Co-op community in New York

Bill Morris at Bricks & Bucks on November 17, 2021

Material shortages delayed the completion of the 6485 sidewalk shed on Broadway (image courtesy of New Bedford Management).

We have all read about major supply chain disruptions caused by the coronavirus pandemic, climate change, extreme weather, and shortages of workers, especially truck drivers. It has caused the scarcity and price increase of everything from computer chips to cars to pies. Inevitably, kinks in the global supply chain began to restrict the capital projects of New York co-ops and apartment boards.

Consider a 60-unit co-op at 6485 Broadway in the Bronx Valley. A mandatory exterior wall restoration project was supposed to start last year, but was shelved due to the pandemic. When the board of directors dealt with this work this spring, it fell into a major supply chain disruption.

“The scaffolding contractor does not have enough materials,” said Eddy Diamantis, 51, a retired police lieutenant who serves as chairman of the cooperative’s board of directors. "This is a setback-not only for us, but global. It took us a few weeks back."

Fortunately, the board of directors has a representative of the owners from its management company New Bedford Management, who is responsible for overseeing the work and tracking delays, change orders and the resulting cost overruns. "The initial problem was a shortage of plywood and wood," said Andras Joo, head of the New Bedford owner's representative department. "Once the metal frame is erected, they can't get wood from anywhere, not even Home Depot. Wood this year is 10 times more expensive than it was a year ago."

Joo said that the delays and material shortages caused by the pandemic were not catastrophic, but they had a knock-on effect. "Unexpected delays may cause you to change the start date multiple times," he said, "but there are wood shortages in many places. The material cost is much higher this year, and the change order is much higher than a year ago. This is beyond Normal inflation."

When the number of bricks that needed to be replaced was unexpectedly large and change orders began to be received, the cost of the project jumped from an estimated US$120,000 to more than US$200,000. This put the board in trouble. Cooperatives are composed of middle-income shareholders with a high proportion of retirees. "We are not a Park Avenue cooperative," Diamantis said. "We operate on a lean budget, but we have to impose a one-year evaluation fee. At our annual meeting, we explained to shareholders that we have not increased maintenance costs for three years, and we need to increase maintenance costs by 4% next year. If necessary, we will use our credit line to make up for cost overruns."

Joo predicts that the struggle of this cooperative will become more common throughout the city. "We have many projects that have to be postponed," he said. "Now we are facing higher prices and fewer resources. We have to renegotiate many contracts. Contractors and architects were overbooked. This year, some projects were contracted. Prices have risen by 30%."

How does the board of directors respond to this pressure? "My suggestion," Joo said, "is to start as soon as possible and plan ahead. Every board of directors who plans to carry out capital projects next year should have already started. Plan the budget more flexibly and plan longer delivery times. Hire a representative of the owner. And very carefully formulate the scope of work, and then determine the price and duration of the contract. Try to determine the cost so that the contractor can bear any increased costs."

Diamantis added: "My advice to the board is to build as many reserves as possible. These cost overruns and supply chain issues will not disappear anytime soon." Then he lights up. "We are squeezed, but we will be fine."

Main player-Property Manager/Owner's Representative: New Bedford Management Company. Engineer: Joseph Faranick. Contractor: Super American Contracting. Scaffolding: Geo USA Construction.

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