The horror stories abound: Ivy Leaguers flipping fries. Dot-com darlings begging for work. A six percent unemployment rate. It's no secret that the New York job market is in the intensive care unit right now. So then how is it possible that co-op management agencies are taking out full-page wanted ads and offering hefty signing bonuses for qualified (and sometimes even less-than-qualified) recruits?
The answer is that there is a severe shortage of experienced co-op and condo managers, and no one new is entering the biz. New York City real estate is practically a full-contact sport, and an almost-always robust sector of the economy, so why are management firms having such trouble attracting players? What lead up to the shortage? What can be done about it? And what does it mean for the future of co-op management?
At the most obvious level, the problem arose because managing co-ops is no walk in the park. The hours are long, the pay is rather unimpressive, and the burnout factor is high. "A typical managing agent probably works until 10 p.m. at least two nights a week because of all the evening board meetings," says Michael Berenson of AKAM Associates, Inc., a co-op management agency. In return, a seasoned pro managing a portfolio of properties worth hundreds of millions can expect to command only an average $75,000 annual salary, or thereabouts.
But underpinning the low pay grievance lurks a more abstract complaint - a frequently cited lack of professional respect. "They [board members] often don't see us as professionals," says Mark Weil, another managing agent from AKAM Associates, Inc. "They're not real estate professionals themselves, so they're attending these meetings in their free time. This isn't their "˜real' job - so they don't seem to realize that this is our real job," he says.
"A lot of board members sort of treat the whole thing as a spectator sport," adds Susan Wolf, a former real estate owner and manager who now works as a broker. "But a manager is only as good as the board he works for. If they're unqualified, you can have problems. Even if they're good, you're still beholden to a committee, which always makes it hard to get anything done."
Andrew Hoffman of Hoffman Management explains the tension like this: "The problem comes from the fact that each board is paying only a small yearly fee - let's say 10 percent of what you need to earn to pay for your whole administrative staff, etcetera - so you need to have multiple clients. But then each of your clients expects to get 100 percent of your time. They all want you to be at their beck and call, not realizing that you're managing 10 other buildings as well." It can all add up to a lot of dissatisfied managers, many of whom are defecting for greener pastures in brokerage, development, and commercial properties.
All this still doesn't explain why there's a shortage now, though. After all, managing co-ops has never been fun, but there were always a few people willing to do the job. So then the question is, why now? Maybe things weren't always this bad. What changed?
To fully understand this sticky situation, it's helpful to examine the history of the co-op management business. Although co-ops have been around forever, the 1980s saw a huge boom in co-op conversions. Back then, most owners-turned-sponsors continued to serve as managers. According to Wolf, this system made a lot of sense. "The sponsors already know the building. They have the experience, the connections. They have a guy who's willing to come fix the boiler on Christmas. They're getting the best prices on contracts and supplies because they've already done the haggling. These people were huge assets to their buildings," she explains. But over time, co-op boards received control and the sponsor/managers went out and large numbers of managing agents were needed to replace them.
Next came the kickback scandals of the 1990s when a number of people went to jail because managing agents can be held personally liable. "The indictments of the '90s drove a lot of people away, and ever since then fewer and fewer people have wanted to get into the business," reports Berenson. "Each year it's gotten worse and worse."
Another major development that began plaguing already beleaguered managers (of rentals as well) was New York City's predilection to regulate everything to the teeth. "There are new regulations all the time," says Weil. "It wasn't always this bad, but now the bureaucracy is spinning out of control," he says. Wolf agrees, offering sanity-breaking examples like this one: "Take window guards. The manager is required to offer guards to everyone in the building. Once a year, you have to send out forms to everyone asking if they want guards or not. But what if they don't send the forms back? You can't just put the guards in without permission. But if you don't receive the form saying they didn't want them, you could be in big trouble. All this stuff takes up a lot of time, and it makes it very difficult to do business. In other cities real estate management is a popular retirement job. Not here though. Every little thing comes wrapped in red tape. "
But all this notwithstanding, one would think there would still be a fresh crop of newcomers willing to learn the ropes in the profession. Not so, say the pros, for a number of reasons. For starters, this isn't a business people typically train for in college or any established institution. Most colleges and business schools don't even offer classes in building management - much less co-op-specific management - and even if they did, managing real estate in New York is so radically different than doing it elsewhere that that education would be almost useless. "You really only learn it on the job," says Berenson. "The regulations change so rapidly, there's really no way to prepare by just learning the basics. You have to be up to date," he explains.
Traditionally, most co-op managers fell into the business via the owner-to-sponsor route or they were doormen in the building who worked their way up, or something similar. Back when co-ops were a relatively new phenomena, board members were willing to entrust a doorman or other staff member with more administrative duties. But now that the business has evolved and become more sophisticated, they aren't willing to take their chances with someone inexperienced. Margie Russell, the executive director of the New York Association of Realty Managers (NYARM), puts it this way: "Fifteen, 20 years ago, many boards were new in their roles and it was an accepted practice to have management trainees reporting to a Director of Management and attending board meetings alone. Not now. Now boards expect a much higher level of sophistication, so in turn managing agent companies are much less likely to bring on trainees."
Everyone we spoke with was in agreement that salaries for experienced managing agents are due for a hefty upward correction, but what with a struggling economy and the new real estate taxes, that doesn't seem likely to happen anytime soon. And clearly, throwing money at the problem isn't all there is to it. So what else can be done? Berenson and Weil mention that some management firms are now offering training to new recruits in an effort to lure fresh blood while maintaining the level of quality their clients demand. "We're going with a homegrown approach," says Berenson of his firm's program. "We think that's going to become more common." Wolf suggests that professional organizations might offer training seminars to co-op board members as well, to help them better understand the situation faced by their managers and be able to hire wisely.
Russell also speaks of the need for training to fill in gaps. She mentions that Suz Landi, David Frankel Realty's director of management, has initiated a program to regularly send resident managers to training classes and seminars that are traditionally geared towards the property manager. "The staff on the building's payroll can be a big help if trained properly to take over some of the day-to-day responsibilities that don't require a senior person. For example, a doorman who has taken building management courses at Local 32BJ can be a big help to the resident manager on some of his day-to-day issues. It's about training and hiring wisely at every level of building operations, " she explains.
Yet another suggestion is licensing. "There's been some talk about licensing," says Hoffman. "Right now there's only certification, but no licensing required. That might help put more professionalism into the field."
And last but not least, there was a general consensus that the respect issue would have to be dealt with in some way. "Boards may have to become a little more sensitive, a little more realistic in their expectations," says Hoffman. "They tend to flip agents all the time, trying to find someone cheaper, but it's often pennywise and pound foolish. A good, experienced agent can save you $50,000 just like that," he says.
When all is said and done, it seems that the burgeoning co-op management biz has reached a turning point, or perhaps more accurately, some growing pains in its development. Obviously, many things will have to give in order to rectify the current problems. But whatever changes are in store, New York's management professionals will be on the front lines of the battle.