Le Havre’s $35 Million Makeover

The French phrase “le havre” means “the port,” but, for years, the 55-year-old Queens co-op Le Havre might have just as easily been called “le bateau coule,” or “the sinking ship.” The 32-building cooperative had hit hard times, according to those who were there. But now, led by a hard-charging board president and a relatively new leadership team, the 1,024-unit co-op has not only turned things around but is also making a big move to bring its physical plant into the 21st century.

Originally built by William Levitt of Levittown fame, the Levitt Houses (as they were then called) opened for business in 1953 as rental properties. Comprising 32 identical buildings, with floor plans allowing for a mix of one-, two-, and three-bedroom units, the development originally sported three swimming pools; handball, basketball, and tennis courts; an ice skating rink; and a restaurant named Ripples on the Water. Rooms were 1950s chic – spacious and airy, with rows of windows – while what would now be called retro kitchens featured turquoise-colored metal cabinets. Each building in this middle-class paradise had eight floors, and each floor had four corner apartments.

But when the current board treasurer, Stanley Greenberg, moved into Le Havre in 1972, things had changed. The Levitts had sold the development to new owners, who had in turn sold it to other owners. Not wanting the Levitt name to linger on and faced with beautifully tiled lobbies sporting an “LH” logo, they came up with a moniker to match the initials: Le Havre.

However, although they were good at fitting name to letters, these owners were not as good at running the property. They deferred maintenance. The cinderblocks that had been used to construct the development deteriorated, and roof and window leaks became common. “It must have looked very modernistic at the time [it was built],” Greenberg says, “and it was probably very inexpensive to build.”

By the early 1970s, the ice rink had closed, and so had one of the pools, and property owner Realty Equities was placed in receivership. Greenberg recalls it all as part of an overall downward spiral. In 1984, Coronet Properties, which had purchased the property on the block, decided to try a co-op conversion. The company painted the buildings’ exteriors, installed new aluminum windows, and built a recreation center, Le Club, which included exercise and meeting rooms and a food concession.

But that didn’t stop the leaks. “Over the years, from 1984 forward, the thrust of everything here was centered around leaks in apartments,” Greenberg remembers. “Either they were coming from the roof, or from the windows, or from the exterior walls. Management’s ideology was to do repair work only if someone complained. At various points, it was more or less aggressive. And as time progressed, [the weather] continued taking its toll on the buildings.”

In 2004, Michael Palladino, a hospital executive and a new board member appointed to fill out a term at Le Havre, walked into the management office and found the superintendent mulling over a five-foot-high stack of papers – all complaints about water leaks. The super told Palladino that the co-op’s property manager would generally send inspectors to verify leaks in apartments, charge a lot of money to Le Havre for inspection reports, and then walk away from the repairs for lack of money in the treasury. The story wasn’t much better for the few roof replacements that had been done. Recalls Palladino: “They were laying tar over tar. They charged top dollar. And we got a butcher job out of it.”

Believing that the 11-member board was not up to its tasks, Palladino decided to run for president and recruited a handpicked group to run with him. “I had no knowledge of contracts or financing,” he admits. “I brought the co-op’s financial statements to my accountant. He said, ‘Mike, your daily budget is far below normal, you have 32 buildings leaking and falling apart, and there’s not a cent in your capital budget reserve. You can only get into trouble.’”

That pessimistic assessment only clarified what Palladino wanted: a professional accountant who would have the co-op’s best interest in mind when tackling the multi-million-dollar projects that had to be done.

Palladino’s pitch to Stanley Greenberg to run for treasurer was a declaration that he would run an honest administration: “I’m a team player only in the sense that I make up my own mind, and I will vote the way I want, and if there are any shenanigans, I’m going to resign. When we asked people to run, we said honesty was the first trait we wanted, and we wanted people who were willing to work hard.”

His pitch to the shareholders was just as direct: “I said, ‘If you elect me, I am going to raise your maintenance, and then I’m going to raise it again. But we’re going to fix this place.’ The only thing I know about roofs is that they go on top of buildings – but I know how to put a professional team together.”

Taking office in 2005 with a majority of new members, the board’s first move was to fire the management company and install Margaret Costello, who had been an on-site assistant, as office manager. Along with Costello, another key hire, Jack Grasso, director of maintenance, would share the responsibility of managing Le Havre’s 40-person staff.

Then a series of weekly – and, at some points, daily – board meetings began. At those, the new team – including nine cooperators and two representatives of the sponsor (who still owned 15 percent of the units) – decided just how to approach the mammoth job of repair and reconstruction.

The board hired an engineering firm, Lawless & Mangione, to do a comprehensive review of the physical plant. Fulfilling the extensive recommendations would cost $35 million: new roofs, windows, and a complete renovation of all outer walls using a liquid plastic to seal and strengthen them. The board signed off on the plan without calling for an advisory shareholder vote.

Palladino retired from his hospital job and now had the opportunity to devote himself to the work at Le Havre full time. He was determined that the cooperative would only go to the topmost tier of companies for construction services and persuaded one of New York’s top construction law firms, Day Jones, to sign off on the contracts.

Greenberg looked at financing options, and the cooperative settled on a 30-year, 5.58 percent $53 million mortgage refinance deal through lender NCB, paying off the development’s existing debt of $17 million. This was a 30-year, self-amortizing loan, with interest only for the first five years. It was designed to allow the co-op the flexibility to keep maintenance low while construction and associated repairs were ongoing. Signing up with NCB saved over $1 million on mortgage recording tax fees.

The board conducted a sealed-bid process on all jobs, ensuring that at least three firms were in the final running on each contract. General meetings, a newsletter, and a series of special sessions with the shareholders kept everyone informed. The board’s buildings and grounds committee, meeting once a month, had an open door to shareholders and had engineers at the gatherings to answer questions as the contracts were finalized. There was no opposition, says Palladino, and the entire board was in on every interview.

Winning bidders included Skyline, a window installer, and AM&G, a masonry firm. Palladino says he knows that Le Havre paid a 10 to 25 percent premium to contract with top tier firms, but justifies the added expense by the way the work has turned out and the fact that, throughout the extensive renovations, there hasn’t been one city-issued violation.

“The way we presented it was, we are going to give you back the quality of life you deserve as a shareholder.” Because prices were steadily rising, shareholders were confident of the value of their investments, and they understood that this was work that needed to be done. Le Havre’s engineers had determined that the structural integrity of some buildings was at risk.

Today, a visitor to Le Havre can see a dramatic contrast between the earth-toned buildings that have been renovated and the beige ones that have not. Cracks and lines mark the older structures, but the new ones appear shipshape. As the work continues, Greenberg is careful to keep maintenance affordable. A nine percent increase in the first year of the project has been supplemented by annual three percent increases since then. As they have elsewhere in the metropolitan area, soaring fuel costs at Le Havre have been passed along to shareholders.

When asked if the management team felt a bit of fatigue from the pace of the work, Costello, the manager, says that, on the contrary, board members have been energized from accomplishing so much. She says it was a relief to get only noise complaints. There were no complaints of leaks from the renovated buildings.

“The shareholders are happy with the way things are progressing,” notes Greenberg. “The best way you can tell is when you have your annual meeting, how many of them are yelling and screaming. At the last meeting, there were none. The shareholders have gotten a good, sound foundation for their investment. It makes for a lot of happy people.”

“If it wasn’t for the unity of the board, we could not have gotten this project done,” adds Palladino. “And we are all friends. Things are still evolving, still changing. Slowly but surely, we will get this place right.”