The first challenge for the Principals was to improve the Cooperative’s profitability. Using cost-cutting measures and reducing delinquent carrying charges resulted in the Cooperative going from operating deficits to operating profits.
The improved profitability also stabilized the physical deterioration of the property which enabled the Cooperative to pass HUD’s Real Estate Assessment Center (REAC) annual inspections. Failure to pass the inspection would have given HUD cause to take over the property.
The Principals then formulated a plan to reposition the asset by changing the designated land use and zoning; identifying financial resources for the entitlement process; and, developing and implementing a relocation strategy.
Execution of the plan ensured that the Cooperative would attract a development partner and change the value of the land. The Cooperative, led by the Principals, lobbied local and federal government officials to gain their support for changing the land use designation and zoning. This would create density consistent with the surrounding neighborhoods. Without the change in land use and zoning, there would be no economic benefit or right to return for the members. The principals successfully garnered the support of the local government officials and the land use designation was changed from low density to high density, mixed-use, and mixed income. This approval made the property more attractive to the development community and significantly reduced the risk to the owners and potential developers.