Parallel Lives

For Dolores Manigault, life was growing increasingly precarious at 2-4 Windsor Terrace in White Plains. For years, the board members of the 78-unit co-op had balked at making improvements to the grounds and now a majority was dragging its feet on a mortgage refinancing, threatening to veto the whole project.

Without the deal, the co-op would effectively go into a financial free-fall. There would be no way to upgrade the property, owners wouldn't be able to sell their units and no one, effectively, would be able to move in.

"Our backs were up against the wall," recalls Manigault. How could the conflict-averse board president convince the four difficult directors that it was this deal or no deal for the cash-strapped middle-income co-op?

Meanwhile, over in Brooklyn Heights, the shareholders at 160 Columbia Heights had their own problems. Eight years after struggling to plug a deficit left when the sponsor defaulted, the shareholders were dealing with a building bleeding cash. For Georges Mosse, a retired hotelier, the problems didn't become clear until he bought his co-op and ran for a seat on the board. For him, the question came down to the basics: be liked or be a bulldog and fix the building.

Finally, in Chelsea, Doug Crouch and four other shareholders who had wrested control away from the sponsor were starting to feel like Hercules battling the nine-headed hydra. For every problem they solved, another developed in its wake - more complicated and costly to fix. After awhile, they had to make a choice. In a neighborhood that was still a haven for pimps and prostitutes, it was make or break time. Should they stay or should they go?

Meet three different co-ops and three different leaders, with three different stories, all with a similar problem: a thorny financial situation that seemed to get worse as attempts were made to unravel it. In each situation, one board member had to call on unique reserves of stamina to pull the building through hard times. In each, there are lessons for co-ops about leading and learning, about confrontation and cooperation. For these board members, drawn into their tough-love role because of their concerns for their homes, becoming a leader was the only way for their co-ops to survive.

THE IRON MAIDEN

Dolores manigault, 64, is the kind of woman who lives by a simple rule: if at first you don't succeed, try again. For the 25-plus years she has lived in White Plains, Manigault, a retired hospital nutritionist, has spent countless hours worrying quietly over the fate of her home: a 78-unit co-op primarily owned by former renters. Her chief concern: they are unfamiliar with and largely reluctant to take on the responsibility of running a co-op corporation.

But Manigault, a soft-spoken woman with an almost preternatural personal reserve, has worked steadily over the past two decades to turn her lower middle-income co-op into an upscale building, and, though the change has taken years, today, the two red brick, six-story buildings with the newly landscaped grounds has become one of the more attractive, affordable co-ops in White Plains.

"It's really been a struggle," admits Manigault, with typical understatement, "but I think we've done pretty good." Over the last 15 years, since the building has gone co-op, there have only been three maintenance increases, and one was for a jump in the building's heating bills. The reserve fund hovers around a quarter-of-a-million dollars and apartments purchased for a modest $50,000 in 1987 are now worth about three times that.

Sixteen years ago, however, when the sponsor converted the building, the property was heading downhill. The signs for change were ominous, with an inexperienced board and a property in disrepair. Manigault's doggedness in coping with the issues has been the critical factor in the building's success, maintains the co-op's attorney, Jim Glatthaar.

"She is, in my mind, what a co-op president should be, and that is not someone who orders everyone around, but someone who builds a consensus and convinces people what the right thing to do is, and then puts in her own time and effort to get it done."

Though self-effacing, Manigault is no pushover. As the co-op's attorney describes her: "Sometimes there is this congeniality" and sometimes there is "the white glove on the iron fist." The latter typically comes out when there are problems with the building's financials or particularly difficult tenants. For instance, when one tenant refused to turn over maintenance, pleading poverty, Manigault calmly went to court and told the judge what much of the building knew to be true: while the woman wasn't paying maintenance, she had recently purchased a top-of-the-line pair of sneakers for her son, who was seen sporting the pricey shoes around the building's grounds.

"What you find in a conversion like this is everyone's mentality doesn't go with the change," offers the former hospital administrator, picking her words with care. Years of experience dealing with fellow employees at Westchester Medical Center have honed Manigault's sense of when to push and when to lean back. She also lays some of the building's problems at the feet of the sponsor.

According to Manigault, the sponsor overestimated how many of the renters would be willing to buy, which quickly became a problem for the new board. Manigault, who was elected president in 1988, notes: "When you inherit renters and owners, the mentality doesn't go together."

But despite setbacks and the board's learning curve, 2-4 Windsor Terrace has entered the market as a middle-class housing unit, attracting young professionals like Rebecka Hier, who works as a financial analyst in Manhattan. When she was growing up, she always wanted to live in White Plains, and over the past several years has tracked the city's renaissance with increasing interest. Two years ago, she bought her one-bedroom unit, and last year, she joined the board, noting now: "I wanted to take a more active part in what was going on."

Hier, who helped shepherd the board through its most recent refinancing, tips her cap to Manigault's leadership. "Without Dolores, we definitely would not have gone as far as we did. She's very dependable, has a lot of information, and everyone in the building is very comfortable with her, and goes to her with their problems."

Glatthaar remembers the long sessions with the board as he and Manigault patiently spelled out what would happen if the co-op reneged on its agreement to pay back the sponsor: the building would go into a financial free-fall, with no one able to buy or sell. Two of the board members were particularly reluctant to look for another mortgage, arguing that since they had no interest in selling their apartments, the building didn't need a mortgage that would strictly benefit the sponsor.

It took all of the attorney's skills and the president's tact to convince the four other board members that it was in their own best interests to accept a mortgage with a higher-than-average interest rate. But the larger problem was the high ratio of tenant-occupied to owner-occupied apartments. At the time of the refinancing, the sponsor owned 36 of the 78 units; today he owns roughly 30.

While most new shareholders would like to see that number diminished, James McGinnis, who purchased his apartment two years ago, is unconcerned with the speed at which the building is selling. "The last time I was on a board was many years ago, when I owned an apartment in the city and we had a lot of professionals on the board. I think this board is running things just as well as [that] board. The building is being continually upgraded. In 2002, we did a considerable amount of work, sidewalk work; pointing; the main roof is being done right now; the garage roof was done a few months ago. Financially, I think we are in great shape."

McGinnis, who occasionally attends the open board meetings, describes Manigault as the "mainstay" of the board. Glatthaar, too, attributes the success story to her steely resolve. Along with a much-improved physical plant, the building is on solid financial footing with more than a quarter-of-a-million in reserves and co-ops worth twice and three times what they were purchased for in the late '80s and early '90s. "Two-four Windsor has gotten to where it has, mostly because of her work," says Glatthaar.

When asked what it takes to be successful in her role, Manigault pauses, reluctant to say anything self-promotional. Finally, she acknowledges: "It's stick-to-itiveness, and hoping that things will get better. You have to keep people aware that this is their home. And you have to treat it like it is."

HELL DRIVER

Richard Unger has a metaphor for what life was like at 160 Columbia Heights in Brooklyn Heights before and after the newest shareholder, Georges Mosse, joined the co-op board in 1999. It wasn't that the board member in charge of capital projects was doing a bad job with the building before Mosse joined the board, "it was just that, in comparison, he wasn't doing a good job. It's like you had a Volvo, and a Cadillac drove up. What Georges brought to the table was so much more."

By his own admission, Mosse, who once owned a string of luxury hotels in his native France, is not shy. And his admirers and detractors have the same thing to say about him: the retired hotelier is a man used to giving orders and is unapologetic about the outcome - be it bruised feelings, board defections, or a shareholder couple selling its apartment and walking off in a huff.

Retired from the board this past fall, the 60-year-old French expatriate is matter-of-fact about the contretemps he stirred up in the three years he headed the board of directors and oversaw the building's capital projects. There were bruised feelings, and three directors even left the board.

"They had a hard time understanding that things were going to change drastically, immediately, and that it was nothing personal," he says. "It's like the new kid on the block comes in and says, 'Hey we're going to change things.' Maybe you don't like that, but that's life."

More important, the 11-story prewar building, with its sweeping views of the New York Harbor, has been transformed from a dilapidated half-rental, half-owner-occupied building to one of the preeminent addresses in Brooklyn Heights.

Roughly around the same time that Georges and Danielle Mosse moved in, the board issued a dictate: all absentee homeowners either had to return or sell. The co-op had just been through its third mortgage refinancing, says Unger, and it was time to make all the shareholders pull their weight: either live in the building and take an interest in its quality of life, or sell.

The property had just suffered through a long and difficult decade, which began with sponsor default in the late 1980s that left the shareholders with $250,000 in debt and no way to collect the maintenance on the units still owned by the sponsor. After a year of searching for a new lender, Unger, a board director and commercial banker, suggested a "tactical default" to attract a lender. The plan worked, and in 1994, Freddie Mac issued the co-op a new loan in exchange for the unsold apartments as collateral.

Slowly, the building moved forward, leveling an assessment each year equal to one month's maintenance to pay down the debt. Although it refinanced its mortgage in 1994 and 1998, the buildings's structural problems persisted, partly because the board was reluctant to spend any large amount for needed upgrades.

After he was elected, Mosse says he was "stupefied" when he read the building's financials. Nearly one million dollars in the reserve fund, and yet the building was leaking money. In his first move, he pushed the board to convert from oil to gas, which would ultimately save thousands of dollars in heating bills each year. He then had new water meters installed.

The work continued. The building's facade was repointed and the roof was repaired. All the hallways were renovated. New light fixtures were put in and then all the windows were replaced. That alone came with the heady price tag of $900,000. To pay for the aggressive series of repairs, the board began diverting the yearly assessment from paying down the mortgage to paying for repairs, selling the units formerly owned by the sponsor and renegotiating its mortgage.

Then the board fired the management firm and brought in a new company, a move that sparked a four-month fight among the shareholders over the cost and style of Mosse's management decisions. As Alexandra von Stackelberg, the board's current president, puts it: "We had a little bit of turmoil."

She maintains that it was a majority decision by the board members to fire the former management company, but acknowledges that the brunt of the dissent was focused on Mosse and his "take-no-prisoners" leadership style. Secret meetings were held and the shareholders attempted at coup at the annual meeting in 2001. For the four months leading up to the October meeting, the building was torn apart by politics and angry words. The fight ended in a rout for the unhappy shareholders: Mosse's slate was reelected. Mosse has since patched up bad rifts with two former board members unhappy with his style, while the shareholder who tried to stage the coup has moved.

When Mosse asked her to join the board in 2000, "I didn't think he needed me, and I have to say I went in with a fairly hostile feeling," admits von Stackelberg, who was elected president this past fall after Mosse stepped down. "I thought there was poor communication with shareholders. I was concerned about how the building's assets were used and I was concerned about the operational status of the building, the cleanliness, and the upkeep."

In a short time, however, von Stackelberg said she found that the board worked effectively and very hard and learn that "not everything is always as it appears to a shareholder who is not active on the board."

Von Stackelberg also learned to appreciate Mosse's style. "I think Georges may rub people the wrong way. He has demands, he wants things done...and he is not always the most diplomatic in getting that across. And I sympathize with that, because it's easier to speak your mind."

Today, largely thanks to Mosse, the co-op has been renovated; there is $150,000 in the cash reserves, $2 million in assets in four unsold units and an operating budget of roughly $120,000. A two-bedroom unit facing Manhattan that sold for $260,000 in 1996 sold this year for $750,000.

Concludes Unger: "I think that Georges was a good transition to the future. He did what he had to do. He provided leadership and with his experience jumped right into the capital improvements, because there was no one else who could do it."

METICULOUS MARVEL

These days, when the shareholders of 22 West 26th Street stand on their rooftop, they can look over a flourishing residential street, bounded by the Chelsea flower district on the west and gleaming buildings on the east. But back in 1982, when the first five families moved into their co-op, a converted manufacturing building, anyone who bothered looking out the window would have been met by the depressing array of electronics factories and welfare hotels. And life only got seedier at night.

"Anybody who bought into 22 West 26th Street knew there were issues to deal with," says former board president Dan Wasser, who recalls mornings walking outside to discover the parking lot behind the building littered with condoms. But even he was caught by surprise by the depth of the problems inside the building.

"We had a reserve fund of $10,000 put in by the sponsor. That's wholly inadequate," recounts Doug Crouch, then as now the co-op's board treasurer. "And what he was calling a boiler in the basement was a little burner. We had leaks and loss of heat constantly. And the sponsor had grossly underestimated the electrical costs. We had to raise maintenance initially, we had to raise it substantially, and most of that maintenance was coming from him."

For sheer tenacity in steering a building through financial hardships, no one could match the staying power of Crouch. "We were just five plain folks," he insists. But they were lucky, too, for the original shareholders were all professionals - auditors, attorneys, and financial analysts - and they had sunk their savings into purchasing homes on the edge of Chelsea and weren't about to walk away from their investment. Situated between a dodgy nightlife and depressing day traffic, "we were like the Israelis, we had no other place to go."

"This was a job for all of us," agrees Wasser, who bought his co-op in 1984. "We spent as much time as was necessary to get things done, and that was a lot of time." Everyone in the building worked very hard, says Wasser, and from the beginning, the treasurer, Crouch, "was unbelievably generous with his time."

Lynn Whiting, director of management for Argo, says Crouch's attention to detail was "extraordinary...Everyone has their area of interest and expertise," and when Crouch comes to the table with his proposals, they are clear and "meticulous."

Like the current board president, Sandy Mattingly, Whiting has been working with the building for the past 11 years, and both Whiting and Mattingly are unabashed boosters of Crouch. "He is by far our most valuable shareholder," maintains Mattingly. "There is no one in the building who has worked as long and as hard as Doug has worked on making our building a very successful place to live and own in common."

It's been a long journey. Apart from the problems with the heat and hot water, the prostitutes using the parking lot behind the building for work, and the tiny reserve fund, the board was up against a sponsor who was unhappy with his maintenance increases and balked at every turn in paying them. And with half of the 20-unit building owned by the sponsor, that maintenance was key to the operation of the building.

Over the first two years, the biggest problem was getting the sponsor to pay its maintenance. The board ultimately sued to collect the amount due, $300,000. While the company argued with the shareholders over the cost of the maintenance and back taxes, the lease expired on the commercial tenants. "That gave us a loophole," says Crouch. "We took him to court a second time to evict him, and this time we got a judgment. We got control of the commercial space."

The board members never saw the back taxes, but they did gain an asset worth millions. The building ended up with a reserve fund of over $300,000, and the commercial space. Crouch, says Mattingly, stuck through the tedious process of winning a change in zoning on one of the spaces so the building could sell the space as two residential units. Not only was that an asset to the cooperative, but Crouch "saved us thousands of dollars over the year in professional" consulting. "He has been able to bring people up to speed, spearheaded the efforts to win a timely refinance and he was the prime member of the board [leading] the process of trying to negotiate to buy the land" beneath the building.

In 1998, in what was probably the most critical move for the co-op, Crouch led the effort to purchase the ground lease for $1 million. The lease had been set to expire in 2010, and there was no way knowing what the new lease payments could have been, recalls Crouch, and in anticipation of the expiration, banks were balking at giving new shareholders good deals on mortgages. The lease payments, which were $30,000 a year, could have gone up to as much as $300,000. Instead of renting the land on which the building sits, the co-op now owns it outright.

Today, along with its solid financials, the building has lovely aesthetic amenities: renovated hallways and lobby, a seven-days-a-week doorman and a roof garden carefully nurtured by Crouch's wife, Bonnie. The prices of the units, which started at $120,000 to $200,000 in 1982, have now swelled to $1 million.

"There is nothing that is more critical to life at the co-op than the financials. The other stuff is essential," adds Mattingly, of the quality-of-life features, "but we have kept our financial house in order through lots of difficult and bizarre hurdles."

Whiting sees the building as a success story in which each board member has taken an active role that fitted his or her personality. And she credits Crouch with a large part of the success. "I just think he has a straightforward approach. That he determines what his goal is and he has a plan of action to achieve that goal. When one goal is accomplished, he goes on to the next, so is able to see the entire equation of what he has to do to get the result he needs."

Crouch gives credit to the hard work of the shareholders who labored alongside him to protect the building. The sponsor was outgunned. He only had attorneys. The shareholders had one another, and they were a group of smart, committed people with their "backs up against the wall...He was up against people who had no place else to go. This was their home, they were fighting for and he didn't have anywhere near the same commitment, because he would have had to buy the commitment and he wasn't willing to."

TALES OF THE CITY

There are straightforward lessons for boards to learn from these tales of the city, and board directors in different buildings who have never met but seem to have parallel lives. Among them:

Leaders should realize from the start that doing the job right is not only thankless but also time-consuming. "Back in 1982, we had no idea of the number of things that we were going to have to deal with," recalls Crouch. But once the shareholders took over the board, "we took control of the building. We knew we were going to get to where we needed to get. It took an awful lot of hours." Thousands of hours. "Over the course of the first 10 years, I and one or two others were putting in 20 to 30 hours a month."

Leaders should understand that it is okay to be unpopular with the shareholders and with the board. "I was not too well-received [at first]," Mosse admits. "Because in the New York co-op, the attitude is, 'Who is this guy who just comes in the building and wants to be on the board?'" Hopefully, the board will look beyond the personality of a leader and examine the ideas being presented.

For instance, Mosse had good intentions and good ideas, and the board eventually realized that. He had run a chain of luxury hotels in his native France, and for a time owned and managed the boutique Hays-Adams Hotel in Washington, D.C. In addition, he was unapologetic about his take-charge attitude, and slowly the board started to adapt to his style, appointing him CEO of building management. "I had no interest in the title. I'm at that point in my life that I don't care. What interested me is the impact I could have on the building." That became clear to the board.

If possible, try hard to find consensus on the board. Mattingly says that there have been nearly no contested votes on the board and everyone has understood that when there is a clear majority, "you stop arguing and go on to something else. It's a great board. I haven't been on another co-op board, but when I talk to our lawyer or managing agent, they are freaked out that we work as well as we do." He attributes the effort to enlightened self-interest. "I think people are in it to protect their investments, but also their homes, and we are small enough that each person really makes a difference. People are very committed to the building."

When you have consensus, don't be afraid to take action - and then avoid rumors and disharmony by communicating the whys and wherefores to the shareholders. After Mosse fired the company that had been managing the building and brought in AKAM, that sparked a four-month fight among the shareholders over the cost and style of Mosse's management decisions.

"It was one shareholder who agitated the whole building," Mosse notes. "I would say for personal reasons. He wanted to take over the board. He was concerned that we were going too fast, that we were not [operating in] the interests of the shareholders, that the funds were in poor shape. And, of course, he had no clue about what he was talking about."

In the end, communication is crucial, among board members, to the shareholders, and to any interested party. For with communication, hard work, and care, a board and its leaders can build consensus, avoid chaos, and make the phrase "Home Sweet Home" more than just a platitude.