Opportunities for Large Scale Preservation: The Interim Facility

Negotiating a note sale on a distressed multifamily building is a long and complicated process and is associated with a significant amount of risk for note buyers. By the time a responsible developer has become a note holder, they have already completed months of work: of due diligence, of negotiating the originating lender down on price, of securing subsidy and financing from HPD.  Up until this point, we have only been successful in completing building-by-building preservation through note sales, and only in a very few number of cases. But a portfolio by portfolio approach does not take into adequate account the severity of the foreclosure crisis, and a programmatic response is needed to secure large-scale preservation. In order for the New York City affordable housing community to accomplish this, we will need to greatly enhance our development capacity. We believe we have developed a tool to do just that.

We now believe that this can be done through the creation of an “Interim Facility” that would have the capacity to conduct a bulk note sale, manage properties in the interim of the foreclosure, and secure permanent, community minded disposition for the buildings. In some cases, the Interim Facility would work with tenants to develop a limited equity cooperative. In all cases, the entity would practice the tenant-choice model of ownership and engage residents in final disposition.

Click here to view the Interim Facility, a graphic we developed to demonstrate one way we have envisioned such a entity capable of bulk note purchases. We are also playing with other ideas, such as a joint venture between several neighborhood groups. Stay tuned for how this exciting idea plays out, as it represents a real opportunity to exit the foreclosure crisis with a strong tool for preservation and the possibility for long term affordability for NYC tenants.

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The Wall Street Journal: Developer Plans Harlem Building

The Wall Street Journal recently published an article about real estate developer Joseph Tahl and the lot that he is gunning to buy in East Harlem. Here’s an excerpt:

Tahl Propp’s push to build more apartments in the neighborhood has raised concern among some neighbors, who fret about the company increasing its share of Harlem’s affordable housing market.

“We are increasingly worried about the rent stabilized buildings being converted to luxury condos,” said Emily Goldstein of Tenants and Neighbors, a housing advocacy group.

Joseph Tahl, president and co-founder of Tahl Propp Equities, described his company as a long-term owner and operator of residential buildings with no interest in forcing out tenants to raise rents.

He said about 90% of the 3,500 apartments owned by the company are “affordable” housing units, meaning rents are below market rates or are subsidized.

The article goes on to report that in exchange for the vacant lot, Joseph Tahl would maintain use agreements on four of his other buildings for the next twenty years. In exchange, he would be allowed to purchase a vacant lot in Harlem for $1.

Lets start with what we know. We know that Joseph Tahl is not the champion of affordable housing he says he is. Tenants in affordable units report being pressured to move out. Its noticeably harder for them to get the services that market rate tenants in their building receive easily. And the “90% affordable” figure he swears by? Not quite accurate.

We also know that Joseph Tahl’s “offer” to maintain affordability in these buildings is a not quite what it seems. Some of these buildings already have  Land Disposition Agreements which require him to renew the affordability contracts  for the next 20 years.  Worse, Tahl’s offer to the reluctant-to-sell City of New York looks like it might actually get City support.

Let’s all join together is wishing Joseph Tahl a big GOOD LUCK in his attempt to offer up nothing, and in return get the chance to drive up rents, push out tenants, and change the landscape of an entire community.

Read more at The Wall Street Journal Online.

“Sen. Schumer, Christine Quinn Push Feds To Pressure Bank That Owns Shoddy Housing”: The Village Voice

As published in the The Village Voice by Elizabeth Dwoskin

Image courtesy of The Village Voice

A consequence of our sucky economy: The city estimates that around 125,000 housing units will go into foreclosure over the next two years.

In many cases, owners (including banks) are trying to unload these buildings, and while they wait, living conditions deteriorate drastically for tenants, with landlords racking up housing code violations for lack of heat and hot water, for toxic mold outbreaks, leaky roofs, and rodent infestations.

Conditions have gotten so bad, in some cases, that city officials have taken a lot of flak from advocates (and from journalists), and these buildings have become PR problems for the city. And so, over the past year, officials have been playing a bigger role, by being a middleman between tenants, banks, older landlords and prospective ones.

Today, city and state officials, and Senator Chuck Schumer, took things a step further by asking the federal government to force a big bank that owns many foreclosed and distressed properties to come clean about their finances and sell the properties to a responsible buyer.

New York Community Bank is one of the most active providers of loans to landlords that buy multi-family dwellings in the city. According to the Urban Homesteading Assistance Board, the bank controls the mortgages on 34 foreclosed buildings, which are home to 800 families. 328 buildings that are owned by the bank and home to 6,000 families are in very shaky condition: they have more than three hazardous health and safety violations per apartment. Until recently, the bank owned five properties that were on the city’s worst buildings list.

Last month, Mutual Housing Association of New York, a real estate company that has the support of the city’s housing agency and tenant advocates made a bid to buy the 34 foreclosed properties. According to City Council Speaker Christine Quinn, New York Community Bank turned the company down, saying the offer was too low.

Schumer, along with Quinn and Congresswoman Nydia Velazquez, say that the FDIC — the federal agency that supervises financial institutions — should force New York Community Bank to come clean to buyers about the actual state of the finances, living conditions, and repairs needs of the buildings. Though no one has said it outright, the implication here is that the bank is fudging the numbers to make the distressed buildings more attractive to a higher bidder. The other implication is that the city has not had the pull with the bank that it would have wished.

The New York pols say that what they are asking for is well within the power of the federal agency. Because many of these mortgages were securitized by Wall Street, and are therefore implicated in the wider economic crisis, Schumer and Velazquez had inserted a section into the Dodd-Frank financial reform bill — passed by Congress last summer — that makes the federal government take some responsibility for the problem of distressed mortgages on multi-family dwellings, which afflict big cites like New York.

Schumer said today in a press release: “Here is a perfect example for the FDIC to take into consideration as they help build a framework for this program. The message here should be clear: residents of affordable buildings throughout the City should not be the victims of never-ending cycles of overleveraged gambling by predatory equity investors.”