When a Capital-Repair Majority Vote Is Needed, a Board Prez Comes Knocking
Lion's Head Condominium
Sept. 24, 2014 — The latest dilemma for co-op board president Prem Lachman, of the 67-unit Lion's Head Condominium in Chelsea, is one to which any board member can relate: How do you perform required capital repairs with the least amount of financial pain for residents?
This is what confronted Wall Street hedge fund manager Lachman when Merlot Management president Beth Markowitz, the condo's property manager, delivered some bad news from Rand Engineering and Architecture's Local Law 11 report. The front and back façades needed immediate repair, penthouse additions to the roof required the removal of a stucco-like substance that was possibly causing leaks and a new roof had to be installed. Total cost: $1.25 million.
The board asked Markowitz to present a loan proposal to them, so she crunched the numbers and also spoke with Mindy Goldstein, a senior vice president at National Cooperative Bank (NCB). That lender offered the condo a 10-year, self-liquidating loan at a favorable rate, and so the board voted to pay for the bulk of the repairs with the loan and the remainder with operating-fund money.
Clock Is Ticking
Lachman looked at the problem and then looked at his watch. The bylaws required a majority vote of unit-owners approving a loan that exceeds $1 million. Normally, the board would send the owners an email or a print packet with information about the deal, and follow that up with a unit-owners' meeting. Too slow.
Lachman reversed the traditional process. Instead of the unit-owners coming to a meeting, Lachman went to them. He made plans to contact all 67 unit-owners himself, sending everyone a memo of the essential facts. Then he went calling.
"I basically presented the loan, in person, to everyone. I went door to door, knocking on people's doors, and I presented everything — the contractor's report, the numbers, everything," Lachman says. "I then answered their questions."
Lachman finally obtained his 51 percent majority — and then some, ultimately getting 61 percent in favor. He rushed the results to NCB. Then came the most excruciating part: the waiting game. "I was pushing our lawyers to push the bank's lawyers," he says. "And as we were locking in our rate, I was so scared. I started calling our lawyers four times a day and told them to be on top of the bank.
A Close Shave
"The morning of the day that we closed, I was getting a haircut," he continues, "and the guy nearly cut my ear off when I jumped for my phone. I pick up the phone, and [Markowitz] says, "It's 5.01 percent, what do you want to do?' I say, 'Lock it now!'"
After that, the actual work seems anticlimactic. The job, divided into three parts as Markowitz originally had laid out, is about to begin, always following Lachman's dictum: Keep everyone informed and involved.
"I thought the right thing to do was to go individually," Lachman explains. "This is a big number, you know?" He adds, "Either you do the damn job or you don't do it."
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Adapted from "Countdown at Lion’s Head" by Tom Soter (Habitat, September 2014)
Click image to enlarge.