$35 MILLION MAKEOVER, P.2

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 how to approach the mammoth job of repair and reconstruction.

The Steps

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 devoted 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 so as to to keep maintenance low while construction and associated repairs were ongoing.

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.

Winning bidders included window installer Skyline and masonry firm AM&G, 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 has not 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. And there have been no complaints of leaks from the renovated buildings.

Today, a visitor 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.

"If it wasn't for the unity of the board, we could not have gotten this project done," adds Palladino. "Slowly but surely, we will get this place right."

Adapted from Habitat April 2008. For the complete article and more, join our Archive >>