Sound Financial Shape
- Jun 06, 2014
As the commercial real estate cycle in New York City—and the nation—turns to condominium development, the management of for-sale multifamily housing is once again in the spotlight. Overseeing a portfolio of some 18,000 condo/coop units in New York, Halstead Management Co. LLC is positioning itself for growth. MHN Executive Editor Keat Foong interviews Martha Goupit, Halstead’s managing director, executive vice president, about the nature of the business today.
What’s the most unusual challenge your team has had in the past year?
I would rather not skew the question with “unusual.” A challenge that has developed over the past several years and continues to morph is the makeup of our boards. We are delighted to see that there is a real interest being taken by many individuals, particularly in the new construction sector, wherein the talents of residents with strong financial and accounting backgrounds are committing their time to participate and guide these new developments in their early stages, keeping them on course and maintaining the integrity and function of what the developers have worked very diligently to provide in amenities and services. Vigilant effort on the part of the management company is enhanced with the expertise of these savvy members who already have full-time jobs, but are lending their time to add a level of comfort to their neighbors that ownership is working with management to protect their investment.
Many of our readers work with rental properties. What lessons learned from working with New York City co-op boards would translate best to working with residents in a rental community?
Any community of “residents” deserves transparency when it comes to what is going on in their own community and how it affects them both financially and in their day-to-day quality of life. Communication is a given but effectively sharing information with your tenants via newsletters, memorandums, e-mail blasts via wireless devices and in person—an open door policy so to speak—circumvents discord. A manager should welcome criticism and see it as positive, not negative, feedback, embracing a different point of view that can lead to a new path or way of doing things the next time.
Many co-op/condo board members do not have backgrounds in accounting, real estate or management. Do, and should, co-op board members undergo some form of “training” for their jobs?
In general, boards are becoming savvier. And while there is no formal training that occurs when a new person joins a board, there are different ways they can go about educating themselves and have a more impactful term. For instance, there are a number of publications targeting co-op and condominiums that write informational stories to help the board members become familiar with a number of different issues that may occur in the building, and serve as a guide for handling these situations.
Additionally, boards can join the Council of New York Cooperatives and Condominiums (CNYCC) where members have access to a host of great information and consistently get new and relevant information through email blasts and news articles being posted on the Council’s website. Another benefit of membership in the CNYCC is its annual housing conference. For a full weekend each year, the conference covers everything from board member roles to financial and legal responsibilities.
Even if a person does not have a background as an attorney or an accountant, they can still make a positive impact during their time on the board.
How do you deal with boards that micro-manage? And what about boards that are too hands-off? Is there a way to strike a balance in order to accomplish building objectives?
Micro-management, while seen as a negative, requires managers to address the issues head-on with the board who may not be aware that this is how they are being perceived. There are ways to re-direct how a board member or “the board” is communicating, and the same is true for boards that are too hands-off. It is the manager’s responsibility to elicit board involvement and to educate them on the importance of their contribution, as they were elected by the building’s residents to maintain and enhance the building’s value through teamwork. E-mail has been a game changer with regard to board communication but, on the flip side, it can become a hindrance when used as a forum to vet feedback on contentious issues. Board meetings are for face-to-face discussions, and e-mail should enhance a board’s ability to make quick decisions and move the day-to-day operations forward. Finding a way to deflect and encourage response is the manager’s challenge in order to strike a balance that works for both the board and their manager.
What do you observe to be some of the top concerns and challenges of New York City cooperative/condominium boards today?
Some of the main concerns I see boards dealing with is staying competitive with new buildings, keeping ahead of all of the changes in the market, and continuing to learn about all the new technologies available to them. With a number of state-of-the-art buildings coming to market, each boasting a variety of seductive amenities, older properties have been forced to take a look at unused common space and find ways to convert it into attractive uses for both current and prospective purchasers.
The most common challenge all buildings must deal with is balancing the budget. This can be a very sensitive issue to existing residents, and also to potential owners looking to buy. You don’t want the perception to be that your building has not been managed to protect the asset and its owners from costly assessments due to poor management or board conflict. Again, the board and management company must have common expectations. If that synergy doesn’t exist, it may be time to re-examine the relationship with the current management company.
How can cooperative/condominium boards control costs or reduce the cost of capital projects?
Co-ops and condos do not want to be known for a higher monthly maintenance or common charges than comparable buildings. Potential purchasers may shy away from buildings levying large assessments to perform capital or emergency repairs on an annual/ongoing basis. Thoughtful planning, anticipating capital repairs and securing an appropriate reserve fund for emergencies is an effective way for co-op and condo boards and management companies to protect its residents from unexpected financial surprises.
For instance, maintenance of the building’s exterior components and mechanical systems require diligent attention on an ongoing basis. Having a five-year capital plan that addresses what components may be exceeding their useful life and securing monies to ensure those funds are available is imperative. Boards who are penny wise and pound foolish can find themselves forced into levying emergency assessments on owners, creating discord and an unnecessary burden on the building’s financial position.
What strategies have you found to be most successful for increasing a building’s value?
Amenities have and continue to be sought after in today’s market. The standard storage and laundry rooms no longer cut it. The lure of pools, media rooms, gyms, basketball courts, wine storage, children and adult entertainment rooms are vying with existing buildings lacking these amenities. The need to keep up with all of the competition and find ways when feasible to tap into unused common areas is paramount. These spaces need to be considered both for their income-generating possibilities as well as for their desirability in today’s market and will, when implemented appropriately, enhance those properties needing a boost in value.
What is your assessment of the state of the business of cooperative/condominium management in New York City today for companies such as yourself? Is the industry growing?
Business at Halstead is strong, and is continuing to grow. With the acquisition of several smaller boutique firms, Halstead has brought together a group of seasoned professionals; each brings their specialty and point of view to a challenging profession.
The industry is growing by virtue of all the new residential development, both ongoing and anticipated, in New York City. We’re in a unique position—these buildings all need to be managed. Through Halstead’s seasoned team, we can successfully help an established building get on track, but we also know how to get a new development opened, assist the new board with establishing procedures and keep them in sound financial shape moving forward.
What keeps you up at night?
Anything that is unfinished to my satisfaction at day’s end. As anyone in this business knows, the devil is in the details so they had best be well attended to!