Renovation by: Leann and Tomasz
We purchased our apartment last year with the intention of gutting the whole apartment, but we really wanted to finish our bathroom before our baby was due. This project was originally going to be done by a friend of ours, however he was in an accident and we were left doing the project a month before my homebirth. Without a tile contractor as we had already paid half of the amount upfront, we decided to pursue the project ourselves.
When I looked at my co-op’s financial situation in 2005, we had less than $10,000 in reserves, negative equity and barely positive cash flow. My building needed a sustainable, long-term fiscal plan. And I had my prototype: the Marriott hotel chain. I had worked for Marriott in the late 1980s into the early 1990s. At that time, the chain set aside a percentage of its revenue each year for capital repairs and improvements. As a result, management is able to repair and improve the property so that it stays current. Our co-op was in desperate need of a Marriott-style makeover! …
My building is not wealthy. But we were able to take small steps to improve our finances, and your co-op or condo can, too.
The following is an excerpt of an article in The New York Times by Elizabeth A. Harris that talks about NaBors Apartments’ efforts to become more environmentally responsible.
Stephen Vernon is the president of a 112-unit co-op in Inwood called Nagle Apartments that has tried hard to become more environmentally responsible. The residents of the three-building complex started simply about five years ago by upgrading the lighting with motion sensors and more efficient bulbs. Then they moved on to larger projects.
“Our goal,” Mr. Vernon said, “was to do green projects that made fiscal sense.”
Almost all of the windows were replaced and new radiator valves were installed, at a cost of about $860,000. To cover the costs of these and other upgrades, the building took out a two-part loan and the development authority brought down the interest, leaving the residents with an average rate of 4.31 percent.
Through a combination of selling apartments that the co-op owned, interest on investments (it owns some Treasury bonds), and energy savings, the improvements were made without an assessment or maintenance increase.
These days, the building’s boiler spends a great deal of time resting comfortably on the lowest setting, and gas consumption has decreased by around 40 percent.
Now, the building is looking into putting in a green roof — layers of plantings and soil.
Green roofs keep the top of a building cool and provide a layer of insulation. They also retain rainwater, which can help keep the city’s sewer system from being overwhelmed in a heavy rain. But some consultants say that you’ll get more bang for your buck keeping the roof cool with white or silver paint and that a building will be better insulated with traditional materials like fiberglass. Green roofs are, however, much nicer to look at — and hang out on — than the alternative.
Another initiative that the co-op is undertaking is environmentally friendly renovations. As rental apartments become vacant, the co-op makes them over for sale. It uses recycled materials where possible, installs energy-efficient appliances and decorates with low- or nontoxic paints and finishes. One of these apartments, a 900-square-foot two-bedroom, is on the market for $359,000.
The sales agent, Matthew Bizzarro of Stein-Perry Real Estate, who also lives in the building, says that he has priced it a bit higher than comparable apartments in the area. Traffic has been good, he says, and has included people who say the green factor appealed to them.
By Corinne Ramey. Article reprinted from The Manhattan Times.
Kermit the Frog famously proclaimed that it wasn’t easy being green, but interior designer Marvin Jay Brooks disagrees.
“It’s been so easy to renovate from a green perspective,” said Brooks.
The interior designer is currently working on an environmentally-friendly renovation of an apartment on Bogardus Place in Inwood. The renovation is spearheaded by one of a growing number of green committees or groups on co-op boards that are dedicated to making their buildings more environmentally friendly. Throughout the renovation of the two-bedroom apartment, Brooks and his team have not only used green components, like paint and tiling, but made sure that all the current materials are disposed of or recycled in an environmentally-friendly way.
“We’re trying to be as eco-friendly as possible,” said Kristin Tsafos, co-head of the co-op’s green committee. The building, which was built in the ‘50s, became a co-op in the ‘80s, she said. Today, the co-op, which is composed of three different buildings, is trying to be as environmentally friendly as possible, using everything from energy-efficient windows to compact fluorescent light bulbs. “I just recently moved in November, and one of the things that drew me to the co-op was they that they had a newly formed green committee,” said Tsafos, who also works at Scholastic.
From floor to ceiling, Brooks and his team are using the greenest materials that fit within their price range. These include low-VOC, or volatile organic compound, water-based paint, which gives off less chemicals or pollutants than conventional paint. The joint compound that goes on the walls was produced in New York City — so no carbon footprint from driving it across the country — and the paint and joint compound were purchased at Green Depot, a store on the Lower East Side.
The apartment also has ecoTech brand tiles, energy efficient lighting and windows and energy-saving fixtures. In the bathroom, they have installed a low-flow toilet and showerhead.
The biggest challenge is realizing that being environmentally friendly doesn’t end with paint and flooring, Brooks said. “We’re not only using green products, but working in a green fashion,” said Brooks. “You can’t just throw everything in a black bag.” For example, a scrap metal collector in the Bronx picked up the stove, and the carpet will be taken to a recycling center in New Jersey. He said the least green part of the renovation was probably the linoleum floor, which they hadn’t found a way to recycle and was too water-damaged to use again.
Although Brooks has been working as an interior designer for five years, this was his first renovation so focused on environmental impact. He said much of his environmental education came from Green Depot, which provided literature on recommended products.
The renovation is more expensive than a conventional one, said Tsafos. Brooks estimated the total cost would be between $20,000 and $30,000. “On a regular renovation, I highly doubt an owner would spend $35 to $50 for a gallon of paint,” he said. Normal, low-end paint costs between $12 and $15 a gallon. However, on some components the co-op was limited by price. “Not everything is available in a price range we could afford,” said Tsafos. “For the cabinets, we ended up going with IKEA.”
Although the apartment doesn’t yet have a buyer, the co-op hopes to put it on the market in August. Tsafos estimated the approximately 975-square-foot apartment would sell in the mid-$300,000 range. “This will be one of the first green renovations in the neighborhood,” said Matthew Bizzarro, a real estate agent for Stein-Perry Real Estate who will be selling the apartment. Bizzarro said that clients would likely be willing to pay slightly more for the green renovation. “I’m finding the trend is that more clients are looking to be more environmentally and socially responsible,” he said. “I think the demand is high, but there aren’t a lot of options that allow a customer to make a decision.”
Brooks, who lives in Washington Heights, said that although one green apartment won’t have a huge environmental impact, the project demonstrates that others can do similar renovations at affordable prices. “I think it’s a step in the right direction of how to get people on board,” he said. And so far, working on the green renovation has been rewarding. “I can change people’s lives just by changing their surroundings,” he said.
The Manhattan Times is the bilingual newspaper of Washington Heights and Inwood.
When a Manhattan co-op faced foreclosure, one woman made a difference.
By Michael Sullivan
Reprinted, with permission, from Habitat, vol. 21, no. 175 (January 2002).
Walking around the grounds of Nagle Apartments, a 111-unit cooperative complex in the Fort Tryon area, it is hard to believe that the co-op was once on the edge of foreclosure, facing multiple lawsuits simultaneously. There is a new children’s playground, a new community room, and a beautiful garden. Beyond that, there is a tangible sense of hope and community among the residents.
Walk back a decade and the picture was entirely different. Firmly in the grasp of the sponsor, the co-op was living a financial nightmare. Units sold at dirt-cheap prices and the atmosphere seemed downright dangerous. How would you like to be awakened by an ax coming through your wall when a neighbor decided to make some unsanctioned renovations? Or have pigeons nesting in your apartment?
The root of cooperatives is cooperation. With it, properties grow and flourish. They develop into a community. Without it, the needed nutrients aren’t there and the property stagnates and eventually begins to wither. That was what was happening at Nagle Apartments. It was slowly being choked to death.
The story of Nagle Apartments’ renaissance illustrates the power one voice can have and how that grows exponentially when it gains support. It is a lesson in community-building and perseverance, of how one co-op was reborn after near-death.
Using Power Wisely
In 1987, Rita Henley Jensen, who had to sell her place on Morningside Drive as part of a divorce settlement, was looking for the cheapest apartment she could find in a relatively trouble-free neighborhood. She had also just started a job as a reporter for the National Law Journal. Jensen “settled” for a sixth-floor apartment at Nagle Apartments, a three-building cooperative complex near The Cloisters—the price was right and the unit provided a view of trees and the nearby park.
Having spent time at a daily newspaper covering the government beat, Jensen became curious after a short time about how the co-op ran its affairs. She felt she had a pretty firm grasp of how things should be running, so she attended an annual meeting in 1988 to see how the board operated. It wasn’t long before her hand shot up.
“Where’s the annual report?” she asked.
“Oh, it’s not done yet,” was the reply.
Shocked, Jensen asked another question, a “softball,” she now calls it, something that the board should have been able to answer without much difficulty. She doesn’t remember what it actually was, but she remembers the reaction.
“I was stonewalled,” she recalls. “They couldn’t give me an answer. This was a big investment on my part and I wanted to understand what was going on.”
Jensen walked away troubled by that meeting. At the next year’s gathering, she was shocked once more. A board member gave a talk on how much of the property’s budget was consumed by mortgage payments. The figure spurred Jensen into action. She joined the board in 1989. “This was a building that had a heavy investor and sponsor presence, so it wasn’t difficult to get on the board,” she explains. “We hadn’t had a competitive election ever—one of our afflictions.”
Using her investigative talents, Jensen began unearthing the mortgage mess. It turned out that the sponsor held the mortgage and that there were provisions in the offering plan that required the co-op pay an exorbitant interest rate if it failed to refinance. With owner-occupancy in a horrid state and the mortgage coming due in 1992, there seemed little chance Nagle Apartments would succeed in refinancing. In addition, Jensen discovered, the sponsor had ceased making his maintenance payments, while the co-op still made mortgage payments to him.
Not one to hold her tongue or forego the use of strong language when needed, Jensen told the other board members simply, “This is bull——. He doesn’t pay us, we don’t pay him.”
“But what if he forecloses?” the other members asked. He won’t, she assured them. The board had long been afraid of acting against the sponsor in what Jensen says was “corruption by passivity.” By not doing anything or even attempting to rectify the problem, the board was costing shareholders money.
The board, at last, took its first stand . . . and the checks started coming in. At least from the sponsor. As the market started to sour, other investors would begin to cease paying maintenance and default.
The Larger Goals
Encouraged by the success, Jensen took a look at another of the property’s concurrent issues, a below-market, 20-year garage lease held by a garage operator. The original lease had expired in 1985, but the board had extended it another 15 years. Curiously, none of the members in 1987 knew about the renewal and because of this tried to evict the operator. In the litigation that followed, the operator produced the signed lease extension to the board’s surprise and the board was stuck in a “no-win” lawsuit.
Jensen sums up their condition: “We’ve got no reserves, we’re in a no-win litigation, the mortgage is coming due, investor ownership is a problem. It’s bad.” The board’s previous philosophy—trust our professionals, it will all work out—needed some revising. Maybe something more current, like The X-Files’ catchphrase: “Trust No One.”
The first victim of the new philosophy was the property’s attorney. When a settlement regarding a contractual dispute with the sponsor was delivered via a handwritten fax with no details regarding dates or cash reimbursements, Jensen stood up again and said, “No.”
“But this is the best we can do,” another board member said.
“Then let’s not do it,” Jensen replied. The board disagreed and approved it anyway.
Not deterred by the lack of support, Jensen stayed on the board and became president in 1991. She kept her eye on the attorney, though.
Go Tell It to the Mountain
Now came another lesson for the battling board, which can be summed up this way: “Go tell it on the mountain. If you don’t get the answer you want or like, keep searching. You may be wrong, but you may also be right.”
Explains Jensen: “It’s like a doctor. You should trust them, but you should also ask about the prescription they give you. Your professionals will give you the classic, cautious answer. If you’re a wealthy co-op then you should probably take it. But if you have your back up against the wall, the classic, cautious response may be inappropriate. It might be good legal advice, but it may not be appropriate.”
In the process of covering some of New York City’s biggest law firms for her job, Jensen had a chance to often write about the deals the partners were working out. Of keen interest to her was the ability of companies to restructure their debt. In her capacity now as board president she turned around and wondered why they couldn’t do the same thing.
“You just can’t,” the co-op’s attorney told her.
“Why not? I don’t like this one,” she said.
“You can’t.”
“Well, I want to.”
Frustrated with the bickering, Jensen gave the lawyer a test. Much like her initiation to the board, she asked him a softball question: “What zone are we in?” The answer cost her $400—the attorney said that he needed to send an associate over and make copies of maps and other material. His response cost him his job with Nagle Apartments. An attorney out to rack up billable hours at their expense was not what they needed.
Nagle Apartments’ current attorney, Theresa Racht, a partner with Rosen & Livingston, says that, legally, the late 1980s and early 1990s were a different time from 2001. Key cases didn’t exist yet that clarified how the relationship would work between sponsor and building. So boards were hamstrung. They were left having to rely on professionals who were blazing the trail.
That doesn’t mean, however, that boards had to follow or should follow blindly. “Boards really need to listen to their instincts and ask for back-up information,” advises Racht. “[They should] ask if the theory the attorney is using has been tried anywhere else and what the results were. Tell them: ‘Give me examples of where this issue has come up. Explain this to me more.’ Look at the time being spent on your building and try to get a sense of what they are spending it on. If you are getting six hours billed for ‘research,’ find out what the research involved. Find out what the procedures are. Get a full understanding. There may be a cheaper way to do it.”
Frustrated by events, Jensen took up the cause with the sponsor at every opportunity she could. She began attending public forums wherever she could and testifying about the building’s plight with its sponsor, accusing the attorney general of abandoning co-ops by not regulating them.
“It was a scam. You could sell the building at whatever price to shareholders. You held the mortgage and then sold apartments to investors so that it could never really be a co-op. Then you could sell three or four units to someone who drove a taxi, for instance. Clearly they were underwater. And they are renting to really young people. So all this cash was getting drained and we’re faced with an inability to make it a co-op or find other financing. We were held captive by whatever terms they could dictate.”
And captives they remained. Or so the sponsors thought.
Connections
Getting something accomplished can be partly about connections, says Jensen, a prize-winning writer. You never know to who you might be speaking or who they know. “As a reporter, this is what you do, right? On whatever story I was working on I kept knocking on doors until I got what I needed to get. You call people cold. You know how the levers of power work and how to meet powerful people. I knew that I needed the powerful people in this community to understand what was going on.
“Co-op voters vote. Political leaders are aware of this and I bet they know how specific buildings vote. That’s important. You have to know that these people are employees of the community and I think they are there because they like helping people. They can’t always help you, but if they can, they will.”
In November 1994, the sponsors sat down with Jensen and discussed the mortgage and an extra $1,000 a month that the owners would have to pay them. Jensen stood up, put her coat on and walked out.
Things seemed hopeless until a chance conversation at a bar meeting. An attorney mentioned to Jensen that he had heard that one of the sponsors was in bankruptcy court. Upon further follow-up, it was determined that this was true and that he was the sole proprietor of the building. “Bingo!” shouted Jensen. The property thus fell under the control of the bankruptcy trustee.
At the time this began, the Community Development Corporation (CDC) decided to make funds available to co-ops so that they could buy out their sponsors. The writer picked up her pen and wrote. Detailing their building’s difficulties, Jensen wrote a letter to CDC and Nagle Apartments eventually became the first building to receive funds, $1 million. The outstanding mortgage was $1.95 million. The board then got into negotiations with the bankruptcy trustee and bought their mortgage for about 50 cents on the dollar.
Again, things seemed to be looking up for Nagle Apartments. But when the filing happened relating to the deal, the two sponsors came dashing in, crying for the deal to be halted. Their defense in court? “They said that when they had informed us that one of them was the sole proprietor that he had just been saying it, that it wasn’t true,” explains Jensen. “It was actually a complicated partnership and this other guy that we haven’t heard from in years, he owns part of it, they say.”
So, rather than making a quick deal, Nagle Apartments was once more looking at litigation. And the professionals were again telling the board that they wouldn’t win. The partnership probably did exist, so all the sponsors would be guilty of would be perpetrating a fraud on the board. To make matters worse, the sponsors shortly afterward went to state court and put the property into receivership—the board had stopped making mortgage payments because they weren’t really sure who they were paying anymore. The judge sided with the sponsors, thus robbing the board of income to run the building. “Now, we’re screwed,” Jensen recalls thinking. But, she notes happily, her board stuck by her.
“Rita had put the lion’s share of effort into everything during this time and the board really looked to her for guidance and opinions,” observes Robert Kleinbardt, a board member and investor. “Most everyone followed her.”
“She was a natural leader,” agrees Frank Castillo, a first-time board member who moved into Nagle Apartments in 1995. “She was really keyed into all that was going on and kept up-to-date on laws and management issues. We gravitated toward her. We also had open meetings and encouraged people to come and participate. The best way to make changes, we told them, was to get involved.”
Jensen filed disciplinary proceedings against both the sponsors, who were attorneys. They, in turn, filed a contempt citation against Jensen. As if that weren’t enough, they further alleged that the co-op’s attorney should not represent Jensen because it would be a conflict of interest. So she represented herself . . . and won.
The rollercoaster wasn’t ready to settle yet, though. Back in court on the foreclosure action, the judge informed Jensen that there wasn’t any defense against such an action. Flabbergasted but unflappable, Jensen and the co-op’s bankruptcy attorney came up with a strategy, one part of which was to show that there was cause, $55,000 in legal fees worth of cause. Mounds of paperwork were filed.
Like every other dealing, the course of this suit would wind up and down and knot itself in all sorts of ways. At one moment, the paperwork would all turn up missing. In the next, Jensen would be bumping into a friend of the judge’s, who offered to step in and help her. The judge, with an additional set of paperwork also gone missing, at this point seemed to tire of the insanity and sent the case to mediation.
The Truth Is Out There
Nagle Apartments ended up receiving in the settlement $100,000 cash from the sponsor, $100,000 off the face value of the mortgage, and a new 10-year, lower-interest rate mortgage that would allow the co-op to prepay at a rate of $25,000 per year and eventually, after seven years, be allowed to find other financing and prepay the entire amount. In addition, any units that came up for sale could not be sold to investors.
“As homeowners we wanted to pay down our debt. It really bothered me that, after 14 years, we still owed the same amount of money after paying roughly $14,000 a month,” notes Jensen. “We were renting money that we never had.”
At the time this agreement was signed in February 1997, there were 31 owner-occupants in the buildings. The turnaround after this began almost immediately. All during the “bad years,” the board had continued to buy apartments, grabbing one for just $1,500. Following the settlement, the board began selling apartments for $20,000, $30,000, and up. Loans were still difficult to procure, so the board offered purchase money mortgages.
Not long after this, Jensen attended a cocktail party at Columbia University where she met a man from Chase Bank who was in charge of their Community Bank program. The program, not yet underway at that point, was designed to make loans available to purchasers in co-ops with fewer than 50 percent owner-occupancy if the bank believed that their loans could or would lead to 50 percent owner occupancy. Even though, at 30 percent, Nagle Apartments did not qualify, Jensen got a business card anyway.
When Jensen approached the Chase representative, she says, she didn’t know that it was he who she would be looking for. She was simply targeting people who might be able to help her and making connections. Eventually, she thought, someone would point her in the right direction.
In the year following her meeting with the Chase representative, the board pushed hard at trying to get above 40 percent owner-occupancy, at which point they felt they could approach Chase again. By 1999, after instituting a sublet policy, the co-op was close enough to qualify and Chase began making loans. For a few years, these were the only loans available to purchasers.
One of the key factors that led to increased interest in purchasing was a website put together by board member Eduardo Gomez. Complete with floor plans for all the units and useful information for both buyers and owners, the website, www.naborsapts.org, brought immediate results. (Not the least of which was that building policies were now available for viewing and consulting.)
“I saw the website and thought that there had to be something wrong with the price,” recalls Quenby Miller, who bought in 1999 and almost immediately got on the board. “There was so much information there, so I kept looking and researching. But I couldn’t find anything else like it.”
Miller, a newcomer to home ownership as well as to co-op life and board service, relied on Jensen to teach her the ropes. “You have to listen a lot in the beginning,” Miller observes. She also caught some of Jensen’s commitment and, even after she left the board, she stayed involved with different committees.
“We have a very diverse community and a lot of personalities,” she observes. “The key, I think, was that we kept our minds on the final product and managed to find a way for all our styles to fit together.”
“It could have been a powder keg,” adds Mary Hack, the current manager of the property. “But the board treated everyone with respect and responded to their needs quickly. They genuinely cared that everyone got a professional, courteous, and intelligent response to their concerns.”
The Future
One question that hasn’t been asked is where was the manager during all this time? Jensen says they’ve been through about five companies now and finally have a good one in Mary Hack, of Blue Woods Management. During the troublesome times, the managers seemed to offer nothing in the way of advice, but something in the way of lining their pockets. Marvin Gold Management was one among the many; it went out of business when its principal pled guilty to corruption charges.
A board, having learned its lessons, can have its professionals doing what they are supposed to be doing. Jensen, gladly, says they’ve finally gotten there. “We’re at a point now where people are taking the management of the building away from me and I think that this is terrific. We’ve grown up now. For a while it felt like it was mine and only mine. It was my obsession to work this out. Then others bought into this, into the idea of a community and responsibility.”
Others now plan the parties at the buildings. Others are taking control of negotiating the new garage lease, expiring in February 2002. Others are looking into window replacement. And the reserve fund, so long empty? It’s $50,000 and rising. The two sponsors are down to 13 apartments. Whereas a two-bedroom apartment sold for about $20,000 after the settlement, one sold recently for $119,000.
As always, Jensen is keeping herself busy. In June 2000, she launched Women’s E-News, a news service company that provides articles on women’s issues to media outlets. Ironically, the lessons she has taken out of her board service have proved vital in helping her forward her other goals.
Buildings survive when people step up to the plate, she concludes. And whether or not things work out, you’ll leave a better person with more skills than when you entered. “A lot of what I learned through this whole process I’m taking with me to this startup. To develop something from scratch takes a lot of confidence and I had a lot more of it at the end of this business. I could walk into a bank and talk to them about a million-dollar deal. No problem. I can play with the big boys.”
Rita Henley Jensen, president of our Board of Directors, recently received a Management Achievement Award from Habitat magazine. The profile, which appeared in Habitat, vol. 20, no. 173 (November 2001), is reprinted here with permission.
Habitat Management Achievement Awards 2001
By Tom Soter
Rita Henley Jensen, Board President
Property: Nagle Apartments Corp., Manhattan, N.Y.
Category: General Effectiveness
Division: Board
In 1992, Nagle Apartments, a 111-unit co-op near The Cloisters in Upper Manhattan, was in dire financial straits. The sponsor held the mortgage to the 49-year-old building—and it came due that year. The provisions of the offering plan required that the co-op pay an exorbitant interest rate if it failed to refinance. However, the sponsor had sold many apartments to investors who had defaulted. Maintenance payments were stopping and less than a third of the units were owner-occupied. The sponsor was often three months behind in maintenance payments and the co-op had no reserve fund.
Moreover, the roof leaked ferociously. Pigeons nestled in at least one apartment. The garage operator held a below-market, 20-year lease, and the garage’s upper deck was badly in need of repair. The real estate market had collapsed and two-bedroom units, which had sold for $80,000, were worthless, partly because no bank would finance mortgages for potential buyers.
Rita Henley Jensen bought her apartment in 1987 and in 1989 she joined the board. In 1991, she became president. Step by step, using an extraordinary amount of legal and political savvy, along with fact-finding, tenacity, and fortitude (she defended herself on a civil contempt of court charge brought by a court-appointed receiver), she managed to turn the co-op around, bringing it back from the brink of bankruptcy to success.
The settlement Jensen achieved was extraordinary: $100,000 cash from the sponsor, $100,000 off the face value of the mortgage, and a new ten-year mortgage that would allow the co-op to pre-pay at the rate of $25,000 per year and eventually, after seven years, be allowed to find other financing and pre-pay the entire amount. In addition, the sponsor was allowed to sell nine of his apartments to another investor; that investor has to sell them within five years to an owner-occupant.
In 2001, the co-op is 74 percent owner-occupied with sale prices for two-bedrooms at over $100,000. The roof and the garage have been repaired, a new playground has been installed, and the reserves have grown to $80,000. The co-op is in the process of awarding a new 10-year lease for the garage that will capture revenue three times the current rent.
Jensen is matter-of-fact about why she took on this daunting task: “I work hard for my money. My apartment was a huge investment, and there was no way I was going to lose that money. On the other hand, nobody ever asked me to run anything before. And therefore I was thrust into this leadership position with no experience. It was with my gut.
“So many people worked together,” she adds. “I was given the leadership role but other people really pitched in. We all worked together and saved our investment. We created a building where we really wanted to live. This was really about community and autonomy.”