Partnering / Business of Management Survey 2013

Judy Mann is the board president at the 173-unit Newswalk, and she was frustrated by the condominium’s most recent management firm, which promised the moon but delivered only scars. In fact, Mann was getting skeptical about the very idea of a management firm.

“I think the managing agent business is a very complicated one. Having a cost-effective system that works is very tough – at least, it has been in our experience here.”

She recalls the previous firm that managed her property. The Newswalk is a luxury gut renovation of a Daily News printing plant in Prospect Heights, Brooklyn. “We had a managing agent who was very good at tracking arrears and staying on top of payment plans. She wasn’t so good at staff supervision and some of the building’s technical stuff.

“So we went to the management firm and said, ‘This is only semi-working,’ and we were told we would be getting a replacement: a star managing agent. Then he was piled high with buildings, and we never saw him.”

Soon after, Mann’s condo found a new management firm that was “very, very customer-focused, dealing with our unit-owners on a very personal level.” When KW Property Management & Consulting, which manages 45,000 residential units from six regional offices in three states, started working at the Newswalk on November 1, the company sent out a packet to all unit-owners that not only introduced KW, but also offered a questionnaire asking people what kind of service they expected from their managing agent.

“It never even crossed my mind that you could have a questionnaire like that,” says Mann. “All I ever wanted was that a managing agent would get back to me someday without my having to work too hard at it.”

KW immediately began training the staff. KW told the board that there was no staff room, no lockers, and no refrigerators. “Then we found out these guys were working with their own tools,” recalls Mann. “There was no one paying attention.”

Every week, the board received a management report. “It has all of this information that we have never known,” Mann notes. “What are the move-ins on rentals, what are the purchases? The things he’s taken care of, staff supervision. We have a terrific super who has needed backup. He’s getting it. All the pieces of the puzzle are falling into line. It’s a real partnership.”

Partner or consultant? Most management firms say they are not just employees of a co-op or condo but partners. “‘You’re as good as we are and we’re as good as you are’ is what I tell my boards,” says Peter Lehr, director of management at Kaled. “We have to be on the same page. I would say it’s more of a partnership now.”

But partnership takes on different meanings depending on who’s talking. Many managers see partnership as a way to guide their boards through the maze of real estate issues. “When you look at the things we do – today, I’m dealing with installing new booster pumps in the building. I have a temporary boiler in one building, we have an environmental issue in one building, there’s a legal issue in one building,” says Michael Wolfe, president of Midboro Management. “In what other field do you have to have a very good working knowledge of all those categories?”

A new kind of partnership is emerging, however. It is a partnership based on economic need – the co-op saving money, the management company earning it – and that may be pointing to a change in the management landscape. As David Kuperberg, CEO of Cooper Square Realty, puts it: “Can management services do more than day-to-day management and help the building improve and succeed? To be a caretaker manager is not what boards want now and is not what’s effective.”

Is This the Future?

“Just collecting the maintenance, doing a budget, paying the bills, and making sure the staff shows up is not enough anymore,” says Kuperberg. “The good managers are the ones that help their buildings do better than what everybody else is doing.”

Indeed, Cooper Square has broadened the range of services it offers under the ownership of the larger FirstService Residential Management. Among the areas it now covers: project management; energy services; on-line sales and lease applications; insurance pools; free move-in services for new residents; and energy financing.

“It really is partnering with our boards to reduce costs,” says Kuperberg. “By reducing costs, we are increasing property values. There’s a correlation between maintenance/common charges and purchasing prices. The lower the carrying charge, the higher the purchasing price.”

While such programs may be a trend for the future, most New York management firms don’t have the size needed to offer them. For instance, Cooper Square, which is owned by the larger FirstService Residential Management, can take advantage of FirstService’s size to become part of a 24-hour “customer care center.” Kuperberg says that “this is a service business, and it is our job to service all the residents of our buildings.” One of the greatest complaints, he notes, is that managers do not return phone calls – promptly or at all. The manager is frequently in the field, and ends up playing frustrating games of phone tag with residents calling with questions. In response, Cooper Square offers its customer care center, with a 24-hour-a-day bank of phone operators who do nothing but answer questions. “We have 600 pre-answered questions for each building with a Google-type search engine,” says Kuperberg. Each building might have similar questions – what is required under the alteration agreement, for example – but the answers may vary depending on the circumstances of the particular property. The operators have access to the records of every Cooper Square client. If it’s an emergency, it’s transferred to an agent’s cell number.

But Kuperberg freely admits that such a center would not be feasible in New York. “There isn’t the volume needed,” he says, adding that it pays for itself because it is a regional center dealing with FirstService clients as well.

Some managers think there are drawbacks to these large-scale “partnering” relationships. “You set up these outside service companies and they can take away from your core business, which should be management,” says Wolfe. “I think there are conflicts of interest in setting up a separate company.” He believes it can hurt the management firm’s credibility when it is recommending work. Some may ask, “Is it really necessary? Or is the manager trying to create work for his subsidiary?”

Although the Florida-based company KW currently manages only three properties in New York City, Andy Ashwal, the executive director at KW who is managing the Newswalk condominium, has high hopes for the firm’s future in the Big Apple. But he says it is not planning to set up any subsidiary companies to do construction management, among other things. Ashwal says he feels that such operations dilute the mix, and that management is about running the buildings in a proactive way.

What happens if your board doesn’t like the core management services, but is locked in to all the extras? Does it live with poor management in order to get the carrots dangled from the partnering stick?

As many managers argue, the business of management should be management. Neil Davidowitz, president of Orsid Realty, says that, “basically, our role is to ensure the stability of this corporate entity. It’s almost like a guardian. You’re in charge of all elements but you answer to someone else: your board.”

Being in charge means more than dealing in a reactive way, and many management companies already practice long-term planning for their buildings. KW, for instance, typically projects five years into the future. “That’s centered on maintaining the central plant,” says Ashwal. “It revolves around Local Law 11 and other regulations. It’s looking at staffing – how you might need to be moving your staffing around, as well as other cosmetic capital things, like changing carpets every five years. Have you done an engineering study so you can set aside reserves?”

Ashwal says that such planning is attractive to boards. He notes that his company’s size – and the purchasing and manpower efficiencies that come with that – may be one reason that the new to New York company may make inroads. But another calling card is the firm’s philosophy, which may sound familiar to longtime New York City managers.

“As apartment prices go up, as purchasers become increasingly more sophisticated, as we expect the flow of information to be more open, management companies will increasingly have to provide more information, more vision to their clients,” concludes Ashwal. “It’s definitely become a partnership. We work for the building, so they are definitely the boss in the scenario, but I believe that we are the ones that are helping them make their decisions and steer their ship. If you’re not initiating things then you’re not adding value.”

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