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.


Fight for affordable housing! Fight for a better deal!

Forty-two buildings spread across the Bronx, Manhattan, and Brooklyn are currently in foreclosure. These buildings, home  to more than 1500 low-income families, are now at risk of being lost to the same speculative financial instruments that led to a massive housing crisis in 2008. Investors continue to gamble on these homes, while 1500 families suffer in hazardous living conditions. 
At this moment in NYC, we cannot afford to lose even one unit of housing for the poor and working class. Let alone more than 1500. That’s why tenants are organizing and fighting back. Join us on Tuesday, March 18th at 11AM on the steps of City Hall to fight back against speculation on affordable housing and for a better deal for tenants!
A group of four predatory equity groups (Normandy, Westbrook, Vantage, and Colonial Management) took out a $133 million mortgage in order to buy the portfolio in 2007 during the housing boom. They hoped to cut maintenance costs and force tenants out to raise rents. When people refused to leave their homes, the landlords pocketed the tenants’ rent and let the buildings deteriorate more and more until finally they defaulted on their debt causing all 42 buildings to fall into foreclosure in April 2012.

And that’s just the tip of the iceberg. Tenant have been suffering from neglect and harassment for years. No heat and hot water for days at a time. Elevators that are broken as often as they work. Ceilings that have collapsed or are missing entirely. Repairs that should take hours take months to complete — and then, they are only patchwork. One building hasn’t had gas since August. These conditions are unjust, and tenants are demanding change. 
On Tuesday at City Hall, we say enough is enough! We demand safe, permanent, and affordable housing. If Colonial Management won’t take care of these buildings, we demand that the bank sell them to someone who can. 
Will you stand with us on Tuesday morning?
For more information, or to let us know you’ll be there, contact Kerri White at 212-479-3358  or at kwhite@uhab.org




Ismene Speliotis, 718-246-8080 ex 203
Kerri White, 212-479-3371


BROOKLYN (Jan. 15, 2014) – Residents of two decrepit rent-regulated buildings in Crown Heights and their supporters rallied today to demand that the new owners – who illegally bought the foreclosed-upon homes — stop trying to make a quick buck on the backs of the tenants.

“For the past three years, tenants in all four of these buildings have fought for their homes while suffering unconscionable living conditions,” said Kerri White, Director of Organizing and Policy at the Urban Homesteading Assistance Board, which is helping the tenants, along with New York Communities for Change.

“There is a preservation deal ready to move forward, it has been funded by the city and is supported by the tenant associations. (Broker Sanford) Solny and his investor friends must drop their opposition to the foreclosure immediately. This is a fight they cannot win: their protracted and frankly ridiculous interventions only force tenants to suffer for longer.”

The deteriorating buildings, which have been in foreclosure since 2009, have racked up 319 code violations on just 12 units.   There are holes in walls, water damage and other violations.

The way we are living here, they are treating us like animals,” said Pinkrose James, Tenant Association representative. “If Bernard Neiderman’s friends think they can get our buildings back from the tenants, they are wrong. We are here to demand that the foreclosure move forward so the Mutual Housing Association of New York (MHANY) can begin work on our homes, and to tell let anyone interested in buying these buildings to back off.” 

In March 2012, the Mutual Housing Association of New York (MHANY) purchased the mortgages on the buildings with the intentions of becoming owners once the properties wound their way through the foreclosure process. MHANY bought the mortgages with the support of the tenant associations, housing advocates, and city officials. The 25 year-old non-profit organization has plans that include a complete renovation in the buildings, funded by the Department of Housing Preservation in Development.

However, in the fall of 2012, slumlord Bernard Neiderman illegally sold the deeds to 230 and 232 Schenectady Avenue to a group of investors based in Borough Park. It is illegal to sell buildings that are in foreclosure. These investors, working through broker Sanford Solny, hope they can flip the buildings, buying out MHANY’s interest and making money off the top. This speculative behavior has slowed an already glacial foreclosure process, forcing tenants to wait longer for the repairs they desperately need. The buildings are both in the City’s Alternative Enforcement Program. The tenants rallied outside Solny’s office in Borough Park to demand that these investors drop their baseless and speculative opposition for the foreclosure, and allow the preservation deal to move forward.

“Unfortunately, many neighborhoods that low- and moderate-income New Yorkers have called home for generations have increasingly been affected by the speculative real estate market.  As buildings are sold at speculative prices amongst uncaring and unscrupulous investors — prices that cannot be maintained with the legal residents and legal rents — the greatest victims are the tenants themselves,” said Ismene Speliotis, Executive Director of the Mutual Housing Association of New York.

“MHANY ‘s plan to purchase the note, oversee the completion of the foreclosure, rehabilitate the buildings, and provide decent and affordable housing to the residents is still intact.  We are working with all parties to complete the foreclosure and take care of the residents and the buildings, preserving another affordable housing asset for the Bedford Stuyvesant and Crown Heights community.”

Housing Will Never Be Affordable Until There’s a Living Wage


Today, thousands of fast food workers are striking in over 100 cities to demand $15/hour wage and the right to organize! We were going to write a long, passionate article about the connections between today’s fast food strikes and the housing justice movement.  We were going to talk about how the same people who are struggling for better conditions and affordable homes are the same people who are forced to work in sub-standard conditions and get paid below living wages.  We believe all this strongly, but Eviction Defense already published it in an article titled “Fight Forward: Why Fast Food Strikes are Important for Housing Justice.” 

Here’s what we think is one of the most important point:

The struggle to make housing affordable and available is the struggle to eliminate class barriers to it. On the one side we struggle to take housing out of the marketplace and a good controlled democratically by the people, but on the other end we still live in an economy ruled by capital and if wages are too low to afford anything we cannot meet in the middle just by focusing on the housing sector independently. Instead, this is a multi-front fight that needs to be engaged in a number of sectors simultaneously, and the ability for low-wage workers like fast food employees to see a living wage opens up their access to housing almost immediately. This empowers us in the housing justice movement since it means that workers who are now seeing moderate housing financially accessible can begin finding stable communities, and we can then fight to keep rents and mortgages within financial reach and to protect people who lose their jobs or are still finding it difficult to make ends meet.

And also

What these strikes really remind us is that the housing justice movement is not centered on the issue of housing on its own, though things like rampant fraud and discrimination are rampant on their own. Instead, this is a fundamental issue of class struggle that roots itself in the unequal distribution of resources and economic power. Fast food stands as a beacon of an exploited workforce, where people are underpaid and does not allow people to engage equally in the things we all need. If we are really to target the unequal distribution of housing in this country, then it is always going to come down to the fundamental inequalities inherent in capitalism. To really confront this we need movements that take direct action in multiple sectors, where workplace struggles are one of the most important ways to target the sources of this oppression right at the point of production. Labor struggles are an indispensable part of the economic project we need to target if we are to ever get close to our dreams of equal access to housing and community control over the sector as a whole.

Preach it!  To support the fast food workers, and the struggle for better conditions and access to resources for low-income people everywhere, join us today at 4:00 in Foley Square!  See you in the streets!

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! 

Workers Rising! Reflections on the Low-Wage Worker Organizing Conference

Car Wash Workers Organize in NYC, photo: AFL-CIO
Car Wash Workers Organize in NYC    photo: AFL-CIO

Yesterday, I attended an inspiring conference called “Workers Rising: a Symposium on Low-Wage Worker Organizing in NYC” put together by The Center for Popular Democracy and United NY. The conference’s energy was incredible- the main room was packed with folks standing in the back, crouching along the walls.  A wide range of people contributed working in sectors ranging from organizing, law, policy, city government, academics, and of course people working in low-wage jobs.

Here are some of the most important take-aways:

-A new labor movement has sprung up in the past year in which previously uncharted territories of the labor industry are being organized.  Industries such as fast food and retail, for example, are organizing workers who often work for minimum wage ($7.25 in NYC).  These workers are widely thought to be students looking for part time jobs, actors, or those looking to make an extra buck.  Contrary to this assumption, the majority of fast food workers and those in the retail industry are attempting to work in those industries full time, depending on that work to support themselves and their families.

-Successful attempts to organize car wash workers, taxi drivers, and domestic workers are taking place across New York City

-New York City is coordinating organizing its low-wage worker campaigns with other efforts across the country- mostly in LA and Chicago.  Organizers are sharing successful organizing strategies and change the face of the industry nation-wide. This collaboration across job sectors and cities clarifies that these efforts are part of a larger movement rather than isolated events.

-A great deal of organizing taking place in NYC is happening through “worker centers” and in collaboration with community groups rather than through unions.  Groups like Retail Action Project, New York Communities for Change and OUR Walmart are organizing workers outside of the traditional union structures.

-Integrating labor and other issues (notably immigration reform) is crucial to create real change in labor.  Immigration reform will impact millions of low-wage workers across NYC, as well as the way the workplace functions.  Important to note as well is the growing shift from full-time workers to outsourcing and employing temps in all sorts of industries, including fast food. This, according to many of the panelists, will only increase as more immigrants gain rights as legal residents or citizens.  Immigration polices which promote guest-workers and outsourcing create challenges for organizing and regulation of rights in the workplace.

-The Center for Popular Democracy and United NY released a report entitiled “Workers Rising: Organizing Service Jobs for Shared Prosperity in New York City.” The report puts forth 4 sets of actions to improve the lives of low-wage workers in New York City. The actions are that:

  • The city should pass legislation that would ensure at least five days of paid sick leave (Earned Sick Leave Act) and protect workers from erratic scheduling (Predictable Scheduling Act)
  • NY should better regulate high-violation industries, and pass laws like the Car Wash Accountability Act and creating an “enhanced privileged permitting” system at airports
  • The City should create a “Mayor’s Office of Labor Standards” to educate employers, investigate worker complaints, and enforce worker rights
  •  NYC should modify its “home rule” authority in order to set a citywide minimum wage, which would be higher than the current state minimum wage.

As an organizer with UHAB, this conference helped me to connect tenant struggles with their apartments to their struggles in the workplace.  I work with one tenant leader, Ms. D., in Crown Heights who deals with horrible building conditions and a frustrating situation with an absentee landlord. In addition, she works as a home health aid, working hard for little pay.  Not only has Ms. D stepped up as a tenant leader in her building, but she has also begun attending union meetings and standing up for her rights in the workplace. It must be hard and frustrating  but Ms. D is working to create change in several aspects of her life, tackling huge issues through collective action.

Attending this conference reminded me that labor organizers need to work housing organizers who need to work with community organizers.  Everyone has the same goal: to give low-income New Yorkers a bigger voice in how they are treated, as well as to assert and expand their rights.  Keep up the good work!

2013 Brings No New Relief in the Rockaways

Yesterday’s big news from Washington was that the House of Representatives – despite Eric Cantor’s best efforts – decided to vote on the Senate’s bill to avoid the so-called “Fiscal Cliff.” The measure passed, leading to the first significant tax increase on the wealthy in over 20 years.

But while the House leadership was moving a vote on this bill, they were choosing NOT to vote on another: a bond measure that would speed additional relief to thousands and thousands of people in New York and New Jersey who are suffering as a result of Hurricane Sandy. With Boehner abruptly tabling this bill, which passed the Senate several weeks ago, we will have to wait until the next Congress to secure legislation for Sandy relief. This is unacceptable, as some of Boehner’s colleagues have pointed out since yesterday.

New York Communities for Change documents just how unacceptable this is in a new report released today. The report, titled “Forgotten: How the City has Failed Sandy Victims in the Rockaways,” is the result of extensive surveying in affected neighborhoods and holds a critical lens to Bloomberg’s Rapid Repair program, which has been anything but rapid even when it does provide repairs.

It’s 2013, its below freezing outside, and Sandy victims are still suffering. One particularly salient experience, reported by the NY Daily News, tells the story of Audrey Walker, who needs $35,000 to make her home inhabitable. She has received some money from her insurance company and some money from FEMA, but is still nearly $20,000 short. It’s time for the city to step up.