Hank Haynes bought an apartment at 240 East 46th Street in 1990, four years after the building was converted from a rental to a condominium. It didn’t take him long to realize he’d bought into a world of woe. Phone calls were not returned, problems were left to fester, and rancor was the rule of the day.
“When I moved in, there was a tremendous amount of animosity between the sponsor and the people who had bought apartments,” recalls Haynes, 67. “People were unhappy with the management company, which was owned by the sponsor.” To further increase the discontent of the unit-owners: the property manager and the accountant also worked for the sponsor. Times were tough at the 100-unit building.
It got worse. At the time, the sponsor controlled six of the nine seats on the board, thanks to his ongoing ownership of numerous apartments. Many unit-owners saw this as a conflict of interest. (Currently, 7 apartments are owned by the sponsor and 44 are occupied by renters.)
After two years of problems, Haynes, a sales executive, decided to run for the building’s board. “I wanted to bring a business perspective to the board,” says Haynes, who was elected secretary (six board members are elected and three are appointed by the sponsor). “By treating it as a business, you keep the building desirable to move into. That’s how you increase value.”
This one simple rule also meant that “you have to define your goals and get people to buy into them – board members as well as unit-owners.”
Haynes’s views on a businesslike approach were shared by board president Panos C. Adamopoulos, a manufacturer of exercise equipment who had moved into the building in 1979. He bought his apartment during the conversion, and won election to the board in 1988.
The two men agreed that the first order of business was cleaning up the messy arrangement with the sponsor’s management company and accountant. In what was arguably the most important decision this board would ever make, its members set out to find the right management company. After whittling the field down to four finalists, the board hired Andrea Bunis, president of Andrea Bunis Management, which handles some 70 properties in the city.
Benefiting from Bunis’s 30 years of experience in the industry, the board soon made sweeping changes: it replaced its accountant and lawyer, and began cleaning up the messy financial and legal matters the sponsor’s firms had left behind.
The board also hired an engineer and, following its “business perspective” approach, asked him to inspect the building and devise a long-range plan for repairs. Like any good business team, the board wanted to take the initiative and not be buffeted by the winds of fate: the 40-year-old building was beginning to show its age, and Haynes and Adamopoulos planned to stay on top of the situation.
This willingness to look at the long term and do repairs properly, instead of in a patchwork fashion, would prove to be key to the building’s success. “There were certain things that we knew were going to have to be done,” Haynes says. “So we [asked] the engineer to give us a time frame for the things that were going to have to be replaced. We found out when these items were going to reach the point when it wouldn’t make sense to repair them.”
The engineer’s 10-year plan called for virtually a total makeover – renovating the lobby and replacing the roof, boiler, both elevators, water tank, and all hallway carpeting and wallpaper. The cost would come to about $1.7 million. Now the big question: how to pay for it?
Assessing the Situation
At this point, the board made a crucial philosophical decision. The six elected members – Adamopoulos and Haynes, plus a dentist, a doctor, a chiropractor, and a retired businesswoman – agreed that the smart way to pay for the looming capital improvements was through assessments, not hefty annual maintenance increases.
Adamopoulos explains the thinking this way: “I can spend my own money any way I want to, but I have to be three times as careful when I’m spending someone else’s money. It’s a very important word we have to keep in mind – the economics of every project.”
More significantly, by using assessments, the board could encourage future sales by keeping the common charges low. “We didn’t want to increase common charges to pay for these projects because we felt that would hurt apartment sales,” Haynes explains. “We felt, after much soul-searching, that an assessment for each job would keep common charges down and keep our reserve fund healthy. We could also show people exactly where their money went.”
Adds Adamopoulos: “An increase in common charges is permanent. It can’t come down once the project is finished. But if we need $100,000 to replace the boiler, we can assess all 100 apartments $100 for 10 months, and the project is paid for without a [permanent] increase. There might be people who can afford up to a 10 percent increase in common charges, but we might force other people out of the building because they won’t be able to afford to live here anymore.”
With assessments covering the costs of capital improvements, the board has been able to keep annual common charge increases below the rate of inflation, in the range of two to three percent.
In addition, it saw the sponsor fade away as a force in the building. As operations improved, apartments began to sell briskly. The sponsor, occupied with other real estate deals, sold off all but a few of his apartments. “He got his money and got out,” Adamopoulos says.
A Team of Pros
Adamopoulos gives much of the credit to his managing agent. “Andrea is involved in every project, no matter how big or how small, at no extra cost to us,” he says. For her part, Bunis, who has been known to level harsh words at “frustrating” boards with private, unprofessional agendas (such as a co-op she repped where the president wanted to challenge a restaurant lease because he didn’t like the food), has high praise for the folks at 240 East 46th Street. “They don’t make decisions off-the-cuff. They listen to the upsides and the downsides, they listen to the unit-owners and their professionals, and then they make a decision.”
This virtue came in handy when it was time to replace hallway carpets and wallpaper – a job that has the potential for unholy howling. To short-circuit complaints, the board showed sample carpets and wallpapers to unit-owners and let the majority choose. It then installed those choices on one floor and let unit-owners see the results before finishing the job. Bottom line: new hallways, no howling.
The board members were also savvy in how they approached the annual meetings, often a time for residents to unload pent-up frustrations with how their building is being run. They managed to avoid such rancor by attempting to not get bogged down in petty controversies or ax-grinding.
In Bunis’s experience, such an approach is noteworthy and reflects the board’s business philosophy. “It’s not that they don’t have opinions, but they’re not confrontational. If there’s a conflict, we table it and come back to it later. The biggest controversy we’ve had has been changing the company that maintains the laundry room.”
“We’re flexible,” says Adamopoulos, noting that he votes on issues only when he’s needed as a tie-breaker. “Why fight over a tree or a light bulb? No, we don’t want that. There’s no need for petty misunderstanding and egos. The majority decides and the minority follows.”