Michael DeGrazia was sad to see that Longacre Gardens was getting, well, a little long in the tooth. When he moved into the 88-unit, garden-style co-op in White Plains more than 30 years ago, it was a place to call home. Slowly, however, Longacre fell into disrepair – windows leaked, driveways were cracked and potholed, and rain seeped through roofs into top-floor apartments. “Even though the buildings were showing their age, things hadn’t reached the point where we were getting massive complaints from shareholders,” DeGrazia says. “But as board president, I didn’t want to wait until then to fix things. I wanted to get ahead of the curve.”
The problem was that repairs require cash, and Longacre didn’t have much, nor could its middle-class residents afford punishing maintenance hikes or assessments. Fortunately, DeGrazia, an accountant who is director of finance and administration at SUNY-Purchase, knows his way around a budget – and exactly where to look to tap every available penny.
Building the Reserves
Longacre’s finances had been shaky from the start. When the eight-building complex went co-op in 1981, it had only $50,000 in reserves, and it took years of strict, meticulous management just to stay operational. Through small, steady maintenance increases and assessments, the board eventually managed to sock away about $250,000 in its reserve fund.
But that still wasn’t enough to cover the needed repairs, and on top of that, DeGrazia was determined to save the money for an emergency. “Every board has a responsibility to keep its reserves healthy,” he says. “To do that, my philosophy is to pay ongoing expenses – like taxes, mortgage, and utilities – with ongoing funds, and pay for one-time capital projects with one-time funds.”To come up with the money, DeGrazia’s first move was to take advantage of the 2009 real estate market correction, which sent property values plummeting. The board began tax certiorari proceedings, contesting the co-op’s property valuation, and in 2012 received a hefty $300,000 payoff from the city, as well as lower taxes going forward, saving Longacre $50,000 a year.
“We were lucky because it was an advantageous time market-wise,” he says. “But the fact is, there is never a bad time. If you’re not suing your municipality every year, you’re not doing your job.”The next step was refinancing the mortgage. Longacre slashed its interest rate from 6 to 3.88 percent, enabling it to cash out $800,000 in equity while still reducing its monthly payments. That gave Longacre a total of $1.2 million for upgrades. At the same time, the board was pocketing $75,000 a year from reduced oil and gas prices, which allowed it to lower its operating budget. “I hate to say it, but the recession was a good thing for us – we capitalized on lower fuel prices, lower real estate values that allowed us to lower our taxes, and lower mortgage interest rates,” DeGrazia says. “What’s the lesson here? Take advantage of the economic climate when you can.”
Best Bank for the Buck
With money in hand, the board began seeking out vendors for the repair projects. “We didn’t jump at the lowest bidder, but we went with the best value – we looked for the best bank for the buck,” says DeGrazia, who oversees some renovation projects at Purchase and knows the value of comparison shopping. “What you spend is what you get.” Starting in 2013, the co-op began systematic work on the property – from big-ticket items like roof and window replacement ($400,000 each) to replacing garage doors and repainting building foundations – gradually restoring everything to prime condition.
A proactive board has been essential to Longacre’s turnaround. “Each year we’d talk about what capital improvement we wanted to do, and go through the financials diligently, always keeping costs in mind,” says Brian Scally, vice president at Garthchester Realty, who has managed the co-op since 2007. “This is a real hands-on group that does their homework beforehand, and follows up by keeping a close eye on spending until a project is complete.”
“It has taken a lot of planning and coordination,” says DeGrazia. That included sending regular notices to shareholders informing them of repair schedules and how to prepare their units for the contractors. Sometimes, they needed a little persuading, like when they balked at the board’s plan to spend $200,000 on landscaping. “The residents didn’t always understand how the appearance of the grounds could have a big impact on sales and people’s perception of your property,” says Nancy Driscoll, the co-op’s treasurer. “We had to explain to them that we wanted Longacre to be a place you were proud to walk into.”
The co-op recently finished the re-landscaping work to rave reviews, says Scally, who notes: “Longacre is now a pristine, beautiful property and financially sound, which has kept us competitive in the area and draws in potential purchasers.” Indeed, the last three units to go on the market sold in just a few weeks at their asking prices.
And DeGrazia still has more home improvements on his to-do list. “I’m very big on aesthetics and curb appeal, so I want to upgrade the lighting, maybe by adding lanterns, and fix the irrigation systems for the lawns,” he says, “You should always be reinvesting in your property.”
The cash flow is there. Thanks to scrupulous budgeting, Longacre has now amassed an astonishing $800,000 in reserves. “I figure a complex our size should be sitting on at least $600,000 at any given time, so we won’t be spending too much at once,” DeGrazia says. Not that he’s tempted, since money management just comes naturally. “I have an identical twin brother who is president of his condo complex. So, yes, I guess you could say it’s in my DNA.”