New York's Cooperative and Condominium Community
As part of our ongoing Problem Solved series, Habitat spoke with Carl Cesarano, a principal at the accounting firm Cesarano & Khan.
Reevaluate budget priorities. It's very hard to navigate the landscape these days. In addition to the lingering pandemic, there’s very high inflation, and expenses are more unpredictable. The assumptions and assertions that went into original budgets have changed, so it’s time to see which expenses can be cut. Consider whether there’s any opportunity to raise charges other than maintenance and assessments.
A sharp drop in commercial income. When you have lots of commercial units, your whole budget is based upon their revenue. We have a client where their annual commercial revenue - from stores and restaurants - was in excess of $1 million. When the pandemic closed many of the stores down, its revenue was cut in half, and it needed to find a way to make up the shortfall to balance its budget.
The balancing act. We did this in a number of ways. The underlying mortgage was refinanced before rates started to climb, and we were able to reduce the interest rate and also put some money in the reserve fund. We were also able to secure a forgivable Paycheck Protection Program loan. We anticipated that utility prices would rise, and we shopped different alternative suppliers to lock in our natural gas rate until 2023 and our electric rate through mid-2022.
(Like what you're reading? To get Habitat newsletters sent to your inbox for free, click here.)
Flowing again. Each commercial tenant has had different issues, and we took this into account to get the income stream restarted. Depending on the type of business, we've offered some rent forgiveness and different models of leases. We restructured some of the leases to offer more flexible terms to help make it easier for small operations to stay in business. We basically took it on a tenant by tenant basis, and the good news is we have everybody back up and running. We have our existing tenants back in action, and we're just about up to our million dollars again in cash flow from rent.
More challenges ahead. In the future, budgets are going to have to be a living, breathing thing. They're going to have to be looked at all the time. As an accountant, my approach is to work as the board’s business partner. I want to help them look at stuff in real-time and look at every option that's available to us. And we're going to have to keep tweaking and augmenting as appropriate.
Engage, enrage, ask questions and give answers with your community of board members. Submit your questions and comments here!
Co-op and condo board business broken down into bite-sized bits - 2 stories each week. Read now on all digital devices.
Learn all the basics of NYC co-op and condo management, with straight talk from heavy hitters in the field of co-op or condo apartments
Professionals in some of the key fields of co-op and condo board governance and building management answer common questions in their areas of expertise
Got elected? Are you on your co-op/condo board?
Then don’t miss a beat! Stories you can use to make your building better, keep it out of trouble, save money, enhance market value, and make your board life a whole lot easier!