How to Turn Around a Financially Troubled Building

The Challenge

When I asked the outgoing manager of the co-op that we were taking over for the transfer check, he said, “What check?” This transaction is standard in transitions between agents; it’s how the old agent transfers the operating funds to the new one. In this case – a 75-unit property on the Upper East Side – there was no check because there was no money. We soon found that vendors had not been paid and a significant number of sponsor-owned apartments were in arrears. Mortgage payments were late, and the co-op was close to going bankrupt. It was not a pretty situation.

The Solution

Getting those unsold sponsor units to pay or else evicting the tenants and selling the apartments became a key element in our workout plan. It took five years of working aggressively with those owing money, making deals with vendors, and marketing and selling many of the co-op-owned apartments. Proceeds from the sales ran anywhere from half a million to a million dollars.

Within the first nine months, we started seeing results. Today, we have over $315,000 in reserves. We still own two apartments. And we were able to institute a flip tax to help with the ongoing financial stability. We were able to accomplish all this without an assessment.

The Lesson

The most challenging thing in a situation like this is staying levelheaded and not panicking. The most important thing is to take a deep breath, roll up your sleeves, and go to work. Come up with a game plan to start solving the problems, one by one.