Just Do It

Clinton Hill Apartment Owners Corp., a 1,221-unit cooperative, is tucked along Clinton Avenue in the Clinton Hill section of Brooklyn. Composed of two campuses — the north and the south, which are separated by two blocks — the 12 red brick buildings are bathed in green. It's everywhere, from the well-kept lawns, to the shrubbery, to the trees that hang over the courtyards and the streets. It is the kind of place that the board president, John Dew, says he likes walking around after a board meeting, even if it's raining.

Now take him back four years to when he started his presidency. The picture is entirely different. The grass is yellowing and brown; the shrubs are primarily in the same condition; he's carrying an umbrella even when he's under the bridgework erected to do work on the buildings for fear that giant puddles of water will cascade down on him, as they have before. He's also one of a handful of people who has to be removed from their apartments when one of the property's roofs begins leaking.

And those are just the external conditions. The 17-member board acts more like two intractable heavyweights — the owners and the sponsors — than a governing body. Each takes a position opposite the other and they slug themselves into lethargy. Dew, feeling as if he is standing amidst the blows, thinks for a brief moment that this is more than one person can handle.

There was no single defining moment when Dew suddenly became a great president. The saga of Clinton Hill begged for a savior and seemed to work toward that goal, hoping for his or her arrival. Someone had to come along eventually and put things right. Other board members and the property's professionals say he was the person with the right attitude, skills, and energy. And when push came to shove, his waver into pessimism was only brief. So, if there were a moment to define John Dew that would be it. But how did he, a diehard optimist, get there?

BRIDGE INTO TROUBLED WATERS

Clinton Hill, originally built in the mid-1940s as navy housing, was converted to co-ops in 1984. Like many other conversions, there was resistance to purchase by residents and thus the sponsor, Time Equities, retained a large number of units. (There are two "sponsors," but Time Equities is involved most prominently.) While the conversion was successful, the seeds of discontent were sown. Fearing that cooperative status meant that renters would eventually be kicked out of their apartments, many residents looked askew at anything that smacked of authority or change. Into this soup stepped Dew, who moved into the top floor of a building in 1988.

A former real estate property manager who now works in the health care industry, Dew settled into Clinton Hill, thinking that the $70,000 he'd paid for a one-bedroom was a good investment. Then the first rain came and with it the first signs of problems.

"It got so bad," Dew recalls, "that I'd have to listen to the weather report every day to make sure there was no rain in the forecast. If there was, I'd have to put plastic bags down on the floor and then newspaper on top of that."

In an ideal world, this would have been the moment when Dew got involved with the board and got the roof fixed and maybe saved the property a lot of heartache, but it wasn't. Because he spent so much time away from his apartment, Dew considered the leaks something of a nuisance but not serious enough to warrant his full attention. Untended, the nuisance grew.

Coming home from work one day a few years later, Dew found his entire apartment filled with poles, "like something out of an S&M club," he jokes. Meant to stabilize the weakening roof, all eight apartments on the top floor had the same treatment. Unaware of the extent of the problem, the residents were surprised to learn that they would have to be relocated to other units for about six months while more serious repair work was done. They were…and stayed out for close to two years.

At the same time as this debacle, another mess was brewing unbeknownst to anyone. The board had entered into a contract with a company to have the parapets on the buildings either replaced or repaired. To do that, the contractor said that bridging would have to be built throughout the property, inside and outside. The total cost of the bridging alone was nearly $500,000. After the bridging was erected work began, but did not last long.

Reports began to come in from maintenance staff that the work being done was substandard, so the contractor was ordered to stop. With the real estate market hitting the skids and the costs of repairing the roofs escalating, the board was unable to afford to hire an engineer to refute the contractor's claim that everything was progressing fine, so the two parties hit an impasse and stayed that way for seven years. The bridging, however, remained up, covering the grass and bushes, and the landscaping quickly took a turn for the worse.

"It was awful," remembers Yvonne Cummings, a resident since 1987, "but people just accepted the fact that this was what the property was always going to look like." And according to Dew, there was little chance the board was going to be able to change things.

"There was a lot of mistrust on the board at the time," says Dew, "and the resident board members, who had the majority, didn't have a lot of experience, so we were basically being led around by the seat of our pants. The sponsor, of course, had more experience, but we didn't have good people to lead us. And we couldn't afford to hire the sort of professionals we needed. There was also high turnover — no resident board members served for more than a year or two — so there was no continuity."

Roberta Axelrod, director of cooperative conversions, sales, rental, and marketing for Time Equities and a sponsor representative on the board since the beginning, blames the professionals for creating much of the mistrust and confusion. Clinton Hill had been through a spate of managers in the past few years, including a stint with Marvin Gold, who was later indicted and pled guilty to corruption charges. They would eventually settle for a few years with Insignia, but the match wasn't quite right, says Axelrod.

In addition to management problems, the board struggled with legal advice. Notes Axelrod: "The board hired a lawyer who specialized in bankruptcy, so that's what he started talking about. But if you go into bankruptcy, the owners are still liable to their lenders even if it is foreclosed. He didn't explain this to them. There were real issues to deal with, certainly, but I didn't see any reason to be looking at bankruptcy. I believed we would be able to refinance. They were getting poor advice."

Unfortunately, given the animosity between the sponsor and resident sides of the board, no one was listening to Axelrod. Not when she was saying they didn't have to file for bankruptcy and not later when she said they needed to buy out of the contract with the parapet construction company. To make matters worse, Time Equities itself was experiencing problems with the souring market of the early '90s and had to return unsold shares to a variety of lenders, who brought their own interests into the mix. Sales became limited to cash only. One apartment sold for as little as $17,000. Auctioned apartments went for much less, as low as $1,200. Sounds like a steal, right? Well, maybe it wasn't, what with leaking roofs, elevators that weren't working, and landscaping turning yellow, just to name a few of the difficulties.

"I really didn't understand the magnitude of the problem at that time," admits Cummings. "I knew we were close to going into bankruptcy but it didn't sink in."

By 1995, Dew had had enough bad news. He and Cummings joined the board. Change was on the way.

CHANGES IN ATTITUDE

Luckily, Clinton Hill did not file for bankruptcy in 1994 as their lawyer then was suggesting. But they still had a host of problems to address. Things improved with Dew and Cummings on the board, but not at a blistering pace. The animosity on the board was still at full tilt and showed no signs of improving. One of the causes of this was that the resident board members had a policy of meeting among themselves before having a full meeting with the sponsor representatives. Basically, Dew recalls, it was used as an opportunity for the resident board to solidify a position and then uniformly hand it to the sponsors at the next meeting. Under such a system, the distrust would never dissipate. The board still floundered under knee-jerk decision-making and, unless there was another change, seemed like it would continue to do so. The board needed an attitude adjustment. That came in 1998.

Dew was elected president that year and immediately went to work. His mission: to make Clinton Hill a viable co-op by trying to build a consensus on the board and in the community. As one of his first tasks, he worked to get rid of the bridging eyesore. Biting the bullet, the board hired Rand Engineering to examine the parapet work that had been done. "Not up to standard" seemed an understatement.

Observes Dew: "You could see where bricks were missing, where cement had not been placed, and you could see that the walls were already beginning to lean."

Unsure of what to do, whether to continue with the contractor or attempt to sue, Dew took an unusual step: he listened to the advice of the sponsors who were suggesting that the board pay the money to get out of the contract and get on with things. The contractor had made a buyout proposal, but the board initially thought this was unfair. The sponsor had researched the proposal and thought that it was fair. He told Dew that the co-op could make a counteroffer, too, and see what happened.

"There's this myth of the evil sponsor," notes Axelrod, "that we're only there to take advantage of the property. An effective board recognizes that sometimes the sponsor is there for the long haul and what is good for one is good for the other. We have the same issues. John came on and changed the whole tone of the board. He saw that we had a lot of experience and to the extent the board would listen to us they would be helped. It took a lot of courage and leadership for him to do that."

"The board at first thought that the contractor should not only walk away from the contract, but give us money," notes Dew. "The sponsor brought to us an understanding of how these negotiations work. It was expertise that we otherwise would not have gotten."

Going against popular opinion, Dew stopped having separate meetings of the resident board and got the sponsors actively involved in the future of the co-op. They paid the contractor $50,000 and exited the contract, and then hired a new firm, which began work once more. The repairs on the parapets were important, but the repairing being done within the community was even more important. As the project progressed, sections of the bridging were taken down and the board was able to begin repairing the landscaping as well, replacing shrubs, grass, and flowers, and putting up new awnings.

"That immediately uplifted the community," recalls Dew. "The attitude began to turn around and people began to feel good about living here at Clinton Hill."

"John had a vision for the property and he shared that with the other board members," says Cummings, who became vice president in 1998. "He was also very proactive and willing to try innovative ideas."

By the time work was underway once more on the parapets, the board had been able to refinance for $17 million, allowing them to replace their first and second mortgages with a new first one and set aside money for other necessary capital improvement projects, including boiler replacement, an elevator upgrade, and an electrical upgrade on a system that dated back to the 1940s. Brownouts were not infrequent at the property because of the system's age. (The real estate boom of the late '90s did play some havoc with Clinton Hill, though. Construction bids for the upgrade came in $2 million higher than what was given in the loan, forcing the board to delay work until the boom slowed and prices came down.)

That setback aside, with repairs underway and the property's facelift progressing, banks once again became interested in loaning to purchasers and prices, finally, began to climb once more at Clinton Hill. In 1998, a one-bedroom on an upper floor with a nice view was averaging around $30,000 to $40,000. By 2002, the average price had risen to between $130,000 and $140,000.

With these structural issues being addressed, it was time, the board thought, to look again at its professionals. Taking to heart the saying, "Once bitten, twice shy," the board took due diligence to a new level, interviewing several management companies over several months. They eventually decided on Mark Greenberg Real Estate (MGRE). For a property that was used to hiring the biggest of everything, the departure to a smaller firm was a meticulously researched one.

"Sometimes, when you go with someone smaller — a mid-range firm that is looking for growth — you find them a little hungrier and they pay attention to you more," notes Cummings.

"Not only did we meet many of their representatives, but we also toured several of their properties and talked to on-site managers and boards," adds Dew. "What impressed us was that their principals were involved, as well. If we had a problem, we would be able to talk to them and they should also know what was going on. We needed a company that would be very close to us because we needed a lot of work."

After hiring a new attorney, as well, the team was in place and the real fun was about to start.

FANTASY ISLAND

Steve Greenbaum, director of management at MGRE, sat down with Dew at the start of their relationship and asked him to create a "fantasy list." What was that? "I told John to give us a list of all the things they wanted to accomplish in their wildest dreams — what were their priorities, what were their expectations, what do they want in the future?"

One of the things Dew put down was saving money on power. To begin that, they hired Herb Hirschfeld, an energy consultant who works closely with the New York State Energy Research and Development Agency (NYSERDA). He was instrumental in getting help for the property so that their upgrade would include submetering. Once this was secured, Clinton Hill went even further. Garnering a $758,000 grant from NYSERDA, the property will soon be cogenerating its own electricity. When the building replaced its boilers, the board looked to the future as well, installing dual-fuel boilers so that they can be switched to natural gas when prices are favorable.

Another of the goals was clearing up thousands of city violations that the property had been accruing and ignoring for years. To do this, managers poured through hundreds of pages, spending hundreds of hours, so that the violations could be fixed and written off. The end result was that the property was able to get J-51 approval, which had previously been held up by the violations.

Most of the items on those first two wish lists have now been accomplished, says Greenbaum, and new lists are created each year and held up as measuring sticks.

"Because we set goals, we were all working toward them," notes Dew. "We then knew what we wanted to do and how we wanted to get there. That allowed everyone to use their expertise to help us with this."

SECRETS OF SUCCESS

Clinton Hill's story is an amazing one. And it provides a number of lessons for other board members. When asked what he thought were the "secrets to his success," Dew had this advice:

(1) Get involved in your community. As Clinton Hill Apartment Corp. has seen its resurgence, so has Clinton Hill, the area. More affordable than Park Slope and Brooklyn Heights, the tide of Manhattanites has started flowing there. To keep track of the changes and increase the area's — as well as the co-op's — desirability, Dew helped start the Clinton Hill Consortium of Homeowners, comprised of all the co-ops in the Clinton Hill area. He serves as president of the organization, which focuses on policing, sanitation, transportation, and education in the area.

His involvement in such "extracurricular activities" lets politicians know that he has a group of people who are paying attention to how they are being served. So, for instance, when the board was looking into cogeneration and wanted a grant, NYSERDA received letters from local politicians supporting the co-op. In return, Dew makes sure that the residents know who is doing what for them.

(2) Work it out. Taking a realistic look at the property's finances, Dew was aware that not everyone was going to be able to collect money from them for services rendered. So, he asked for help. From the banks that held their first and second mortgages, he asked for some relief: he got it to the tune of $3 million. Knowing that all the elevators were in dire need of repair or replacement and that this needed to happen fast, he completed an agreement with the co-op's elevator company to do the work in a few months but to accept payment over a few years.

(3) If you don't know, ask. One of the key characteristics of Dew that helped him earn the respect and trust of the community and the board was his ability to admit when he didn't know something, says Greenbaum. And when he didn't know something, he found someone who did and dove into the information headfirst. If that meant going to seminars, interviewing experts, putting in lots of hours sifting through brochures, he did it. Whatever it took for him to make an informed decision so he could give his board the information it needed to make an informed decision.

(4) Judge by results. Individual styles and interests may differ, but Dew asked his board to go with him for a while and judge by what was happening with the steps they were taking. As tough as it was to learn to trust again, the board's and community's faith were rewarded.

As one example, look at the board meetings. Even with a separate resident board meeting happening, the full board gatherings would sometimes last five to six hours or more. It didn't make sense to believe that stopping the resident-only meeting would aid in shortening the meeting. In fact, the opposite would seem to be true. But, as tensions ebbed and the parties learned to work together, meeting time was cut in half. Dew also took to alternating meeting locations between the north and south campuses. This alleviated some concerns from the north that the south — where meetings had traditionally been held — was receiving all the attention. He added pizza, too, making for a more friendly and comfortable atmosphere.

(5) Be positive. Dew's attitude "makes you want to do more things, to go the extra mile," notes Greenbaum. In other words, it is infectious. His charisma helped change the way the board operated and the whole dynamics of the property. Explains Dew: "Everyone on the team has value and is important."

All this is wonderful, you think, but what about that moment of indecision, of doubt? Talking to Axelrod, Cummings, and Greenbaum, the response is that they always knew things could be fixed. It's surprising, then, to hear that the man who spearheaded the effort had a crisis of faith. It happened, Dew says, for the first few months of his presidency. Sleepless nights. Unsure of what he was in for. Lots of worrying.

"Essentially, I was thrown to the wolves," he remembers, "but the executive board stuck with me, which made things much more doable. We were able to dispose of most of the personality problems pretty quickly and get down to brass tacks with what we needed to do to make things better. Once we got over those first months, we were able to chart progress." When and if that progress ends, then, says Dew, it will be his time to go.

"Oh," he adds, "don't worry. I know when it'll be time to go." For now, though, he's got more work to do.