The Surreal Estate

Perspectives on Tenant Organizing from the Urban Homesteading Assistance Board

Predatory Equity fails again…and no one is surprised.

Today the Wall Street Journal published an article about yet another Predatory Equity deal that has fallen into foreclosure. This huge 42 building portfolio of affordable housing spread over the Bronx, Brooklyn and Manhattan is known as the Three Borough Pool. UHAB along with out allies have been expressing concern for these buildings for years. We began organizing

The portfolio is a classic Predatory Equity deal: a group of well known private equity groups including Normandy Real Estate, Vantage Properties, Westbrook Management and David Kramer, purchased the properties with an inflated mortgage from Wachovia Bank, who quickly sold the debt into a commercial mortgage backed security. Several of the owners are now notorious in NYC for tenant harassment in other properties. According to Normandy’s website their business strategy is to “target value-add and distressed asset and debt opportunities in high-quality locations… We identify assets that are underutilized, have operational inefficiencies, or have below-market rents.

“Under-utilized assets” is landlord-speak for “home to low income families who we think can easily be evicted.” This was certainly their plan in the Three Borough portfolio. As with most Predatory Equity deals, the tenants began facing harassment and building conditions began to decline. Rents continued to rise, leases citing MCI increases on elevators that continued to break down and roofs with reoccurring leaks. Default rumors began spreading as early as 2010, and when the mortgage became due in full in 2012, LNR partners stepped in as special servicer for the CMBS to deal with the fall out.

UHAB began organizing some of the buildings in 2009, and CASA has had an established tenant association in one of the largest buildings in the portfolio for many years. According to security documents, the buildings were 94% occupied at the time of purchase. And tenants did not bend to their landlord’s harassment tactics — they refused to be displaced — directly leading to the portfolio’s failure.

UHAB is working with organizers from CASA, New York Communities for Change, Mothers on the Move, Banana Kelly and PACC to engage tenants across the portfolio.  Our efforts have been met with extreme harassment from Colonial Management, who manages the entire portfolio. David Kramer, one of the owners in the deal, is a partner at Colonial Management. Supers and property managers have attempted to lie to tenants about meetings being cancelled, tried to impede on tenants rights to have a meeting in the lobby and have even out-right lied by passing out flyers that denied the buildings are in foreclosure:

Colonial notice not in foreclosure

This only intensifies the frustrations of tenants who have been suffering from problems with management for some time.  Neglect of the buildings have caused serious problems for the families who live in them.  Conditions like mold, leaks and vermin are not uncommon in the buildings. The WSJ article published a map along side the article which highlighted the code violations across the properties:

WSJ Violation Map

The WSJ article also mentions a possible deal on the table to end the foreclosure, although their source is anonymous. Considering that the portfolio has been in default for almost three years, we happen to think that any investor would be mad to refinance this portfolio without a significant mortgage write down. Ultimately, this is what the tenants need. Any refinancing should not be negotiated behind closed doors with sources that refuse to be named in the press. Tenants deserve (and demand) a voice at the negotiating table.

LNR Partners’ decision on how to deal with this portfolio will affect over 1,500 families. Working with tenants, they could transfer the buildings to a housing developer who will work alongside residents to respect their rights, ensure good repairs, and keep the buildings affordable. However, LNR could also work with the current management and transfer our buildings to another speculator with the same, unsustainable mortgage. This would cause tenants to live through another round of harassment and neglect. Tenants are joining together to fight LNR and Colonial Management because they have no other choice: the buildings are an important source of affordable housing, and losing these 1500 units to another speculator would be devastating for New York City. Join UHAB and our allies in standing with the tenants of the Three Borough Pool and demanding a better deal! 

Fighting for the Future: Lessons from 1520 Sedgwick

This is a video from a few days ago when we celebrated the return of 1520 Sedgwick to well-maintained affordable housing for low to moderate income residents in the Bronx. This was the culmination of a long, hard-fought campaign started by the tenants with the assistance of UHAB in 2007.

I wasn’t the organizer in the 1520 Sedgwick campaign, since I joined UHAB in 2008. But because of the importance of the campaign my formation as a tenant organizer was shaped through the lens of 1520 Sedgwick.

In 2007, residents of 1520 Sedgwick reached out to UHAB and Tenants & Neighbors because they had learned that their building had been sold to a landlord who intended to remove affordability restrictions and attract higher paying tenants to make up for the fact that he over paid for the building in the first place.

Sedgwick was the iconic predatory equity campaign: strong tenants stood up to fight for their homes in a historic building known as the “Birthplace of Hip-Hop.”   Tenants, with UHAB’s support, began pushing back against their landlord. Our earliest campaign goals at 1520 Sedgwick were to keep the buildings in the Mitchell Lama program and prevent a sale to real estate speculator Mark Karasick. Help came flooding in, starting with DJ Kool Herc, the father of hip-hop who started the cultural trend in the community room of 1520 forty years ago, but soon city leaders like Senator Schumer and Congressman Serrano, to name a few, joined the fight.

It was an emotional and impressive campaign. And, despite everyone’s best efforts, we failed. Big business profiteering off affordable housing won the fight. The building was sold to Mark Karasick, who bought it with a $7.2 million mortgage from Sovereign Bank, shortly thereafter it was removed from the Mitchel Lama program. Predictably, the building began to fall in to disrepair. However, rather than becoming discouraged, the tenants remained organized and continued to fight for what they knew their buildings could be.

That’s when Workforce Housing Advisors entered the scene, with an unconventional plan to purchase the mortgage and foreclosure on the owner. The tenants were ready to pick up the fight once again, and the second time around it was not difficult to find the support of city agencies and elected officials to help with this preservation option, and the building was recovered.

This recent celebration was the official ribbon cutting, post renovation of the building. The tenants and all their supporters who helped win this campaign came out to see what all the work was for, a beautiful affordable housing complex for the residents who fought so hard for their community.

While we are grateful for the support from all the organizations and agencies, we need to take a moment and specifically thank the tenants. Their struggle and their victory has taught UHAB’s Organizing and Policy Department so much over the past five years. When they reached out to us in 2007, we were in the early stages of predatory equity and were just discovering how financial malfeasance and mortgage over-leveraging based on speculation and gentrification, impacts tenants and their homes. Now, it defines our work. We learned about foreclosure at 1520 Sedgwick; Workforce Housing’s plan to purchase the mortgage and foreclose on the owner provided the inspiration for our campaign against New York Community Bank and created the framework for the First Look Program that came out of it.

Currently, while we continue to face the fallout of the previous housing bust, at the same time we see buildings being re-overleveraged. It’s disheartening to feel that real estate hasn’t learned from the failures of speculators like Karasic. Still, I look at the 1520 Sedgwick campaign and remember the resiliency of the tenants, their refusal to give up, and it reminds me that while it’s easy to be discouraged, the present isn’t permanent and the future is worth fighting for.

A Green Future for Formerly Distressed Buildings

Workforce Housing Advisers, the group that helped save 1520 Sedgwick , the Birthplace of Hip-Hop, is upping their ante in the Community Development world in the Bronx by moving beyond developing and preserving decent, safe affordable housing and starting a project that will benefit not only the tenants but the whole community in the Hunts Point area of the Bronx.

This was all started by a group of horribly distressed basically abandoned buildings located at 16, 920, 924, 928, and 935 Kelly Street. These buildings were all put in the city’s Alternative Enforcement Program (AEP) in 2007, meaning they were among the 200 worst buildings in NYC. The properties only continued to decline from there. But now, Workforce Housing stepped in, bought the debt, finished foreclosure and has begun a $16 million renovation of the properties with financing that ensures they will remain affordable in the future.

Considering their past exploits, this is merely par for the course for Workforce Housing. However, with Kelly St. they are taking a step further and initiating a project that will benefit the tenants as well as the greater community. The project is called Kelly Street Green, and its goal is to provide support for a healthy, fresh food purveyor in a commercial space in the Kelly Street buildings. The project is currently requesting proposals from interested parties, and a committee (that includes yours truly) will help determine who will ultimately run the space. The store will sell produce from local farms as well as the community garden adjacent to the properties. This project will be a huge gain for the community of Hunts Point which is often considered a “food desert” meaning it is extremely difficult for people in the community to acquire quality groceries.

Even better, as the Daily News reports, the space will be leased at a substantial discount and will receive up to $150,000 in start up grants. The person/group selected will also receive a rent free apartment in one of the buildings.

If you are interested in submitting a proposal, or just want to find out more about this project visit kellystgreen.com. We’re excited to participate in this innovative project, and are looking forward to hearing about your ideas!

Lack of Space in NYC Homeless Shelters: The Blame Game

From NY 1

According to New York 1 Mayor Bloomberg is blaming rising populations in NYC homeless shelters on “out-of-town homeless” seeking shelter in NYC. According to the Daily News out-of-town families in shelters have increased by 48% since 2008. Besides the immediate question of why we should only care about homeless families who are from New York City, the issues of increasing homelessness and lack of shelter space raises serious concerns about city housing policies around homelessness.

Patrick Markee of the Coalition for the Homeless, disagreed with the mayor. In his words:

“The real problem is we have record and rising homelessness in New York City,” Markee said. “The real problem is we have high rents and low wages. And the real problem is that the mayor’s policies are not working.”

We have seen, through our work, tenants being displaced by predatory equity and foreclosure. If this occurs, tenants often have no where to go except for the shelters. This crisis was intensified when the city moved to cut the Advantage program which had the specific goal of assisting homeless families. The Advantage program was created to temporarily help families pay rent so they could move out of the shelter and into an apartment. Unfortunately, the program was cut earlier this year even though there were 15,000 families who were enrolled in the program at the time. Since other rental assistance programs like Section 8 and the Family Eviction Prevention Supplement (FEPS) are either too full or have stricter restrictions on who can qualify, many people who lost the Advantage subsidy have no other recourse for rental assistance.

Whatever the reasons are for raising homelessness and lack of space in shelters, we all need to revisit programmatic solutions to help families both in shelters and those who are at risk of losing their homes.

Watch the video and read the full NY1 article here.

Panel Discussion Holding Landlords Accountable Monday in the Bronx

On Monday, I will be joining an impressive group of housing experts to discuss current housing issues and possible solutions for holding bad landlords accountable. This forum was inspired by the recent City Limits issue,”The Phantom Landlord” (a must read if you haven’t already) which focused on one landlord Frank Palazzolo and his inexplicable ability to remain untouched despite his involvement in many, many properties where bad conditions have been disastrous and even deadly for the residents. This forum will talk about possible legislation and strategies for holding landlords like this accountable.

The discussion will be held on Monday, April 23rd at the Scala Auditorium on the first floor of the Leo Engineering Building, 3825 Corlear Avenue (a block west of Broadway, between E. 238th and E. 240th streets). Please join if you can it should be a very interesting discussion!

For more information on who the panelists are and what will be discussed check out Bronx Matters!

Follow

Get every new post delivered to your Inbox.

Join 1,038 other followers

%d bloggers like this: