Bills take aim at predatory equity

Tenants hold signs at a rally at City Hall, followed by a City Council hearing on legislation aimed at curbing the practice of predatory equity. (Photo by Sabina Mollot)

Tenants hold signs at a rally at City Hall, followed by a City Council hearing on legislation aimed at curbing the practice of predatory equity. (Photos by Sabina Mollot)

By Sabina Mollot

On Halloween, dozens of tenants holding spooky signs rallied at City Hall to bash landlords as vampires if they engage in predatory equity. The event was held prior to a City Council hearing on a package of bills that were aimed at stopping the blood-sucking practice.

Predatory equity is generally defined as when a landlord purchases a property with a high level of debt that could only be expected to be paid if the owner aggressively tries to get rid of rent-regulated tenants and replace them with higher paying ones. Tactics that could be considered aggressive by landlords include harassment via frivolous lawsuits, a lack of basic maintenance, illegal fees, constant buyout offers or construction that’s unsafe or seems gratuitously disruptive.

One of the City Council members pushing legislation, Dan Garodnick, gave the example of Stuyvesant Town’s sale to Tishman Speyer a decade ago as a prime example of predatory equity.

“This is when landlords overpay for buildings with the speculation that they will be able to deregulate units and drive out tenants,” he said. “You’re not making them enough money so they will try anything to get you out of there. This is harassment.”

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Pols name and shame ‘predatory’ landlords

Council Members Dan Garodnick and Jumaane Williams with tenants at a press conference at City Hall (Photo by Maria Rocha-Buschel)

Council Members Dan Garodnick and Jumaane Williams with tenants at a press conference at City Hall (Photo by Maria Rocha-Buschel)

By Maria Rocha-Buschel

Tenant advocate groups have a message for landlord who harass tenants: You’re being watched.

At a press conference last Thursday, the advocates and elected officials said that they have identified predatory equity landlords who tenants say have been mistreating them and forcing them to live in hazardous conditions. Councilmembers Dan Garodnick and Jumaane Williams, who formed the Coalition Against Predatory Equity last year with Councilmember Ritchie Torres from the Bronx, were at the event.

“We now have names attached to these situations so they know we’re going after them,” Williams, chair of the Council’s Housing Committee, said.

The landlords that have been singled out are Alma Realty Corp., Benedict Realty Group, Coltown Properties, Icon, SMRC Management, Steve Croman and Ved Parkash. Various tenants from buildings owned by these landlords were at the event, including residents of 444 East 13th Street, who recently filed a lawsuit against their new management company with the help of the Urban Justice Center because they have no gas or hot water and the management company has been doing construction despite a stop work order from the Department of Buildings.

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City exploring options to maintain affordability in Stuyvesant Town

Senator Chuck Schumer with other elected officials at a rally in Stuyvesant Town in 2010 (Photo by Sabina Mollot)

Senator Chuck Schumer with other elected officials at a rally in Stuyvesant Town in 2010 (Photo by Sabina Mollot)

By Sabina Mollot
One month after CWCapital’s beginning of the foreclosure process of Stuyvesant Town, city officials as well as U.S. Senator Charles Schumer have announced ways they were trying to help tenants in maintaining affordability.
One possibility is offering a tax exemption in which the owner would commit to a 40-year agreement for affordability. That possibility, first reported in the New York Times, could preserve as many as 6,000 apartments for families of four earning between $65,000 and $135,000 a year. This is just one option, however.
A city official confirmed today that there are other government programs that could be explored and there have been good faith discussions with CWCapital as well as Council Member Dan Garodnick in an effort to create more transparency going forward. CWCapital’s decision last week to take ownership of the property is being seen as an opportunity to take the time to explore options in maintaining affordability. More specifically, the idea is to avoid a repeat situation of the 2006 sale to Tishman Speyer when tenant affordability wasn’t even a factor. Because any transaction would be considered private, the city has some but not limitless sway on the outcome and currently, the administration is trying to gauge what tenants’ rents and income levels are to determine what their needs are.
Meanwhile, Fannie Mae and Freddie Mac, who provided crucial mortgage financing in the Tishman Speyer sale have committed to not financing a deal that would be “unacceptable to tenants and the city,” the Times quoted Schumer as saying.
In response, Mayor de Blasio called this a “positive step.”
In a written statement, he added, “We are aggressively using all the levers we have at our disposal to protect affordability at Stuy Town. Senator Schumer has been a forceful leader in pushing Fannie Mae and Freddie Mac to make sure the city and tenants have a better shot at shaping this outcome and protecting this community for middle class New Yorkers.”
The administration has also been quick to note, however, that while most buyers would require help from Fannie and Freddie for such a large transaction, there are others that could possibly make a deal without those agencies’ financing.
Still, the news of their cooperation has been greeted with enthusiasm by the Tenants Association, which still plans to hold a rally in front of City Hall on Friday at 10 a.m. The rally will be attended by elected officials, including Schumer.
Susan Steinberg, chair of the Stuyvesant Town-Peter Cooper Village Tenants Association, said the news left the TA “very encouraged. Our voices have been heard and our advocacy on behalf of STPCV tenants is bearing fruit. The need to maintain STPCV as a place where ‘families of moderate means might live in health, comfort and dignity’ is important to New York City, and beyond. Middle class affordability can’t become a thing of the past. We welcome the support and participation of our state and local electeds in helping us protect our homes.”
Garodnick, along with dozens of other local city, state and federal politicians had sent a letter to Fannie Mae, Freddie Mac, the Federal Housing Finance Agency and Housing and Urban Development (HID) on June 10 in an effort to get Fannie and Freddie to not invest in deals that put affordable housing at risk.
Today, he praised the commitment made by Fannie and Freddie.
“This commitment from Fannie and Freddie will help us cut off the oxygen to another predatory deal here,” said Garodnick.

Maloney: Fannie/Freddie bill won’t get passed as is

Congresswoman Carolyn Maloney at a May, 2010 press conference in front of Stuyvesant Town, discusses her Fannie/Freddie legislation. (Photo by Sabina Mollot)

Congresswoman Carolyn Maloney, at a May, 2010 press conference in front of Stuyvesant Town, discusses her Fannie Mae/Freddie Mac legislation. (Photo by Sabina Mollot)

By Sabina Mollot
Two weeks before the scheduled foreclosure sale of Stuyvesant Town’s debt, Congresswoman Carolyn Maloney reintroduced legislation that would prevent Fannie Mae and Freddie Mac from investing in future, similar housing deals that lead to the loss of affordable housing rather than the creation of it.
However, she freely admitted that the bill is not likely to get passed any time soon.
“It is very difficult to get a bill through Congress, but I am continuing to build support behind this important bill,” said Maloney, “and I am looking for opportunities to incorporate the reforms it proposes in other legislation.”
The bill was first introduced in 2010 after Fannie and Freddie got affordable housing goals credits for their participation in the Tishman Speyer purchase of Stuyvesant Town.
Maloney reintroduced the bill on Friday, May 30, following the formation of a coalition of over 40 local elected officials aimed at fighting predatory equity. The Coalition Against Predatory Equity (CAPE) was formed by Council Members Dan Garodnick, Jumaane Williams and Ritchie Torres and one of its goals is to ensure responsible lending by Fannie Mae and Freddie Mac.
Both agencies are mandated by the federal government to help increase affordable housing. However, Fannie and Freddie were parties to the Stuy Town deal in 2006, despite the owners’ business plan of ousting stabilized renters and replacing them with market rate paying ones.
Specifically, the agencies invested in a $22 billion commercial mortgage-backed securities transaction that contained the senior debt on the ST/PCV. Fannie Mae and Freddie Mac’s participation as senior debt holders of $3 billion was critical, as it represented nearly 60 percent of the total cost of the acquisition.
Maloney’s bill, if passed, would prevent Fannie, Freddie or any other government sponsored enterprise (GSE) from receiving affordable housing goals credits when a project’s debt is disproportionate to its income like the ST/PCV venture.
The bill would also require the GSEs to use the same standards for assessing their investments in the secondary securities market as they would for direct investments for the purposes of affordable housing goals credits.
“Part of Fannie and Freddie’s mission is to encourage affordable housing, but some of the deals in which they have invested have caused the opposite to occur,” said Maloney in an official statement. “Affordable housing credits shouldn’t be awarded for investments when the only conceivable scenario for profitability is for rents to rise. That is what’s happening at Stuyvesant Town/Peter Cooper Village, and that’s what my legislation is designed to prevent.”
A spokesperson for Fannie did not respond to a request for comment. A spokesperson for Freddie said he couldn’t comment on legislation affecting the agency.

 

Pols planning housing ‘emergency legislation’

Council Member Dan Garodnick (second to left) with Assembly Member Brian Kavanagh and State Senator Brad Hoylman pictured at a January meeting of the ST-PCV Tenants Association meeting, with (far left0 TA attorney Tim Collins

Council Member Dan Garodnick (second to left) with Assembly Member Brian Kavanagh and State Senator Brad Hoylman pictured at a January meeting of the ST-PCV Tenants Association meeting, with (far left) TA attorney Tim Collins (Photo by Sabina Mollot)

UPDATE: Since this story ran in the June 5 issue of Town & Village, CWCapital moved to formally take ownership of ST/PCV, a story in the New York Times reported. According to Council Member Dan Garodnick, he still expects to move ahead with the emergency legislation.

By Sabina Mollot
In response to the upcoming foreclosure sale of some of the Stuyvesant Town debt, local elected officials are drafting emergency legislation to help protect the stability of the community and others like it.
However, it’s unclear what that legislation would do or if it would impact the foreclosure process in any way.
The legislation was mention in an email sent by the ST-PCV Tenants Association to neighbors on Tuesday afternoon, in response to being asked what the association was doing about the foreclosure.
Along with scheduling a rally on the day of the sale, Friday, June 13 at 10 a.m., in front of City Hall, the email mentioned that the TA had approached the mayor as well as the attorney general to ask for help. Additionally, the TA noted, “State Senator Brad Hoylman, Assemblyman Brian Kavanagh, and Councilman Garodnick are working on an emergency package of legislation to be introduced at both the city and state level to help protect the long-term stability of communities such as ours.”
When asked for details on the legislation, Garodnick said he couldn’t provide any yet.
However, he said, “We are contemplating a variety of options. Hopefully we’ll have more soon. I can’t say much more than that at the moment.”
He also said that he’d been in touch with the mayor’s office about the impending foreclosure. “My sense is that they are looking at ways to be helpful,” Garodnick said.
The mayor’s office hasn’t responded to T&V’s numerous requests for comment on the subject of the Stuyvesant Town foreclosure.
Last week, Garodnick announced the formation of the Coalition Against Predatory Equity, which is aimed at keeping affordable housing from turning into overleveraged housing.
Garodnick, who’s also an attorney, added that the only parties with the power to stop or delay the foreclosure are those “in the capital stack.”
The TA said in the Tuesday email it wasn’t sure if one of the debt holders would attempt to stall the process or if CWCapital would attempt to continue to shut the TA out of the process. CW has still declined to talk business about the TA’s hope for a condo conversion plan. The company has also declined to discuss a bid reportedly being prepared by its parent company Fortress, of $4.7 billion.
“Ultimately, we can control only what we can control,” the TA said. “But we can continue to make sure our voices are heard and try in a thoughtful, aggressive, substantive way to affect what happens when CW forecloses — not just for ourselves but for those who aspire to live here in the future.”
The Tenants Association, along with asking tenants to show up for the rally, is seeking volunteers to flier buildings.
The TA is also offering bus rides to City Hall. Those who want to reserve a seat are asked to register online.

‘CAPE’ crusade aims to fight predatory equity

Council Member Dan Garodnick, with other elected officials at City Hall, discusses the “CAPE” coalition. (Photo by Ilona Kramer)

Council Member Dan Garodnick, with other elected officials at City Hall, discusses the “CAPE” coalition. (Photo by Ilona Kramer)

By Sabina Mollot
On Wednesday, Council Members Dan Garodnick, Jumaane Williams and Ritchie Torres announced the formation of a coalition of over 40 elected officials who are committed to keeping affordable housing from turning into overleveraged housing.
Specifically, the Coalition Against Predatory Equity (CAPE) was organized in an effort to avoid the type of massive debt deals that have led to the loss of affordable housing like at Stuyvesant Town.
“We have a wide-ranging, diverse group and together we have some powerful principles,” said Garodnick, adding that the coalition is “strength in numbers.”

The four goals of the group are:
To get Fannie Mae and Freddie Mac to commit to not lending to any owner in a deal that puts affordable housing at risk.
Avoid investment of city and state pension funds in deals that harm tenants.
Stop offering tax abatements or subsidies to development deals that would lead to the loss of affordable units.
Come up with legislation aimed at limiting “the abuses of predatory equity, and assists tenants in over-leveraged buildings.”

Garodnick, who released a report about the dangers of predatory equity in April, said the coalition is also concerned about the Stuyvesant Town foreclosure and the reports of a bid by CWCapital’s parent company Fortress.
“We are looking into the appropriateness of all that activity,” said Garodnick, adding that all of the coalition’s four principles are relevant to a post-predatory equity Stuyvesant Town.

Congresswoman Carolyn Maloney, who’s previously authored legislation that if passed, would ensure more responsible lending by Fannie and Freddie, said she’d reintroduce that bill this week.
“Nothing was more shocking about the Tishman Speyer/Stuy Town/Peter Cooper transaction than finding out that the federally-chartered Government-Sponsored-Enterprises tasked with expanding affordable housing were actually investing in a deal that could only succeed by converting as many affordable units as possible into luxury rent apartments,” said Maloney. The congresswoman said she hoped the bill would “send a message that these GSEs cannot game the system and fail to comply with their affordable housing responsibilities.”

Along with politicians, over a dozen organizations, including the ST-PCV Tenants Association, Tenants and Neighbors and the Urban Justice Center, have joined the coalition.

Stuyvesant Town-Peter Cooper Village Tenants Association will rally on day of foreclosure sale

ST-PCV Tenants Association President John Marsh, pictured in May, 2013 with local elected officials and tenants, protests a mid-lease increase. (Photo by Sabina Mollot)

ST-PCV Tenants Association President John Marsh, pictured in May, 2013 with local elected officials and tenants, protests a mid-lease increase. (Photo by Sabina Mollot)

By Sabina Mollot
Following reports that Stuyvesant Town/Peter Cooper Village’s special debt servicer, CWCapital’s own parent company, Fortress, intends to bid on the property on the day of a foreclosure sale, the ST-PCV Tenants Association has organized a rally to protest the way business is being quietly conducted.
Because the Fortress bid has been reported to be $4.7 billion, according to Bloomberg, TA President John Marsh said at that price, the pressure to make a profit is likely to create a repeat scenario of the Tishman Speyer purchase with its business plan of evicting tenants paying lower rents.
“Right this instant we all need to start talking about what we are going to do about Fortress and the other sharks circling us,” TA President John Marsh told neighbors on Facebook. “The writing is on the wall. It’s about to happen again. Tishman Speyer redux. The financial press is speculating, full of scenarios providing detailed financial road maps to our demise.
Another issue is the debate over whether a purchase by Fortress is a conflict of interest, which Susan Steinberg, chair of the Tenants Association, said is difficult to answer without looking at a contract that’s confidential.
“So nobody can read the clauses, and I think that would have been very helpful if some attorneys would have been able to take a look at it,” she said.
“To me,” Steinberg added, “it looks like insider trading. That’s my perception. But without having access to a basic document, it’s really hard to make a judgment call.”
She also said she thought it was disingenuous of the special servicer to refuse to talk business with the TA, after initially saying the company just wanted to wait until the “Roberts v. Tishman Speyer” negotiations were concluded. “They were stringing us along,” said Steinberg.
The Tenants Association announced its own intention to bid, with partner Brookfield Asset Management, in 2011. The TA/Brookfield bid has never had a dollar amount attached to it and that has not changed. However, the TA has stressed that the bondholders would be made whole.
A spokesperson for CWCapital has previously declined to comment on the reported Fortress bid and was not immediately available for comment on the upcoming rally.
The purpose of the rally, the TA said, is to show any potential owner the political might of the tenants.
“It’s to let them know if they think we’re going to sit down and let them roll over us, they’re wrong,” said Steinberg. “If they think we can’t create trouble for them, they’re wrong. We expect the elected officials to continue to support us.”
Marsh added, “We need a responsible owner, who takes the long view and not just someone looking to make a quick buck, getting in and getting out.”
On May 13, CWCapital announced it would begin foreclosure proceedings on a chunk of the mezzanine debt that’s reportedly worth $300 million and set a sale for June 13. By doing so it will be able to take over the property, at least temporarily.
The TA’s rally will begin that day, a Friday at 10 a.m. on the steps on City Hall. Local elected officials are expected to attend and the TA is asking tenants to show up as well.

Garodnick says city needs to crack down on predatory equity

At City Hall, Councilman Garodnick cited Stuyvesant Town as a prime example of predatory equity, a practice that has continued throughout the city. (Photo by Sabina Mollot)

At City Hall, Councilman Garodnick cited Stuyvesant Town as a prime example of predatory equity, a practice that has continued throughout the city. (Photo by Sabina Mollot)

By Sabina Mollot

With Mayor de Blasio expected to unveil a housing plan soon that’s supposed to create or preserve 200,000 units of affordable housing, Council Member Dan Garodnick has released a report that’s determined a part of the plan to maintain the city’s stock of affordable housing needs to be a crackdown on predatory equity.

Garodnick discussed the issue in front of City Hall on Tuesday, saying that even after the market crashed, landlords have continued to accrue excessive debt in building purchases and then attempt to either pass the costs on to tenants in ways that are sometimes illegal or become slumlords.

“Tenants are being forced out because rents are jacked up on their apartments or because the apartments are becoming uninhabitable,” he said. Garodnick, while joined by other elected officials, housing advocates and a handful of tenants of distressed buildings, said it’s up to the city to step in with policy to break the cycle of buildings becoming distressed and tenants getting gouged or harassed. Naturally, Garodnick gave the example of the now infamous $5.4 billion Stuyvesant Town deal, in which owner Tishman Speyer lost all of its investors’ money following a failed attempt to turn the mostly rent-regulated complex market rate. Calling it the poster child for predatory equity, Garodnick recalled how “their entire business plan was to evict as many rent-stabilized tenants as quickly as they could.”

Meanwhile, since then, there have been similar deals that have been even worse in terms of those properties being allowed to deteriorate. Such blighted properties, noted Garodnick, are a burden on the city. He also referred to the refinancing last week of the 1,600-unit Three Borough Pool, which was $133 million in debt. After being refinanced, the property’s debt has swelled to $146 million, which Garodnick said makes no sense.

“They avoided foreclosure by refinancing with even more debt. How is that even possible?”

In his report, titled “Ghosts of the Housing Bubble; How Debt, Deterioration and Foreclosure Continue to Haunt New York After the Crash,” Garodnick suggested a few policy changes to deal with properties that are overleveraged. One is to have the city invest much more in Alternative Enforcement Program, which allows the city to repair violations and bill the owner. The city currently only spends $50,000 on the program, relying on federal grants to make up the rest of the $7.6 million budget.

Another plan is to give good-acting landlords the first chance to buy foreclosed mortgages after the city buys them. He also said he would look into the possibility of “creative solutions” where long-suffering tenants being able to get a crack at buying. He noted how this was currently a goal in ST/PCV, though in that case, the proposal to buy was not organized with assistance from the city. Another of his recommended changes is to create new standards for receivers or debt servicers to make sure they are protecting the health and safety of residents. Currently, receivers can’t be sued in Housing Court without approval of the Supreme Court judge who appointed them. Finally, Garodnick also recommended creating new state guidelines around the existing federal Community Reinvestment Act, which pushes banks to lend in low-income areas. The idea there is to focus on the quality of loans, not just the quantity.

Along with those proposals, Garodnick also discussed new legislation that would make the Department of Housing Preservation and Development (HPD) create a watch list of owners who engage in predatory equity. The bill was authored by Council Member Ritchie Torres, who represents a district in the Bronx where the practice has become increasingly common.

Harvey Epstein of the Urban Justice Center recalled the predatory equity in Stuyvesant Town. (Photo by Sabina Mollot)

Harvey Epstein of the Urban Justice Center recalled the predatory equity in Stuyvesant Town. (Photo by Sabina Mollot)

While at City Hall, Torres said that at this time, “There are no consequences” for owners who engage in “intentionally harassing, defrauding and displacing tenants from their homes.” He, along with State Senator Brad Hoylman, said he supported Garodnick’s proposals, and Hoylman said he would address them at the state level. A couple of tenants then shared tales of living in buildings that were so poorly maintained, the only ones who seemed to be in control were the rats and drug dealers.

The issue of Stuyvesant Town was also revisited by Harvey Epstein, director of the Urban Justice Center’s Community Development Project. Epstein recalled when Garodnick, then a new member of the City Council, contacted him in 2006 about Tishman Speyer. At that time, stabilized tenants had started receiving, en masse, primary residence challenges from the owner. “Over 3,000 tenants were subject to potential eviction in Stuyvesant Town,” said Epstein. “That’s what predatory equity is. When you take tenants who’ve lived in a building 20, 30, 40 years and you find ways to get them out.”