborate with the managing director on the board package, on legal issues, review of the finances.

And that gives us a higher level of transparency, but also productivity. So the managing director is checking in on everything that's going on, gets to know the building, gets to be a resource and will communicate directly with the board and has an open door to the board. So this way we talk about the hit by the bus scenario.

Somebody gets shipwrecked and can't come in. There's another person, a partner that really does know the players, does know largely what's going on, on the big picture side and can provide that level of security and comfort to the board, the residents and the staff. 

Carol Ott: And I presume that the managing directors are senior experienced people. Because I know in the property management business, it's a tough business. It's hard to find agents today. And some will be relatively inexperienced. Does your system help train them or how does that work?

Melissa Cafiero: Yes, it does. We are fortunate in that, at Halstead, the average experience level, direct experience level as a property manager in New York is over 19 years. Which is, I think pretty extraordinary. And our retention is high. It's over 10 years and that's gone down since COVID where we've had some premature retirements.

People just changed their lives and went into something completely different or nothing at all. But we do have juniors. We have a responsibility and there's just a reality that kids in kindergarten are not raising their hands saying they wanna be property managers when they grow up.

It's just not a career trajectory. So you have to make them. They're built. So we are taking more junior people that have either worked as assistant property managers or in a related field. We do put them on a team with a managing director. The managing director typically will have a small portfolio that they retain, that they're the direct person on, they're the account executive and the managing director.

We'll utilize those more junior property managers working directly with the managing director on that portfolio. And that allows them training grounds so they can really see how it's done by the best of the best. 

Carol Ott: From the board side, is that a difficult sell? I mean, the board may or may not be aware of what you're doing.

Melissa Cafiero: They are aware but there's complete continuity with the person that they trust wholly. It is not that we put them on those buildings with the managing director and then they take over. They learn there, and when they're ready, they will go on to other buildings new buildings, new to our management or maybe where we need to make a change within the team.

But the team usually stays intact. So your managing director is your managing director, regardless of the other changes that happen on a support level. So that continuity remains. 

Carol Ott: And would you say for the management business, for companies that don't have some kind of tiered responsibility, that it's problematic?

Melissa Cafiero: Yeah. Because even the best intentions, right? Mistakes happen, things fall through the cracks. There's misjudgment, and it's a whole lot of work. It's a whole lot to retain and without some level of overlap, without some oversight, it's really ripe for major errors. Four eyes are better than two.

And when we build out in these teams and the managing directors are on the executive team, so we're sharing that information. We're looking at the same items, we're creating checklists and we're creating calendars so that we understand what's going on because this was an industry that was highly independent.

You worked on your portfolio, you closed your door, you went to the buildings. Nobody really knew what was going on. And the benefits of technology is that we can track a certain number of things and that's not as a gotcha. That's really as a resource to be able to say, don't forget this year these three buildings are due for their local law. Let us know when you've contracted with the engineer architect, and then we can continue to follow up. And it's really just to be helpful. 

Carol Ott: I'm curious today versus, maybe 20 years ago, compliance is a huge issue for buildings and for property managers.

. Now, let's say you've got a junior person who's got a ton of things to comply with, plus making sure the building is operating okay. How does that work with a team set up? 

Melissa Cafiero: Sure. So we run reports daily. We use a third party service that's monitoring all of our agency compliance, and it is a very comprehensive platform.

We can go in whenever we want and run reports for Local Law, run reports on boilers. We're getting alerts on a daily basis. The managing director is getting copied on the alerts for all of the buildings underneath them and our compliance department is as well. So we're able then to once a week go back and just check in and ask for updates on those compliance items.

It gives us that access. 

Carol Ott: And so the agent also is getting those alerts?

Melissa Cafiero: Yes. They are the primary. 

Carol Ott: And I'm just curious, does the managing director or somebody on the executive team come to the building to come to any of the board meetings or the annual meetings? 

Melissa Cafiero: Yes. We require a minimum of four meetings by the managing director annually.

With Zoom and calls it's often much more frequent. Their calendars are a little more free to have those afternoon Zoom calls. If there are issues that are going on, specific issues, which often there are-- a major project or a legal issue or something that's new that requires a additional information, they'll participate more frequently.

They go to the annual meetings, which again, are not all live these days, but they do go and visit the building whenever requested. So not weekly, not as routine as we require for the property manager. But it's also not that they're just assigned a name and have never been to the building.

They do have to understand the building. 

Carol Ott: And in terms of expertise when a board has to figure out a capital plan that incorporates financing or assessments, and complying with Local Law 97 or all the variety of laws , which is a very complicated thing to understand where the money's coming from-- is that left in the agent's hands, or is that more on the executive level? 

Melissa Cafiero: So the executive managing directors are the best of the best. So we understand really in depth all of the issues and on a very deep level. So you referenced Local law 97.

So there's an energy component, a compliance component. There's also a financial component. There's a operational component. How do you get this done in that building? How do you achieve that? And there's a real in-depth understanding. And especially upfront when these things were new, the executive panel really had to understand that and study it and speak to all the experts to understand how we should create an SOP for that. Since then, because it's not that new, we've been able to educate downward so that our managers understand it at a similar level. That said, I think, six or seven months of additional understanding makes it very easy for us to present on it. Not everybody has the same comfort level in terms of that presentation, but generally we're getting together with those new issues brainstorming, speaking to the experts and putting together a package so that we can carry that forward to the entire team regardless of their level of ability to communicate that outward. 

Carol Ott: I'm curious for a new management relationship. You went over some of the information that you need to get from the board or to try and understand. What kind of information does the board get from you? Or do they just sit back and wait to be taken care of?

Melissa Cafiero: So in this day, and this is very different from 20 years ago, we get very extensive requests for proposals. They're usually done in unison with corporate counsel, so you know, they can be seven to 50 pages of questions, really in depth starting at the top where they wanna understand the structure of ownership, all the way down to how many people work overseeing lease renewals. So they can get really specific. Often that alone gives some indication of their pain points. Because they'll be very focused on certain questions. 

You talk about capital planning, I think that's a very popular question. ,How do you deal with capital planning and looking at the years forward? So we get a good indication of what they're looking for. We respond to every question. We will provide sample documents reports. Some RFP specifically ask us to relay a specific instance that applies to their question.

We will do that as well. So I, I think very few boards in search of management, just sit back and let you present. I think it's very structured. They go in knowing the questions they want answered. And they're less impressed with the dog and pony show. The glossy binders are not gonna cut it.

They really want the questions answered. 

Carol Ott: Do you have any boards reach out to you who don't have detailed RFPs? 

Melissa Cafiero: Yes. 

Carol Ott: What percentage would you say? 

Melissa Cafiero: Less than 5%. 

Carol Ott: Oh, really? 

Melissa Cafiero: Yeah. 

Carol Ott: And these RFPs are done in consultation with counsel? 

Melissa Cafiero: I'd imagine they are. I think some of them are too much and you're not gonna get the right answer or what you're really looking for.

I have seen ones that are structured like a survey. And I think those are probably a better starting point to prompt an interview and to expand on those issues. But some of them are clearly done and many of them are done in consultation with counsel and the RFP is due back to counsel.

So they're the person who's cutting through it, and going through that with their clients. 

Carol Ott: And is the request for an RFP after you've done a dog and pony show, or don't you even do the dog and pony show anymore? 

Melissa Cafiero: We do them frequently and especially because we're able to do them on Zoom.

Typically they'll request the RFP, and I think that's how they get to their short list in terms of who they decide they want to entertain and that's when the dog and pony show will come.

It's convenient, more attendance from the board side. Typically the RFP goes out first. We will complete the RFP. We'll send it back. That probably creates a shorter list in terms of who they decide. 

And then frequently there's the follow-up after that. Which is a series of additional questions references or additional references. And that's an indication that you've made it to the short list. 

Carol Ott: And in this process, they've clearly tried to assess your company's strength and weaknesses.

Where in this process do you have an opportunity to assess them? Is it only after you've been hired? 

Melissa Cafiero: No, I think in the conversation, I think starting with the RFP sometimes we get a clue to some of those pain points or their level of desire to micromanage. I know that's a dirty word but you can see that indication sometimes in that.

So then when we would meet. We would ask follow up questions. Among boards, especially when they're moving on, usually it's because something has upset them with their current agent. Often those are financial issues and the financial management issues. The thresholds for approval on bills and payments or expenses; that's a big one. So they will ask us often how, what our process for approving payment is and what those thresholds are, and we tell them what our recommended or our standard is and they'll come back in the conversation and say we wanna approve every expense in advance. And so we have to work through that. And I think that's like a trust building exercise. Again, I think this is very much like speed dating, right? Everybody is gonna ask the questions where they've been burned prior. And so you know, we build on that conversation.

Carol Ott: And I'm curious, after you've gotten the RFP, you have a sense, and now let's say you've been brought in to meet with them, and I presume you're bringing in one of your executive team and maybe an agent also? 

Melissa Cafiero: Yes. So our ideal scenario is we have a reach out whether that's an RFP or just a email or a call.

At that point we like to have an immediate call with the point person. It's not always possible. Sometimes these are very sanitized, structured processes. But just to feel them out and see if we can have a quick meeting. And that's with the executive team only so that we can get a feel for them.

So that would be myself and one or two of the other managing directors, our director of operations and typically our controller, just to understand and hear them out and so that we can try and put together the right team. We really don't present a team until we understand what the building is looking for.

We have to meet them first because we just don't want to bring the wrong people. We have utmost confidence that any of the managing directors are going to serve any kind of building but when it comes down to the property manager and the assignment, we have to make sure that it feels right.

And some of it is very superficial even. You want the person that looks the part for the building as well, that just feels that way. I recently walked a building that is extremely state of the art, high luxury new construction. It is a condominium that feels like a five star resort.

I have great managers that love to spend lots of time in the boiler room, and for a lot of buildings that's exactly what they need and it's what they appreciate and want. Clearly that's not what is meant for six month old, 50% occupancy resort like, hotel like condominium. So right away we are creating shortlists in our head of who would make sense on this building. 

Carol Ott: So in looking back , this is like speed dating and I'm wondering, I'm sure the boards judge how successful they are and you judge how successful you are in making a match. How would you gain your success rate? 

Melissa Cafiero: I think generally with the initial assignments we're like at a 99%.

We really do well pairing. Occasionally when a building doesn't wanna give too much insight and so then it just becomes a numbers game. Want us to come to the very first meeting with the manager knowing nothing else. And that's how they're going to make their choices.

And I will always tell them that it's better if we can walk the building first, if we can meet with you first before presenting an assignment or a proposed property management team. But sometimes buildings insist. They don't wanna go move past the first conversation without seeing what we've got.

Occasionally we think we have an understanding. We bring a manager to the meeting and I realize this was not the right manager. And I will typically always say upfront, we will bring a proposed team. Let's get to know each other a little bit better. We have other options, and if you'd like to meet two or three, we can do that as well.

Carol Ott: From the board perspective, who obviously wants to have a successful match because nobody wants to be switching managing agents. What would be your advice for them as they try and create a good management marriage or look for a new partner? 

Melissa Cafiero: Yeah, so I think that the RFP generic information is important and they should continue to ask those institutional issues, organizational questions about the company and how we operate.

But I do think that in an actual interview they should be willing to reveal what their real style is, and how they work and what they're looking for in terms of a partner. It really is about chemistry. So I think they should be really honest and upfront about that. They should reveal what worked in their last relationship and what did not work in their last relationship.

I think that is the best set of details that we can work on to try to make that match. 

Carol Ott: Thank you very much. Thank you for sharing your insights.