How to Leverage Your Manager’s Professional Relationships

The Challenge

Lindsay Park Housing is a 2,702-unit Mitchell-Lama co-op in Brooklyn. Amerada Hess approached us, as the management, with very strong incentives to convert from oil to gas. But being a Mitchell-Lama, we didn’t have the money to do the conversion.

The Solution

We were a long-term partner with Amerada Hess as a fuel provider. The firm’s rep said the company could put together a plan in which they would finance the conversion for us at a low-interest rate. We would have to make a five-year commitment to purchase gas from them at a fixed price. Our accountant, Rick Montanye of Marin & Montanye, helped us negotiate a very favorable rate at a time of energy rate uncertainty. The package was about $2 million in financing to convert the 10 burners and all the other ancillary piping. After three years, we would be saving money. Since the gas prices have come down, we’ll probably be able to lower that payment.

The Lesson

A lot of boards look only at pricing, not at relationships. You have to look at both. For commodities it’s important to have a long-term relationship, because when you bounce around from vendor to vendor, you’re not taken seriously. Getting the best price should be weighed against the value of a long-term relationship.