When Projects Intrude

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In three very different parts of the city, three very different co-ops – one massive, one merely big, one relatively small – are facing the same challenge. Simply put, these three co-ops must make major capital improvements that entail workers entering every apartment and disrupting the lives of every shareholder. In times like these, there are two words every co-op board and management team absolutely must remember.

“Communication and coordination,” says Brendan Keany, property manager at sprawling 2,820-unit Penn South, a private, limited-equity co-op on the northern rim of Chelsea.

Keany’s voice, a rich brogue from his native Ireland, is the voice of experience. Shortly after he took over as property manager in the mid-1990s, Penn South undertook the replacement of all 27,000 windows in the complex’s 10 high-rise buildings. Thanks to steady communication with shareholders and nearly military coordination among the board, residents, contractors, and the co-op’s 110 staffers, the project was an unqualified success. Every single window got replaced ahead of schedule and on budget.

“That window project did something psychological for the board and the shareholders,” Keany says. “It went excellently, and it gave the board and management confidence that we could undertake a major project and get it done and do it well.”

Today, using lessons learned from that experience, Keany and the co-op’s board are getting ready to start an even more harrowing project – the $100 million removal and replacement of the worn-out heating, ventilating, and air-cooling (HVAC) pipes that are wrapped in asbestos and buried behind every apartment’s plaster walls.

“Even though the windows were a large project,” says Keany, “this one is the mother and father of all the capital improvements we’ve ever done. This involves going into every apartment and ripping open the walls and doing an asbestos abatement. What makes this difficult is that the shareholder can’t be in the apartment while the work’s being done. The workers will build a double-walled plastic tent around the work site and do air testing all the time while they’re there.”

It’s not hard to imagine the complexity of organizing such a project on such a large scale. But to appreciate just how nightmarish the logistics are, you need to know a bit of history.

An Old-Time Co-op

Penn South was built by the International Ladies Garment Workers Union with the help of land-acquisition subsidies from the city and state. The co-op was formally opened during a lavish ceremony on the campus-like grounds on a hot day in the spring of 1962. President John F. Kennedy was the keynote speaker, and on the platform with him that day were many union officials, politicians, and dignitaries, including Eleanor Roosevelt, Governor Nelson Rockefeller, Mayor Robert Wagner, and Robert Moses, the city’s ruthless master builder immortalized in Robert Caro’s biography, The Power Broker.

Throughout its nearly half-century existence, Penn South has remained true to its pro-union, working-class roots. Even as thousands of garment industry jobs went overseas and many of the old garment workers died, the co-op steadfastly resisted the temptation to allow apartments to be sold at market rates. As a result, Penn South enjoys “shelter rent” – an arrangement similar to Mitchell-Lama housing, where real estate taxes are pegged to the co-op’s income rather than to neighborhood real estate values – and it is one of the last bastions of affordable apartments for working-class people in Manhattan.

But such a noble history can also be a double-edged sword. When a wave of pipe failures made it apparent that the original HVAC pipes were nearing the end of their life expectancy, the board was faced with a devilish question: how do we get people of modest means to pay for an astronomically expensive capital improvement?

The first step was to find out just how astronomical the price tag was going to be. In August 2008, the board hired the engineering firm Jaros, Baum & Bolles to assess the pipes’ current condition and remaining life expectancy, and determine whether they needed to be replaced, what alternatives existed, and the likely cost. Nearly a year later, the engineers came back with two options: replace all existing pipes in all buildings; or leave the old system intact and build a new one alongside it, which would entail drilling new holes in the concrete floors and sacrificing some space in every apartment. The cost was estimated at $60 million. A line-by-line budget estimate by the construction management firm J.T. Magen soon boosted the estimate to $80 million.

It was time for some communication. The board brought in an asbestos consultant to speak to the shareholders. “We didn’t want to have any Monday morning quarterbacking,” Keany explains. Then the board asked the shareholders to vote on the two options. More than half of all shareholders voted; of those, 85 percent were in favor of removing and replacing the original pipes. Like most New Yorkers, they didn’t want to forfeit a single square inch of space inside their apartments.

The big question remained: how to pay for the job?

The Money Tree

Keany and the board started shaking every tree that might yield money. They visited politicians and bureaucrats in the city, in Albany, in Washington, D.C. They talked to bankers. They prepared a detailed white paper for city officials with a title that said it all: “Penn South Faces Financial Crisis.”

Eventually, after much back and forth, the city came forward with $22 million in low-interest loans. The board added a three-pronged source of revenue: a 10 percent maintenance increase; an increase in the surcharge imposed on residents whose income exceeds the co-op’s definition of “middle income”; and an increase in new sales prices from $12,000 to $18,000 per room.

Together, these sources enabled the board to refinance its mortgage. Wells Fargo offered a $134 million mortgage with a 4.5 percent interest rate and a 20-year amortization, which was backed by Fannie Mae and then purchased by the AFL-CIO’s Housing Investment Trust.

With the money in hand, it was time to start coordinating the logistics of getting shareholders out of their apartments so the workers could get in. It was decided that the work should be split into two phases: first, during fall and winter, a hole will be cut in the plaster wall, the asbestos will be removed, and the hole will receive a temporary cover; then, during warm months, the pipes will be replaced and re-insulated, and the plaster will be permanently repaired.

In canvassing apartments to determine if built-in shelving or other fixtures would impede workers, the board members got one more unpleasant surprise. They discovered that there were upwards of 100 hoarders in the complex whose apartments were so cluttered that the work would be impossible – without some wholesale house-cleaning. Only trouble is, hoarders by definition hate to throw things out.

“We had a lot more hoarders than we would have thought,” Keany said. “We considered taking legal action against them, but we realized it’s a sickness.”

So the board brought in Dr. Catherine Ayers, a San Diego-based expert on hoarding, to talk to the staff and shareholders, explaining the disorder and how to deal with it. Few hoarders showed up to hear her speak. As an extra incentive to get hoarders to open their doors, the board will impose a $50 fine on any shareholder who doesn’t allow inspectors to come in and perform routine yearly maintenance and cleaning of the apartment’s HVAC unit.

With work on the pipes set to begin in October, Keany is now busy drawing up schedules and notifying shareholders when their number will be coming up.

“We plan to go into a given apartment and complete the asbestos remediation in that day,” he says. Arrangements are being made for people who are bedridden or in wheelchairs. People must make provisions for their pets. As the project gains momentum, Keany expects the warning time to increase from one month to six months for each apartment.

Walter Mankoff, who has served on the co-op’s 15-member board for the past 30 years and is now treasurer and head of the HVAC committee, was involved in the earlier window-replacement project. Experience has taught him that boards need to get busy when faced with such major capital improvements. “This is a very active board,” he says. “We’ve been involved in all the choices that have been made. We don’t micromanage, but we do participate.”

Challenge in Riverdale

Up in Riverdale, in the far northern reaches of the Bronx, a much smaller co-op is dealing with an equally big challenge. For years, shareholders in the seven-story, 64-unit co-op had reported leaks – from roof drains and around many windows. Then, after the catastrophic nor’easter storm in 2009, shareholders reported that water was penetrating the building’s exterior brick walls and entering their apartments.

“After that storm, we realized we had to do more, so we brought in an engineer to take a look,” says Dana Charlton, a law firm secretary who has served on the co-op’s board for four years and is now president. “The engineer discovered that the interior walls around the through-wall air conditioner sleeves were beginning to crack. The problem was deterioration of the sleeves.”

In Charlton’s apartment there are three air conditioner sleeves but only two air-conditioning units, yet the walls around all three sleeves are cracking. Since many apartments were experiencing similar problems, the board decided early this year that, in keeping with the engineers’ recommendations, every air conditioner sleeve in the building should be replaced. “We realized that was a major decision,” Charlton says, “because it meant we were going to have to go into every apartment.”

At the annual meeting in May, the board laid out the problem and the proposed solution. “We told them the whole story,” Charlton says. “Some people have been clamoring for repair work for a long time, but some people who don’t have leaks now were not too happy.”

After hiring a new management company, Veritas Property Management; a new engineering firm, Sullivan Engineering; and the general contractor Skyline Restoration, the board introduced its team of professionals to shareholders at an open informational meeting in July. The contractor brought an easel with drawings, laying out when and where work would be done on exterior bricks and air conditioner sleeves. Eventually, the roof and roof drains will be replaced, the garage roof will be waterproofed, and fire escapes will be scraped, primed, and repainted. People asked questions about these jobs, and the professionals provided answers. “Everybody had an opportunity to speak,” Charlton says. “I asked people to please speak up.”

The board declines to reveal the price tag of the work, but Charlton says the mortgage was refinanced and maintenance was increased to pay off the loan. In late July, sidewalk scaffolds went up and the work began, with an expected completion date late this year.

“It’s going to be intrusive – noise and dust,” says Charlton. “People realize it’s going to be a terrible disruption, but they also realize that having water coming in around their air-conditioning units is a much worse disruption.”

Updates were to be posted on an easel in the lobby as work progresses. Shareholders were made aware that when exterior brick work was being done outside their apartments, filters would be placed over their air conditioners and all windows had to be shut and locked. The super will remove air conditioners when the contractor is ready to replace the sleeves. Re-plastered interior walls will need four or five days to dry before the air conditioner can be replaced.

Like Keany, Charlton understands the key to making this process smooth and painless. “Communication is the key – and [so is] respect for the shareholders,” she says. “They must know we’re trying to make everything as easy for them as possible. It’s not easy for us because we’ve never done this before. Luckily our property manager, Carl Borenstein, has.”

Then, there is always the upside. Observes Charlton: “It’s going to be terrific when it’s done.”

Rego Repair

Out in Rego Park, Queens, the 446-unit Park Plaza co-op is tackling a repair job that you might expect to find at a Motel 6 in Albuquerque, but not in New York City. The two 15-story brick buildings, erected in the early 1960s, have motel-like concrete catwalks running along the exterior walls that most shareholders must use to gain entry to their apartments. Because of a faulty heating system that was designed to keep ice and snow from accumulating on the catwalks, moisture invaded the concrete and rusted the rebars. The concrete began to fail. A disaster was waiting to happen.

“Repair work was done on the catwalks years ago, but it wasn’t done properly,” says Ines Guerra, a real-estate broker who moved into the building in 1998, joined the board in 2008, and became president last year. “The concrete was deteriorating and cracking, both on the deck floors and ceilings. When I got on the board, the previous board had just commissioned an engineering firm to assess what needed to be done.”

The news was not good. The engineer reported that most catwalks needed to be repaired and many needed to be replaced. It was going to be a massive job with a price tag of at least $1.6 million and a wicked headache for virtually every shareholder. The board decided to lay it all out.

“At our annual meeting in the summer of 2009,” says Guerra, “we brought in the engineer and our new property manager, Mark Greenberg Real Estate, and we laid out the best- and worst-case scenarios, in terms of dust, noise, removing decks, walking on planks. In addition to that, we put notices everywhere: on doors, in the laundry room, the mail room, the lobby. We also have a newsletter. We used every means of communication.”

After interviewing half a dozen contractors, the board hired Flag Waterproofing & Restoration. When it was discovered that special shoring columns would be needed on the north side of the building and that some terrace railings needed to be reinforced, the price tag crept up to $1.8 million. But here the co-op was in luck. Because it had a healthy reserve fund, the board was able to absorb the unexpected costs without resorting to an assessment or maintenance increase. “I think that’s part of the reason people are so understanding,” Guerra says with a laugh.

Another reason is that the board and management company have worked tirelessly to let shareholders know what to expect. Guerra, the management team, and the contractor meet every other Tuesday to chart progress and anticipate the project’s next phase. These findings are then posted on color-coded charts in the lobby. The communication doesn’t stop there.

“Then we put out a memo laying out the days each shareholder’s deck is going to be worked on,” Guerra says. “The key to this is communication, letting people know what to expect in terms of noise, dust, inconvenience. They understand that there will be certain hours when they can’t enter or leave their apartment.”

The catwalk work will be finished sometime this fall. So far, Guerra says, the job has been smooth considering the magnitude of the headaches involved.

“We’re blessed with an excellent management company and an excellent contractor,” Guerra says. “But if you don’t have cooperation from the shareholders, your job is much harder. Your phone rings with complaints. But people have been understanding, considering that some of them had to walk on plywood planking to get in and out of their apartments. The ones who deserve a medal are the shareholders.”