Protestors had also gathered for a rally earlier this month at Lone Star’s downtown offices.
Photo: Sherry Mazzocchi
Put people ahead of profits.
That message rang loud and clear last week on the streets of northern Manhattan when local elected officials and residents gathered to demand property owners refrain from selling 10 northern Manhattan buildings at unsustainably high prices.
At a press conference in front of 566 and 570 West 190th Street this past Mon., Oct. 22nd, City Council Speaker Christine Quinn, together with New York State Senator Adriano Espaillat, New York State Assemblymember-elect Gabriela Rosa, and New York City Councilmember Ydanis Rodríguez, urged Vantage Properties and Lone Star to find a responsible buyer for the buildings who would not put tenants at risk.
“It’s outrageous that Vantage and Lone Star would jeopardize the stable housing of hundreds of New Yorkers to turn a quick buck,” Councilmember Quinn said. “If these buildings are sold with millions of dollars more in unsustainable debt, tenants will be the ones who pay the price when the new owners can’t make mortgage payments or repairs.”
The ten buildings, formerly owned by Vantage, have a complex history.
During 2006-2007, Vantage made huge but untimely real estate bets in Northern Manhattan and Queens.
Just before the bottom fell out of the market, they paid more than $1 billion on 130 buildings or 9,200 rent-regulated apartments.
Vantage quickly acquired a reputation as a predatory landlord, harassing tenants out in order to raise rents. Buildings racked up violations and slid into disrepair.
In 2010 Vantage paid $1 million to settle a lawsuit accusing them of deceptive practices brought by then State Attorney General Andrew Cuomo.
Later that year Vantage failed to make interest payments and defaulted on a $44 million loan for the 10 buildings.
Lone Star, a private equity fund, acquired Vantage’s loan from Anglo Irish Bank and foreclosed on the ten properties in March. Lone Star has also foreclosed on several other Vantage Properties, including four other Washington Heights buildings and one in Harlem.
Now the 10 buildings are for sale, with a price of $50.75 million, $6.75 higher than the original loan. Housing advocates say the price is out of line with rental incomes.
The math doesn’t add up, according to Celia Weaver of Urban Homesteading Assistance Board, a housing advocacy group.
“We know how much they need to spend to maintain these buildings,” she said.
Tenants pay below market rents and the buildings are in disrepair. In order to generate enough income for the building to be profitable, owners would have to neglect the repair or encourage long-term tenants to leave to increase rents, she said.
"We have seen the detrimental effects these faulty investment schemes have had," added Councilmember Rodríguez, who led a protest at Lone Star’s downtown offices earlier this month. "It is past time that Lone Star and similar speculators did the responsible thing and adhered to the demands of their tenants.”
Councilmember Quinn said that when elected officials shine a light on questionable practices, prospective owners know their purchase is going to be under a microscope and they back off.
“So what we're doing here, we're not doing just to do it,” said Councilmember Quinn in an email. “We're doing it because we know this makes a difference based on other experiences. What the City can and will do is hold this owner and the present owners, particularly with the support of the court and legal intervention, accountable and that is just not going to be something that people are going to necessarily want to undertake if it doesn't add up.”
Councilmember Quinn said the City had success with a similar situation in the Bronx, where Milbank Real Estate’s properties entered foreclosure in 2010 after they defaulted on a $35 million mortgage.
“And let me tell you, in the case of Millbank, I met with prospective owners, people who came in and said, 'I'm a nice guy! I'm going to buy this building!’,” she recounted. “And I said, ‘No. Your numbers don't add up. And if you buy this building, you're buying me. And you don't want to buy me.’ So that made them back off, and I think we can do the same thing again."
Manhattan Legal Services is also prepared to lend tenants a hand.
“We are prepared to seek justice for these tenants, in court if necessary, unless Lone Star takes responsibility for the inevitable result of irresponsible lending practices," said Daniel Anisfeld, Housing Unit Director at Manhattan Legal Services, in a statement. “We are committed to ensuring that any future purchaser of these properties complies with the law, making the repairs that are necessary for our clients' health, safety, and dignity."
The buildings are on a Housing Preservation and Development (HPD) watchlist, called the proactive preservation initiative. The agency monitors the buildings to ensure conditions do not deteriorate.
HPD Commissioner Matthew Wambua said the tenants of the 475 apartments deserve a responsible owner. “Today we are sending a strong and unmistakable message: HPD is here to help,” he said. “To the tenants: we are looking out for you. To the owners: we are watching you.”
Lone Star refused to comment.
A Vantage spokesperson said they no longer owned or operated the buildings and they are not connected to the sale.