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Housing Group Warns of Trouble for Manhattan's Rent-Regulated Apartments

By DNAinfo Staff on December 10, 2009 3:09pm  | Updated on December 10, 2009 3:04pm

By Jon Schuppe

DNAinfo Reporter/Producer

MANHATTAN — Tenants of rent-regulated apartments owned by “predatory” investment groups are facing a new threat as their landlords head toward foreclosure and a second wave of “vulture” speculators squeeze profits out of their deteriorating buildings, warns a new report.

The problem is particularly acute in Washington Heights, Harlem and parts of the Upper West Side and Lower East Side, according to the Association for Neighborhood and Housing Development, a housing advocacy group. These areas have historically been home to moderate-income residents, but are now attracting wealthier people.

“We’re seeing continued harassment of these tenants as their buildings get closer to foreclosure and their apartments fall into disrepair,” ANHD executive director Benjamin Dulchin said.

His organization’s report details how, during the real-estate bubble, private equity-backed developers snapped up roughly 100,000 rent-regulated apartments in New York City. 

To make money, they needed to get more rent, which required turning the units into market-rate apartments, the report says. That's done by moving existing tenants out, upgrading the apartments, and bringing in people willing to pay higher rents.

Many tenants claimed their landlords were trying to force them out by skipping repairs and taking them to court for alleged lease violations. Many tenants banded together and fought back, according to the report.

Then the real-estate market tumbled, and the investors’ bets didn’t pay off.  

“For the most part, the buildings haven’t gone into foreclosure, but they’re hurtling toward it,” Dulchin said.

Now, a new wave of “vulture” speculators are trying to capitalize on those bad investments by buying them at a discount, the ANHD says. Their money-making techniques could mirror their predecessors’.

“It’s an unseen crisis because you won’t see buildings abandoned and boarded up," Dulchin said. "It’ll be less repair, and harassment.”

His group sees "vultures" circling W. 109th Street, between Columbus and Amsterdam avenues.

The Pinnacle Group bought 22 rent-regulated buildings on that block in 2005, according to the ANHD. There has been widespread speculation that Deutsche Bank, which holds the mortgages, wants to sell them to another investor at a steep discount.

Kenneth Fisher, a Pinnacle Group lawyer, declined to comment on any specific building the company owns, and said he hadn't seen the ANHD's report. But he expressed doubts about how much ANHD knows about Pinnacle's financial standing.

"I don't know what their methodogy was, but on any particular building how could they possibly know what the rent roll is or what we pay for paper bags or anything else?" Fisher said.