Garodnick might seem like an unlikely champion in the fight against foreclosures' impact on tenants. His district covers some of Manhattan’s priciest real estate, including the grand apartments along Central Park South and much of Museum Mile. By contrast, the vast majority of home loan foreclosures in New York City are concentrated in a few low-income neighborhoods on Staten Island and in Southeast Queens, such as Jamaica and South Ozone Park.
But Garodnick’s district also includes the more than 11,200 rental units at Stuyvesant Town and Peter Cooper Village, which sold in 2006 for nearly a half-million dollars per apartment. That's one reason he backs three related bills (Introductions 889, 956 and 959), which would require that renters be notified of a pending foreclosure, require banks and others to register foreclosing properties with the city, and require owners to maintain upkeep of properties while in default.
Those downtown Manhattan units have plenty of company: Local experts count more than 70,000 “overleveraged” rentals where the commercial real estate loans may be larger than the value of the property based on rental income.
As these properties' debt becomes more onerous and foreclosure becomes a possibility, a variety of officials and advocates hope to protect tenants while a tangled web of owners, lenders, and investors struggle over who has the right to whatever value is left at the properties.
At the same time, state and city housing officials hope to potentially rescue these buildings and preserve them as housing for low and moderate-income New Yorkers.
“We don’t think that the shoe has dropped yet for overleveraged buildings,” said Holly Leicht, deputy commissioner for development at the city’s Department of Housing Preservation and Development (HPD). “We think things will get a lot worse. We want to make sure that those buildings don’t decline as landlords walk away.”
Protecting Tenants
The worst-case scenario for these buildings could already be playing out at the 1,230-unit Riverton complex in Harlem. In January, Riverton’s owners defaulted on their $250 million package of loans on the property.
The property is now in limbo as the mezzanine lender and the permanent lender begin what could be a protracted legal battle over the property, which analysts estimate to be worth either as little as $80 million, based on the current rent roll, or as much as $196 million, depending on how much rents can eventually be raised at the rent-stabilized property, according to recent coverage in the real estate financing trade press.
In the meantime, Riverton’s current owners and managers have little incentive to invest new money to maintain the property, because they are almost certain to lose Riverton to one or another of its lenders.
