The Surreal Estate

Perspectives on Tenant Organizing from the Urban Homesteading Assistance Board

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Flipped Again: More Private Equity Groups Speculate on The Three Borough Pool Portfolio



On Saturday, the Wall Street Journal reported on the most recent update in the saga of the Three Borough Pool, a group of 42 buildings which over the last 8 years have been packaged together in one mortgage, speculated on, foreclosed on, refinanced and is currently being broken up and flipped again. This group of buildings is another example of the continuing cycle of predatory equity and is further proof that we have yet to come up with a solution to the problem of speculation in the rent regulated housing market.

UHAB has been tracking and organizing in this portfolio for several years. It is one of the classic examples of predatory equity. Three private equity companies (Normandy Real Estate Partners, Westbrook Partners, and Vantage Properties) partnered up with David Kramer, the president of Colonial Management, to package 42 buildings spread across the Bronx, Brooklyn and Manhattan. The investment group took out a mortgage with Barclays who then packaged the note into a Commercial Mortgage Backed Security (CMBS.) Securities like this were a common tool that many believe contributed to the 2008 financial crisis and are disastrous for affordable housing. In the Three Borough Pool, like other CMBS portfolios (Stuyvesant TownRiverton, Fordham Towers/Robert Fulton Terrace, and the Milbank portfolio) the owners eventually defaulted on their mortgages and the buildings fell into foreclosure. In 2013, UHAB and other housing advocates began working with tenants in the buildings to push for a responsible sale of the properties. However, two of the private equity companies that led the building to foreclosure were able to refinance and pull the buildings out of foreclosure. It is these companies who are now once again selling the buildings.

This weekend’s WSJ piece focuses on 8 of the 42 buildings; these 8 properties were recently sold to a real estate investment company called Black Spruce Management. According to Normandy & Westbrook, prior to the sale they made a lot of repairs to the buildings. This assertion comes as a surprise to the tenants who are facing major condition concerns on a daily basis. HPD code violations have actually increased over the past year, but the problem is actually deeper than that. These buildings have a long history of neglect and failing conditions, and they need more than patch work that could clear violations. The night before this story came out, one of my co-organizers received a call from a tenant in one of these buildings who was in tears because she found a rat in her living room in the apartment she shares with her grandchildren. Tenants in these buildings have suffered from systematic leaks, mold and lack of heat and hot water. These problems are deeper than code violation repair, they are problems which demand more extensive renovation, which would require a large financial commitment. Considering the amount that Black Spruce paid for these buildings, it is unclear if there is financing for this type of deep repair work.

The WSJ story claims that the new debt on these properties is considered low. First of all, the new mortgage of these buildings is an average of about $83,000/unit. This is the same average debt level as when the owners defaulted on the CMBS mortgage. Second, the mortgage does not tell the whole story. The full purchase price on the 8 buildings was over $57 million, or about $110,000/unit. This means about 25% of the financing is equity investment. As Black Spruce mentioned from the article, they are backed by investors: investors who are presumably seeking a return on the millions of dollars they gave to Black Spruce to purchase these buildings. Having a “lower” mortgage at the expense of putting more off the books equity into the deal does not solve the underlying problem: these are rent regulated buildings with low-income tenants and limited ability for rent increases. If the financial stability of the buildings is contingent on large rent increases, this portfolio will fail. Unless, of course, the plan is to either push the current low income residents out of their homes in order to raise rents, or to starve the buildings of money needed for maintenance in an attempt to keep costs down. This is not a new practice. This is Predatory Equity 2.0, the same kind of speculative financial venture that landed these buildings in foreclosure in the first place.

This type of speculation is particularly relevant as we approach June 15th, when the current rent regulations are set to expire. The current rent regulations are not strong enough. Advocates and tenants know that it is impossible for landlords to achieve their financial expectations when they over pay for buildings by continuing to rent to the low and moderate income families who have lived in these buildings for years. Predatory equity, like in the Three Borough Pool, makes rent regulated tenants the victims of harassment as landlords aim to push them out to achieve higher rent increases. It is vital that our legislators in Albany recognize the importance of strengthening the rent regulation laws. It has become a business practice for landlords to buy buildings with the intention of violating our laws and we shouldn’t allow it to continue. The only way we will be able to put a stop to these illegal practices is for our elected officials to reinforce the original intentions of the stabilization laws: to protect tenants in these buildings from being held hostage by greedy landlords who seek to make a profit off the suffering of our neighbors and our communities.

Stabilis Press Conference

Here is  a video with footage from the Stabilis press conference and building tour on December 3rd. Letitia “Tish” James, who will become our Public Advocate in just a few days, spoke beautiful words of solidarity with the tenants. Tenants spoke about the hardships and appalling conditions they have endured while living in a building with a negligent landlord. Then the tenants lead a tour of the apartments to show some of these conditions. Please watch and share!

Speculator today, slumlord… today?

broken stairs 10.7.13 now fixed

After two years of tenant organizing, not that much shocks me anymore.  I’ve seen holes in ceilings, mold covering bedroom walls, and families living without basic amenities like fridges or stoves.  But walking into 755 Jackson Avenue in the Bronx was a shock.

A quick rundown: The building has 11 units and 215 code violations. It’s in HPD’s Alternative Enforcement Program, and on the Bill de Blasio’s Worst Landlord List.  The building has asbestos, lead paint, mold, leaks, and two tenants were injured on a collapsed staircase (pictured above).

And if that’s not enough, it’s owned by the one and only Stabilis Capital Management.  (In case you forgot, Stabilis is the lender on 836 Faile Street and six buildings in Ridgewood, all of which are in foreclosure and in deplorable condition.)

Wait! Stop the presses!  Stabilis owns buildings?  That was our question, too, given that we’ve only ever seen them acting as a mortgage holder interested in flipping debt.

That probably was their plan here as well, but things went wrong: Stabilis bought the debt at 755 Jackson Ave while the building was in foreclosure.  When the building went to auction, we assume no one bid and Stabilis took the title by default. It seems like it was all a big mistake. With a lot of consequences.

While Stabilis became owner in June, they have done nothing to step forward and claim responsibility for the building.  This has left tenants in a position where they don’t know who to call in an emergency or who to pay rent to. It leaves the City responsible for repairs. The building is effectively abandoned.

We’re now organizing at Jackson Avenue and tenants are planning to push Stabilis out of their building. And now that we know how Stabilis treats the buildings they own, we’re doubly fired up to fight against them at Faile Street and in Ridgewood, Queens.

Tenants, elected officials, and advocates are demanding that Stabilis find a responsible way to dispose of this property, and the other distressed multifamily buildings in their portfolio.  Check out Councilmember Maria del Carmen Arroyo’s letter to Stabilis Capital here, and stay tuned to our campaign!!

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.

Tenants from Distressed Bronx & Queens Buildings Descend on Bankruptcy Court to Demand Private Equity Company Preserve Their Homes


Manhattan, NY: Tenants from six dilapidated buildings in the Bronx and Queens travelled to Bankruptcy Court today to confront Stabilis Capital Management, the mortgage holder on their homes. The buildings are currently in foreclosure and are being managed by an agent who works for Stabilis. Tenants are suffering from leaks, mold, rodent infestations, falling ceilings, and in some cases, a lack of basic plumbing.  Stabilis is scheduled to appear in court today to seek control of the deeds on the properties, which are located in Ridgewood, Queens. Tenants fear that if they are successful in securing the deeds, Stabilis will sell the buildings to the highest bidder, putting residents at risk of continued unlivable conditions, and displacement.

Tenants, advocates, and elected officials are demanding that Stabilis meet with them to present their plan for preserving the properties, which are rent regulated and home to 36 low-to-moderate income families. Tenants are calling on Stabilis to sell the buildings to affordable housing developers who are willing and capable of fully rehabilitating the properties, keep them affordable in perpetuity, and allow tenants significant control in the management of their homes.

Stabilis is one of several companies that has been buying up debt on severely distressed rental properties in New York City’s gentrifying neighborhoods. The acquisitions resemble activity of the market before 2008, when private equity firms purchased large portfolios of rent-regulated apartment buildings, leading to foreclosure and mass deterioration of the housing stock. Today at Bankruptcy Court, the Queens tenants are joined by tenants from 836 Faile Street in the Bronx, where families are facing a similar situation with Stabilis Capital Management.

“As a resident of 1821 Cornelia St., I am concerned about the safety of the adults and children living in these six buildings,” said Tenant Leader Denise Serrano. “We pay our rent, so Stabilis should pay their bills and prevent the electricity and hot water from being shut off. They need to fix things like the locks on the front doors. We want to meet them to discuss who the next owner will be.”

There are currently 549 violations on 36 units at 1821 & 1894 Cornelia, 1673, 1675 & 1726 Woodbine, and 18-14 Woodbine. Tenants have been working alongside their elected officials and the Urban Homesteading Assistance Board to encourage the equity company to meet with them and allow them a voice in the future of their homes.

“Tenants should not suffer because of bad bets made by private equity investors seeking to gamble on New York’s housing market,” said Congresswoman Nydia Velazquez. “Stabilis Corporation must comply with local, state, and federal Fair Housing laws and should move swiftly to make badly needed repairs in all of its properties, including those in Ridgewood.”

“Too often, tenants are the ones who pay the price for bad lending decisions,” said City Council Speaker Christine C. Quinn. “If Stabilis Capital Management refuses to meet with tenants to develop a plan to protect the future of their homes, then they must sell these buildings to someone who will. I thank the tenants, UHAB, Congresswoman Velázquez and Council Member Reyna for their efforts to protect these homes and call on Stabilis to immediately begin repairs on these neglected buildings.”

“We can’t keep letting these vicious cycles send buildings deeper into distress. Whether they live in a foreclosed building or not, all tenants have a right to safe, decent housing,” said Public Advocate Bill DeBlasio. “When properties get this bad, we need everyone to come to the table–including banks and lenders–to put it back on a sustainable track. Tenants deserve nothing less.”

“It is not acceptable to put families at risk and force them to live through undignified conditions because of the irresponsibility of a landlord. Stabilis has acquired more than just foreclosed buildings, they have acquired people’s homes,” said Council Member Diana Reyna. “These tenants have a right to clean and safe housing and it is incumbent upon Stabilis to appropriately renovate any buildings in their portfolio.  If they are incapable or unwilling to do this renovation, they need to transfer control of the building to someone who can.”

“I am here today to support my constituents and neighbors who are suffering with the horrific and unimaginable living conditions for over 5 years,” said Assemblyman Mike Miller.  “Clearly, the present owner and the management corporation have been absentee allowing their tenants to live in unsuitable conditions for years.  I stand with my neighbors together to demand that our Judicial System, in particular our Bankruptcy Court, force the equity company to rehabilitate the properties immediately or to step aside and allow the buildings to be sold to HPD-approved developers who have the skills to stabilize these properties and provide safe living conditions for our community.”

“Stabilis Capital Management financial transactions seem to be disastrous for the tenants who occupy these buildings,” said Kerri White, Director of Organizing and Policy at the Urban Homesteading Assistance Board. “If Stabilis has no plan on how they will rehabilitate these properties to make them safe and decent for the families who live there and compliant with the laws of the City they should exit this deal now.”


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