About New York County, NY

NYC Multifamily Operator Influenced By Drug Money?

11-06-09

Neil Gronowetter Broker Multifamily Apartment Building Complex

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Office: (646) 658-7367

Rubin Schron, a major multifamily operator in New York, and his co-conspirators, allegedly accepted a $50 million kickback from a pharmaceutical vendor that serves nursing homes controlled by one of the men.

The Justice Department on Wednesday filed a complaint against real estate investor Rubin Schron and attorney Leonard Grunstein, a partner at Troutman Sanders. Murray Forman, who is the sole employee of an investment bank owned by Grunstein, was also named in the filing. The complaint alleges the trio orchestrated a scheme to receive a $50 million payment from Omnicare Inc., the nation's largest nursing home pharmacy, so it could continue to provide services to Mariner Health Care Inc. Schron purchased Mariner for about $1 billion in 2004, according to the complaint.

Earlier this week, it was reported that Schron and other owners of the Woolworth Building, including noted real estate investor Steve Witkoff, are considering selling a 51% stake in the building to the Sorgente Group, an Italian firm that also owns a stake in New York's Flatiron Building. The Woolworth Building's breaktaking lobby is pictured here.

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Brand New New York City Rentals / Below Market Value - JAD Realty Group

11-04-09

Jeffrey Ditri

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Office: (610) 781-8417

Brand New Rental Listings Weekly! Studios, One Bedrooms, Two Bedrooms, and Three Bedrooms. Below Market Priced Apartments. Upper East Side, Gramercy, Murray Hill, Midtown East/West, and Union Square.

Contact JAD Realty Group for current availabilities or to schedule an appointment - 610.781.8417

www.jadrealtygroup.com/JAD_Realty_Group/Home.html

Contact JAD Realty Group for current availabilities or to schedule an appointment - 610.781.8417

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The Acid-Laced Band Aid: Extending & Expanding the Gimmicky $8,000 Homebuyer Credit

11-04-09

Neil Gronowetter Broker Multifamily Apartment Building Complex

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Office: (646) 658-7367

In what should be the bottom news story of the day, Congress has decided to extend the $8,000 homebuyer credit. I called this already, but it did not require the skills of Nostradamus. The extension would cover homes under contract by April 30, 2010. It would also not require first-time buyers. Anyone who has owned a home for at least five years could get a $6,500 credit on a new residence. Income limits for eligibility would also be raised, making many more people qualify. Rich people buying another home get an $8,000 gift, even if they don't need it. On the flip side, poor people who overpaid in the last few years for a home can now trade up under the program -- combined with an FHA loan. This will allow them to buy a new home for next to no money down, and strategically default on the old one. I may be radical in my belief that Uncle Sam should refinance all residential properties down to 1-2%, for those borrowers earning verifiable W-2 income, and willing to sign with a personal guarantee. However, extending this $8,000 provision, in the absence of requiring a minimum 20-25% downpayment or verifiable W-2 income, is a recipe for further disaster. More people will strategically default. The government is making it easier to switch out your old, underwater home, for a new, seemingly market-priced home. But if these old houses come to market, along with seven million units that still have not, they will further drive down market prices. This will push more home values underwater, increase foreclosure and vacancy rates, further drive down rents, and compress apartment building valuations. This, in turn, will cause further commercial mortgage defaults in the multifamily asset class.

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Keep Our Buildings Heavily Rent Regulated. In Return, We, The Residents of Stuyvesant Town, Give You 20,000 Votes!

11-03-09

Neil Gronowetter Broker Multifamily Apartment Building Complex

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Office: (646) 658-7367

Fannie Mae and Freddie Mac hold part of the primary $3 billion mortgage on Stuyvesant Town / Peter Cooper Village, the most expensive apartment complex in American history. The financing was then securitized, divided into traunches, and sold to a myriad of investors. There is also $1.4 billion in less-prioritized mezzanine debt, and another $1.8 billion or so in equity put into the property. The folks who put up this $3.2 billion will never see a dime of it again. Of all of this, Tishman Speyer and its affiliates put in just $112 million, according to one person familiar with the deal. The number I've heard repeatedly was in the range of $40-50 million. Now, U.S. Representative Carolyn Maloney, Councilman Dan Garodnick, State Senator Tom Duane, Borough President Scott Stringer and Assemblyman Brian Kavanagh are calling in their chit in rescuing Fannie and Freddie. In an open letter, they remind the two GSEs of their taxpayer-funded largesse. In return, they want Freddie and Fannie to play a key role in "preserv[ing] Stuyvesant Town and Peter Cooper Village for middle class residents into the future" and "keep[ing] Stuyvesant Town and Peter Cooper Village unified as a single community." My euphemism translator and code-breaker says that this means: Don't look to work the building and raise the rents. Don't expect to take any units out of rent regulation long after the J-51 status expires. Don't even think about turning the buildings condo. More importantly, Freddie and Fannie will have to take a haircut on their principal. In exchange for this generosity imposed on taxpayers, Freddie and Fannie will have to agree to surrender opportunities to maximize profit. Here is a copy of that letter, free of code: Fannie Mae Freddie Mac Stuyvesant Town Peter Cooper Village letter 10-26-09 MFI WM

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Stuyvesant Town, Atlantic Yards, and the Road to Hell

10-29-09

Neil Gronowetter Broker Multifamily Apartment Building Complex

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Office: (646) 658-7367

Two major commercial real estate disputes have been winding their way through New York’s court system. In both cases, a municipality intervenes in the free market, ostensibly for the greater good of the community. Unfortunately, those well-meaning intentions end up doing more harm than good – especially when accepted rules are either discarded or rewritten.
First, New York State’s highest court ruled 4-2 last week that the owners of Manhattan’s Stuyvesant Town and Peter Cooper Village, the most expensive apartment complex in American history, could not simultaneously receive certain tax benefits and free up units from rent regulation. Second, home and business owners on the site of Brooklyn’s Atlantic Yards argued their case before New York’s Court of Appeals. The According to the plaintiffs, the State of New York, by way of the Empire State Development Corporation, illegally blighted their properties under the doctrine of eminent domain for the benefit of a private developer. At first glance, the results appear diametrically opposed: the “little guy” won in the former, while the “big guy” will likely win in the latter. In both cases, whim and caprice carried the day over due process.
The new owners of Stuyvesant Town had expected, among other things, to make capital improvements. They would then pass along those costs to their tenants in the form of rent increases. The City of New York even incentivized this strategy under its J-51 program, by providing tax abatements. Stuyvesant Town was one such J-51 beneficiary.
The Division of Housing and Community Renewal (DHCR), a New York City agency responsible for supervising affordable housing in New York State, issued an advisory opinion in April, 2000, that owners whose buildings were rent regulated solely because they received these J-51 benefits could not remove units from rent regulation. If, however, they received J-51 benefits, and the units were rent regulated for other reasons not related to the J-51 program, then the owners were free to remove units from rent regulation once they exceeded a monthly rent of $2,000. The DHCR drew this conclusion from their reading of applicable rent regulation legislation from 1993.
The majority in the Stuyvesant Town decision explicitly recognized that the State Legislature’s nine year silence in response to the DHCR’s decision can constitute acquiescence. Nevertheless, the majority held that “there is no indication that” this issue, and the DHCR’s ruling “had been brought to the Legislature’s attention.” The dissent was livid at that fanciful inference: “As plaintiffs themselves put it, ‘[b]attles over rent stabilization are among the fiercest in Albany…[I]t is inconceivable that the Legislature did not know what was afoot…” (The majority ignored the fact that the New York State Assembly has passed a battery of onerous rent regulations every year in recent memory, while the State Senate has opted not to pass it along.) The court’s minority cited to a 1989 case in which the DHCR construed a rent regulation statute in a particular way. There, the Court of Appeals deemed the Legislature’s subsequent silence as acquiescence.
The purchasers of Stuyvesant Town have been accused of many things. Some of those critiques are perfectly valid. One unfair criticism, however, is that they should have known not to remove units from rent regulation once they surpassed the $2,000 threshold. The rules of the game were changed very late in the game. Harsher critics would say that they were changed retroactively.
Since New York’s highest court ruled on the legality of a state law, it will be extremely difficult to get a hearing before the U.S. Supreme Court. Federal courts defer to state courts on interpreting local law. Tishman Speyer Properties, the owners of Stuyvesant Town, will have to argue that a federal right of theirs has been violated. Their best chance appears to be under the Fourteenth Amendment: No state shall “deprive any person of life, liberty, or property, without due process of law.” (This is especially ironic since civil rights activists pressured then owner MetLife to desegregate the privately owned housing under the same doctrine in 1952.) Not only was money taken, but also the additional value that their property would otherwise have, but for this decision. In the words of legendary, disbarred mouthpiece Roy Cohn, "Don't tell me what the law is. Tell me who the judge is.” In this case, the judges are Scalia, Thomas, Alito, and Roberts. It only takes four Justices to grant a writ to hear a case…
The Atlantic Yards matter, by contrast, has not yet been decided by New York’s Court of Appeals. The ambitious project, spearheaded by private developer Forest City Ratner, plans for a sporting arena, 16 mixed-use commercial and residential buildings, including affordable housing, together with public open space. In order to clear the way – literally – for the project, New York State condemned occupied properties in the immediate area. Under the eminent domain doctrine, a municipality can take private properties after compensation, so long as the properties are put to “public use.” The 2005 Supreme Court case of Kelo v. City of New London greatly expanded the Court’s understanding of what constitutes “public use.” Plaintiffs’ properties in Atlantic Yards, like plaintiff Kelo’s house, are in otherwise good condition. Their only “sin” is that they are located within a development area. The Court in Kelo reiterated that a municipality may not take property under the pretext of a public purpose, when its actual purpose was to bestow a private benefit. (Speaking of private benefits, the proposed Atlantic Yards arena in Brooklyn will cost the city nearly $40 million, according to New York City’s Independent Budget Office. By contrast, the developer stands to receive $726 million worth of public benefits for the project.)
Atlantic Yards project was supposed to provide 2,250 units of affordable public housing, a slam-dunk for meeting the requirements of “public use.” Records recently released under the Freedom of Information Act reveal that Forest City need only seek funding through subsidies for affordable housing. If the developer cannot secure this money, he is under no obligation to build the proposed number of units. There is no guarantee that the project will include any affordable housing. As a result, the public open space alone (and certainly not the arena, which charges admission) might not meet the relatively higher threshold for “public use,” as defined by New York State’s constitution.
As the rules for J-51 seem to have changed midstream, so too were the applicable guidelines for Atlantic Yards. When New York City’s Metropolitan Transportation Authority sold the development site to Forest City Ratner, the Public Authorities Accountability Act of 2005 required the M.T.A. to secure an independent appraisal, and solicit multiple good faith offers for the property. The M.T.A. did neither.
If New York’s Court of Appeals broadly interprets New York’s own “fair use” doctrine, then plaintiffs in the Atlantic Yards case will have to seek relief from the U.S. Supreme Court as well. Besides claiming that the project is not public use, they will also have to argue, like the owners of Stuyvesant Town, that their property rights were also deprived of due process.
Both rent regulation and eminent domain require the precision of surgeons. The results, however, all too often reflect the precision of blind circus strongmen with sledgehammers. Well-intentioned bureaucrats and judges should be encouraged to work for the greater good, so long as they follow ethical and accepted guidelines. While the homeowners in Atlantic Yards and the owners of Stuyvesant Town may think they have nothing in common, they both have more in common than they, or their respective supporters, would care to admit.
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