Board president Bruce Horowytz thinks of his co-op building as “iconic.” “I like to call it the Dakota building of Hell’s Kitchen,” he says. He’s only half-joking. While it may not be able to claim the Dakota’s past and present residents – including John Lennon, Yoko Ono, Lauren Bacall, and Rudolph Nureyev – the Piano Factory has played an instrumental role in a New York City neighborhood that has undergone dramatic change. The building dates back to 1874 when it was, indeed, a piano (parts) factory – and when a piano in the parlor was a common sight in many New York homes. But by 1981, the brick building with its elaborate arched entryway and wrought-iron flourishes had been converted into a luxury co-op. It may now be iconic in another, less colorful way: as an exemplar of how buildings can succeed by going it alone.
The 49-unit building, on West 46th Street near 10th Avenue, is self-managed – an approach with lofty ideals but numerous difficulties. Self-management has obvious benefits: shareholders control their own fate, and their monthly maintenance is generally lower than in co-ops that pay fees to a management company. But there are downsides. For one thing, you don’t have an experienced real estate professional to advise you, so shareholders have to carry the load.
“When you’re self-managed, participation by shareholders is important,” says Bonnie Reid Berkow, a Piano Factory resident for more than 30 years, a current board member, and a partner at the law firm Wagner Berkow, which specializes in co-op and condo issues. About 10 years ago, the board found its self-management skills pushed to the limit when it faced a financial dilemma: an extensive repointing project (plus other expenses) had wiped out the co-op’s reserve fund.
The board set up a finance committee that performed an evaluation of the building’s potential upcoming repair and maintenance needs and mapped out a financial path to pay for it. “We put together the operating expenses, we went through the accounts, and we looked at what was happening,” explains Christine Shostack, the building treasurer. The committee included shareholders with financial industry experience and others familiar with the building’s infrastructure. They created a list of potential problem areas: multiple roofs, roof fans, the boiler, and other infrastructure. “We estimated the useful life and we guesstimated the cost,” says Shostack, who has worked as a program and project manager for banks and brokerage firms. “We knew that wasn’t exact, but we knew whether a project was a $10,000 or a $100,000 thing.”
The plan allowed for Shostack to earmark $80,000 each year toward capital repairs and a reserve fund. Most of the budget was raised through monthly maintenance payments, although a $100 assessment was introduced for several months. The board was counting on a second mortgage to fulfill their capital needs and carry out their plan. Both mortgages will terminate on the same date and be paid off in May 2019. The first mortgage was for $1.75 million; the second for $350,000.
In addition to financial planning, self-management requires board members to do more than attend monthly meetings. Horowytz, the president, who has lived in the building for 21 years and has been on the board for all but one of them, regularly meets with the superintendent. Horowytz’s long-term knowledge of the building helps keep a lid on repair and maintenance budgets. “We step up,” says Horowytz, who owns two restaurants in the neighborhood. “I like the board president job, and I am very hands-on. I go onto the roof and inspect it with the super and pull walls apart and see that we don’t need the whole roof replaced. That’s a different approach from having a management company, and it saves us a lot of money.” The seven board members face election every two years. A core group of board members – including Horowytz, Berkow, and Shostack – have served in some capacity since they moved into the building in the 1980s, always returning to a formal role after a short hiatus off the board.
Life in a self-managed co-op is not always a walk in the park. For one thing, there is no buffer zone between the board and the residents. “There are some neighbors who don’t like me and don’t talk to me because of things I have had to do as board president,” explains Horowytz. “If we had a management company, then it would be easy to say, ‘Oh, the management company wanted to do that.’”
Never Too Busy
On a more practical note, being self-managed also means never getting to say you’re too busy. You have to make time, which can be onerous when you’re taking on a big project. “Finding an engineering or architectural firm, interviewing people, having them report to you, and dealing with contractors is a lot of work and very time-consuming,” says Berkow, who reports that the board flirted with the idea of hiring an outside management firm recently when it faced a large capital project. “Then we think about it and decide we can do it,” she adds. “This is working and we keep on going as we are.”
A self-managed board tends to rely heavily on its superintendent. “An effective super is a key component to making self-management work,” observes Shostack. “Day-to-day interaction with contractors, inspectors, and potential vendors is key to making the building run. Board members have full-time day jobs, so we count on the super to handle the transactions and escalate as needed. When we had [an inefficient] super, this all fell on board members.”
Shostack, as treasurer, files any required documents with the city each year. Bookkeeping is outsourced. “Early on, we had a shareholder doing the bookkeeping,” she says. “Outsourcing ensures privacy and takes care of large clerical tasks like cutting checks, getting maintenance tasks out, banking – all the stuff that is very hard to do when you have a full-time job and you’re trying to juggle that with the co-op.”
Some board members worry that being self-managed could hurt the co-op’s ability to keep up with neighboring buildings in the curb-appeal sweepstakes in gentrifying Hell’s Kitchen. “Apartments are selling for $1.5 million and people want $1.5 million services,” says Shostack. “We never had a doorman. There is some concern that we’re competing against buildings with these services and the prices will reflect that.”
There’s another concern. In the future, self-managed buildings such as this one may face an insurmountable hurdle: The necessary commitment from all shareholders may not be possible. “The people who are buying the apartments are more often professionals who have less time than those that moved in originally,” Shostack says.
Can self-management at the iconic Piano Factory survive? Stay tuned.