You ran into big financial problems at a new co-op during the conversion boom in the ’90s, and how you solved it is as instructive today as it was then. Can you tell us about it?We took over a building in 1990 that had converted two years earlier with a unique mortgage situation. The sponsor created what’s called a wraparound mortgage. There was a conventional first mortgage of about $13 million, with an almost 10 percent interest rate. Then the sponsor created his own mortgage, wrapped around the conventional one, and this was collateralized by a $4.5 million line of credit. The sponsor used this wraparound to subsidize the high interest rate of the first mort-gage, actually reducing it by about half. And he did that so it wouldn’t be so expensive to live there?Yes, and so he could sell apartments. Then, in 1993, the sponsor went bank-rupt, as many did at the time. His wrap-around mortgage, which had reduced the co-op’s mortgage payments, became invalid, and the first mortgage lender turned to the co-op for the full, unsubsidized payments. By this time, the sponsor had subsidized interest pay-ments to the tune of about $665,000.So what happened?The co-op didn’t have the money, plain and simple. It was completely caught off guard. I think maybe that many people didn’t understand the complex-ity of the wraparound mortgage and that they were being subsidized. They stopped paying the interest payments, and we went to negotiate with the bank, which took a very hard-line position and demanded full payment of interest. So we instituted litigation against the sponsor. We became a creditor in his bankruptcy proceeding, and we contin-ued the negotiations with the bank. This went on for three to four years.During that time, how was the co-op surviving financially?It was a disaster. About $2.5 million in interest had accrued, and there were no sales to offset that. However, we were able to negotiate a deal where the sponsor gave us five of his units in exchange for a release from him. Also, interest rates had dropped, and in 1998 they were able to refinance their mortgage with a $15.6 million loan at an interest rate of just 7.9 percent.Making them financially stable?Well, in order to close on the mortgage, it was necessary for them to do a $22 per share assessment. They also had to enact a 38 percent maintenance increase.Yikes. What’s the state of affairs now, 20 years later?They were able to pay down the loan to $10 million and refinanced two more times since then to take additional cash out. The interest-rate market has favored them at each refinance. Last year, we refinanced a $12.5 million mortgage on a 30-year amortization at 3.9 percent. The value of the apart-ments has skyrocketed. In 1999, the average sales price per share was $278, and last year it was $1,263.Wow! What’s the lesson here for other boards?Never panic. There is always a solution to the problem. You just have to sort through it and explore your options.