Condo Media - October 2010 - (Page 46)
Advanced Reserve Solutions Inc.
Helping Clients Protect Their Biggest Investment Through Long-Range Fiscal Planning Goals
by Pamela Schweppe
here’s an old saying that people don’t plan to fail, they simply fail to plan. For no one is that more true than for condominium associations. Capital improvements can be expensive in multifamily housing, and failure to put aside enough money to fund them can be catastrophic for unit owners when the bill comes due. Advanced Reserve Solutions Inc. (ARS) — as its name suggests — was created to help associations avoid that kind of situation. Through personal, onsite assessments and interviews, and a sophisticated software program, ARS is able to give property managers and association boards a customized report that helps them make sure their capital reserves are properly funded, based on current and projected future needs. The owner of ARS’s New England office is Michael Callahan. A native of New England, Callahan opened the office in Dover, N.H., in 1998. Today, it serves clients in all six New England states. “Often, the association doesn’t have a reserve study done when it transitions from developer to association control,” he explains, “so the capital reserve is underfunded from day one.” By working closely with property managers and boards of directors, he helps to create a plan to build up the reserve funding, to avoid hefty special assessments, loans or what he describes as “peak-and-valley style” contributions.
A Complicated Process Made Easy for Clients
The process begins with a thorough onsite inspection of every component, from roofs, siding and roadways to lighting, decks and swimming pools.
Every component is measured, quantified and evaluated against specific indicators of how much useful life it has left. “If I see an 11-year-old roof looking like it’s 25 years old, I try to find out what’s going on,” Callahan says. “We have to base our assessment on its condition today, not what was originally expected. By doing that, it gives the association a more realistic funding timeframe between now and when the component will actually come due for replacement.” Location also factors into his planning. “We see every complex as a blank slate,” he explains. “The aging process differs by location within the country and even within the state.” Sometimes, it even differs within the complex itself. At an oceanfront property in Maine, for example, units on the ocean side of the complex have a different maintenance cycle than those on the inland side, due to the effects of wind and salt water — all of which is taken into account in the final report. The report itself undergoes several iterations before it is finalized, and the amount of time required to complete it varies, depending on whether it’s a two-unit association or a complex with 12,000 units plus 18 pool areas. After the onsite inspection, a draft report is drawn up using a proprietary software program that calculates the amount of capital reserves that will be needed, based on the condition of the property’s various components, and each individual unit owner’s fair share distributed over the components’ expected lifespan. Trustees and unit owners then have an opportunity to give feedback on the document. “We want them to have
input,” Callahan says. “Some longtime owners have a knowledge of the association’s history that’s invaluable. We want that.” He points out further that having input into the final report helps unit owners feel more invested in it — and therefore more likely to put it to practical use. “We don’t want it to be something that’s just put on a shelf,” he says. “It’s a living document, and something they’ll use for years to come.”
An Important Tool in Today’s Lending Environment
The type of planning services offered by ARS has become more critical in recent years. In fact, some states now require that capital reserve studies be updated regularly and disclosed to unit owners. In addition, FHA loans now have requirements around capital reserve funding. Bill Donovan, senior vice president of Barkan Management Company in Boston, agrees that all lenders have been more focused on capital reserves since the economic downturn. “They want to be sure a long-term planning study has been done,” he says, adding that potential buyers, too, want to know that the risk of special assessments has been minimized. “Capital reserve funding doesn’t preclude a special assessment,” he says, “but longterm planning just makes good sense.” Donovan has been an ARS client for “several years” and has used its services for a number of the properties he has managed. “The ARS study is very comprehensive,” he says, “and Mike is very accommodating. He presents the study in draft form and will modify it specifically for the client at no extra
Table of Contents for the Digital Edition of Condo Media - October 2010
Condo Media - October 2010
From the CED’s Desk
CAI Regional News
Asked & Answered
CAI-NE Annual Conference & Expo
Board Member Insight
Classified Service Directory
Statement of Ownership
Condo Media - October 2010