How to Turn a Two Million Dollar Crisis Into a Win

When a condominium's facade project ballooned to over two million dollars, the board was facing a crisis. The solution involved unconventional contractor negotiations and a prepayment strategy that surprised everyone with its success. In this episode, three veteran property management executives reveal the insider strategies that separate struggling buildings from thriving ones. Steven Greenbaum, executive vice president at The Lovett Group, Alvin Wasserman, senior director of asset management at Fairfield Properties, and Melissa Cafiero, president of Halstead Management, share real stories of creative financing solutions, like portfolio analytics that uncover hidden savings, and why some of the smartest financial moves require boards to stick their necks out when everyone else is playing it safe. Habitat’s Carol Ott conducts the interview.

How To Run Your Building: For Co-ops and Condos

Transcript

Carol Ott (00:42)
Welcome to Habitat's Management Series, where we have gathered leading New York City property management executives to discuss the challenges their companies and clients face.

as they navigate the complex world of co-op and condo operations. It's a given that about 80 % of a co-op or condos budget is fixed, leaving a board in management only about 20 % to really influence. Today's panel of distinguished property management leaders in New York are going to help us understand what kinds of strategic initiatives a board can take that might

Carol Ott (01:19)
actually make a difference on that portion of the budget and the overall health of the community. I'd like to introduce our distinguished panel. We have Stephen Greenbaum, Executive Vice President at the Lovett Group, Alvin Wasserman, Senior Director of Asset Management at Fairfield Properties, and Melissa Cafiero President of Halstead Management. Before we discuss strategic initiatives in detail,

Carol Ott (01:45)
I'd like to go around the table and ask each of you, why would a board want to move on any strategic initiative given that

Carol Ott (01:54)
it often means sticking your neck out and it's a lot of

isn't necessarily required? Steve, let's start with you.

Steven Greenbaum (02:02)
So I always feel that an active board, when they take on that role and they really want to serve their community, taking initiatives and sticking their neck out, which is really what boards do just by volunteering, I think it's their

role to not only do the work, but also to educate the shareholders. So I think not only do they need to pre-plan and do a lot of things in advance, and we'll talk about that later, but I think it's also important for them to educate the shareholders and let them know what they're doing, why they're doing it, and how they're going to go about it, especially when it comes to financing.

Carol Ott (02:36)
you want to jump in?

Alvin Wasserman (02:37)
The role of the board is to act in the best interest of the entire community of the owners and the shareholders. And this is the responsibility that they take on when they decide to run for the board. So taking a little bit of a risk by sticking your neck out and taking action that you know you're going to not going to satisfy everyone. you're going to hear some criticism.

But ⁓ ultimately, what you do should be for the benefit of all.

Carol Ott (03:04)
Melissa.

Melissa Cafiero (03:05)
Sure. Likewise to what everyone has said, as a volunteer board member, you're charged with being the ultimate fiduciary for your constituents. Therefore, there has to be an active role. I think more so than just ⁓ volunteering to stick their neck out, I think there's an obligation to really get in the weeds.

understand the investment that they're protecting and do the best job possible. So I think strategy and moving forward in that direction is really part of the role by definition.

Steven Greenbaum (03:27)
you

Carol Ott (03:37)
So terrific. I'd like

to dive into some real world examples that you've been involved with. Steve, in a conversation we had about this topic, you told me about a condominium that you manage that didn't have much of a reserve fund, but had a lot of capital projects that had to be done. It's not atypical. To me, though, that spells a hunt for money. And what was their situation? How did you help? And what

Steven Greenbaum (03:57)
Correct. Right.

Carol Ott (04:04)
was the initiatives that they took that we could label strategic.

Steven Greenbaum (04:09)
So this condominium, like many other condominiums, was not financially super stable. They had some money. They started proceeding along with their facade project, their FISP Project, and they uncovered more work than they planned on or even thought they would do.

Plus then they were saddled with the garage repairs that were quite, quite costly. So a job that they thought would come in somewhere around under a million dollars was slated to cost over $2 million. They didn't have the money. They didn't know how to get the money. Obviously an assessment was impending and they had no other choice. But what we did is to really go out and figure out what the worst case scenario, how we're gonna raise that money and what the best way

to do that for the unit owners so they wouldn't feel that ultimate crunch. And we needed to raise the money fairly quickly because we knew that we needed to do the work before the required deadlines. And we had to be able to know that we had the money. So we worked on different initiatives where we actually went out, got the spec.

would out and bid the job with various contractors and ask some of the contractors if they were able to do financing. And some of them had third parties financing. some contractors said, no, we, you know, we got plenty of work. We don't need to be involved in any kind of financing. We're not going to find your financing. Go find it out on your own. And we actually found one or two contractors that were willing to finance the job. At the same time, we were able to go out and find another company that would give us financing.

But that those rates were just really, really prohibitive. So we were able to negotiate the work and speak with the contractor and have the contractor give us, you know, three years worth of low interest financing was around 4%, which I thought was incredible at the We also knew that we needed to raise some money pretty quickly because the contractor wasn't going to finance the entire job. So we went to

the unit owners and we explained what we were doing, how we're going about this and what the plan was. And we also said to them that if they wanted to save money that we're going to have a 36 month assessment. But if you want it to save the 5 % interest that you can prepay. And this way we would gather up some cash that we needed upfront and you were able to save your interest and plus get a small, small discount on the project.

We were surprised that at least 25 % of the building opted to save the interest in prepay. So we had some good down payment money for the contractor.

Carol Ott (06:30)
Can you just tell me the prepay, what was the amount on average?

Melissa Cafiero (06:31)
Thanks.

Steven Greenbaum (06:35)
So

on the average, it was about 25 to $3,000 a unit, depending on the size, some were more, some were less. So that went out. And a lot of people jumped in to save the interest. So they thought it was an opportunity, but they also appreciated the fact that they had options and the fact that we communicated and the fact that the board took the time to really go through all these steps, step by step.

And also to keep the unit owners advised all the way through it. So we had probably four town hall meetings. You know, we met with the contractors, we met with the unit owners, we met, the board met with the unit owners, the board met with the engineers and the contractors. And then we had a finance meeting just to discuss the finances. So we kept the unit owners informed every step of the way, and they felt that they were party to all the decisions, which really made a very big difference.

Carol Ott (07:25)
And I

guess that is sort of my question. I mean, this board, would say it sounded like it was great work, but they did stick their neck out. They limited their options by the contractors who were going to be able to help them. Some unit owner could later down the road say, you picked a poor contractor just because he was going to provide us money. So did they circumvent that potential conflict?

Steven Greenbaum (07:34)
yeah.

Right.

Carol Ott (07:50)
by communication, is that a strategy?

Steven Greenbaum (07:52)
So look, we all know that every annual meeting we go to the biggest complaint we get from shareholders and unit owners that I want more communication, more transparency. So we hear that every time we go to annual meetings, I know that Alvin and Melissa are shaking their heads because we hear this nightly. So we did that. We made sure that we communicated and we were very transparent about what we were doing. So it was important to do that. And the other part was we didn't communicate to the contractors. We went out and instead of usually we go to five or six contractors, we went out to eight.

⁓ to see, and we didn't tell contractors bid the job if you, know, only if you could do financing, because we had other options, a ⁓ third party finance company that was going to do it. We could have gone out and gotten the mortgage. You know, there were other options available to us. So when we bid the job, we bid it to get the best contractor for the best price. It just so happens that the best contractor at the best price also offered us a finance. I guess we cajoled them into, you know, getting the job that way.

Carol Ott (08:45)
And I just want to ask for boards that may be listening to this, when a contractor offers financing, are they going to a third party or is this out of their company billing?

Steven Greenbaum (08:56)
So that's a great

question. So some of the contractors offered third, but they went to a third party and they financed the job or they had a bank that would, you know, would that they had a credit line with and they would offer that numbers to us. This contractor did it personally through his company and he went out 36 months for us.

Carol Ott (09:12)
Nice. Melissa, when we spoke earlier in the month, you were taking a hard look at areas of the budget where potential savings could be found and proactively taking steps to realize those savings. Can you share what you're doing and how successful you think this initiative is or will be?

Melissa Cafiero (09:32)
So I think we're all aware that there are non-discretionary items that really encompass most of the operating budgets in both co-ops and condos. in the co-op world, the underlying mortgage, the real estate taxes and labor, throw in some insurance, and then ⁓ that's about it. You've got very little left to play with. So here you have a board that is

Steven Greenbaum (09:35)
Thank

What.

Melissa Cafiero (09:57)
expected to make headway and do

job, but really they have so

they can't do anything about in those categories. So we've had boards come back to us and say, we understand that there's only 15 or 20 % remaining in the budget, but it's our job to really get in the weeds about that. the first step.

in that direction is that they're looking at the bills and they're questioning the bills and they're questioning, you know, ⁓ routine maintenance, repairs, are these really necessary? Is it the best pricing? And so, you know, that has been the environment for a long time. But we're going a step further because they are seeing rising costs between congestion pricing, potentially ⁓ now tariffs. ⁓

Steven Greenbaum (10:25)
It's kind of weird to have a lot people in the I think it's not that we're not going to to get in there. It's just that we're going able to So I it's a good that we're to in

Melissa Cafiero (10:45)
And just a shrinking market

Steven Greenbaum (10:45)
there.

Melissa Cafiero (10:46)
of available vendors, both on supplies and in the contract realm, the competition is just narrowed. So we've had to really look at those things, that small fraction of their operating budget. And what we've done is we've created analytics to look at buildings and create a baseline comparison. What is the percent?

Steven Greenbaum (10:54)
Okay.

Melissa Cafiero (11:09)
building, can on there are outliers. can either

that there is good reason or realize that is where we need to focus instead of looking at a big categorical pot.

you know, with no real direction. And so we have been successful. We've noticed that across the portfolio, there are some discrete line items that everybody seems to be paying more for. And so now we can go directly to the vendors and contractors that provide that and try to hedge the buying power of our 200 plus buildings to get better pricing on those items. And we have the

analytics and data to support that what's going on with this. think one of the biggest one is the fuel surcharge and congestion pricing. We've seen that from a lot of the larger vendors and to go back and say to them, well, if you're servicing 100 buildings in this area, it's not really rational to charge that over and over again. And you beat them up a little bit.

come back home and be a little more service oriented and we have had some success.

That is in general what we've been looking at and that's been a strategy. And I think that it's very helpful for our boards when we can provide their ⁓ comp analysis of like buildings. They're able to present that.

sort of in a

blind format to the residents of the building to show what efforts they're making, how they're performing against comparable buildings in the neighborhood.

Carol Ott (12:47)
So every building buys garbage bags. And I assume that it's bought building by building. So my super will go to the supplier and order X number of garbage bags. Is that something? I mean, it would seem like you would, take your portfolio, you'd see how many garbage bags you buy a year. You'd go to the vendor and you would be able to negotiate.

Steven Greenbaum (12:47)
Thanks.

Carol Ott (13:08)
Perhaps a better price? Perhaps something?

Steven Greenbaum (13:09)
Okay.

Melissa Cafiero (13:11)
Yeah, absolutely. And so those are the kinds of things that we have looked to negotiate on behalf of our clients. We try to limit it not to just one. We don't want to, you know, only offer one garbage bag supplier to our clients. So we will go to several and we'll create an internal price list. The same with, you know, salt.

during the winter months and a number of other items. Right now, gas detectors being the big one with compliance, compostable bags for composting. So ⁓ all of it.

Carol Ott (13:49)
And I'm assuming this is somewhat of a change

where, I mean, either clients are asking you or you're stepping up basically saying, we want you to look at, we want you to buy stuff for us as a portfolio, not just as, an individual building. Is that a change?

Melissa Cafiero (14:07)
Well, yeah, we're not actually buying. You know, we're not procuring that and warehousing it and offering it. What we're doing is we're just doing the back end work. We're working with the large vendors that we were already working with among the portfolio. But just trying to bring that competition front and center so that we have real pricing on items that everybody or most of our building must buy into.

And making sure that the vendors on the other side are crystal clear that this is a family and all of these buildings ⁓ are under our umbrella. And so there's transparency in that regard.

Steven Greenbaum (14:32)
Okay.

Carol Ott (14:47)
Thanks. Alvin, when we spoke earlier, you pointed to associations that followed investor Warren Buffett's advice. Do the opposite of what the herd is doing.

Melissa Cafiero (14:50)
Thanks.

Carol Ott (15:00)
How does that advice translate to co-ops and condos?

Alvin Wasserman (15:04)
Well, to begin with, in baseball, there's a term called getting ahead of the curve. And what that means is anticipating balls and strikes and getting ahead in the count. And every baseball fan knows that if you can't hit a curve ball, you're not going to succeed as a major league player. So how does that translate for, say, Warren Buffett getting ahead of the curve? And in terms of investments,

Steven Greenbaum (15:20)
Thank

So.

Alvin Wasserman (15:31)
When everyone's exuberant, that's when he sells. When everyone is frightened, that's when he buys. Then how does that translate for management companies who have loans for underlying mortgages for co-ops and construction loans for condominiums and

Melissa Cafiero (15:43)
Thank

Alvin Wasserman (15:52)
loans, mortgages for ⁓ equity portfolio? You have to be familiar with

the economic cycle, which generally runs over 10 year periods. Fairfield has over 200 buildings in the equity portfolio that we own and manage. And during the period when loan mortgages were running three to 4%, sometimes even lower, we refinanced almost every property and extended the years that they came due.

and put us in a very strong position for the future. We said, well, look, we're doing this for ourselves. What we do for ourselves, we don't have management A and management B, management light, management fairfield. We manage our properties with the same way and the same care and the same pride of ownership as we do our own properties. And so we approached all the co-op boards and we said, this is the time.

to refinance your underlying mortgage. We approached every condo board we knew had major projects coming up. We said, this is the time to take a loan. And I would say, certainly with the co-op boards, almost all of them, except maybe one, heeded the advice and they got underlying mortgages at two and a half to three and a half percent.

Carol Ott (17:11)
And I'm going

to jump in here. And most of the buildings have prepayment penalties. And for a board, that's a big deal to imagine you're paying a penalty to refinance. And you're going to have to justify that to your shareholders who are going to see that. How did you get your boards to overcome that stumbling block?

Steven Greenbaum (17:25)
Okay.

Alvin Wasserman (17:33)
Well, that was the sticking point for the one board that didn't refinance. And

Carol Ott (17:38)
It caved.

Alvin Wasserman (17:38)
it

was a sticking point for most of the boards. People who are not ⁓ savvy in finance and investments and in underlying mortgages, that's a hard thing to swallow. It could be tens of thousands, even a couple of hundred thousands. And what we did is laid out spreadsheets and showed how ⁓

Steven Greenbaum (17:42)
So,

Alvin Wasserman (17:59)
in the end, the boards are going to benefit. They're going to, in some instances,

reduce their monthly common charges, come out with more money for their reserves, and it's a win for them. It's a win for the community. ⁓ The one board that just couldn't comprehend that waited, and they waited until their loan came due a few years later, which was recent.

Steven Greenbaum (18:15)
Okay.

Alvin Wasserman (18:26)
And they're now facing where they have to refi

at a much higher interest rate and they've lost. We can do the best we can to explain to people what's in their best interest. Well, we do for ourselves, but not everybody ⁓ is comfortable with that. And you can't force anyone to do anything.

Steven Greenbaum (18:41)
So.

Carol Ott (18:46)
Do you think that one board that didn't take your advice is getting pushback

or negative feedback from their shareholders or their shareholders just don't even know, don't understand?

Alvin Wasserman (18:59)
I don't

think they're practicing true confessions. I don't think they're telling their shareholders that they had the opportunity and Fairfield's great, they told us about it. We didn't listen and now we're, they're not, you know, and it's not our business to disclose anything like that. They just have to live with the consequences themselves.

Steven Greenbaum (19:01)
Okay.

Okay.

Carol Ott (19:20)
I'm for any of these strategic initiatives that you have spoken about, the board, I mean, they're basically saying to their community, we are sticking our neck out because we think this is the better option to take. Kind of lay out for

what makes sense, what are the steps that a board has to do

feel comfortable doing that.

Melissa, do you want to start with you?

Melissa Cafiero (19:47)
Sure, think Stephen touched on it. think communication is key. I think there should be ultimate transparency

the board has agreed on any strategy moving forward. I think that there should be ⁓ concise communication and ongoing communication with the community. And I think that people appreciate that, regardless of

if it's a hard pill to swallow, like a major assessment.

Steven Greenbaum (20:13)
Thanks.

Melissa Cafiero (20:15)
⁓ I think people are logical. They understand. I think there's, boards should be prepared with all of the information, evidence of their research, that they've looked through everything. And then I think they need to communicate that forward. And I think that you can't please everybody, but most people will understand. I think that's the reality.

Carol Ott (20:35)
Okay, Steve, do you have a comment here?

Steven Greenbaum (20:37)
So I agree, you know, obviously we tout communication and transparency and I think it is paramount and like, like everybody who says, you know, most people will acknowledge it and accept it and appreciate the communication. And I can't tell you how many times people have come up to me and the board's gone, you know, we understand now why we have to do things. And we do that with the budgets too. When we do a yearly operation budget, we have a town hall meeting. takes about 30 minutes.

We go through income and expenses because for years we kept hearing shareholders who were contentious saying, where's all my maintenance going? Where I pay all this maintenance, where's my money going? So we really do a communication push to really explain their budget so they understand. But the other point that's important is the board has a lot of access to a big community besides for the managing agent. You know, the managing agent usually have one manager who comes into the meeting and explains stuff. They have a back office. I know that.

that Melissa and Alvin and we have controllers in our back office some wonderful financial people, some brilliant people who know the vast markets. mean, the three of us have historical institutional knowledge that is unrivaled in this industry, but we also have people in our back office that we could talk to and co-ops and condos also have a group of people they can run this stuff by too. They all have accountants, you know, so if there's a question about an assessment or a question about.

What should we do with our money? Should we refinance? Should we have an assessment? You know, it never hurts to pick up the phone and call your accountant, you know, and there's also finance people on your board. If you don't have somebody on the board, go and recruit a volunteer who has good financial knowledge and run it by them and communicate that when you go to the shareholders, not only we get this information from our managing agent, the managing agent, CFO went through it. We ran it by our attorney, we ran it by our accountant. So the constituents understand that it's not just

one managing agent and one board member making these huge multimillion dollar decisions. It's a community. It takes a village as they say. And there's a lot of people at our fingertips that we can go and access. And it's always important to do that. We like to say, we don't want to take all the blame for it. So we could always shift that good news or bad news, you know, and share it with the account, the attorney and CFOs and other finance people.

Carol Ott (22:52)
So Alvin, I'm wondering, sort of building on what Steve just said, do these ideas come from the board? It's hard for me to imagine. Or is it coming from the management who's saying, you might want to do X, Y, and Z, and then maybe the board is clever enough to go talk to all its professionals. Where did they?

Alvin Wasserman (23:10)
Well, in this

instance, nobody was really thinking about refinancing because they were in the middle of a term of an underlying mortgage. So it did come from management. we have somebody who runs a mortgage company within Fairfield who is very knowledgeable because we were doing that for ourselves. and that person would make himself available to the boards.

to answer all the questions they have, whether or not they used us. Because not every board used Fairfield's mortgage company to refi. some decided, you know, they knew somebody or they went out and shopped and they felt they could get a better deal. There's no requirement for that. But what I find is of utmost importance is simplicity in communication. And when something is true,

Steven Greenbaum (23:59)
Okay.

Alvin Wasserman (24:00)
it's simple.

in communicating to the entire community about the concept of refinancing the underlying mortgage, there were two key points. Your monthly charge is going to go down.

you're going to have more money in the bank. Any questions?

Carol Ott (24:15)
You didn't leave the point, we're going to pay several hundred thousand dollars to do this.

Alvin Wasserman (24:20)
We provide a whole spreadsheet to everybody to look at that. And if they have questions about it, we're happy to answer it. But the net result are the two things that we highlight. And in one instance, it took an entire year for the board, month after month, we communicated with them, the community. took a whole year.

Steven Greenbaum (24:34)
Okay.

Alvin Wasserman (24:44)
for them to finally say, let's go for it. They got a 2.5 % loan.

Steven Greenbaum (24:48)
Thank

Carol Ott (24:49)
And I guess I need to ask, the reason it took a year, is it because, did the board not understand? Were they hesitant in communicating to their shareholders and felt they would get blowback? Why did it take so long?

Alvin Wasserman (25:02)
It was a combination of ⁓ not completely understanding. It's a combination of also being concerned what kind of reaction they're going to get from the community. There could have been two or three people on the board who said, hey, this is a no brainer. And then you've got board politics that come in because

Steven Greenbaum (25:04)
Okay.

Alvin Wasserman (25:22)
those two or three people are the ones that are saying it's a no brainer.

Steven Greenbaum (25:22)
So

Alvin Wasserman (25:26)
And so, you know, there's a number of things that had to be navigated in order to come to a really good result for that board. On our part, and I say this to my managers and it's something that I practice in life, something you have no control over, let it go. Don't hold onto it. Don't ruminate about it. You

made your best effort. Let it go. But.

next month, try again. And in between, just, you know, let it rest.

Steven Greenbaum (25:59)
Okay.

Carol Ott (26:00)
question about where the strategic initiative comes from. So I mean, I may be wrong here, but each building has a managing agent who may be experienced, may be less experienced, but they're really busy making sure

the building is operating properly. The super's doing its work. The supplies are there. They're checking in with the compliance. They're getting the contractors on board.

Are these the people who really will be suggesting strategic initiatives that the board can take, or does it come from somebody higher up in a management company that a board has retained?

Steven Greenbaum (26:38)
Yeah, that's a great point, Carol.

You know, I always say to my boards that your property manager has five or six buildings. They know that little microcosm of that little world. So if there's anything ever that's bigger or loftier or something that they need, a bigger question, you know, we always have a tier. I think Alvin and Melissa are the same. You know, we educate our managers to the best of our abilities. We always have seminars. We're always learning. We're always doing things with Habitat and things that just teach our managers constantly.

But they know that when it comes out to certain bigger decisions, they can go back into the back office and look to their team leader or to the CFO, depending on what the question is, and we could really help them do it. Like I said before, between Alvin and Melissa and myself, we have hundreds and hundreds of years of institutional knowledge. I don't expect my property managers to know all the nuances about mortgage refinancing or how to get a construction loan or how to really handle a huge project.

But they have the backup to come to our office and talk to either the team leader or talk to, you know, somebody in our office to get the information they need. And that's really what we do. We want our managers to be able to deal with the day to day boots on the ground, really deal with that. But they also need to be intuitive enough to say, Hey, this building is thinking of doing X or this is the project that's coming up. Go to their leader, their manager, their executive, their CFO, their back office.

and get the information they need. And and we know that we've always gone to a million meetings when there are bigger things that we need to handle and we'll have a discussion. We also tell them if they don't know, they have access to their attorney, they have access to their accountant besides for our back office. So again, back to this big community, I don't expect the managing agent to be, a man on a ship, on his own, but I expect them to know when they're talking about refinancing or if there's a bigger project.

If it's something that they don't know, or they need the nuance or need the help, they come to us and we help them. That's what we do as leaders in this industry. And that's important. And so to your answer is, I don't expect a typical manager to know the nuances of refinancing a mortgage, but I need them to know that, hey, our mortgage is coming up or rates are going down, or we'll have seminars in our office talking about, hey, this is what's going on in the industry. Bring this information to your board. If it fits, let's work with them.

Carol Ott (28:56)
It's one thing if you've got something in front of you, like something that needs to be financed, and that makes sense. You go to somebody who can help you figure out how to do that. With all the city's new compliance requirements, there are strategic ways of bundling what needs to be done or making sure you haven't forgotten X, Y, and Z as you do your building's facade.

Steven Greenbaum (29:19)
Mm-hmm.

Carol Ott (29:20)
Is it up to the board to ask maybe a more senior team at their management company, help us figure out how to bundle this, or is it up to the management company to come and say, let us help you? who asked that question first?

Alvin Wasserman (29:35)
Well,

the way we approach that, Carol, they use the analogy. The property manager is the tip of the iceberg. And the iceberg is the substance of the company, the stratified company below. But in some management companies, there isn't a lot of depth. And so instead of being the tip of the iceberg, the manager is just like a floating piece of ice on the ocean.

Steven Greenbaum (29:41)
So.

Alvin Wasserman (30:01)
And if the Titanic were to sail by, it would still be sailing today because there would be no iceberg

Steven Greenbaum (30:08)
Okay.

Alvin Wasserman (30:08)
to hit. So what our policy is and what our strategy is, I have a staff meeting with managers every week and every manager reports on everything that's going on at their properties that is significant. And what I say to them, I don't want to hear that the landscaper was there to cut the grass or

you know, something like that.

Tell us what your problems you're facing. Put it on the table. You have ⁓ hundreds of years of experience in this room. When you do that, it's our problem and we solve it. When you don't, you're on your own. And so we encourage open communication with the managers and to hear about what's going on at the properties. And when one manager talks about a compliance issue,

Steven Greenbaum (30:33)
So

Alvin Wasserman (30:58)
and

other managers have that same compliance issue, we put together a strategy that works for everybody and we present it to the board. And this way, the managers get the benefit every single week of myself and two directors and an assistant director at that meeting in addition to the property managers. That's a big investment in time.

and finance for our staff, but we find that it helps them and it helps the boards.

Steven Greenbaum (31:22)
Okay.

Carol Ott (31:29)
And Melissa, does something similar go on at your company?

Melissa Cafiero (31:32)
Sure, yeah, a combination of all of those things. We do have routine meetings, which are agenda-based here in-house. So we're hitting points on latest compliance, upcoming budgets,

things of that nature. We'll bring in guests, so on and so forth. But on a more day-to-day basis, we work in tiers. We have managing directors, which

together make up our executive panel. The managing directors have insight into each of the buildings on the financial understanding of that. So when their budgets come due, when their mortgages come due, you know, other specific details about that building. And so we're able to strategize ⁓ globally and then sort of on

Steven Greenbaum (32:17)
Thank you.

Melissa Cafiero (32:19)
⁓ a subset of buildings. think energy, you brought that up. Everybody is facing, has some impact of the energy code and energy laws impacting us over the next few decades. So we're able to look at those buildings and which ones

are subject to fines sooner, complex equipment. We're able to break out all of the buildings that have

Steven Greenbaum (32:40)
Okay.

Melissa Cafiero (32:44)
specific HVAC systems based on their installations and or commercial footprints in the base of the building so we can target those, develop a strategy, work on it through. And to your point, I don't think that boards

should be always taking the lead. think magazines like Habitat alert them to these upcoming things. So we're always trying to sort of

beat them to the punch, right? You don't want to walk into a meeting and they say, how come you haven't told us about Local Law 97? We want to be pseudo experts before that so that we can really talk fluently about it. And, some of our more junior property managers really have to have that education, really have to be coached. We put together a newsletter so that should summarize

Steven Greenbaum (33:10)
Okay.

Melissa Cafiero (33:36)
those things and if they're not really comfortable talking about certain issues, they've got to bring us into the fold, any one of the executives or even just a more senior manager. ⁓

Steven Greenbaum (33:48)
Yeah, Carol,

let me just add one thing. And obviously, Alvin and Melissa's points are fantastic and so true. The other thing we do is we make sure that at every board meeting, we give the board's information because like Melissa said, we don't want boards to say, how come I didn't know? Why didn't you tell me? You know, that's the last thing I ever want to hear from a board. We didn't know. So we spoon feed information to the board so they have that information on a monthly basis.

we put together what we call a milestone report that lists all the compliance items, whether they're completed, when they're due, what's pending. So every month this is handed out and given to them in advance at a board meeting. So it's there for discussion, whether it's on the agenda or not, same way you give them financial report to let them know how much money they have, where the reserve fund is, who's in arrears, how much money you have. But that milestone report every month goes into a board package. So it sparks conversation.

Obviously it gives them a timeline or you keep, it keeps nudging. Look, boards have a lot on their plate and there's a lot of things to do in a short period of time. That's the board meeting. And you want to be productive and you want to hit the points, but you also want to keep them aware of what's coming down the pike, not today. And this goes back to strategic planning. You want to know that, you know, this report is due in six to eight months, or this needs to be done in a year from now. So let's start planning. So.

We do these milestone reports and we put it in every board meeting every month so we can kind of track and give the board some idea of what they need. And we'll highlight things that are six months out or things that are due next month that we need to do. So it keeps the board informed. And remember, we clearly understand that they're unpaid volunteers and we're the paid professionals. So we really need to be assertive in making sure they do or they let us do what needs to be done for the building.

Carol Ott (35:38)
I'd to ask each of you if you were to pick 123 areas that you think a board and with their management partner should be looking at for strategic initiatives about anything, what would those areas be?

Steven Greenbaum (35:53)
Well, I'll just piggyback on what I said. You know, the milestone report that gives you all the New York City compliance really is paramount. That's, all the compliance issues to stay on top of them, because if you don't do them, the fines are huge and the cost of doing a lot of these compliance issues are very big. Second thing is definitely financing. To keep an eye on your financing monthly. I don't expect the board members to comb over all the reports that we give them.

but to at least pay attention to the financial information we give them on a monthly basis to understand where they are financially, who owes them money, who do they owe money to, where they stand as far as the reserve fund. And the third most important thing I think is communication and transparency. I mean, I can't say that enough because we hear this at every, I was at an annual meeting last night. We need more communication and transparency. And I got to tell you, this building does four newsletters.

has an annual meeting and two town hall meetings and they're still complaining about that they need more communication and transparency. So I think it's important not only to be clear and transparent with your board, but also to try to go that further step and get out into the shareholders and communicate to them. So that's my thing.

Carol Ott (37:01)
Melissa?

Melissa Cafiero (37:01)
Yeah, I agree. think we've touched on all of the items. Compliance is a big one. When we've looked at the analytics and Carol, think I alluded to this previously, Local Law 11 facade projects are really the largest, most routine spend

our properties. And so I think there has to

acceptance that these are unavoidable.

⁓ And you have to sort of bake it into your forward approach for a fight, know your

financial planning So every five years, know, you're gonna have this big Ticket the best way to deal with that is to sort of assume some part of that on a rolling basis So I think that's a good strategy I think that also plays into mortgages and refinancing. I think we we can all assume that the

Steven Greenbaum (37:42)
Okay.

Melissa Cafiero (37:52)
interest only loans that are going to come

the next three or four years. That's a scary thought. I think sooner rather than later, the boards have to be talking about this. And even if there's nothing to do, it's too early to pull a trigger. think communication, transparency, reminding the shareholders that this is the world we live in, but that they're on it now and they're going to continue to work towards that.

Steven Greenbaum (37:57)
Okay.

Melissa Cafiero (38:19)
maybe a subcommittee, volunteers, I think that's probably a good way to soften

what might not be so great, but inevitable in the next couple of years.

Alvin Wasserman (38:28)
The vast majority of our properties are ⁓ suburban residential. And so we're dealing with different compliance issues than the city properties. Is the grass one inch or one and a half inches tall? Is the swimming pool gonna be open Memorial Day weekend? And I've been tracking that for decades and it rains nine out of 10 times on Memorial Day weekend, but that pool has gotta be open.

Steven Greenbaum (38:42)
Okay.

That'll be open.

Alvin Wasserman (38:55)
⁓ I would say that the three main things for these properties are infrastructure and planning for replacement long-term of roofs, siding, walkways, finance, being prepared for those infrastructure improvements when they're needed, and maintenance, keeping things pristine all of the time.

Steven Greenbaum (39:08)
Okay.

Alvin Wasserman (39:18)
And what covers all of those is good communication about all those three things.

Carol Ott (39:26)
If I sort of summed up what you three have said, you really have to know the details of what needs to be accomplished, whether it's compliance requirements or financial requirements. You need a picture before you can have any kind of strategic initiative to tackle that. And it sounds like it's the management company.

that should be providing that picture to the board. And then hopefully the board can act on that.

Melissa Cafiero (40:02)
Absolutely.

Steven Greenbaum (40:02)
Absolutely.

Carol Ott (40:03)
Thank you all for such a thoughtful and interesting discussion.

Melissa Cafiero (40:07)
Thanks for having me.

Steven Greenbaum (40:07)
Thank you.

Thank you. Thank you, Carol.

Alvin Wasserman (40:08)
Thank you, Harold.