Impact of rent regulation changes on Building Sales

David Goldsmith

All Powerful Moderator
Staff member

Isaac Kassirer’s stuck with stabilized apartments — and rent strike​


Emerald Equity loses bid to pull South Bronx portfolio from regulation​


For landlords whose business model was flipping rent-regulated apartments to market rate, the 2019 rent law was crushing. The legislation closed most of those paths, dragging down the values of regulated buildings.
Some of their owners have called it quits. But others have soldiered on, trying new tactics to achieve the same result.

For one, Isaac Kassirer of Emerald Equity Group, a decision by the state last month proves that creativity isn’t enough to secure the market-rate conversions of yore.
In the late 2010s, Kassirer built up a sizable stack of stabilized assets. But the rent law brought trouble. Come December 2020, the indebted entities on more than a dozen Emerald buildings faced bankruptcy. And as of last year, the portfolio — previously 3,500 units — had shrunk by more than half.
In August 2020, Kassirer attempted to stanch the bleeding. He filed an application with the state’s Division of Homes and Community Renewal to see if six South Bronx buildings could be exempt from rent-regulation.

Kassirer argued that they had been renovated in 1991, qualifying them for the 30-year tax break known as J-51. The provision mandates that a landlord issue stabilized leases while getting the tax break. Kassirer asked the state to authorize the portfolio’s deregulation when J-51 expired last year.
Last month, the state denied the request.

HCR’s rent administrator George Nnochiri wrote in an order that each of the owner’s buildings had been rehabilitated under the city’s Urban Development Action Area Program. The incentive allows owners of buildings on land previously owned by the city to qualify for a 20-year tax break.

Nnochiri noted that the renovations had been completed via a government loan and under the state’s Private Housing Finance Law, those units are exempt from deregulation.
The decision applies to 1187 Anderson Avenue, 1191 Anderson Avenue, 1195 Anderson Avenue, 1220 Shakespeare Avenue, 1210 Woodycrest Avenue, and 1230 Woodycrest Avenue in the Highbridge section of the Bronx.
Kassirer said in an email that neither he nor Emerald Equity Group is affiliated with the Bronx properties in question. However, property records show Kassirer signed as the buyer for 1220 Shakespeare Avenue; 1187, 1191 and 1195 Anderson Avenue; 1210 Woodycrest Avenue and 1230 Woodycrest Avenue on Nov. 28, 2017.

Property records do not show any have since been sold.
Had Kassirer’s application been approved, renters in the buildings’ 272 units could have faced four-figure rent hikes and fierce competition from the open market.
But with one battle down, the renters are still waging a war for livable housing.
“The tenant association is happy about this huge victory,” said Julius Bennett, a tenant leader at 1230 Woodycrest Avenue. “But the happiness is not full.”
The buildings collectively have over 900 open violations and the city’s Department of Housing and Preservation has classified over a quarter of the infractions as “extremely hazardous.”
Tenants have complained of mice and roach infestations, leaking ceilings, mold, broken toilets and peeling lead paint, according to HPD.

And in December, residents of 1230 Woodycrest Avenue and 1220 Shakespeare Avenue received shutoff notices from Con Edison, signaling that the landlord had not paid the electric bill.
The tenants of 1230 Woodycrest, which has the most violations of the bunch, declared a rent strike Tuesday to pressure Kassirer to remedy the violations and pay Con Ed.
“The rent strike is going to go on for as long as I am old — and I’m 84,” said Bennett. “It’s going to go for as long as it takes to resolve this.”
A spokesperson for the tenants said the utility could shut off service in the common areas, which would prevent tenants from using the washer and dryer, intercom and elevator. A shutoff would also affect cooking gas and heat, the spokesperson said.

The law firm Kucker Marino Winiarsky & Bittens, which is listed as a contact for the buildings’ owner on the HCR decision, did not respond to a request for comment.
A representative for the firm previously commented on the Bronx buildings dispute on behalf of Emerald Equity Group, but later said he had done so incorrectly and had intended to send the statement on behalf of the LLCs listed as owners in the HCR filing. To his understanding, he said, neither Emerald nor Kassirer is affiliated with the properties.
 

David Goldsmith

All Powerful Moderator
Staff member

Rising interest rates will dampen city’s investment sales market this year​

Lingering effect of low rates, scramble to lock in deals will drive activity for only a few months, report predicts​

Activity in New York City’s investment sales market continued to rebound in the first quarter of 2022, but a slowdown could be on the horizon as rising rates drive up borrowers’ costs.
Dealmakers bought and sold 582 properties in the quarter, a year-over-year jump of 53 percent, according to a report by Ariel Property Advisors. Those transactions totaled $8.9 billion, a whopping 320 percent increase from the first quarter of last year and roughly in line with the first quarter of 2019.

Still, nearly half of those closings went into contract at the tail end of 2021, when the city saw a dramatic acceleration in investment sales, Ariel president Shimon Shkury said. The $15.6 billion worth of deals that closed in the fourth quarter — a three-year high — represented both an anomaly and a symptom of Covid’s lingering effects on the market, Shkury added, predicting that activity could slow in the second half of the year now that low pandemic-era interest rates are rising again.

“The first quarter marks a drastic change in the cost of debt and the expectation is that interest rates will continue to rise,” Shkury said. “As a result, we expect momentum to continue in the second quarter as both buyers and sellers rush to complete transactions, but we also expect the second half of the year to be somewhat slower.”
Investment in warehouses and other industrial properties have increased significantly, with 43 deals combining for $548 million, compared to just $164 million across 42 deals in the same period a year ago.
The multifamily market also continued to show signs of strength in the first quarter, with $3.2 billion worth of deals compared to $844 million a year ago.

Of the four boroughs covered in the report (Staten Island was excluded), Manhattan saw the largest year-over-year increases in deal and dollar volume, with 88 properties fetching $5.4 billion, a 676 percent increase from $696.4 million across just 39 deals in the first quarter of 2021. Those first-quarter figures paled in comparison to the fourth quarter, however, when 132 properties sold for a combined $8.5 billion.
The amount spent on multifamily properties citywide rose to $3.2 billion across 359 deals in the quarter, up from $843.7 million across 199 deals a year ago. In Manhattan, that number jumped 392 percent to $1.6 billion, from $329.4 million last year, while the number of deals increased 140 percent.
 

David Goldsmith

All Powerful Moderator
Staff member

BlackRock sells stabilized UWS rental for $90M after landmark designation​

West Side landlord Morris Schreiber bought the 125-unit building at 98 Riverside Drive​

Tenant complaints in New York renting are as common as gum on the sidewalk, but few buildings have a StreetEasy page dedicated to griping.
One Upper West Side property is special that way.

For more than eight years, tenants have flocked to a forum to gripe about unaddressed repairs, revolving-door tenancies, and “filthy common areas” in BlackRock’s purportedly luxury rental at 98 Riverside Drive. One labeled it “a derelict building that is not maintained.”
Now tenants will be bringing their complaints to a new owner: Morris Schreiber. This week, BlackRock, the landlord since 2008, sold the property to Schreiber for $90 million, records show.
BlackRock declined to comment on why it sold the building and Schreiber, whose portfolio is heavily concentrated on the Upper West Side, according to the site Who Owns What In NYC, could not be reached for comment.
However, property records offer clues to the investment firm’s motivation for selling — and the potential upside for the new landlord.
Two years ago, 98 Riverside Drive was given landmark status, which subjects the property to stricter regulation by the city. Such buildings are supposed to be kept in a state of good repair.
That means the building’s 34 open violations, colorfully detailed on StreetEasy as including “catastrophic floods” affecting multiple apartments, could be reported to the city’s Landmarks Preservation Commission.

That agency could then issue a warning letter, and if the owner failed to remedy the violations, it could face a hearing and then a civil penalty. BlackRock’s specialty is investing, not property management or navigating city bureaucracy, and the firm may have wanted to wash its hands of its Upper West Side headache.
Another caveat of landmarked properties is they are costlier to renovate.
Combining apartments is one of the last remaining ways landlords can significantly raise revenue from rent-regulated units since the passage of the 2019 rent law. A loophole in the rent law allows owners to turn two adjacent vacant apartments into one and set a new market-rate rent. A little less than half the units at 98 Riverside Drive are rent-stabilized.
Under BlackRock’s ownership, 98 Riverside Drive appears to have undergone eight unit combinations. The Real Deal records show the property as holding 133 units, but a press release circulated by JLL, which brokered the deal, lists the building as a 125-unit property.
Now, under the building’s landmark designation, any work requiring a Department of Buildings permit would need a separate sign-off by the Landmarks Preservation Commission, according to a spokesperson for the agency.
Stitching together neighboring apartments would likely fall under DOB purview. Thus, Schreiber would need to obtain a certificate of no effect — a document confirming the proposed work is interior and won’t affect the protected exterior of the building — from the LPC before the Buildings Department can approve the project.
Squeezing extra revenue from stabilized units would have been an uphill battle for BlackRock, but the building still holds profit potential for its new owner.
Data from the Department of Finance lists the property’s tentative assessed value as nearly $32.2 million for the 2023 fiscal year. That’s 27 percent above the previous fiscal year and 12 percent higher than the building’s value before the 2019 rent law.
Astronomical rent growth in the city of late will likely drive revenue higher, compensating for the 2-4 percent rent bump the rent guidelines board is considering for stabilized units.
Plus, if the building’s alleged history of “revolving door” tenancies still holds true, there could be frequent opportunities for rent resets.
 

David Goldsmith

All Powerful Moderator
Staff member

In rare move, Steve Croman looks to sell large apartment portfolio​

Notorious landlord asking $120M for 14 buildings in and around East Village​


Aside from his history of scandals, Steve Croman is known for rarely — if ever — selling his apartment buildings. But now, the landlord plans to do just that.
Croman is looking to offload 14 apartment buildings in and around the East Village for more than $120 million, The Real Deal has learned.

He’s the latest in a group of old-line New York landlords who have moved to part ways with their properties in recent months as fallout from the state’s 2019 rent-regulation overhaul has combined with demand from investors eager to get in on the city’s recovery.

But unlike investments that were suddenly strained when state lawmakers limited landlords’ ability to raise rents on regulated apartments, the properties Croman is offering are almost entirely free-market.

The 14 buildings are all small walk-ups that hold a combined 102 units, collectively covering more than 80,000 square feet, according to a marketing brochure from Marcus & Millichap.

Property records show Croman acquired the buildings between 2005 and 2014 for at least $35 million. The offering price for the portfolio is $121 million.
Sources believe the landlord has put other buildings up for sale. Croman did not immediately respond to a request for comment.
Croman — whose 9300 Realty at once owned more than 150 buildings in the city — is infamous for his allegedly predatory treatment of tenants. For years, he was accused of harassing rent-stabilized renters so his company could deregulate their apartments and rent them at higher rates.

Croman went to jail on a one-year sentence in 2017 after pleading guilty to mortgage fraud charges.
Apart from the scandals, Croman is also known as a longtime owner who rarely sells his properties. But he’s one of many similar investors who have chosen to do so in recent months after finding the regulatory environment unfavorable.

Hold Croman in contempt over Kips Bay rentals: receiver

Appointee says landlord “has laughed at the court order for 2 months”​

In a ranking of the most frustrating jobs in real estate, being a receiver for Steve Croman’s apartment buildings would be right up there.
According to the one appointed for his four contiguous properties at 208-214 East 25th Street, the landlord — whose name in news stories is never far from the word notorious — has continued to collect rent but has not passed it along to her.

Moreover, receiver Haley Greenberg told judge Francis A. Kahn III in an Aug. 18 letter, he hasn’t turned over all of his tenants’ security deposits or the building’s records. She wants Kahn to hold Croman in contempt.
Greenberg added that she would “like to avoid having the former tenants bring lawsuits” over security deposits that were not returned after they vacated the Kips Bay building.
The judge had appointed the receiver to the four buildings with 85 rental units in May after Maverick Real Estate Partners brought a foreclosure action against Croman one year ago.

While the dispute over a $25 million loan acquired by Maverick has unfolded in court, past tenants have been left to wonder how they will recover their security deposits, and current ones about where to send their rent checks.
One of the tenants, who asked to remain anonymous, said her bank accounts became overdrawn one month when the receiver and the property manager, Centennial Properties NY, both debited her accounts. Centennial has since returned the payment, the tenant said.
Centennial sent notices to other tenants asking for rent even after the receiver was appointed, court filings show. “Your client is ignoring court orders and improperly threatening tenants,” Greenberg wrote in June to one of Croman’s attorneys.
In another message, the receiver said, “Your client has now laughed at the court order for almost two months.”
Representatives for Croman, who was banned from managing his real estate portfolio after pleading guilty to a felony in 2017, disputed the receiver’s claims.
“Our client has never been in contempt of any court order,” said attorney Terrence Oved, who accused a Maverick Real Estate Partners affiliate of putting the receiver up to the contempt request.
An attorney for Maverick declined to comment.
 

David Goldsmith

All Powerful Moderator
Staff member

Kushners look to sell big piece of Manhattan apartment holdings​

New Jersey-based firm continues pivot to suburban multifamily​

Kushner Companies is looking to sell a sizable chunk of its Manhattan apartment portfolio as the family firm continues its shift to the suburbs.
The New Jersey-based company has put 18 buildings with more than 325 units in Greenwich Village up for sale. The properties account for about a third of the firm’s multifamily portfolio in Manhattan, according to Real Capital Analytics.

It’s one of the biggest offerings from the Kushners since the family sold 666 Fifth Avenue to Brookfield Asset Management in 2018 and pivoted toward building a sprawling suburban multifamily portfolio in Maryland, Virginia and the firm’s home state of New Jersey, among other places.

Representatives for Kushner Companies did not immediately respond to requests for comment.

The offering is split into two portfolios. One is a group of 11 buildings in the East Village with 197 units. The asking price wasn’t available, but marketing materials from Meridian Investment Sales show the properties carry $85.5 million in debt.
The teaser notes that the seven-year, interest-only mortgage has a fixed interest rate of 3.34 percent and is assumable by a buyer — a feature that’s become especially valuable in a market chilled by high interest rates.
KKR, for example, recently purchased a Philadelphia multifamily complex at a record-setting price of $357 million — a deal that was only possible because the private equity firm could assume the low-cost debt in place.

The second Kushner portfolio consists of seven buildings in the East Village and West Village with 129 units. Marketing materials from Marcus & Millichap list the asking price at $58 million.
The Kushners began investing in Manhattan rentals around 2012, and at one point the company was reportedly the second-largest owner of apartment buildings on the Lower East Side, behind Steve Croman.
The firm began selling out of New York around 2017 when Jared Kushner left to become a senior adviser in the Trump White House. Since then, the company has poured its money into suburban multifamily assets, where it first made its name.
In its latest move, Kushner launched a hostile takeover bid of New Jersey’s Veris Residential real estate investment trust.
 

David Goldsmith

All Powerful Moderator
Staff member
Wafra sells East Village’s The Nathaniel for $57M

Investment firm takes roughly 42 percent loss on 138 East 12th Street​

The Wafra Group is taking one on the chin for an East Village mixed-use property it purchased seven years ago.
The investment firm sold The Nathaniel at 138 East 12th Street to The Westover Companies for $56.8 million, roughly 42 percent less than the $98.3 million it paid for the luxury rental building in 2015. The deal works out to about $838 per square foot. Crain’s was first to report on the transaction.

It’s not clear why the property sold for more than $40 million less than its previous sale price. Wafra has not responded to a request for comment.
A JLL team consisting of Steve Rutman and Rob Hinckley brokered the transaction, Traded reported. A separate JLL team consisting of Steven Klein and Jamie Leachman represented Westover in acquiring $26.9 million in financing for the purchase. There’s no information on the acquisition financing.

The 68,000-square-foot development was built in 2014 on the corner of East 12th Street and Third Avenue in the East Village. The nine-story property features 85 units across roughly 50,000 rentable square feet and an 18,000-square-foot Westside Market grocery store on the building’s ground floor.
This marks the Pennsylvania-based Westover Companies’ first purchase in New York City. The property owner and management company’s portfolio includes about 15,000 units in more than 70 locations along the East Coast in states such as Pennsylvania, New Jersey, Maryland and Florida.
Westover also manages about 2 million square feet of retail and commercial across eight shopping centers and 11 office buildings in the Philadelphia area.

Among the firm’s recent acquisitions include a $79 million purchase last December of a 240-unit apartment complex in Dania Beach, Florida and a $55 million deal in 2019 for a 331-unit multifamily property in Westchester, Florida.
 

David Goldsmith

All Powerful Moderator
Staff member
Gee, who pointed out the risks 3 years ago?

Uptown landlord Sugar Hill Capital faces another foreclosure​

Filing from lender comes as owner faces similar action on Washington Heights property​

Another building acquired by David Schwartz’s Sugar Hill Capital Partners near the height of the multifamily market in the late 2010s is now in the crosshairs of its lender.
U.S. Bank, as a trustee for CMBS bondholders, wants to foreclose on the six-story, 23-unit property at 121 West 116th Street in Harlem, alleging in a complaint that Sugar Hill is in default on a $4.9 million loan after failing to make payments since July.
The complaint names an entity connected to Sugar Hill and several current and former employees of the firm as guarantors on the loan, including Schwartz and former principal Alex Friedman, who co-founded Sugar Hill with Schwartz in 2009 but is no longer with the company.
An affiliate of Long Island-based Arbor Realty Trust, provided the loan in 2018, according to the complaint, the same year records show Sugar Hill acquired the building for $7.5 million. The debt was assigned to the CMBS trust in 2020 and a notice of default was issued in September of last year after the borrower had not made payments for three straight months, the complaint alleges. CW Capital is special servicer on the loan.

Sugar Hill Capital declined to comment.
The 18,000-square-foot building was acquired by Sugar Hill as part of a $250 million portfolio deal in 2018 for 53 Harlem apartment buildings owned by Irving Langer’s E&M Management. The deal came during the boom years of the city’s multifamily market, before changes to state rent laws limited landlords’ ability to raise rents on stabilized apartments.
Now signs of distress are emerging for owners of stabilized apartments as interest rates remain high and billions of dollars in debt on multifamily properties is set to come due in the next two years.
The foreclosure filing comes as Sugar Hill is facing a similar action on a 54-unit property at 4300 Broadway in Washington Heights, where it allegedly fell behind on a $16 million mortgage and has failed to make loan payments since August.
 

David Goldsmith

All Powerful Moderator
Staff member
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