Aug. 15, 2013 — Today Habitat introduces "Teachable Moments," an occasional feature in which leading management professionals offer quick takes on various topics of interest to co-op and condo board members. In the first of this series, four industry veterans give mini-lessons on how to find creative solutions to problems that resist the usual approaches.
Gerard J. Picaso
President, Gerard J. Picaso Inc.
Because of a requirement that 85 percent of shareholders vote in favor of any amendment to their bylaws, a co-op we manage was vainly struggling to get a transfer fee (flip tax) implemented. The shareholders were not against it; they were just apathetic and wouldn’t turn up (or give proxies) for a meeting. But then, along with the co-op attorney, we discovered that the board had the right to implement certain fees. Consequently, the board passed a capital contribution, which stated that any new purchaser would pay 1.5 percent of the total price they paid for their apartment as a contribution. Although not a transfer fee or flip tax, it served the same purpose.
Carl Borenstein
President, Veritas Property Management
For one Riverdale co-op, the obvious choice wasn’t necessarily the best one. We manage a building with two No. 6 oil burners with differently dated triennial certificates: one earlier and one later than July 2012 — the date after which certificates wouldn’t be renewed under the city’s No. 6 oil phase-out. What initially appeared to be the problem – different triennials — turned out to be the solution. Instead of wasting the board’s “energies” on how to fund a No. 4 oil conversion or an expensive running of gas lines, we worked with the Department of Buildings to move forward the expiration date to coincide with the earlier expiring burner. This less obvious approach gave the co-op time it thought it didn’t have, and unexpected savings when Con Ed later decided to run gas lines as part of a separate initiative. The lesson: Think outside the box.
Jack Lerner
President, Plymouth Management
A 60-unit co-op in Chelsea owned a small office space off its lobby that presented challenges for attracting quality tenants and uses. This had been an issue through various market cycles and was not indicative of the weakened economy. Recently, the apartment became vacant and we suggested considering other uses. We established criteria based on highest / best use, added shareholder value, and potential revenue stream. The building did not have any storage space available to its residents, and we learned several of the shareholders were making use of offsite storage facilities throughout the city. A feasibility study determined the number of storage spaces we could install and a market survey determined demand and rates. Thinking outside of the (tiny office) box, we were able to add an amenity for the shareholders and increase the apartment’s revenue by 16 percent.
Ellen Kornfeld
Vice President, The Lovett Company
In an 89-unit Manhattan cooperative, the board of directors was exploring ways to finance a building-wide window replacement project. A two-bedroom, two-bath apartment owned by the cooperative became vacant and the opportunity presented itself to sell the unit. Based on estimated costs of $2 million to replace the windows, the board hired a real estate broker and placed the unit on the market for $1.5 million. The apartment needed a lot of work and did not show well. Management strongly recommended the board consider a $140,000 upgrade to the apartment, remove it from the market until the renovations were completed, and re-market it as a newly renovated apartment with first-class finishes. The board of directors took management’s advice and went along with the plan, ultimately selling the unit for $2,250,000, a much higher price than was originally asked. With funds now available to purchase new windows, the cooperative is proceeding with the capital project.
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