Evolution: Management

The beeper was beeping, and the manager had to find a phone booth to call into his office to see why he was needed. After waiting until a phone became free, he called his office. The office administrator looked through the message slips and found the one addressed to the agent. It was a call from 1077 Riverview Towers' board treasurer about a check he had written. Had it cleared?

Beepers, deposit slips, cleared checks — what a difference 20 years makes.

The management business has changed dramatically since 1982. From coping with computers to communicating with savvy boards, the 21st century manager is a different animal from his late 20th century predecessor. Among the areas in which his business has changed:

Computers. In 1989, a Habitat survey showed that 85 percent of the 56 responding management firms had some form of computer system (either in-house or offsite). By 2001, any firm that did not use computers both within the firm and to communicate with its boards was an anomaly. Computers have made the manager's world much faster-paced. Boards can now communicate with each other and with management electronically. "E-mail makes correspondence very quick," says Alvin Wasserman, director of Fairfield Property Services. "In terms of service, work order requests can be handled through our web site. So can questions about bills, and everything else except emergencies."

Computerization has also meant faster access to cash. No more deposit slips and "get-there-by-3:00" deposit visits; most management firms now employ "lockboxes" in which the money goes directly to the bank, bypassing the manager. Many also use electronic direct-deposit systems, which allow for instant access and up-to-the-minute tracking.

Cell phones. Whereas the 20th century manager relied on pagers and public telephones, his 21st century counterpart can respond instantly on his cell phone. A 2002 Habitat survey found that the vast majority of managers had cell phones; in 1989, the first year of the magazine's annual survey, cell phone use wasn't even a question.

Back office. For most management firms, the back office staff has increased with the business — and the growing complexity of the work. For example, 20 years ago, Mark Greenberg Real Estate (MGRE) had one administrative assistant for the entire back office. She would process resales, refinancings, and subletting requests. By 2002, the company had two full-time office managers and five bookkeepers (with one simply dedicated to accounts payable). According to Steve Greenbaum, director of management at the firm, the workload has increased because "we write lots of checks — to vendors, for mortgages, insurance premiums, and utility bills. Accounting has become a full-time job. To avoid getting late fees, you have to be very fastidious." In 1982, MGRE had a staff of 6, including the managers. By 2002, that number had risen to 43, including onsite managers and their staffs.

Separate accounts. In the 1980s, many firms set up "agency accounts" in which several buildings' funds were commingled. This caused confusion, invited corruption, and is now illegal. "The elimination of agency accounts was a significant change," says Donald Levy, director of management at Lawrence Properties. "With commingling, it wasn't long before some agents were doing very bad things."

Workload. Twenty years ago, managers were expected to handle 10, 12, sometimes even 15 buildings — which led to burnout and inefficiencies. A Habitat survey in 1989 found that the average manager supervised from 10 to 15 buildings. By 2001, that had dropped to an average of 6 to 8 buildings. Explains Greenbaum: "Every building now needs more attention and more work needs to be done. The role of the manager is more intricate, more complex, and more sophisticated."

Code compliance. One way that the agent's job has become more complicated is through the health and safety regulations. There are dozens — perhaps hundreds — of new or revised city, state, and federal laws of which the manager must keep track. The result: some firms have set up separate compliance departments. All of them spend more staff time making sure that the laws are obeyed.

Education. With discrimination lawsuits leaving board members personally liable in some cases, both managers and boards have to be more knowledgeable about the law. "People are more litigious now," explains Gerard J. Picaso, president of Gerard J. Picaso. "Twenty years ago, people didn't threaten to sue as much."

Managers also have had to learn how to deal with resident-owners. In 1982, co-ops were a relatively new concept. Managers, all former rental agents, were learning the ropes about cooperative living as they switched from dealing with a rental owner — a landlord who knew the real estate business as well as the agent — to resident-owners who were learning as they went along. The manager was in the unusual position of being both teacher and employee, taking orders from his students. That made for a different dynamic. "The level of detail we each deal with on a daily basis — dealing with board members and with all the residents — is more work than just dealing with a single landlord," Levy says.

In general, the manager has had to become a jack-of-many-trades and master of all. "He needs to have a larger breadth of knowledge," Greenbaum notes. "Twenty years ago, he collected rent and cured violations. Now, he has to know about bylaws, how to run an election, financing, changes in the law. He has to be a lot more sophisticated."

Such concerns have led to a marked increase in continuing education courses for managers. The Real Estate Board of New York, the Institute of Real East Management, New York Association of Realty Managers (NYARM), and the Associated Builders and Owners of Greater New York all offer courses and degrees in management, with different designations: Certified Property Manager, Real Property Administrator, Registered Apartment Manager, and an Accredited Residential Manager, among others. Although all of these designations existed in the 1980s, their popularity as a promotion of professionalism has increased.

"In 1982, there was an influx of 'green' property managers new to the co-op and condo aspect of managing property, many of whom came from working for private owners and others from fields with transferable skills," recalls Margie Russell, executive director of NYARM. "At that time, most of the organized training was still dealing with the basics of managing rental properties. Today, there is a need to train a new batch of up-and-coming property managers who are benefiting from today's course work which deals mostly with a broad base of fundamentals. For the local laws and governmental administrative dictates, most management firms hold their own in-house training."

Competition. In 1983, when Habitat staged its first photo shoot for management companies, 16 principals showed up. By 2001, that number had risen to 42 (and was as high as 71 in 1991). Those figures are a good barometer of how the business has changed. In 1982, the field was dominated by three large, old-line firms: Douglas Elliman, Brown, Harris Stevens, and Albert B. Ashforth. During the late '80s and early '90s, there was a boom in small and mid-sized operations. In 1989, a Habitat survey reported that a quarter of the 56 firms responding had been in business for less than a decade. With consolidation and the kickback scandals of 1994 and 1999, in which dozens of agents were indicted, the business has, in Greenbaum's words, "stabilized. The industry has been shaken up and shaken out."

Fees. In the 1980s, fees were an issue. Large firms with brokerage divisions would use low fees as an entry to get exclusives on apartment resales, where the profits would be made. Smaller firms would also lowball prices to build up their portfolio, giving subpar service and/or making a profit on unannounced extra service charges or through illegal kickbacks from contractors. (One large management firm principal, Marvin Gold, admitted in a guilty plea allocution that his agents were expected to take kickbacks to compensate for low salaries.)

Twenty years later, some of that has changed. Fees have gone up — many firms now require a minimum — but not by as much as some would like. MGRE, for instance, was charging $200 a unit in 1982; that has increased to $300 a unit in 2002.

Many managers also report that costs are going up because banks are suspending a practice called "compensating balances." According to Greenbaum and Levy, when a management firm did all its business with one lender — albeit in separate accounts — the bank would extend a number of courtesies, including the waiving of check and other administrative fees. "They would make their profits on the high interest rates they charged per month," Levy notes. But with the lowering of interest rates in recent years, the practice is less common. As a result, managers are passing along more bank fees to their clients.

Board sophistication. The sponsors, who would often control and/or inhibit board action, are generally gone or out of power. The result: boards have become more involved and more educated — and the manager must deal with them rather than a single person, the sponsor/landlord. "The biggest change is the greater involvement of board members," notes Greenbaum, "which is both good and bad. Some bring a depth of knowledge and expertise, while some are over-involved and counterproductive because there is a lack of trust."

The management kickback scandals have also increased board involvement. "As stories of indictments popped up more frequently," says Wasserman, "I believe boards came to realize they had to keep a closer watch on things. There needs to be a balance between a board needing to know and a manager being trusted as the professional."

In general, the manager — like the boards he works for — has grown increasingly more sophisticated. Concludes Picaso: "The manager today knows about accounting, about legal issues, about repair issues — about everything. He has to be multifaceted. He is also better dressed."