The Three Borough Pool: Harassment, Neglect, and Bad Investments…Oh my!

Bad Conditions at 265 E. 194th Street
Bad Conditions at 265 E. 194th Street

In the middle of November, we published a blog post about a campaign we’ve been working on with a group of 42 buildings in foreclosure in three boroughs. The campaign had recently been covered by the Wall Street Journal. Here’s a quick update for the New Year!

The Three Borough Pool is the biggest foreclosure portfolio since Stuy Town went into foreclosure 2010. It contains nearly 1600 units in 42 buildings spanning across The Bronx, Manhattan, and Brooklyn (hence the name “three borough pool”). The $133 million mortgage is being serviced by LNR, a Florida-based group. The underwriting for this $133 million mortgage was based on the predatory idea that the owners would be able to increase building revenue by raising rents and spending less on maintenance. When tenants were not able to be intimidated into leaving their homes, the mortgage went into default. Though the 42 buildings have been in foreclosure since April, 2013, no receiver has been appointed. There are four owners of the portfolio:

  1. Normandy Real Estate, which was documented by the New York Times as far back as 2008 as a predatory equity company determined to harass tenants out of their homes to raise the rents to market levels.
  2. Vantage Properties, who we took on a year ago when they partnered with Lone Star, has also been sued by then-Attorney General Andrew Cuomo for harassment.
  3. Westbrook Partners, which has also been known as a predatory equity group since as far back as 2008 and has been hit with tenant-driven campaigns before.
  4. David Kramer, who also runs Colonial Management, the management group in  all 42 of the buildings that has been harassing tenants.

The harassment that tenants have been facing is serious stuff. There are buildings that are denied access to their community rooms, repairs in nearly every apartment that need to get done, and a completely unresponsive office that forces tenants to call 311 constantly.

Colonial has also gone through great lengths to prevent tenants from organizing. They sent at least two buildings notices that their buildings were not in foreclosure. They’ve gotten their goons to block organizers from entering buildings despite tenants demanding that they let us in. When that didn’t work, they began calling the police who ignored tenant protection laws and denied us the right to meet in common spaces. When even that didn’t work, they once had their super physically grab organizers and force them out of the building.

None of this has stopped tenants. They are getting organized in well over half of the 42 buildings because they don’t trust their landlords and know that this foreclosure is an opportunity to give them real tenant choice.

Over the past four months, we’ve been working with a diverse coalition of tenant organizing groups to educate tenants about the foreclosure process and engage tenants in having their voice be heard. There have been dozens of tenant association meetings across the city, culminating in a massive meeting on December 17th in the Bronx attended by tenants from many of the 42 buildings to strategize about the next steps of the campaign.

This foreclosure is the greatest opportunity for Mayor de Blasio, his new administration, and the City Council to walk the walk after talking the talk in protecting affordable housing for thousands of New Yorkers. Stand with tenants when they say that any bank or private equity company thinking of refinancing these portfolio with these owners would be out of their mind. With debt at this level, the properties would be destined for another round of neglect and foreclosure. The tenants won’t take it anymore. The time is now to join together and fight for a better deal for rent regulated housing in New York City.


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! 

UHAB Organizers Embark on Vantage/Lone Star Foreclosure Campaign

In March, the Real Deal reported that Vantage Property’s Normandy-Vantage Washington Heights portfolio fell into foreclosure, after Anglo-Irish Bank folded and Lone Star Funds took over the loans. Vantage Property, notorious for harassing tenants, owed $42.2 million on the four rent-regulated properties, which– as you may imagine – are highly over-leveraged.

At the same time, Lone Star has also opened three other foreclosure suits against Vantage Properties.  These foreclosures include a 10 building portfolio in Inwood where Vantage owes Lone Star $44.4 million, and at 730 Riverside Drive and 344 Fort Washington Avenue where Vantage racked up nearly $22 million in debt, according to ACRIS.

On top of that, Vantage is in hot water with a third upper Manhattan portfolio where debts total to $70 million, and has been in foreclosure since October 2011. The eight buildings in this portfolio are securitized and we believe are serviced by Torchlight Loan Services.

If you haven’t been doing the math as you read this, no worries! We did it for you: Vantage has been taken to foreclosure court by various lenders for owing at least $178.6 million dollars. And it appears there’s even more to come.  In case  Facebook’s $16 billion IPO is still fresh on your mind, we would like to remind you that $178.6 million is a lot of money.

When it comes to Vantage Properties, we believe that the phrase “all your chickens coming home to roost” applies. Five years ago, Vantage made the wrong bet. They highly overleveraged these buildings, which directly led to tenant harassment: Vantage thought they could evict without justification, reduce services until people got fed up and left, and unlawfully raise rents until their loans made sense. They weren’t counting on New York City tenants and their unflagging capacity for fighting back; they weren’t counting on New York State Attorney General (now Governor Andrew Cuomo) taking them to task for their wrong-doing. Now their buildings are in foreclosure.

We spent much of the past week doing outreach in Vantage Property foreclosures where Lone Star has bought or inherited the mortgage, particularly in the Washington Heights and Inwood portfolios.  Until we begin to work with tenants and reach out to Lone Star to discover its plan for these properties, we are left with many questions. Does Lone Star plan to keep these buildings and become a landlord, or will they foreclose and sell them to the highest bidder? As of now, all we can tell you is that: 1. Lone Star is on a shopping spree. 2.  Vantage portfolios are embarking on their second round of predatory equity. 3. We are very suspicious.