Townhouse Management on Buying Spree of Flushing Bank Mortgages

About two years ago, we began organizing an eight building portfolio connected to the notorious wrong-doer Frank Palazzolo. At the time, these buildings, including 1221 & 1225 Sheridan, 735 Bryant and 3212 Cruger, were in foreclosure and suffering from severe neglect. Tenants were living alongside rats, roaches, mold, lead paint, crumbling ceilings and leaky faucets without heat or hot water.

After fighting for a preservation deal for nearly a year, these buildings were sold against tenants’ wishes to a group called Townhouse Management. This happened in early Spring 2011, though it took the group until August 2012 to secure the deeds to the properties. Tenants were cautiously optimistic about a Townhouse landlord, and initially the building saw a rapid decline in dangerous code violations. But, as we’ve been saying for quite some time, code violations do not tell the whole story.

Last week, we went out to these buildings to check in on repairs. These are some of the things we saw:

735 Bryant
735 Bryant
1221-1225 Sheridan Ave
1221-1225 Sheridan Avenue

1221 & 1225 Sheridan Avenue had experienced a fire in the boiler room the very morning we arrived.  When the fire erupted, the fire alarm did not go off, and tenants were understandably scared and frustrated. Other tenant responses about Townhouse Management was also not stellar. Many people feel neglected and abused. Tenants also feel that conditions have not improved, and management quality has not changed.

Meanwhile, Townhouse Management is on a buying spree. They are purchasing mortgages on buildings in foreclosure all over the Bronx and Brooklyn. Notably, they are buying a significant portion of Flushing Savings Bank’s distressed portfolio. Various LLCs associated with Townhouse Management have bought the mortgages on at least 15 properties in foreclosure from Flushing Savings Bank over the past year.

Nearly half of Flushing Bank’s foreclosure portfolio is in the Alternative Enforcement Program. On these highly distressed buildings, it is essential that the bank not do business with groups like Townhouse Management. Townhouse Management has proven themselves incapable of providing the rehabilitation that these properties need. This kind of cooperation between a lender and a negligent, predatory landlord is exactly the kind of behavior that led us to a foreclosure crisis in 2008, and it cannot be allowed to continue here.

We are working with tenants in many of the buildings that are in foreclosure with Flushing Savings Bank, and fighting alongside them for a safer, more affordable, more habitable future. We will fight to prevent the sale of future mortgages to Townhouse Management, or any buyer not on HPD’s approved developer list.  Stay tuned.


The Wall Street Journal: “Bank Makes a Profile-Altering Deal”

The Wall Street Journal published an article on Sunday highlighting a new relationship between New York Community Bank and housing advocates (including us, the Urban Homesteading Assistance Board.)  To long-time readers of our blog, this is old news. In the years leading up to 2008, NYCB was the largest lender on rent regulated multi-family buildings in New York City and were known for lending to high-profile predatory equity players, like Pinnacle Group, and well-known slumlords, like Frank Palazzolo.  After years of organizing on our part along with along with a coalition of housing advocates, New York Community Bank came to the negotiation table in December. In March, the Mutual Housing Association of New York purchased four distressed notes in Brooklyn.

What’s changed? While the bank has long denied wrongdoing, it was displeased with the attacks and agreed to a pact under which it plans to give landlords and nonprofits a first shot at every distressed mortgage it sells in New York City.

Under the voluntary agreement reached earlier this year with two leading housing advocacy groups, New York Community Bank intends to offer to sell assets first to nonprofit developers and landlords approved by the city’s Department of Housing Preservation and Development as having good track records.

Under the “First Look” program, approved developers will get get an exclusivity period of 2 weeks in which to make an offer on distressed NYCB assets before the bank begins to actively market them. We are hopeful that this agreement willprove useful in recapturing large scale amounts of NYC affordable housing stock — perhaps through an Interim Facility. As we move forward, to different campaigns with different banks, we hope to reproduce this model and create healthier relationships between the non-profit and NYC banking communities to benefit rent regulated tenants.

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!

City Limits Spring Issue Focuses on Notorious Slumlord, Frank Palazzolo

The March/April issue of City Limits Magazine hits the nail on the head by addressing important issues that we at UHAB work on and think about daily.  The entire magazine, titled “The Phantom Landlord” is dedicated to exposing notorious slumlord Frank Palazzolo. In five in-depth articles the CUNY Investigate team uncovers his slippery business style and the tragedy that unfolds as a result. The series ends with a critique of possible solutions, including a new “landlord licensing law.” Along the way, the magazine discusses lending practices and well as innovative policy proposals which could have major impacts on tenant’s lives.

Like almost everyone who has ever worked in NYC housing, we know the name Frank Palazzolo well. Long-time readers of our blog may remember our turbulent fight alongside tenants in 8 Bronx Buildings, sold out of foreclosure last March. Frank Palazzolo was connected to the owners of these buildings, and responsible for driving them into the ground. Companies registered with his Scarsdale address are connected to hundreds of highly distressed properties, but he manages to avoid accountability.  As CUNY Investigative Team (responsible for many of the articles in this issue) reports in Chapter 1: “Hundreds of Properties, Millions of Dollars, no Landlord

Even though the scores of buildings he was associated with teemed with violations and creaked in disrepair, actual legal ownership of most of the properties was usually in the hands of others. The question of who was responsible was forever murky. Lawyers, housing officials and tenant organizers always had a tough, if not impossible, time pinning down Palazzolo’s exact responsibility.

The subsequent three chapters tell the story of a tragic building fire, a complicated corporate policy that dodges responsibility, and an attempt by HPD to “pierce the corporate veil” of Palazzolo’s dirty empire. The final chapter in the five part series is a critique of landlord licensing, a hot new idea that would make it impossible to purchase distressed buildings without proper experience and appropriate record. This could be the answer to preventing tyrants like Palazzolo from continuing to purchase distressed buildings and run them deeper into the ground.

City Limits delves into New York housing issues, and questions why banks are allowed to lend to property owners with such abominable records.  Edward Josephson from South Brooklyn Legal Services writes about proposed City Council legislation which would require landlords to go beyond patchwork repairs and address underlying conditions.  In his article “Council Eyes Systematic Remedy for Housing Violations”, he writes, “Tenants may for the first time experience a code enforcement system that rewards their organizing efforts with lasting improvements in their buildings and their lives.”

The issue even has a tidbit for the gossip page: it reveals Marc Sarfati, father of “Glee” star Lea Michele, to be an associate of Frank Palazzolo. We could keep talking forever about these articles, but why not just have a look for yourself?  Click here to read this month’s edition of “City Limits.” If you’re interested in checking out conditions in a Palazzolo building, visit Picture This! and check out 1221-1225 Sheridan Avenue.