The Lauren, A Condominium

Annual Meeting -- May 8, 1996

President’s Report

Brian J. Larkin, Ph.D.

Introduction

I want to note at the beginning that what we have accomplished is, in the perspective of the Lauren’s history, simply a few more steps in an evolutionary process. Much of what we accomplished was little more than tying up loose ends and adding to work that so many others had begun.

Board Responsibilities

One year ago at this time you elect a new Board of Directors. In doing so you entrusted to us a set of responsibilities and duties. We have taken those responsibilities very seriously.

We have at the same time remembered always that the dollars we spend are your dollars. They don’t come from some abstract budget. Every dollar we spend comes out of your pocket. I remember the fabled Mike Silverstein, our often serving Treasurer, once observing in what I can only interpret as a momentary fit of journalistic cynicism that you should never give any money to a Board because they will always find some way to spend it. Mike was not right, at least as far as this Board is concerned and I think as far as any responsible Board is concerned. At the first meeting of this Board, I brought along some charts showing our projected capital expenditures for the year, our reserve account balance, and our capital budget. I recall being chastised at the time for being so gloomy and pessimistic by, of all people, our budget hawk in residence, John Doolittle. And no one who knows John at all ever accused him of being a tax-and-spend liberal!

I have seen the responsibilities of the Board of Directors in terms of the nature of the Lauren. From my perspective, there are four main principles from which the Board’s responsibilities devolve. These four principles provided the framework for the activities of this Board during the past year.

Principle One: The Lauren is the home of some 300 or so people.

The first responsibility of the Board is to promote the personal safety and security of the people who live and work in the Lauren.

Safety is a perennial concern that has been visited by every Board we have ever had. This Board did not discover nor did we settle this issue for all time. We did, however, under the leadership of a blue ribbon committee, conduct a singularly comprehensive and detailed study of security in the Lauren and took such steps as were reasonable and prudent. The committee was chaired by Jason Juffras, whose insight, analytic abilities and human relations skills contributed immensely not only to the functioning of the committee but to the Board throughout the year. Members included three past presidents, Dr. Elizabeth VanderPutten, Mr. Joseph Morris and Mr. John Felice, and representing the Lauren medical practitioners was Dr. Lillian Comas-Dias.

Because Jason is going to report on the work of the Security Committee and its report, I am going to spend less time on the Board activities in this area than I otherwise would. There are, nevertheless, a few things I would like to note.

First are some quick illustrations of procedures instituted by this Board to enhance the safety and security of everyone in the Lauren.

• We believe that someone in authority should be available to speak for the Lauren at all times in case of emergency. This means the Property Manager or a Board member. What we have done is to developed as a modus operandi a system whereby either Walter or Board member is always on call. Whenever I go out, I let the desk person know the name and phone number where I can be reached. And when I have been out of town, our First Vice President, Paul Kearney, has taken over..

• In case the desk person is temporarily unavailable, as does happen, I have a set of keys that allow access to all areas to which emergency personnel might need entry.

• Both Walter and I maintain a list of persons who might need assistance in case the building has to be evacuated, as it has on several occasions in the past.

These are not big things nor are they onerous things, but the do illustrate the seriousness with which this Board takes its responsibility for personal safety.

Second, I would like to briefly list a few of the important actions this Board took this past year to enhance security in the Lauren.

• Electrical wiring inspection. Last fall we had the building’s electrical wiring inspected and tested. This was a purely preventative measure.

• Automatic door closers. At our first meeting last year the Board authorized the installation of automatic door closer as recommended by the fire department and by our insurance company as a safety feature. They were installed in February.

• Pool deck railing reinforcement. Following up a recommendation by Jason and the Security Committee we had the roof railing reinforced and a number of upright bars added for safety.

• Emergency instructions. Again following the Security Committee’s report, we have distributed emergency instructions to all residents and professional office persons. These are in the form of a plasticized card with a magnet and the suggestion that it might be attached to the refrigerator.

The third thing to which I would call attention is the Security Committee’s report itself. As you know, the Board was so impressed with the Security Committee report that we had copies distributed to all owners and renters. This is, I believe, an extremely valuable document. I should think that anyone thinking of selling would want to have a copy of that report to show to a perspective buyer. And, for what it is worth, Elizabeth and I have filed a copy along with our deed, mortgage papers and Public Offering Statement.

I said a minute ago that the Lauren is home for a large number of people, and this Board has been keenly sensitive to this. We have taken every step we could to enhance the attractiveness of the building, grounds and roof garden -- a point about which I will shortly say more. Home also means, among other things, friends and neighbors. As a way of enhancing the sense of home and neighbors and neighborhood for all the residents here we have initiated the Lauren Newsletter. This newsletter is explicitly not a house organ for the Board and management; it is dedicated exclusively to the people of the Lauren.

Principal Two: The Lauren is a Business

The Lauren is not a club or the Good Will or a social service agency. The Lauren is a business. It is a big business. We borrowed $11.4 million dollars in 1978 to buy this business and each year we pay hundreds of thousands of dollars to keep this business running. This year we will spend $732,000 operating this enterprise. The Lauren is not a mom-and-pop corner store. It is a multi million dollar business.

This requires that the Board of Directors is responsible for actively ensuring that the Lauren is run in a fiscally sound, thoroughly business like manner.

The area where the Board spent the most time was reviewing, tightening and smoothing the ways by which we do business.

• For example, we reviewed our contractual relationships with our financial management firm and in doing so eliminated a surprising number of weak points (e.g., the Board now has exclusive access to our reserves), and in the process reduced our expenses by about $2,500. At the same time, in working with our financial management firm we were able to have them produce date in a fashion better suited to the needs of the Board in making financial judgments.

• We reviewed our personnel procedures. In doing this we appointed a personnel committee headed by Jason Juffras. Dr. Elizabeth VanderPutten and I both served with Jason. The result was an addition for several policies and the modification of several others. Among our chief concerns were staff incentives and the avoidance of legal suits.

• We spent a great deal of time reviewing the capital expense needs for the next five years and produced a 5-year plan, which you have all seen. This effort should provide guidance for future Boards when setting budget goals and as a benchmark when considering unplanned expenditures.

• We undertook a project to computerize the Lauren’s financial and business records. While much remains to be done, we have made major strides including a master database of owners, tenants, and long term guests. You can even reach the Lauren manager by e-mail should you have a request or (heavens forbid) a complaint.

Principle Three: The Lauren is a major investment for 146 or so unit owners.

This requires that the Board of Directors is responsible for protecting and promoting the value of owners’ investments.

This Board has been keenly sensitive to the reality that the appearance of the Lauren is critical to the value of your investment. In this we are not one whit different than every Board the Lauren has ever had. Indeed one of this Board’s biggest regrets was that we did not have money enough to redecorate the halls last year as planned.

What did accomplish was the appointment of a redecoration committee, which was chaired by Board member Paul Kearney. Members include Susan Dunbar (unit 408) and Board members Waldemar Wajszczuk and John Doolittle. Since we will shortly have a report on their activities, I am only going to say two things. One is that the first phase of the hallway renovation project entailed selecting a designer and commissioning a master plan for the entire building. On March 5, 1996 I sent the following email message to my fellow Board members:

"I received yesterday, read, signed and returned to Walter for mailing the preliminary contract with Gotwald & Finch. I also spoke with Mr. Gotwald this morning. He assured me 1) they will get the best quality materials available for the price, 2) the entire project will be done within budget and 3) they will get the materials and labor contracts in place for signing before May 8, 1996.

The second is that this morning, May 8, 1996 I signed the contract for the firm that will renovate the halls.

A quick story. A friend of Elizabeth and a former Washingtonian, in town on a business trip, dropped by our apartment recently. Her first comment in greeting me was not something like, "It's nice to see you" or "What a nice day." No, Barbara’s first words were, "Brian, how beautiful your grounds are. You have the most beautiful building in Washington."

The Lauren’s extraordinarily kept grounds of course are due to the work of the gardening committee, i.e., Don Benedick and Cacho Salinas. Frankly, the Board can take little credit here. Barbara is right and Don and Cacho deserve the credit. What this Board did, like others before us, is to provide the funds the gardening committee need and to offer continued encouragement to and appreciation for their work.

Legal suits are costly. Even under the best of conditions, where our insurance company pays without any question, we still are out $1,000 for our deductible plus the necessary legal cost we incur in simply having our legal firm monitor events. If, as has and does happen, the insurance company balks and we are forced to take legal action to force them to cover the suit, our costs can run into many thousands of dollars.

On September 9, 1995 I send the following email message to my fellow Board members:

"On pg. A7 of Monday's Washington Post is an article covering a badly burned woman who is suing Delta Air Lines for $135 million. My point is not that the Lauren and Delta have much in common. It is only the size of the suit and the fact that Delta does everything it can think of to protect itself from negligence suits. Still they happen. Our $1,000,000 insurance policy looks pretty small against that $135,000,000 negligence suit doesn't it."

Several of the steps this Board took to reduce our exposure to negligence suits involve the pool deck that, because it is on top of the building and was completely unsupervised lends itself to occasional untoward and, though often innocently intended, potentially dangerous behavior. Three of the steps we took were 1) tightening controls over pool deck parties, 2) installing a camera to monitor pool deck activities, and 3) closing the deck at 1 AM to 6 AM during the period of the year that the pool is filled.

Another set of steps toward limiting the Lauren’s exposure to law suits involved the review all of the major Lauren procedures relating to staff and to tenants. For example, because of the possibility of a law suit, the President now reviews in advance planned disciplinary action. This is in recognition of the fact that the Board and owners will ultimately be held responsible for any suit. It is wiser and less expensive to avoid one if at all possible. In addition, we instituted a procedure by which the Board receives on a regular and routine basis detailed reports on all emergencies and all events that involve any outside emergency agency, such as the police.

One example is the removal of the oil tank. When we learned the tank is 24 years old but has an expected life of 17 years, has a single shell (meaning a hole on the outside is a hole on the inside), and that a condominium on Connecticut has just paid about $350,000 to clean up an oil leak, we decided immediately to have it removed.

Principle Four: The Buck Stops With the Board.

The dynamic and evolutionary nature of the Lauren requires that this and every Board is responsibility for continuing the professional development of the Board of Directors. The Board is composed of lay volunteers who have important personal and career responsibilities. It would be easy, indeed tempting to delegate their duties to our property manager, but it would ultimately be unwise.

The Board cannot escape the existential fact that they and they alone are the final, legally and morally responsible representative of the Lauren Condominium Association.

The Board alone is elected by and responsible to the owners of the Lauren. The buck stops with the Board and they cannot escape their responsibility by delegating duties.

In the evolutionary history of the Lauren, one clear and unmistakable trend has been toward increased sophistication and professionalism in the way the Board does business. Over the past 17 years we have made mistakes and we have learned from our mistakes. In the process we have become more knowledgeable about the running of a multi million dollar business. Boards have increasingly assumed greater levels of active responsibility for the conduct of the affairs of this business.

At one time it would have been fair to say that the way the building is run is the way the manager wants to run it. This is no longer true.

We made the first major step when we moved under Elizabeth VanderPutten’s first presidency from the Legume and Norman Management firm to John Bartkow and the Gates accounting firm. This gave the Board significantly greater control over our finances. With experience, each Board in turn has moved up a notch in terms of assuming greater degrees of responsibility.

Perhaps the most significant step in the evolutionary process began during the presidency of John Felice when the decision was made to consider moving from a resident manager to a non resident manger as a way of attaining more professional management for the building. This step was completed during the presidency of Jim Walton with the hiring of Walter Krolman as Building Manager. This step was of enormous import. For the first time in our history we learned what it can mean to have a professionally run building. Everything gets done. We have hot water. The elevators work.

With the employment of a non-resident, professional manager came the responsibility for the Board to move up a notch in its level of professionalism.

No manager however, no matter how capable and well meaning -- and we all know that Walter is as capable a professional manager as we are ever likely to find -- can or should set priorities for the Lauren in place of the Board of Directors. He cannot and should not be left alone to allocate association funds, nor can he exercise financial oversight in place of the Board. These are responsibilities of the Board and the Board alone. To simply deal on a professional par with a professional manager requires an active professional Board.

What this Board has tried to accomplish is a serious and lengthy consideration of the Board’s responsibilities, and in light of this review, we have undertaken a firm arrangement of the Board’s relationships with all our agents, including our financial management firm, auditing firm, legal firm and property manager.

We have tried to establish as firmly as possible the principle that the Buck Stops With The Board.

Where do we stand today?

The bottom line is that the Lauren is a safe place to live -- about as safe as a building can be in any city -- short of a total lock up. We are a congenial and friendly place to live and to work. We have a solid, tight set of financial controls and as professional a set of business procedures as we are able to devise. Our financial situation now and for the next few years appears guardedly stable.

What Needs to be Done?

Three major things need to be done.

1. On the business side of things, a great deal of work remains in computerizing our records and business.

2. On the financial end of things, we badly need to review and get on top of the operating budget in the same way we did this year with the capital budget. I expect that such a review will find that significant savings can be made without adversely affecting the value of our property or quality of life. We still do many things the way we do because they have always been done that way. We still spend a lot of money the way we do because it has always been that way.

3. We must find a way to resolved the current situation involving business owners and the property values of all.

Challenges Ahead

At this time we face two major challenges. One is essentially economic. How do we keep condominium fees competitive and at the same time maintain building and service quality while facing inexorably higher expenses as the Lauren ages?

The second challenge is broader and concerns the nature of the Lauren. Will the current trend of increasing non-resident ownership continue until the Lauren returns eventually to being a rental apartment building? Will we become a balanced building with a more even mix of owner occupied units, professional offices and rental units as the developers planned? Will we become a light commercial building with increasingly fewer residential units over time? 

These challenges are real but there are answers. I propose that the Board of Directors you elect tonight make responding to these challenges high priority items on its agenda for the coming year. 

Credits 

Whatever was accomplished this year is due to the ideas and work of many people each of whom volunteered for the task. No one was paid anything. No one even got a free lunch or a free pass to anything -- even once. No one got his or her unit upgraded or repaired at the Lauren expense. No one got any special treatment or special preference for anything. Most of the time they did not even get much of a thanks. They just volunteered and did their work and that was enough. 

Current Board 

• Secretary - John Doolittle

• First Vice President - Paul Kearney

• Second Vice President - Jason Juffras

• Treasurer - Melva Casswell / Waldemar Wajszczuc

Current Committees 

• Litigation Committee - Paul Kearney, Roger Herschland, Jan Schneider

• Hallway Committee - Paul Kearney, Susan Dunbar, John Doolittle, Waldemar Wajszczuc

• Security Committee - Jason Juffras, Elizabeth VanderPutten, Joe Morris, John Felice, Lillian Comas-Dias

• Personnel Committee - Jason Juffras, Elizabeth VanderPutten

• Grounds Committee - Don Benedick

• Newsletter Editor - Waldemar Wajszczuc

Staff 

• Maintenance Supervisor - Cacho Salinas

• Property Manager - Walter Krolman 

I said that Walter is a thoroughly professional manager. Yet he continues to learn and grow. You may have noticed the recent appearance of the letters AMS after his name. They are a professional designation or ranking and stand for Association Management Specialists. They are obtained though work and study and he got those last year. Last month, he was named to the management committee of the local chapter of CAI, the Community Association Institute. Let me give you this one-line assessment of Walter’s skills. I will stack the management of the Lauren up against the management of any condominium in Washington.

Perhaps the most pointed summary of my esteem for Walter is to read to you from an email message I sent on January 3, 1996.

"The memo Walter sent today announcing the final results of the Lauren Christmas fund for 1995 is quite remarkable. Not only did the total set a new record but the number of (to borrow Walter's quaint phrase) "entities" who participated was also a record high.  "The 102 persons (indeed all contributors were persons) comes pretty close the 100 percent of possible givers when a) those who consider the fund a Christmas (ergo religious) event and decline on religious grounds and b) those who give privately on t he side to various employees and c) those who never give to anything are all subtracted! "This year's level is remarkable in another way for it says that the Lauren is being well run. While each of use can properly take a measure of personal pride in this, the main credit, as we all know, belongs to Walter.

"So I want to take this opportunity to thank him on behalf of all of us on the Board of Directors and on behalf of everyone who lives or works in the Lauren."

Brian Larkin, President
Board of Directors
The Lauren, A Condominium