New twist on major capital improvements.

A stagnant, undervalued 165-unit Fort Lee, New Jersey, cooperative recently underwent an unusual, yet profitable, major capital improvement. It converted to a condominium, with no up-front cost or risk to the cooperative corporation or its shareholders, reports Jack Boyajian, president of ROA Hutton, LLC the co-op to condo conversion specialists.

Built as a rental in the 1950s, Bella Vista Manor converted to a cooperative in 1988. The original sponsor sold only 50 of the 165 units, then the 1990s hit and no one was buying. Bank Leumi took over the 115 unsold units and sold them to the El-Ad Group Ltd., a real estate investment conglomerate. For 12 years El-Ad operated their major holding in the cooperative as a successful rental property, refusing to sell the units in a depressed market. At the time, comparable sale prices in the area were estimated at $10,000 to $25,000 for a one-bedroom co-op apartment and $30,000 to $40,000 for a two-bedroom unit.

With an integrated financial strategy enabling unlimited refinancing opportunities through Fannie Mae, Freddie Mac, VA and FHA loans that were previously unavailable to the Bella Vista cooperative but now available to the Bella Vista condominium, Boyajian and his team were able to successfully steer the coop away from financial obscurity and into a financial windfall. One-bedroom coop apartments, previous to conversion, were valued at $45,000. Post-conversion, as condominiums, they sold at $180,000. Two-bedroom units, barely getting $75,000 as coop, ate now being snatched up at $215,000.

In addition to delivering a package to the board requiring no up-front costs or risk, ROA Hutton devised a plan to sell Bella Vista's 80 garages and 70 outside parking spaces to the unit owners creating a $1.1 million capital reserve fund.