Last month Legal Services NYC took action on behalf of tenants in the Milbank buildings in an attempt to force the bank to spend money on maintaining and repairing the buildings while the foreclosure process—which could take years—continues.
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Using last year's sale of the Bronx's Ocelot portfolio as a general model, HPD intends to assemble a package of subsidies that would permit a so-called responsible buyer to take ownership. The agency doesn't want an open auction, in which a new speculator could scoop up the buildings at a discount, take rents and walk away in a few years, repeating the cycle.
Instead, HPD wants a controlled foreclosure auction. The bank will likely lose money, because the sale price will be less than the note they hold on the property, and the city will have to spend some of its own to facilitate the deal. In January the Bloomberg administration established a $750 million rescue fund, intended to assist buildings like the Milbank properties.
No one has yet been selected to take over the Milbank portfolio, Sokolow said.
The agency will issue a request for qualifications in the next few weeks, from which they hope to draw a pre-approved list of potential buyers for both the Milbank portfolio and dozens more in similar situations around the city. There is no guarantee that banks or landlords will play ball.
Joe Cicciu, executive director of Belmont Arthur Avenue Local Development Corporation, which operates buildings for moderate income tenants in the area, is interested in taking over the Milbank buildings because many are in the neighborhoods he serves, and because Belmont Arthur was appointed receiver for the portfolio when it went into foreclosure. It has been collecting rent and doing basic repairs since.
But Cicciu said with the condition the buildings are in, Milbank needs to sell very, very low: “The buildings, all together, need $15- to $20 million in improvements to bring them up to standard. I'm talking about major system repairs: the boilers, the roofs, the plumbing. These are 1920, 1930 structures. Systems are due for replacement.”
LNR declined to comment, but did confirm that it was in negotiations with the city.
Affordable housing policy makers and advocates are watching the Milbank deal closely, because they think it will need to be repeated frequently in the coming months as more buildings default under the weight of boom-time mortgages.
“There is a tremendous public policy interest in rescuing these buildings,” said Ben Dulchin, executive director of the Association of Neighborhood Housing Developers, a nonprofit that advocates for affordable housing. An ANHD report last year warned that as many as 100,000 individual apartments across the city were at risk of foreclosure as a result of unsustainable boom-era sales.
