After Dodging a Shady Property Manager, a Co-op Gets Financially Fit
Oct. 1, 2015 — Under the leadership of board president George McGrath, the posh co-op called Forest Hills South Owners dodged a shady property manager. But that didn't change the fact that it faced major capital investments. Roofs and aging elevators needed to be replaced in all seven buildings. In addition, the board recognized that evolving dynamics in New York's real estate market meant general improvements were required to keep the curb appeal of its buildings, so the co-op added an indoor gym for residents. All of that costs money. The co-op was in fairly good financial shape but they wanted to get into better financial shape.
Shareholder-generated revenue — primarily maintenance fees — accounts for close to 90 percent of operating costs. Add to that figure fees from 300 garage spaces and laundry rooms and another 10 percent from commercial property that lines Queens Boulevard. The long-term capital investment plan was funded by a 2012 $5 million refinance deal on the co-op's mortgage that took advantage of low interest rates available at the time.
Every June, the co-op triggers a capital assessment that runs parallel to returns from real estate tax abatements. The theory is that shareholders don't pay money out of pocket — McGrath adds most shareholders still get money back on their abatements. The end result is that almost $1 million per year is invested in capital improvements and the co-op reserve fund sits at around $4.5 million — and is topped up every year. "We don't want to surprise shareholders," says McGrath. "We understand people have enough financial stress in their lives."
A Diverse Board and a Plan to Help
The co-op's seven-member board is diverse in its experience. Current members include a business communications professional (McGrath), some information technology experts, a lawyer, and a representative from the sponsor, Pickman Realty Corporation. Board member experience also runs the gamut — a first-year rookie and a long-time resident who has served for 20 years. Meetings are open to shareholders and residents.
"You get a perspective when you're on the board that you don't get as a resident," observes McGrath, who has been president for seven of the twelve years he has been on the board. "We probably generate nine tons of garbage every week and it magically goes away. You don't worry about that until you have a problem. The key to avoid those problems is having a plan and looking ahead."
McGrath adds that it's important for board members to recognize they are amateurs, co-opted from other professions. They should never be afraid to admit they don't know everything, but they shouldn't be afraid to ask questions, either. "One thing you learn about being on a co-op board is how much you don't know about what it takes to run this day to day," he says.
Patience Is Key in Getting Things Done
"I have learned a lot in twelve years on the board but there is a lot I will never know because I'm not working in the business full time. As a board, you have to bring some humility to what you do. The other side of it is that when management comes and proposes an idea, we do a lot of due diligence on it. We have people coming to us saying we have a great idea for the building. Sometimes that works out and sometimes it doesn't. You have to be patient and build consensus on the board and then it has to be accepted by the community."
And while an exceptional relationship between a board and management company can be inspiring, it means nothing if the community doesn't share the enthusiasm for how business is conducted and the buildings are managed.
"The key is to have a vision for the property that is developed from [the] inside out," advises McGrath. "Build that vision in concert with the residents and shareholders and then set out a plan. Make sure you take care of the day-to-day as best you can. The stuff that seems mundane, that's how people will judge you."
Forest Hills South celebrates its 75th year in 2015. It turned co-op 30 years ago. The seven buildings opened in 1940, developed by Morris Pickman and Sons. The Pickman family has a long history in residential and commercial property in Queens and operates today as Pickman Realty Corporation. Pickman's vision for Forest Hills South was captured by the promotional slogan "the suburb on the subway" that adorns a framed poster that hangs in the co-op boardroom. The company still has ties to the co-op. Although 92 percent owner-occupied, some residents still rent from Pickman.
As Forest Hills South heads toward its 76th year, the board and management are looking forward to marrying the original Pickman vision for the buildings with the 21st century. Next on the agenda is adapting digital technology to building management.
"We have a 75-year-old gem here so a big question for us is how to maintain the traditional feeling and lifestyle here, but still deliver the best service in the 21st century," says McGrath. "The Pickmans had a vision when they developed this property. We are always trying to realize that and take it to the next level."
Photo of Forest Hills South Owners by Lorenzo Ciniglio.by Lorenzo Ciniglio