Page 29 - NY Cooperator October Expo 2019

COOPERATOR.COM THE COOPERATOR — OCTOBER 2019 29 York. www.weathertightroof.com Since 1958, out clients have been assured of excellence in building management. We know the right architects for your type of building, the best contractors, the suppliers who discount most, and the insurance brokers who will diligently persue your claims. We know who to call because we measure our buildings’ success in decades. At Buchbinder & Warren, we understand your apartment is not just an investment...it’s a home. Please call us to learn more about our services. One Union Square West • New York, NY 10003 212.243.6722 RESOURCES www.buchbinderwarren.com of variables. Th ese factors include the ex- tent of common elements, the replacement is known as laddering. Love explains the cost of those elements, and the age of the concept in simple terms: “All the instru- property. So for argument’s sake, consider ments don’t come due at the same time. a townhouse style condominium com- plex where members maintain their own cash liquidity needs. Th is enables the co- HVAC systems within their units. A com- munity with this situation would probably the highest yield is that’s available at matu- require less cash for reserve funding then, rity time. If the funds coming due aren’t say, a high-rise apartment building with an needed, they can be reinvested at the high- equivalent number of units that has central est available rate, or can be kept liquid till a HVAC and elevators, which are expensive suitable reinvestment rate is found.” systems to maintain or replace. Sackstein recommends that her clients keep two to izing in high-end condominium communi- three months worth of working capital on ties in Chicago. She recommends that her hand at all times. Th at way, “If there is an clients adopt Investment Policy Statements emergency, the association will have a cush- ion and won’t incur early withdrawal fees out exactly what an association’s goals are, on invested reserve funds.” She advises her and how they can be achieved. Approved board clients “never run too close – because and prohibited investing strategies may it’s not your money!” Short-Term Instruments Mark Love is a Worcester, Massachusetts- based accoun- tant specializing in condominium communities. “Condominium communities are ultra-conserva- tive investors,” he says. “Nine- ty-nine percent of our clients are invested in only CDs and money market funds. Al- most none are in equities,” though he has been successful in producing the best over- seen that very occasionally. Like Sackstein, all results for our clients.” Love takes pains to remind boards that “Th ese funds are ‘other-people’s-money,” – Jersey, Love in Massachusetts, and Nyborg or 'OPM,' as it’s more commonly known. in Illinois, agree on two major goalposts Boards must be very careful about that. “We in managing reserve funds: First and fore- had one condo client that dabbled in the most, no equity investments – not even bond market, but very conservatively. Th at with windfall monies. It’s just too risky. Th e investment would be considered pretty se- cure.” Love attributes the very conservative property manager on reserve fund man- money management habits of today's co-op agement and investment. Don't try to go it and condo boards to board members them- selves being more fi nancially savvy than professionals. It's always better to have an their predecessors 10 or 15 years ago. More outside, objective set of eyes looking out for oft en than not, board members are success- ful business people or professionals, and run their associations in a pretty tightly- monitored way, not unlike a small business. Senior Vice President at Morgan Stanley in Th is higher level of knowledge and expe- rience has led to a more professional and reach to clients involves many steps. “We successful level of management for many fi rst make sure the investment consider- multifamily communities. As Love tells his ations fi t within an association’s written clients, “Th e needle should always be point- ed toward liquidity – early liquidity being recommendations by referring to their re- the order of the day.” Laddering, and Investment Policy Statements Th e investment strategy most oft en em- ployed with co-op and condo reserve funds Th e maturities are staggered according to op or condo to take advantage of whatever Chris Nyborg is an accountant special- (IPS's). Investment Policy Statements lay be outlined within the statement as well. Many of her clients use these, and she be- lieves they are very eff ective. “Security and safety of the as- sets are the most important consid- erations,” says Ny- borg. “We don’t want our clients to lose principal, so we advise them to choose lower risk investments like CDs. We also look at return on invest- ment. Laddering, coupled with an IPS, has All three accountants, Sackstein in New second major point: hire a qualifi ed mon- ey manager to work with your board and alone, even if your board includes fi nancial your community's funds. Words from a Professional John A. Busco is a fi nancial advisor and Toms River, New Jersey. His typical out- IPS. We look to make knowledge-based serve study. We need to keep in mind the time frame of expenses, also taking into “Security and safety of the assets are the most important considerations.” — Chris Nyborg continued on page 36