August 16, 2012 3 Comments
If you follow Predatory Equity as closely as we do, you’ve probably heard of a company called “Urban American Management.” UAM is a New Jersey based private equity group that owns thousands of rent regulated apartments in New York City, including one controversial 4,000-unit portfolio in Upper Manhattan and Harlem that they purchased in 2007 for $940 million dollars: at the time, the second largest residential deal in Manhattan’s history.
UAM tenants are very organized, and they aren’t thrilled with the company. They’ve been fighting with management over a change in electrical billing known as “submetering” since 2009. Tenants feel that the change, which would cause individual electricity bills to skyrocket, is unfair. Tenants are also taking UAM to task for a new photo-identification system that encroaches on their privacy, and have taken the mega-landlord to housing court for bad conditions several times. UAM has an abysmal Yelp review, and an entire blog dedicated to exposing the predatory landlord.
Up until just recently, UAM was run by the Eisenberg Family, experts at over-leveraging, Philip, Joshua and Douglas. Recently, however, we received word that Doug Eisenberg has left the company. But it wasn’t long before he reared his head, signing mortgages and deeds as principal of a new company called A&E Real Estate Holdings. Unless Doug Eisenberg left UAM because he’s had a drastic change of heart, realized that overleveraging is bad for tenants and he’d like to do more responsible business, we’re a little worried about this new company.
Recently, A&E bought two buildings in Washington Heights from Vantage Properties. 217 and 227 Haven Avenue already have a history of predatory equity and foreclosure: in July 2011, Prudential Industrial Realty filed for foreclosure against Vantage Properties. The outstanding debt grew to over $19M dollars. Our own rudimentary analysis indicates these buildings can support a mortgage closer to $6M than $20M. On August 14th, representative from Prudential Industrial’s servicing arm told us that they are no longer pursuing foreclosure. We don’t know how much A&E bought the properties for, but we’re anxiously awaiting the deed to appear on ACRIS. The cycle continues…
This isn’t the first building that Eisenberg’s new company has bought. In March, A&E bought 113-unit 393 West End Avenue for about $55M. Broker CBRE claims to be already marketing this building for Eisenberg, and says they have gotten offers for nearly $600/square foot ($66M.)When the most responsible way to determine value is based on current rents and operating costs, we find it highly unlikely that this building has grown $11M in value in just 5 months. We are worried about a return to the speculative real estate market characteristic of 2005-2007.
Tenants and 217 and 227 Haven are getting organized, and haven’t decided yet how they would like to proceed. But we do know this: they’re tired of being shuffled from one private equity company to another, and we don’t blame them.