....continued-back from the brink

The addition of Tom Lighter to the team was accomplished for similar reasons-and also helped the directors decide that it was time to change managing agents. After the sponsor left, the co-op hired a large management firm that was supposedly an expert in co-op matters. The account executive told them that they would have to replace their 16 boilers because they were beyond repair.
"They said the property would not survive the winter with the ones they had," recalls Samson.
Besides two other contractors the manager suggested, the board wanted Tom Lighter to bid. Lighter, an owner, was in the heating business and had occasionally done maintenance work on the property's boilers. He was surprised to hear of the project and wrote a letter to the management company saying that the boilers simply needed repair and regular care not replacement. Samson says the board never saw the letter and assumed Lighter did not want to bid. Lighter was reportedly angry at being ignored. Months went by and preparations for replacing the boilers began. Nonetheless, Samson, who had accidentally learned that the boilers were only 12 years old, was curious and began making inquiries. Three engineers echoed Lighter's assessment. The lawyer was referred to Lighter by Ventura. He told the attorney about his letter. After some talk between the board and Lighter, the $2 million replacement project was scrapped. "After hearing from Tom, we talked with him and got to know him better," says Ventura. "Then we asked him to be on the board. He shared his knowledge in setting up a boiler rehabilitation program, and eventually served as president. He was able to give us good direction without an ulterior motive. But all of that cast a shadow of doubt on our manager." The management company was fired. It is unusual for co-op board members-let alone anyone-to be able to put aside their egos long enough to listen to harsh criticism. Yet at Georgetown, that's exactly what the board members did. Margolis says it is just common sense, common courtesy, and a belief in the common good. "Listening to what people have to say is very important," she notes. "People

who complain are shareholders. They deserve to be heard. I think if you only hear from them at the annual meeting that's ridiculous. If something is do-able, we try to take care of it. They deserve to have the very best if we can give it to them." Savvy Moves The property also required repairs on more than the boilers. In order to sell unitsÑand get the investment backÑthe board realized it needed working capital. The most efficient way to do that was to restructure the co-op's mortgage debt. It had already refinanced its mortgages a few times for that reason. In November 1998, the co-op refinanced again, obtaining a 15-year fixed rate at 6.85. "We were able to reduce the payment by $30,000 a month," says Samson, "and lock in the rate for 15 years, and amortize the loan on a 22.5-year amortization. By the time the mortgage comes due, the amount of the outstanding mortgage will be $13 million. That's an unbelievable windfall. Now people are paying maintenance, based on a $24 million mortgage." The board also successfully sold apartments. When it took over from the sponsor, owner occupancy stood at about 40 percent. As of February 1999, ownership is at 53 percent. "That means about 100 apartments were sold in the last three years," Goldstick says. "And when we got over that 50 percent threshold, there were more banks willing to lend. We have pre-approvals at Citibank, Chase, European American Bank, and the National Cooperative Bank. That's been a huge aid in helping sell apartments." One step the board took was to reduce subletting by imposing new restrictions. According to Margolis, the new rules have been well-received because everyone understands "that we want to get ownership up," which makes it easier to obtain a mortgage and increases the value of the property. "It's really going swell," she adds, "and I say, 'Thank God, I lived to see it all.'" Another marketing technique employed by the board was simple: show that the financial and physical house was in order. "When we started renovations," recalls Ventura, "we made a conscious decision to make repairs in ways that were very, very visible. We did work in the courtyards and got the community "I feel that the

people of Georgetown have always looked at risks as opportunities." involved in planting flowers. We had contests, Home Depot gift services, and did things people can feel proud of that kept up the appearance of the property. Afterwards, we did thingsyou don't see, like the boilers, and the garage roof, which was leaking. "Not only did that help in marketing the cooperative, but it also helped the board engender strong community support.."We pay attention to everyone, including the renters," says Ventura, who adds that, "some of them have been here 30 or 35 years. They have never been happier. The sponsor neglected them. Since we've taken charge, we gave a paint job and immediately fixed any small problems in the apartments. We made sure that they saw themselves as part of the community, not as 'us against them.' As a result, they were more than happy to send us their rent. The community pulled together for the good of Georgetown,
She adds that they are constantly discussing new topics and ways to improve the quality of life. "After all, we're running a little city here," she says. Just as important to their success, adds Margolis, is the directors' approach. "When you present something, everybody usually has a different opinion," she notes. "Our meetings often run till one in morning. We will sit there until we all agree on a course. When we started, we looked at the depth of the problems and, although there was a lot of anxiety, we decided these are problems we must solve. And, by God, we came through it." "My advice to others is don't panic," observes Ventura. "You have to go through a series of steps. First, you have to be very careful about choosing your professionals and very critical about the information given to the board. You have to weigh all your options. Take the information and disseminate it. We had a feeling of despair when all this started, but we never gave up. While we had differences of opinion, in the end, we banded together. We were very, very concerned about the quality of life. That's how we gained support." To Samson, it is all a question of attitude. "There's a Chinese expression: a crisis is one-half risk and one-half opportunity," he notes.