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Pols Warn Foreclosed Buildings' Mystery Buyer

by Eileen MarkeyCity Limits
August 4th, 2010

A mystery real estate investor who wants to buy 10 woefully distressed Bronx apartment buildings will be stepping into a world of hurt if he doesn't do right by tenants, City Council Speaker Christine Quinn said Tuesday.

Tenants, housing activists and the Council's Taskforce on Financially Distressed Rental Housing oppose the imminent sale of the rent-stabilized buildings formerly owned by private equity firm Milbank Real Estate. They fear the buildings, which are in foreclosure and have a combined 4,500 code violations—including mold, bedbug infestation, sagging ceilings, broken windows and major plumbing problems—will only get worse under a new owner who is unable or unwilling to make the buildings livable again.

"LNR, you should not make this sale," Quinn said, addressing the financial company that controls ownership of the buildings at a press conference and rally outside 2505 Aqueduct Avenue, one of the 10 properties. "And to whoever this individual is who is buying these buildings, understand this: When you buy these buildings, you buy a whole lot of headache from the City of New York. You buy it, you own it and we will hold you responsible for every single violation."

LNR Properties, a financial company acting as special servicer on behalf of Wells Fargo, which holds the mortgage on the buildings, is in negotiations with potential buyers, a source close to the company said. LNR declined to comment on the sale and would not reveal the identity of the potential buyer. The source said LNR is sensitive to the rotten conditions tenants have been living with and has vetted the potential buyer to make sure it is up to the task of improving the buildings. The company believes a transfer of ownership is in the best interests of tenants as well as the firm and bank, the source said.

Rafael Cestero, commissioner of the city's department of Housing Preservation and Development, which has been trying to formulate a response to the growing problem of foreclosures in over-leveraged apartment buildings, said the city has no authority to stop a private sale.

"We don't know who is buying it. Let's see who they are. Let's reserve judgment and then let's see if we can work with them," he said Monday night when asked about opposition to the impending sale.

Milbank Real Estate, a private equity group that owns high-end commercial real estate in Southern California bought the ten buildings—holding a combined 548 apartments—in 2007 for $35 million. Tenants say conditions quickly deteriorated. Milbank failed to make mortgage payments and in March 2009 Wells Fargo began foreclosure proceedings.

Belmont Arthur Local Development Corporation, a Bronx non-profit housing provider, was appointed receiver to collect rent and manage day to day repairs. Belmont executive director Joseph Cicciu said his group has hustled to keep up with maintenance but that the buildings are in such bad condition now that the cost of repairing them far outstrips what the rent roll provides.

"There are still millions of dollars of repairs needed. I hope to god whoever this buyer is will be able to turn these buildings around," he said.

FAIR USE NOTICE. This document may contain copyrighted material the use of which may not have been specifically authorized by the copyright owner. Tenants Together is making this article available on our website in an effort to advance the understanding of tenant rights issues in California. We believe that this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the U.S. Copyright Law. If you wish to use this copyrighted material for purposes of your own that go beyond 'fair use,' you must obtain permission from the copyright owner.


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