Tenants, activists and a state assemblyman gathered in protest last week outside the massive 1,192-unit Riverside Park Community development at 3333 Broadway in west Harlem. The development is one of five projects formerly in the state Mitchell-Lama program bought by the investment groups Urban American and City Investment Fund – together calling themselves Putnam Holding Company, LLC – in May for a staggering $938 million.
“I think it is a shame the city is investing money in preserving affordable housing, but at the same time investing money that is bringing a loss in affordable housing,” Benjamin Dulchin, associate director of the Association for Neighborhood and Housing Development, told the group of around 60 people on Thursday.
Affordable housing advocates are asking city Comptroller William Thompson – whose office manages the city's retirement fund – to review the investment by the New York City Employees’ Retirement System in the purchase of the developments. They seek a similar review from state Comptroller Thomas DiNaopli, who is the sole trustee for the New York State and Local Retirement system.
State Assemblyman Micah Kellner, a Democrat whose Upper East Side district includes one of the purchased properties, criticized the investment of retirement funds for city and state employees in “private equity groups that purchase former Mitchell-Lama developments and make them unaffordable to those same workers.”
The housing groups Tenants and Neighbors and the Urban Homesteading Assistance Board (UHAB) last week documented that the city employees’ retirement account invested $85.9 million in the City Investment Fund, while the New York State and Local Employees’ Retirement System invested $46.6 million in the City Investment Fund and $25.7 million in the Morgan Stanley Real Estate Fund IV. The City Investment Fund and the Morgan Stanley fund in turn provide capital to Putnam Holding Company.
The city comptroller's office, which has heavily invested retirement funds in affordable housing, is concerned about the loss of such apartments through public investments, spokeswoman Laura Rivera said. "The comptroller is sensitive to investments in real estate deals that have a negative impact on affordable housing. In fact, he finds the practice of investing in speculative real estate deals that pressure low-income tenants very troubling and will do everything in his power to protect tenants at risk," Rivera said.
But Thompson did not consider the Harlem portfolio to be an unwise investment, she said. “This does not seem that it would be the type of investment that would have a negative impact on affordable housing,” she said.
In response to that, Kellner said, “I would have to disagree with that. From my firsthand experience I see this investment has a negative impact on affordable housing.” Kellner's district includes residents of a development on Roosevelt Island that was part of the $938 million deal. The assemblyman spoke with the city comptroller’s office late Friday and planned to meet with them further in the coming weeks on the investment.
DiNapoli’s office had had little to say about the deal. “We are constantly reevaluating our portfolio. We look at this and every investment,” said spokesman Jim Fuchs.
Among institutional investors, New York leaders are hardly alone in being unbothered by this kind of investment. At the nation's largest public pension fund, the California Public Employees’ Retirement System, spokesman Clark McKinley – who was not familiar with the Putnam Holdings deal – said that in general, the primary goal is to provide a strong return for retirees. “Our constitutional mandate is to make as much money as we can for the fund,” he said. “We don’t have a mandate for social causes.”
That did not mean fund managers do not care about social issues, he said. The $246.7 billion CalPERS invests heavily in affordable housing, for instance. But he said it was not going to please everybody. “We care, but you have to follow your basic targets,” McKinley said.
While the Putnam mega-purchase, completed in May, did not remove the nearly 4,000 apartments from the affordability program, advocates fear that the tripling of debt service from the purchase will inevitably create pressure on management to move additional tenants out, clearing the way for new residents to move in who can afford significantly higher rents.
The city has only about 39,392 units of Mitchell-Lama apartments left after losing about 26,253 units from the program over the past 16 years, according to the Community Service Society, a city antipoverty organization. More are set to leave, with some 4,000 units in 12 developments now on notice to leave Mitchell-Lama – and the owners of Starrett City's 5,800 units in Brooklyn have announced their intention to leave the program as well.
The Harlem development on Broadway is part of a five-property, 4,000-unit portfolio that was originally owned by a longtime Mitchell-Lama landlord, Jerome Belson Associates. The portfolio includes Harlem properties with addresses at 3333 Broadway, 455 East 102nd St., 1940 First Ave., 1890 Lexington Ave., 1990 Lexington Avenue and 1307 Fifth Ave. as well as the Roosevelt Island development Eastwood at 552 Main Street.
Belson sold the buildings to Cammeby’s International Ltd. in March 2005 for approximately $295 million, or $74,000 per unit, UHAB housing organizer Dan DeSloover said. The properties were taken out of Mitchell-Lama at about the same time as the transfer of ownership, city finance records show.
Two years later the housing market was roaring ahead. In May 2007, New Jersey-based Urban American and Manhattan-based City Investment Fund bought the buildings for $938 million, including $800 million in debt, a spokesman for the partnership and records show. At that price, the units were valued at $237,000 each, tripling their worth in just over two years.
“The incredible prices paid for these buildings and the necessary rent increases that will occur upon tenant turnover mean that low-income families throughout [the city] now have 4,000 fewer housing options,” Tenants and Neighbors executive director Maggie Russell-Ciardi said.