Co-op and condo boards, together with their professional managers, are responsible for their properties' financial well-being. Every financially-challenged property faces the same perils: an inability to meet ongoing expenses, the consequences of unattended capital improvements, the danger of plummeting sales prices and even the dire possibility of foreclosure. When a property is in financial jeopardy, it falls to the board and management to do everything possible to pull it out of the red and into the black. Here are the inspiring profiles of three properties that stood on the brink of disaster and turned that situation around. Here, also, is expert advice on how to ensure your own property's financial success.
Headed for Trouble
In early 1995, Forest Hills Inn Apartments, Ltd. was headed for trouble. The 97-unit Queens co-op had only $180,000 in the bank, a mortgage at 11 percent which included the stipulation that the property could not refinance until August of that year, high shareholder arrears andamong other physical maintenance issuesfaulty drainage gutters that were causing costly repeat damage. A vicious cycle was also in play: A high number of shareholders were subletting, making unit financing difficult to secure. And because prospective buyers couldn't get loans to buy into the building, values were dropping and more and more shareholders were opting to sublet.
So it went until Guy Bergeron assumed the board presidency two years ago. Bergeron's priorities were to secure a new mortgage and impose blanket restrictions on sublettingan unpopular move considering how hard it was for shareholders to sell. Nevertheless, once the property was able to show lenders that it was undertaking a deliberate course of corrective action, the property did find a willing lender at eight percent. But just as closing was imminent, the co-op got hit with a $380,000 water bill. We had gone to metering in 1989 and from that point on, no bills had been issued, recalls Bergeron. Our then-new managing agent, Queens-based Kaled, got busy contesting the bill, and, after negotiations, the lending institution was willing to move forward if we would escrow $173,000.
There were a lot of sleepless nights, Bergeron adds. But eventually the property closed, reducing debt service by $32,000, and getting subletting under control. This accomplished, the property was able to turn its attention to increasing revenue and quality of life. Revenue-generating basement storage bins and an in-house gym have been installed; the co-op has secured less expensive insurance coverage and reduced arrears to less than one percent; units are selling at increased sales prices with no financing problems; a five year plan including new windows, intercom upgrade and sidewalk repairs is in place; and reserves have increased to more than $400,000. Bergeron credits Kaled, board treasurer Paul Anop, past board member Ruth Vosbourgh, and his fellow board members for the turnaround.