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.

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Goodybe 2011: A year in Review

For those of you new to this blog or trying to get a handle on Predatory Equity in New York City – here’s your down-and-dirty year in review.

Highlights, Lowlights, and the Stuff in Between:

1. Lowlight: In April 2011, New York Affordable Housing Associates sold eight  distressed buildings to Bronx VIII LLC (Townhouse Management). While we still don’t know how much Townhouse paid for the buildings, the disappointing transaction was facilitated by New York Community Bank – who explicitly sold the debt to a developer the tenants did not endorse.

2. Somewhere In Between: In May of 2011, Finkelstein Timberger Real Estate bought the infamous ten building Milbank portfolio for the giant sum of $30 Million dollars. This transaction, which still reeks of over leveraging, was made through financing with Signature Bank. Fortunately for tenants, their advocacy throughout the process meant that all of the tenants are protected by an agreement to ensure repairs, eliminate the quest for back-rent, and cap the amount for potential MCI’s in the next two years. Additionally, six of the buildings entered the city’s Alternative Enforcement Program, ensuring further protection from the horrible conditions these tenants suffered for years.

3.  Highlight: In May 2011, after two years in foreclosure, the tenants at Borinquen Court in the Bronx had their building purchased by the non-profit organization West Side Federation for Senior and Supportive Housing. It was a a hard earned victory and the tenants are looking forward to living in a building with the owner they chose!

4. Somewhere-In-Between: Rent regulation was extended in June 2011! The “grand compromise” however has many complaining about the fact that  rent-regulated affordable housing has not been permanently preserved due to the fact that vacancy decontrol is still in effect.

5. Lowlight: In September 2011, The Bluestone Group sold a group of six dilapidated Bronx buildings to Anthony Gazivoda for a whopping $17 Million dollars. This made for the fourth over leveraging of this severely distressed portfolio.

6. Highlight: In September 2011, 1520 Sedgewick (AKA the “Birthplace of Hip Hop”) was saved! With tenant endorsement, Winn Residential and Workforce Housing Advisors purchased the building with an extensive rehab scope and permanent affordability plan to accompany the acquisition!

It was a busy year fighting for decent conditions and permanent affordability in New York City housing. UHAB organizers, tenants, and allies are still actively fighting to against over leveraging, bad conditions, negligent landlords, and against the banking industry’s bottom-line, top-dollar mentality. As Predatory Equity becomes a clearer and more understood trend,  we sincerely hope that our 2012 year in review will hold fewer lowlights and many more highlights as we continue to develop new tools to fight this rapacious phenomenon.

See you in 2012! We have a feeling it will be a great year!

Tackling New York Community Bank

This story is getting old: irresponsible loans given to irresponsible landlords. Our heads are still spinning from the last round of predatory equity, yet here we are, witnessing the continued repetition of worst practices in housing.  We yelled about it then, and now, with voices hoarse but persistent, we keep yelling in hopes that our pleas might penetrate the iron walls of the bank.

In the last few weeks, tenants who live in the eight buildings owned by New York Affordable Housing Associates (NYAHA), and in the midst of the foreclosure process with New York Community Bank (NYCB), have risen up to demand an end to the bad conditions that characterize the tacitly accepted lower standard of living in the Bronx. These buildings went into foreclosure in November 2009 when NYAHA, a conglomeration of some of New York’s most infamous landlords, defaulted on two mortgages with an outstanding debt of $15,918,254. Riddled with 1,610 code violations across the eight buildings, two of the buildings have racked up so many violations that they’ve been placed in the Alternative Enforcement Program, an HPD initiative to more closely monitor and enforce urgent repair work in the 200 worst buildings in the city.

Some tenants in the buildings have lived there for much of their adult lives and many others are new residents ushered in by various Department of Homeless Services (DHS) programs. Long term tenants have watched their homes deteriorate from beneath their feet, quite literally, as floors droop inward due to excessive mold and water damage. Tenants who came from the shelters wonder if perhaps things were better where they came from.

Following the rejection of the bid made by tenant-endorsed prospective buyer Mutual Housing Association of New York (MHANY), tenants stepped up their campaign against NYCB. With the help of UHAB, MHANY, Bronx Legal Services, and the Urban Justice Center, tenants filed the landmark “Milbank lawsuit” which effectively sues the bank in order to get more money allocated to the receiver for building repairs. They also presented the court papers to a local NYCB branch manager while wielding picket signs and marching outside the bank, garnering support for their call to “Write Down Loans, Save Our Homes!”

Unfortunately, despite the pending lawsuit and the tenants’ visible rage,  NYCB went ahead and sold the mortgage notes to an unnamed speculator, carrying the still lingering load of unsupportable debt in tow.

Although it seems that the battle to preserve these 8 buildings has now been lost,  tenants and organizers are currently brewing up new strategies to challenge NYCB’s systematically damaging lending practices. Here at UHAB we are busy compiling research about other NYCB foreclosures with high code violations and what we are discovering does not bode well for NYCB’s image…

Stay tuned for more information about upcoming actions to expose and tackle this  terrible threat to affordable housing in NYC.