We believe that the best way to judge a management company is not by what it says it can do but by what it has actually accomplished. We have listed below some of the problems we have encountered over the years and the ways that we solved them. Now, your building may not have any of these problems today but wouldn't it be nice to know that your management company has the capacity to solve them.
Goldin Choice started managing this building five years after the sponsor converted this building to condominium ownership. The sponsor had chosen the "pay as you go" method of reserve fund contribution which meant that it put money into the reserve fund as it sold apartments. At the time we started managing the building, not all of the apartments had been sold and the entire reserve fund requirement had not been met.
After discovering this problem, we arranged for the sponsor to make a $60,000 payment to the condominium to fulfill this obligation.
THE WATER BILLS WOULDN'T STOP COMING
This Brooklyn Co-op had a water meter installed early in the water metering program. Even though the Co-op had been paying the metered bills directly, its underlying mortgage holder had also been paying frontage bills at the same time for several years.
After discovering this problem, we met with DEP and arranged for payments made on a frontage basis (about $40,000) to be credited against the meter account. At the same time, we arranged for the bank to stop escrowing for and making the erroneous frontage payment.
THE CO-OP THAT ALMOST WENT AWAY
When Goldin Choice first started managing this 82 family building it was only 25% sold, the sponsor had walked away and the building was in poor physical condition. Our first step was to foreclose on the sponsor's shares while collecting the rents from the unsold apartments. The sponsor had used his shares as collateral for a loan. Oddly, as the foreclosure proceeded, the lenders did not step in to protect their collateral so the Co-op ended up owning the unsold apartments. By owning so many rental apartments, the Co-op owners were in jeopardy of losing their right to deduct a portion of their maintenance payments against their taxes. We quickly developed a strategy to avoid this problem.
Through normal attrition, many of the apartments had become vacant. We then decided to try to sell the apartments ourselves. Due to market conditions (this was in the early 90's) and the condition of the building, we were only able to sell one apartment out of the 20 odd that we had attempted to sell. Because of all the vacancies, we had been running a large deficit which was depleting our reserves.
The Co-op was forced to default on its underlying mortgage. The lender moved aggressively and immediately started a foreclosure action against the building. Just as a Receiver had been appointed, the Co-op and the bank entered into a forbearance agreement which allowed the building to keep control of itself and the Receiver was removed. During this period, Goldin Choice acted as a conduit for information flow between the bank and the Co-op.
Our next step was to attempt to find an outside investor ("White Knight") to come in, take over the unsold shares and work out our problems with the bank. We advertised extensively and found several interested parties. The only problem was that every investor wanted the bank to change the terms of the underlying mortgage (cut the interest rate, lower the principal, etc.). Unfortunately, the bank was unwilling to change any of these terms so that approach proved ineffective.
Eventually, the bank proposed a deal that resolved our problem. The bank became our new sponsor! The bank took over the unsold shares while giving the Co-op a large construction loan to repair the building.
After the loan was secured, the Co-op, through Goldin Choice's efforts embarked on a $500,000 capital improvement program. In this program we replaced all the lintels, pointed the entire building, rebuilt 30% of the parapet wall, replaced the roof, installed a new intercom system, replaced all the apartment entrance doors, and redecorated the common areas. In addition, we installed a new laundry room and several storage rooms in the basement.
While we were busy fixing the infrastructure of the building, the bank was busy renovating and selling the unsold apartments. The building is now a successful co-op with over 80% of the apartments sold. Throughout this whole process, Goldin Choice has continued to manage both the Co-op and the unsold shares.
THE SPONSOR THAT HAD TO GO
Goldin Choice started managing this 10 family Co-op in 1990. The building had only 3 tenant shareholders. Prior to having Goldin Choice take over as managing agent, the sponsor had been managing the building in a slovenly manner. Even though the building had no underlying mortgage, it was in arrears with its real estate tax payments. We obtained a loan to pay off the back taxes. In addition, the sponsor refused to pay his maintenance unless he was forced to.
About two years after obtaining loan, we received a notice from the Department of Finance that the building was again in tax arrears. When we obtained the loan, the bank had paid off all of the back taxes on record and had been escrowing any paying real estate taxes since. We were confused. As we discovered after some research, just prior to the point that Goldin Choice started to manage the building, another building had paid its taxes and this payment had been mistakenly credited to our account. All told, including accrued interest, the building owed about $100,000.
Goldin Choice developed a strategy that enabled the Co-op to pay off the back taxes while getting rid of the sponsor. We declared a special assessment to pay the taxes. The tenant shareholders paid their portion of the assessment but the sponsor refused to pay his share. We then started a foreclosure action against the sponsor to force him to pay the assessment. He still refused to pay. We continued our foreclosure action and sold his apartments at auction. Just prior to the auction, due to the lack of payments by the sponsor, the Co-op was unable to make its monthly mortgage payment so Goldin Choice lent the Co-op money out of its own funds to keep it current.
The building is now 100% sold and is a highly desirable building (apartments sell for over $600,000 each). We recently arranged for the building to refinance its underlying mortgage increasing the loan to $450,000 from $250,000. We also arranged a $200,000 credit line with the same bank.
THE CO-OP THAT NO ONE WANTED TO REFINANCE
Although this Co-op had a large reserve fund, a debt of only $6,500 per apartment, was 50% sold and had a rent positive sponsor, when the underlying mortgage became due it seemed impossible to refinance the loan. The loan was too small for the majority of the lenders (including the original lender) and did not fit the criteria of the lenders who normally lent in this market.
We resolved this problem through aggressive negotiations with the original lender. We prevailed upon them to give the Co-op a new 8 year self-amortizing note. The terms were so attractive that maintenance didn't even have to be increased to pay for the new loan and allows the Co-op to contribute $1,000 a month to its reserve fund.
THE BAR THAT WASN'T THERE
The building that contains this 21 unit Co-op that had been converted to a Co-op in 1978. Prior to being converted to residential use, the building had been a hotel with a bar. When the building was issued a new Certificate of Occupancy as a 21 unit residential building, the records at DEP were not properly updated so the Co-op had been paying frontage rates with a bar included as one of the users. After discovering this problem, Goldin Choice arranged for a large credit for the Co-op for this overpayment.