 Dennis, and good afternoon, everybody. Thank you for joining us on another edition of Condo Insider. It's great to see everybody and have you here. Welcome, Dennis. Dennis is with LaLima Asset Management. It is a wonderful new company. It's very refreshing. They're taking some things to a really nice level for condos. And we're going to talk a little bit today about what exactly they do a little bit, but they also are going to be at our next seminar, which is on August 24th, Thursday. The flyers have already gone out to a lot of the management companies. It's already been distributed, but we're going to be doing another distribution soon. So Dennis, thank you and welcome to the show. Yes, and thank you for having me. I look forward to our conversation. So explain a little bit about what LaLima Asset Management does. Well, we are an asset management company. We're dealing with a number of issues for what we call aged condominium buildings. We're not really involved in new condominiums. We're mostly involved with buildings that are 40 to 45, 50 years old that are in this second phase of life, we'll say. And what happens at that point in time is that there are a lot of building components that are starting to wear out, we'll say. It's almost an analogy like human beings. Buildings aren't built to last forever. Neither are human beings. The magic number for both is about 80 years. So at a certain point in time, we have to do things to ourselves physically to maintain ourselves. The same thing happens in buildings as well. So we started getting involved with these older buildings to help them take on the next phase of life. So we feel that with these buildings, there are many aspects that have changed over four or five decades, and that the financial aspect of an aged building is much different than the financial aspects of a brand new building, and the commitments that have to be made for the future in order to be able to last for another 40 or so more years. So we get involved, help people with the idea of financing and how this would work. The projects are different than what a condo association would be dealing with that say in the first five years is not much to deal with. It's all brand new. But when something's 45 years old, we have three or four many very expensive items that we might be dealing with. But we can't necessarily deal with them all at one time. So we say, here's the financial aspects to these things that you're dealing with. Maybe we're going to deal with one or two of these things today. Let's think about what we can do down the road. But we have to get these things planned for it. Because as time goes along, kind of like people, if you don't fix your problems, only things are only going to get worse from there. Like your car. So it's really interesting. This morning, I had to do a Zoom class for a continuing education for a lot of mortgage professionals. And they were all over the country. They were just spread out all over the country. And one of the questions I asked was, what's the biggest complication in your business today? And a lot of them, there was a handful. And I was surprised to see it because it caught my eye, is doing transaction for condos. And they said deferred maintenance. So everyone, this is not unique to Hawaii. This is impacting everywhere across the country, not just Florida. But these people, I mean, they were like in New Jersey, South Carolina. I mean, they were spread out all over. Texas, I remember. But they were spread out all across the country. I was really surprised at, especially when I saw condo and deferred maintenance, I went, oh, I mean, it just kind of like made my eyes bigger. But everybody, we really want you to be aware that this is not isolated to Hawaii. This is happening across the country, where all these units were built. These buildings were built way back when. And like I said earlier, it's like your car. You can only do band-aid fixes for so long. And then you kind of have to really break down and decide to even, I mean, unfortunately, a building, you can't tear down and rebuild on a condo. But you really have to break down and going to have to, I mean, I know some people that took out their engine and replaced it, because it just made more sense. They love their car, but it was just, but with a building, you can only do band-aids for so long. And it's just a bigger problem, right? Right, I'm an architect by trade. And basically, when you follow sort of the history of buildings, basically modern buildings sort of came into existence after World War II. And then a lot of buildings were built by developers. So these buildings get built from a return on an investment. So we haven't built buildings to last for 200 years like you might find in the Europe and whatnot. So what we're faced with is the construction is fine, but it was never intended to last 100 years or 150 years. But we can make it last 100 years if we get on board. And especially with new technologies today, if we get on board with making those repairs, we have new ways of fixing things. We have new materials. So it's actually, we have a great opportunity to extend the lifetime of these particular buildings. And then in Honolulu, it would be tough to, there's some areas in Waikiki, how would you take that building down safely as backed in as it can be and stuff? So there's a lot of reasons to believe that this is something that, that we have to be able to turn around. Maybe a similar case might be like, if you've ever gone to Florida down on South Beach, there was a time there when that area, the Art Deco area was kind of going downhill. And all of a sudden it got rejuvenated and people started fixing up their buildings. And we're kind of in that kind of renaissance opportunity with our buildings that are now in that 50 year old sort of group of buildings right now. High-rise really didn't start till the 60s in Hawaii. Yeah, cause there's no way you can, when you're going to displace hundreds of people, several hundred, and think about that copulonny block where they're trying to, I mean, I feel for them. So that's why, you know, as condos, you know, I mean, you're going to be faced like them. How are you going to put all these other people into another location? Cause you demoed your building to build back new and economically or financially, that's like impossible. Right, right. And so that's, that's where, you know, where we come into play, you know, we're able to, you know, we work on buildings, we do project management. So we're able to, you know, to help people with the construction fixes, but also in the long term, you know, we have to sort of pay attention to trends as well. You know, the cost of electricity is going up when the cost of the barrel of oil goes up, our electric bill goes up. So we're getting more electric vehicles on the road. So how many, you know, charging stations can these condominium buildings hold? We've got climate change, more buildings want air conditioning to go into their, into the units. And so our electrical needs are going up. So there's sort of to make, keep these buildings functioning for the long term. You know, we need to talk about how we can finance things today, the work that we can do today, plan for financing these opportunities for the future to help the buildings, you know, survive for the next 40 years. Yeah, and you mentioned like electric vehicles. I think I saw snippet, you know, where they have the words going across the bottom about electric vehicles, not putting them into the garage. I think I saw it. I tried to watch it, but then I had to get online. Oh. I think there's a lot, you know, electricity isn't for nothing, you know? So you've got the charging stations that can occupy a space. And electricity, you know, on the islands is gent, we don't have oil on the island. So it's basically another electrical need that we're, that we have to satisfy on the islands. Yeah, so, so I'm just imagining Dennis, you know, you're working on my, well, we're contracting with you to help us with some financing and trying to get our repairs done. How we're gonna, how we're gonna do it. How we're gonna manage that cost. And so say like part of that repair, our list is involving electrical because what electrical 60 years ago, I mean, there's new codes, you know? Or they could even be eaten up by rats. And then we got, you know, another kind of kind of worms to deal with too, but trying to bring electrical up and maybe, okay, so here's a snare. What, bring our electrical up. We wanna put solar on the roof. We also wanna consider having the opportunity while we're doing this to do electric charging vehicle stations. Right, right. So kind of give us a little brief about how you could help us achieve that goal. Well, part of my years of experience in construction management was working with the department of education. And a lot of the projects that I worked on, the schools were doing the electrical upgrades. And so we found many of the, you know, the systems there because of the, we'll say, you know, sort of we'll call it aged out. So the electrical needs, we were looking at, you know, putting some air conditioning in the classrooms. We need a bigger electrical size for that. We're actually, you know, we have more electronic needs and whatnot. So basically, there's some real basic fixes for most of these issues. Like, as far as the electrical is concerned, most buildings, you know, aged buildings again, need to increase the sizes of the electrical service. They're just too small. He goes able to do that. It does cost money, but it's something that, you know, 20 years ago, we all knew what white key looked like. And now 20 years later, it has evolved as well. So basically we all have to evolve with the sign of the times. And, you know, electrical is one of those particular things that is going to be a very sensitive issue for a long time to come because of the high cost of energy. Is that kind of like upgrading your electrical meter box? Yes, in a way, right? It's basically say, if you had a hundred amp service, we'll say for a home, you're making it 200 amp service, so you can, you know, handle twice as much capacity. And for condominium buildings, you know, we have electrical engineers who do the sizing based upon what those future requirements might be. So we're probably be upsizing the actual service to be able to handle the future. But right now, you know, these age buildings, if you haven't upgraded your services, probably maxed out at this point. Well, yeah, because I know in my house, well, heck, we'll replace the meter. And I had just replaced it too. Got it replaced because I upgraded. And then they came to give us, gave me a new meter. Like, could I have not known that ahead of time? You know, I was kind of like, oh man, I paid for nothing. But I'm sure, you know, from a single family, and then you're looking at condo, I'm sure the condo's got to upgrade theirs because look at all the window ACs are getting installed. Absolutely, yeah, that's going to be a big issue. And it takes time, you know, some of these transformers have expired or getting close to expiring. And these transformers are made on the mainland. Got to get shipped here. And you've got to get design, we'll say design parameters set up. So, you know, unfortunately for us on the islands, it does take time for all this equipment to get here. So there's really, for my way of thinking, there's never, it's never too early to start working on some of these things in advance of actually doing the actual work because there's a lot of design efforts involved. There's permitting, you know, I won't say delays, but the time period that it takes to get a building permit. So if you're thinking about something today, you know, getting through the design process, getting through the permitting process, you could, it can take you two to three years to be in a position to actually start construction. So, you know, it's, I think condos have to start thinking a little bit more along the lines, moving forward on projects from a design standpoint. Maybe you can't afford it just yet on, sorry, as a construction is concerned, but you don't wanna start find yourselves always starting from scratch, trying to meet some kind of demand that's an emergency situation at that point in time. And then the other thing I wanted to point out too is because some of the buildings that were impacted by the LSE, I know some of them have gone through the design professional, the design professional pointed out certain things like front doors, you know, and with these aging buildings, I mean, front doors don't last forever, but eventually you're gonna fall off. I know mine fell apart. I was shocked, you know, I was really shocked. We're all falling apart. Yeah, and then when it fell apart, I went, oh, these are how they're made. Some of them, it's really, you know, those one by one sticks in there. And so some of these buildings that are at a stage where their front doors are gonna need to be replaced, they can take that opportunity from the LSE because the LSE, they're not compliant with the LSE about the front doors to start using low-layment as a means to set up the specs. Yeah, so there are a number of things that will say that with the LSE, there is two options for passing the LSE. The first option really involves fire sprinkler systems. And the second system sort of excludes fire sprinkler systems, but requires a number of other features as well. And one of the things you might be referring to is for example, doors from the actual condo units themselves all have to have closers on. So they have to close by themselves. And that's something that, you know, we don't even necessarily have to be involved with, but we can combine that with some of our projects. But that's where the association can hire, say almost a handyman in a sense because you just have to spec out the right closer and it's basically a bunch of screws in the wall, that type of thing, and the door. So those are things that when we're working with an association, we say, here's how we can do this. It doesn't have to be our responsibility, but maybe four other things are our responsibility in this process. And so we look to help the associations, help themselves as much as we possibly can and come in and help where they really do need some design and construction. Yeah, to organize them into like what kind of door can be installed. I mean, I'm sure it has to be a fire raided door. That's correct, right? And but then, but yeah, handyman can install that door easily, but it's just telling the homeowner, these are the specs for the door. These are what needs to be installed to be compliant with LSE and we want the doors to be uniform in appearance. So at least you can help them say, okay, these are the specs that's required and it's a door that can easily be purchased at Home Depot or Lowe's, one of the two. We want that for the convenience of it, rather than something that has to be shipped in or you have to special order, which would be really hard. Yeah, there are condos that, for example, where the owner is actually on the windows. So when they wanna do a window replacement project, they have a set of specifications and drawings that if you wanna replace your windows, here's the design for your windows and you can go about contracting somebody to actually do that work. So there can be these design parameters set up for somebody who wants to take that responsibility on for themselves. Right, yeah. Now, one of the things about the life safety evaluation is the things that are being asked for in this evaluation are not special things over and above the building code. So these improvements that these buildings are being asked to comply with are how buildings are being built today, that those things would be included in buildings today. So people might feel like they're being penalized a little bit by because they're forced to put in a door closer or a new fire alarm system, but these are actual basically improvements that help preserve the value of your condominium. If you don't do some of these things, then basically it is in the today's marketplace, it's a sort of a substandard building when you consider all the new buildings also have these other issues involved with it. So it's a good investment for the long term. It is, you know, and people need to understand that LSE, the matrix, Excel, although the original template, I think started out of Chicago, but it took a couple of months and it was with the fire department, Hawaii Council was represented and several other design professionals. It was skewed to match Hawaii buildings. So it's not like this matrix can be used in Florida or California, it's skewed to the Hawaii environment. So there was a lot of thought because I know there was a lot of meetings involved in that. It was very time consuming, but I want everybody to realize that this is, it was skewed to fit Hawaii buildings, the Hawaii environment. So we're just not taking a template that we got off their internet and, you know, it was best. Right, right, this is not, yeah, exactly. This is not specific to Hawaii by any means. You know, many major cities have done this type of same similar thing, so. Exactly, exactly. So we have our seminar on the 24th. I'm really looking forward to it. This has been a seminar that a lot of people have been asking about, understanding financial management. So we're supposed to be going through some simple terminology on how to read financials. And I really want everybody, board members, to realize that when you first see that first set of financials, the ledger, and you know, when you compare it with the budget, I mean, it can be daunting. Your eyes kind of have to get adjusted to reading it. So don't feel intimidated. I don't think anybody should feel intimidated that they don't understand it. It's kind of, it takes a little while to skew your eyes to it, you know? Because it's a brand new form, and you're not used to seeing financial statements, you know? I mean, it's just like when HECO changed the format of the way their monthly statements look like. You kind of have to look at it again and make sure you're looking at it correctly. So it just takes an eye adjustment. But we're gonna go through some of that. Also a little bit about reserves and the importance of reserves and why it's needed, you know? And it's gonna be, I really am looking forward to it. I really think the way it's laid out that it's gonna be very informative. And I think people will walk away with a better understanding, plus a better way that they can explain it to their owners of what the reserves are for. And part of it is the board responsibility because that was one of the biggest things that was coming out of our surveys, our evaluations, is how do we explain to people what, you know, what the reserves are, you know? And I had to explain it to one person. I go, it's simply like a household budget, you know? But it's not a bigger scale, but it simply is a household budget. Because you gotta put money aside, like you live in a single family home, you gotta put money aside, start putting money aside for a roof because, you know, roofs last maybe between 15 and 20 years, you know, depending on the material and depending on how it's been maintained or even the environment that you live in, because if you live on the windward side, the lifespan might be a little bit less compared to, but I don't know if I wanna compare it to the, to wine eye because you have the heat bearing down on it. So that's gonna deteriorate it even just as bad, but it depends. If you do little things in between that you can maybe stretch out the life, but, you know, you need to plan for that. That's a major expense. It could be $20,000, $30,000 down the road that needs to be start putting away. And the big difference is, and correct me if I'm wrong, the big difference between a personal household budget and a condo household budget, you can't just easily go to the bank and get money. That's very true. You know, we kind of look at these reserves as your sort of your financial tool. In other words, this is your starting point to be able to move forward with and is that a reliable document? So it's important to understand where these, where your facts and figures come from in these particular documents so that you have a sense of reliability to those actual numbers. Because, you know, when somebody, owners are looking at this financial statement and saying, okay, well, I see this costs this, this costs that thing, that's reasonable. And then we find out that the costs weren't even accurate or halfway accurate. That's when financial planning starts to go south on folks. So there's a certain reality that we try to maintain with these reserve studies because Hawaii is a different marketplace and costs are much different in Hawaii. Fixes are different in Hawaii than on mainland areas. So basically, this document really needs to really have a strong sense of what's on the islands and how solutions and problems are resolved on the islands. And not just an industry standard pull, you know, pulling SA, what's X number of dollars a square foot for this or that, that type of thing. So we bring in art to our reserve study aspects, we bring out an aspect of these realities of construction because we're also involved in construction. So we have that sort of a different source of costing information that we try to sort of make it more real so that people aren't misled. Yeah, yeah. And I think we need to start, you know, instead of just using reserves, trying to put, this is your, the reserves is your financing tool or your planning tool, put that word tool in there because really that's what it is, right? You said it, it's really a tool and a basis for your planning, your finances and the future. And your reserves can have pretty primary, every component that you can think of, like, I know the reserves don't really allow like for seawalls, but you know what, if you're on the ocean and you have a seawall, it doesn't mean you don't need to put it in there, right? You can add a component if you want to because seawalls deteriorate over time. I mean, even rock walls can deteriorate. One of mine fell off to get the guy to put it back on, you know, so there's other, you know, you can put in for whatever you want just, and it's a safety net as well to make sure you have those funds when it comes time that you have to repair it. You know, when we look at reserve studies, we don't have to include certain, say capital improvement projects because that's a very expensive item to do that, but it's very important to understand what those capital improvements are, even though that you're not putting that item into the reserve or planning to fund, try to fund it in some fashion at the point in time, because a lot of these improvements are multi-million dollars and there's not really a practical way to collect maintenance fees or collect dues towards some of these very expensive items, but it's really important to understand what those particular improvements are so that down the road we're saying, well, we know that this is going to cost X number of dollars, and then that starts the conversation well, how do we plan to go about managing this particular item? You know, capital improvement is something that is either enhances the value of the property or it actually, we'll say, protects the property value, so these are pretty important discussions to be having alongside of a reserve study so that you know, two years from now, you might need to be dealing with this particular situation, and we know how fast time goes, so it's honest. Yeah, yeah, really. And I also want to remind everybody that, especially because we started off the conversation with Electrical, if you're doing some kind of electrical upgrades, make sure you try to check out Hawaii Energy as well for any kind of energy rebates, because that could help offset. I think there was one condo, I think they replaced their boiler on the roof, and they ended up with a $20,000 rebate. Right, and there's a lot of good electrical engineers out there that can help really refine the electrical system of a building in today's modern standards with the idea of photovoltaics, et cetera, to go along with it. So we have a lot of talented engineers on Island, so those folks would be happy to talk to association about what the options are. Cool. Great for electrical. I didn't realize there was certain ones that kind of specialized in that. Yeah. It's kind of good to know, yeah. Because there's so many electrical needs in a building, and when somebody can control all those aspects, then you're gonna actually get some significant savings. And with software technology today, as we were able to do a lot of that. Okay, cool. So I think we're near our vending of our time. So Dennis, I will see you on the 24th, with Sean. Yes, you will. I'm really looking forward to it. The last two weekends with Board of Director Training, it was very energetic as well. And there was a lot of new board members that are really looking forward to the information that they're gonna gain. They already gained the last two weekends. I mean, they were really pleased with that. So we wanna kind of continue the momentum and the education efforts. Everybody's very appreciative of what White Council does as far as educating their board members. So I shall see you on Thursday, the 24th, right? Yeah, you shall. And I look forward to it. Thank you very much for- Okay, thank you, Dennis. I appreciate you being here. Okay, great. Take care. Thank you. Thank you everybody. See you guys. Thank you so much for watching Think Tech Hawaii. If you like what we do, please click the like and subscribe button on YouTube. You can also follow us on Facebook, Instagram and LinkedIn. Check out our website, thinktechhawaii.com. Mahalo.