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Board Splits into Two Warring Factions at Queens Co-op

Written by Bill Morris on June 09, 2015

Queens

Last week, we shared with you the story of Sherwood Village B, a Queens co-op that cycled through three management firms, with each company starting out as the new White Knight, and then departing some months later as the blackest of villains, corrupt to the core. These companies joined the string of lawyers, accountants, and contractors who had been similarly accused by Joseph Desrosiers. Desrosiers and his wife, Olga, moved into the building in 1988. Joseph served as the board's treasurer from 1991 to 1995. Convinced that the co-op was riddled with corruption and "fictitious billing," he got the U.S. Department of Housing and Urban Development and the Queens district attorney's office to open formal investigations. Neither found any evidence of financial wrongdoing. But the accusations continued. 

"The job of the superintendent has changed drastically," says Steven Todorovich, a super who oversees a 120-unit co-op building in Forest Hills, Queens. "You might be able to get away with just a high school diploma but if you are not technologically savvy, your ability to communicate on many different levels will hamper your job." Todorovich is not alone in his experience of how a superintendent's role has evolved through the years. According to several supers and resident managers, staff members now need to know their way around a building with more than just a wrench. Fifteen years into the twenty-first century, a good super has to know how to download and run apps on an iPhone and how to manage his building's systems and infrastructure from a computer. 

It is probably among the strangest exchanges between an outgoing management firm and an incoming management firm that you'll ever see. "We will not release anything until the corporation's accountant has performed a complete audit of all files," wrote Rachel Manhim, property manager at Rachlin Management for Sherwood Village B, a Queens co-op. She was responding to an e-mail from Abdullah Fersen, the president of Newgent Management, the incoming firm. He had written Manhim a number of letters requesting payroll documents, and paperwork with various city agencies, arrears statements, vendor bills, and also access to the co-op's money. Fersen was frustrated and surprised. Rachlin had been fired nearly a month before by the new board of Sherwood Village B, and it was dragging its feet. Fersen, a veteran manager, says he has never seen anything like it before — most transitions are perfunctory — and adds that he was forced to recreate many of the records by diligent research among shareholders, vendors, and various city agencies. "We had to go with our plan and recreate everything from scratch," he says.

Was Rachlin being unreasonable? 

A READER ASKS: I am part of the staff at a midsize condo in Queens. I've noticed that one of the unit-owners seems to get a lot of packages, some of them via messenger. I think she may be operating a business, which I know is against the rules and can get the building in trouble. I talked to one of my co-workers about my plans to approach the board, and he says I shouldn't stir the pot. I'm new and I don't want to snitch on anyone, but I'm just trying to do my job. What should I do? 

When a woman whom we will call Jane Smith moved into Donner Gardens, a 270-unit co-op in Jackson Heights, Queens, in 2001, she was dismayed to learn that the co-op's sponsor, Muss Development, still owned nearly half of the shares some 15 years after the five-building property's conversion from a rental to a co-op. "When I got here, they hadn't been living up to their end of the agreement — which was to sell units," says Smith, a school administrator in the South Bronx, who got elected to the co-op's board of directors in 2007. "We ended up taking legal action against the sponsor, and they told us they were thinking about selling all of their units."

It was a freak storm but it saved the co-op $2.5 million. At least that's one way some might look at it.

Tennis View Apartments, the 177-unit co-op located in the posh Forest Hills Gardens homeowners association in Queens, is part of a small enclave designed in the early twentieth century by Frederick Law Olmsted Jr., son of the renowned landscape architect who helped shape Central and Prospect Parks. The lush landscaping was inspired by the "garden city movement," which aimed to create green oases amidst urban centers. Many of the buildings — a mix of single-family homes, cottages, and apartment buildings — are in the Tudor style, with brick walls, exposed timbers, and terra-cotta roof tiles.

How did a 150-unit co-op in Queens, which still had more than half its apartments under sponsor control, go from normal to nightmare? The tale starts with a somewhat mundane transaction that hit a snag. The sponsor of 87-10 51st Avenue Owners Corp., the Birchwood Organization, decided to sell its entire portfolio of 600 unsold units to a real estate developer named Myles Horn. Included in the portfolio were 81 rent-regulated and market-rate apartments in the Elmhurst co-op. Horn recalls that he had the units under contract but was stymied by Robert Valdes-Clausell, the co-op's live-in building manager who "refused to do the ministerial act of transferring the shares of stock to [him]. Normally they cannot refuse to do so, but they did." Birchwood asked the real estate developer if it could "go ahead and sell [Horn] all of [its] other unsold units and [leave the Elmhurst apartments out of the sale]." Birchwood was worried it might end up in a lawsuit with the Elmhurst co-op. Horn agreed to the deal… wisely.

Talk about getting saved in the nick of time. The owner of Shirokia Tower, a condo in Flushing, Queens, facing foreclosure, was about to see the building auctioned off. Nearly 100 investors showed up ready to place their bids. All of them went home disappointed, reported the New York Daily News, after "a big time real estate investor… salvage[d] the project." Madison Realty Capital really wants to tap the Flushing market. To that end, it seized its chance, providing a "$14 million mortgage to recapitalize Shirokia Tower, allowing the owner of the property to hang on to it." Things seem to have worked out for this Queens condo, thanks to its "white knight." But buildings can end up in financial difficulties for a variety of reasons, one of them being sponsor defaults — if that's the case, then relying on a so-called white knight might not be the best solution

Back in the day, people who couldn't afford to live in pricey Manhattan would take the next best thing. The goal was a nice apartment in a nice neighborhood in one of the outer boroughs with a commute that wasn't too tedious. The payoff was that rents were significantly cheaper in the outer boroughs — even in Brooklyn. But times have changed, and as Brickunderground astutely notes, the price difference between Brooklyn and Manhattan is shrinking. First quarter 2015 sales reports generated by real estate firms like Douglas Elliman confirm that "Brooklyn has set a new record for median sales price, coming in at $610,894 — that's a 17.5 percent increase over the same time last year." It's not news for people who have been priced out of Brooklyn. Brooklynites have been scrambling out of their home borough in search of better prices for a few years now. Some of those folks have ended up in Queens. The good news is that, according to Douglas Eliman's report, the median sales price there is still nearly $200,000 less than it is in Brooklyn. The sobering news is that it's increased by 20.7 percent compared to last year. So it looks like for co-op and condo buyers the time to consider Queens is now, and don't forget that all eyes are also now on The Bronx

Photo credit: Postdlf for English language Wikipedia, licensed under CC BY-SA 3.0 via Wikimedia Commons.

Changing managers should be as simple as changing dance partners. It can be — but it can also be fraught with problems — if the board isn't on top of the situation. David Fox knows. He is the board president at the 134-unit Linden Towers Cooperative No. 1 in Flushing, Queens. A retired laboratory technologist, he has lived in the building since 1976 and has served on the board for 30 years, the last three as president. The co-op has gone through several management companies over the years. In the 1960s, its management firm was indicted for stealing co-op funds. That company's successor worked well until the founder retired and service began to decline. The next company was based in Yonkers, and the manager was rarely sighted on the Linden Towers property. "We had to do more and more work as a board," Fox says. "It got ridiculous." 

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