New York's Cooperative and Condominium Community
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A bankrupt building and tax assessor on the board: the perfect pair.
Board President Philip Eng, Regent’s Park Gardens, talks about the little signs that can mean big changes for a condo.
Regent’s Park Gardens, Queens
Philip Eng still remembers when the lights went out.
It was a Saturday afternoon late in the spring of 2005. Eng had been living at the 318-unit Regent’s Park Gardens condominium in Queens for just two months, his first experience with home ownership. It was all new to him – and when the electricity went off, that was newer still.
At first, he thought it was a short-circuit in his building – the condo consists of 14 two-story buildings on 11 acres – but he then found that the power was off in the neighboring structures as well. It stayed that way for several hours.
Eng poked around and eventually found the reason: Regent’s Park Gardens’ Con Ed bills had not been paid for years. After that, Eng said to no one in particular, “Maybe I should look into doing something on the board.”
Further investigation revealed that the condo was “basically broke, [with almost] no money in our reserve fund,” Eng reports. “It was all wiped out. We owed the city a huge water and sewer bill of over $1.1 million. By the time we found that out, we had no money in the bank. All the members of the old board had sold their apartments and left in 2005. The property was in financial shambles. That’s when I stepped in.”
It was a good thing he did. Eng, 64, knew about money and he knew about real estate. He had been a building inspector for an insurance company for 10 years, had then worked as a real estate appraiser for 7 years, and finally signed up with the New York City Department of Finance, where he has spent the last 25 years and is currently a senior tax assessor.
He soon discovered that the problems at Regent’s Park could be traced back to 1990, when the sponsor of the 1986 condo conversion went belly up. “The board at that time took over control of the entire complex. They assumed the rights and privileges of the sponsor by default,” Eng says. “It was self-managed from 1990 until about, I think it was, 1996 or so.”
The property was managed by a unit-owner, who, Eng recalls, “claimed he knew how to manage real estate. They put him in charge. He drove the property into the ground. We had $1 million in the reserve fund in 1990. By 2005, that was all depleted. Out of 25 years of operation, we had about 18 years of deficits. Those were covered by going into the reserve funds so that by 2005, there was nothing left. Plus we owed bills: we owed money to Con Edison, we owed money to the city EPA for the water and sewer bill, and we owed money to the union.”
Eng says none of the unit-owners paid attention to the disappearing money because they were satisfied with board assurances that everything was okay – and, more to the point, they were pleased that the board hadn’t raised the common charges in at least a decade. After the board members resigned and moved out in 2005, Eng says, “there were all sorts of accusations that they were stealing money. My feeling was, ‘Look, we can’t track them down. We shouldn’t waste our time. We have got to fix up the financials now. It’s going to take a couple of years to do it.’ That’s when I got involved actively in the board.”
Eng joined the board as a committee member, but quickly moved up to board member, vice president, and then president. “The first thing we did was to get rid of the self-managed concept. We had to get rid of the idea that we were going to hire the cheapest person in town to run our operation. We needed professional people here.”
The condo brought in All Area Property Management, because, Eng explains, “it specializes in the real estate management of co-ops and condominiums and its territory was mostly Brooklyn/Queens at the time. They gave us good advice and management skills to operate the property as a business venture. I kept on stressing that to the board members. I said, ‘Look, we’re not going shopping at the supermarket with coupons. We’re running a big business. We have a $2 million budget and $100 million in real estate assets. We’re talking big bucks here. We’ve got to start thinking big numbers. You got to get rid of this mindset that you’re going shopping at Pathmark.’”
The second thing Eng suggested was that the board be more aggressive in running down unit-owners in arrears. In the past, the board would accept whatever the delinquent would offer. If he owed $5,000, for instance, it would settle for $2,500. Eng argued: “That’s not the way to operate. You slap a lien on the guy. You make him pay the whole amount.” The board collected much of the money it was owed, but more importantly, it changed the way the owners thought about their property. “People began to realize that it wasn’t to their benefit not to pay on time,” Eng says. “It took several years to get to that, but we are at that point now.”
The next step was to increase the common charges. “By the time I was finished, I think we bumped it up to a total of 40 percent over what it had been three years prior. What that did was it balanced the budget. It gave us enough money so that we could start up a capital budget to do capital repairs. The building is 65 years old. The management had a legacy of never doing any repairs to the property. That had to change.” Simply by collecting outstanding arrears and raising common charges, the board has been able to do anywhere from $300,000 to $400,000 of capital projects each year for the last few years, using their operating surplus.
Eng says that his work experience helped him guide the board. “I worked as a real estate appraiser. That trained me how to estimate the value of real estate. What enhances the value? Prudent real estate management. If you have good property management, you increase your gross income. If your gross income goes up, the value of the property goes up.”
Eng’s biggest challenge was getting the right people on the board. “There are a lot of talented people out there,” he says, “but they don’t have the time and the inclination.” The property consists of “mostly young people, recently married, who are beginning to set up a family, because we have 228 one-bedroom apartments, and 86 two-bedroom apartments. It’s not for a family with three or four kids. It’s only good if you’ve got a small family or if you live by yourself.”
He continues: “I spend about five to twenty hours a week on board work, in service to the community. That’s OK for the time being, but it’s hard to do that year after year after year. We need new people. If I do the job right, then it benefits everybody.
“Some people like to build things with their hands,” he says. “That’s great. But if you like to build things with your mind, being a board member is a good way of doing it.”
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