Tom Soter in Bricks & Bucks
Back in 2013, a 71-unit Bronx co-op known as The Sussex was facing a conundrum. It was heavily in debt, yet in order to comply with recent changes in city law – a requirement to phase out soot-producing No. 6 and No. 4 oil – the co-op needed to replace its aging boiler. But the building didn’t have the reserve funds to pay for the $30,000 job. To top it off, a number of shareholders were in arrears.
Enter Abdullah Fersen, president of Newgent Management, who’d been hired by the board to turn the place around after years of mismanagement. “We unlocked the road to financial health by discussing the debt with the vendors to avoid liens on the building,” says Fersen. He crafted a workout plan in which the vendors would take less now for a promise of more in the future.
Getting the unpaid vendors on board was crucial. “Communication with vendors is very, very important, so that they know that this is a profitable plan for them,” Fersen says. “When you pay attention to who they are and what they can do for you, they will walk the extra mile for you.”
For instance, he convinced On Time Heating, one unpaid contractor who had worked on the boiler, to accept a partial down payment, with the balance to be paid after the building had settled outstanding debts. He also worked out an installment plan to pay for facade work currently underway, and for roof repairs in the future. “Abdullah convinced me that the building is trustworthy,” says Asad Hussein, the owner of Dany Restoration, which is doing the facade and roof jobs.
Fersen’s plan also prepared forecasts for upcoming projects – Local Law 11, roof repair, façade work – and allocated money for those over the next five years. “Once you put the building in a five-year cycle, the building is set forever,” Fersen explains. “If you have a plan and if you do it on a cycle, the money gets saved into the reserve, and then it’s available for you to use.”
Additionally, Fersen saw that insurance claims (for damages to the property that had not been filed) were collected. Then he visited the delinquent shareholders, collecting about $80,000 in arrears owed over a three-year period. In some cases, he went to the mortgage-holder’s bank or else had the board foreclose on some of the units, which were then auctioned off, bringing in another $60,000.
A central element of Fersen’s plan was to refinance the mortgage for $4.5 million in 2014. The co-op earmarked $125,000 to pay off debts, and another $100,000 for repairs, as needed.
Fersen’s philosophy for the property’s survival is as simple as it is universal: “Eliminate surprises. Once you create a long-range plan, you're really safe.”
PROJECT PLAYERS – PROPERTY MANAGER: Newgent Management. CONTRACTORS: On Time Heating (boiler). Dany Restoration (facade and roof).
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