NYCHA claimed that it needed to sell 900 Section 8 apartments, because it could no longer afford to maintain them.
However, a Progress Queens investigation has revealed that four buildings that were sold were recently refurbished by NYCHA, seemingly refuting claims that these buildings were too dilapidated for NYCHA to maintain.
By LOUIS FLORES
A controversial structured finance transaction originated by the New York City Housing Authority, or NYCHA, to create a special purpose vehicle to offload some Section 8 buildings to private developers is coming into greater view, according to an analysis by Progress Queens.
Three real estate development companies formed a consortium named Triborough Preservation LLC, or Triborough, to borrow money to purchase approximately 900 project-based, Section 8 apartments from NYCHA. The transaction closed last December.
A November 25, 2014, memorandum written by Gary Rodney, president of the New York City Housing Development Corporation, included the proposed terms of the disposition of the NYCHA-owned property.
Triborough would be controlled 50 per cent. by NYCHA Triborough Preservation LLC, a NYCHA-controlled entity, and 50 per cent. by L&M PDP Triborough Preservation LLC, an entity controlled by L&M Development Partners Inc., and Preservation Development Partners, LLC, the latter an entity formed, in turn, between BFC Partners, L.P., and K&R Preservation LLC.
To finance the transaction, NYCHA issued bonds worth $250 million, the proceeds of which were then provided to Triborough in the form of a further loan, with which, in turn, Triborough would use to buy its interests in the properties from NYCHA. Nearly all of the bond issuance would be exempt from federal, state, and local income taxes, and only a small fraction, $20 million, would only be eligible for state and local income tax exemptions. The bond issuance was structured to benefit from a credit enhancement from the Federal National Mortgage Association, or Fannie Mae.
A provision in the Mr. Rodney’s memorandum indicated that NYCHA workers at the properties would be transferred to other NYCHA developments, and a unit of one of the investors would provide property management services to the properties.
According to Mr. Rodney’s memorandum, the individual owners of all of the real estate development companies participating in Triborough were expected to give personal guarantees, except for the individual owners of one of the real estate development companies, L&M Development Partners Inc. The principals of L&M Development Partners Inc. are Ronald Moelis and Sanford Loewentheil. BFC Partners, L.P., is owned by Donald Capoccia, Joseph Ferrara, and Brandon Baron. K&R Preservation is owned by Francine Kellman and Brian Raddock.
Transactions, such as structured finance transactions, which transfer assets for the purpose of securitization or participation, should be made at arm’s length. However, some of the parties had relationships with each other. For example, Mr. Rodney, the president of the city’s Housing Development Corporation and the author of the memorandum to the chair and the board members of the city’s Housing Development Corporation, was a former director at one of the investors in Triborough, BFC Partners, L.P. Vicki Been, the commissioner of the city’s Department of Housing Preservation and Development and the chair of the board of the city’s Housing Development Corporation, had a relationship with another investor of Triborough. She served on the board of the Moelis Institute for Affordable Housing Policy, a New York University think tank that was founded by Mr. Moelis, one of the principals of L&M Development Partners Inc.
Since Mr. Rodney had urged the members of the city’s Housing Development Corporation board to approve the $250 million bond issuance to finance the sale of the properties, notwithstanding his prior relationship with one of the real estate developers invested in Triborough, a request was made by Progress Queens to interview Mr. Rodney. The press office of the city’s Housing Development Corporation declined the interview request, referring questions about the sale of the properties to the press office of NYCHA. Multiple requests for interviews with the NYCHA chair were put off until NYCHA finally declined the interview requests. Multiple questions were submitted by Progress Queens in an e-mail to the press office of NYCHA ; the questions, about the sale of the properties, were not answered, including questions about possible discrepancies in the addresses for the properties that appeared in the schedules to some of the transaction agreements. Amongst other requests, which were also denied, included requests for the formation documents and lists of officers for the various entities incorporated by Triborough to own or manage the properties.
The term of the project was set to last for 30 years. However, the U.S. Department of Housing and Urban Development project-based, Section 8 Housing Assistance Payments contracts, or HAP Contracts, were expected to be extended with termination dates of January 1, 2035, only lasting 20 years. During that time, the properties would benefit from partial real estate tax exemptions under Section 420-c of the state’s tax laws. What happens to the Housing Assistance Payment contracts after 20 years is not known.
For the term of the agreements, the properties would be reserved for tenants who do not earn more than 60 per cent. of the area median income, or $50,340, for a family of four, according to statistics reported in Mr. Rodney’s memorandum. These tenancy restrictions would remain in effect for so long as the $250 million bonds would remain outstanding or for a minimum of 30 years.
In discussions about the interview requests, which were ultimately denied, a representative of NYCHA insisted to Progress Queens that the properties had not been sold. However, Mr. Rodney’s memorandum stated that title to the properties would be transferred, upon closing of financing, from NYCHA to NYCHA Triborough Housing Development Fund Corporation, a special purpose vehicle, or SPV, that was structured as a nonprofit corporation whose sold shareholder was expected to be still yet another nonprofit corporation, NYCHA III Parent Housing Development Fund Corporation. The nominal purpose of the SPV would be to hold the properties for benefit of Triborough. Contrary to assertions by NYCHA that the properties had not been sold, one of the transaction agreements all but dispelled the notion that NYCHA would remain the owner of the properties.
The Declaration of Interest and Nominee Agreement signed by the parties provided to Triborough with the “unconditional obligation to bear the economic risk of depreciation and diminution in value” and the “unconditional right to receive all economic benefits” of the properties. Triborough would take possession of the properties and have the unconditional obligations to maintain insurance and pay any taxes (albeit however reduced) on the properties. Triborough would also, more importantly, collect the rental income from the properties. The Nominee Agreement also provided to Triborough with the “unconditional right to develop residential and non-residential units” on the properties, with the right to request that the city transfer title to the properties to Triborough, and to be treated as the owner of the properties for purposes of lien law and for federal tax purposes applicable to real property. According to the Nominee Agreement, Wells Fargo Affordable Housing Community Development Corporation was a member of Triborough, a positioning that Mr. Rodney’s memorandum hinted was needed so that the Wells Fargo unit could serve as a conduit for the low income housing tax credit investment made by Wells Fargo.
Since the transaction agreements were specific to the ownership, maintaining, and regulating of the approximately 900 apartments for the term of the agreements, any new residential or non-residential units developed on the properties by Triborough may not be subject to the project-based, Section 8 rent restrictions for existing apartments, meaning, that any new units may be marketed at market rate rents.
Requests made by Progress Queens to interview Mr. Moelis with L&M Development Partners Inc. and Mr. Capoccia with BFC Parnters, L.P. were not answered.
A possible lack of authority to make the sale
On background, some government reform activists discussed with Progress Queens about the possibility that the de Blasio administration intentionally sidestepped the city’s Uniform Land Use Review Procedure, or the ULURP process, when it sanctioned NYCHA’s sale of the properties. According to one source, a lawyer with expertise in city legislation, Section 197-c of the City Charter requires that any disposition of city real property must be made through the ULURP process.
The ULURP process primarily gives the public the opportunity to provide testimony at and to witness proceedings before Community Board hearings, before the Borough Presidents’ offices of the boroughs where the respective properties are located, and before the City Planning Office and the City Council. Had the de Blasio administration subjected the NYCHA sale to the ULURP process, the deal could have become a political embarrassment to the administration and possibly could have led to an unwanted outcome. Instead, the administration signed off on a structure of the sale as a securitization with NYCHA holding onto a flimsy claim that it technically retained title to the properties as a nominee of Triborough, although the rights conveyed to Triborough under the Nominee Agreement constructively grant ownership of the properties to Triborough.
"Some city agencies try to abuse the laws or restrictions," the legal source said, adding that, "Officials try to go around ULURP when they can, if no one fights them."
Previous unpopular city projects have sidestepped the ULURP process, such as when the Atlantic Yards project was subjected to state regulations instead of city regulations in order to ram that project through its approval process. By having sidestepped the ULURP process, some government reform activists privately question whether the administration has essentially gutted the City Charter requirement that the disposition of city real property be subjected to the ULURP, perhaps treating the requirement more like the right City Hall and city agencies could exert at their sole discretion without the power and authority of a charter revision committee or voter input.
Some government reform activists told Progress Queens that they worry that if the de Blasio administration is not challenged for having circumvented the ULURP process with its sale of NYCHA properties, the administration may again sidestep the ULURP process for the administration's plans for a massive affordable housing development proposed for Sunnyside Yards in Queens.
Key to keeping the de Blasio administration and city agencies, such as NYCHA, in check would be a City Council comfortable with exerting oversight against Mayor de Blasio. However, a rigorous oversight by the City Council cannot happen, not when City Hall can exert influence in the form of maintaining or eliminating the City Council slush fund from the city budget and certainly not when the chair of the public housing committee owes his election to the the influential real estate lobbying group, the Real Estate Board of New York, or REBNY.
To some government reform activists, the NYCHA sale may establish a precedent, whereby the de Blasio administration, which is seen to be keen on pushing through zone-busting real estate projects, may sidestep the ULURP process again in the future, giving the public no input at all before the city disposes of its real property, such as public hospitals, public libraries, public parks, and possibly community gardens. To ram through the controversial sale of NYCHA properties, some activists noted that the de Blasio administration essentially disenfranchised voters, NYCHA tenants, the tenant advocacy community, the members of the community boards and borough presidents where the properties are respectively located, the City Planning Commission, city taxpayers, and even the elected officials of the City Council, who, had they been keen to hold the administration accountable, would have demanded some form of say before the transaction agreements were signed. Not only that, but Mayor de Blasio may be disingenuously playing dumb, some government reform activists told Progress Queens, to deflect accountability for a bad or unpopular transaction having been approved by his appointees to the boards of the city’s main housing agencies.
Amongst the requests made by Progress Queens to NYCHA was whether the city obtained a legal opinion that allowed NYCHA to sidestep the ULURP process. However, NYCHA declined to answer this request, like the other requests.
To provide background on the properties that NYCHA transferred to the SPV, Progress Queens conducted an inspection tour of the properties.
A reporter visited the Bronxchester, a 208-unit NYCHA development that was transferred by NYCHA to the SPV. The Bronxchester is in the middle of a gentrifying neighborhood in the Melrose section of The Bronx. A Blink Fitness is located diagonally across from the Bronxchester at East 156th Street and St. Ann’s Avenue. The gym is on the ground floor in one of a series of new buildings that occupy an entire block. Across the street from the Bronxchester, a row of Melrose Condominiums lines East 156th Street. And to the west of the Bronxchester lays Via Verde, a gated, low- and middle-income apartment complex with ground floor retail that helped to attract upscale developer interest in that part of Melrose. The Bronxchester offers a small, interior sitting park, a parking lot, and the complex is set back from St. Ann’s Avenue to its east.
On the day that a reporter visited the Bronxchester, several people were entering and exiting one of the buildings’ entrances. One tenant, who spoke anonymously with Progress Queens, said that it has been “great” since “the company took over,” saying that there were general problems that needed to be repaired, “but they didn’t have money,” he said, referring to NYCHA. When asked if one of the problems was mold, a problem that is commonly associated with some of the worst conditions in some of NYCHA’s apartments, the tenant said he was not sure. Instead, the tenant cited constant prior problems with elevators, which would render them inoperable.
A reporter noticed a group of men, who wore construction hats. When one man was approached, he only spoke in Spanish. When asked by a reporter in Spanish if the construction worker could describe some of the work being done, the worker would not comment.
A family of three exited another door to the complex, and a reporter approached the family, asking the family if they had any complaints about conditions in the Bronxchester. A man, speaking anonymously with Progress Queens, said that when wind-driven rain struck the north side of the building, the rain would leak through the walls. He added that many of the electrical sockets would not work, and his apartment had a toilet that leaked around its seal with the floor. When asked about the toilet leak, the man stated that building maintenance had applied caulking around the base of the toilet, but that didn’t address the underlying cause of the leak with the seal, inevitably leading to further leaks.
A review conducted by Progress Queens of online records about the Bronxchester maintained by the city’s Department of Buildings, or DOB, showed four open DOB violations and three open violations issued by the Environmental Control Board, or ECB. The oldest DOB violation dated back to an active violation pertaining to the building’s façade, and all three ECB violations pertained to failures to file reports documenting the condition of exterior walls.
To pay for the financing of its purchase of its beneficial interests in the properties, Triborough is being paid generous rents by the HAP Contracts, with the U.S. Department of Housing and Urban Development. Rents that are regulated are discounted from the legal rent of an apartment. The discounted rent is referred to in the transaction agreements as HAP Rent. At the Bronxchester, the 48 one bedroom units were discounted from the legal rent of $1,440 to $1,200, the 73 two bedrooms units were discounted from $1,800 to $1,500, the 51 three bedrooms units were discounted from $2,160 to $1,800, the 27 four bedroom units were discounted from $2,640 to $2,200, and the 8 five bedroom units were discounted from $3,000 to $2,500.
The Bronxchester is a medium-length walk from the 2/5 subway lines at Third Avenue/149th Street stop. The walk, along Third Avenue, revealed a neighborhood in flux, with a mix of businesses that still cater to low-income residents, in spite of the gentrification, with one furniture store offering a 30-piece furniture package for three rooms for $1,499, for example, according to a sales flyer being distributed on Third Avenue.
In Brooklyn, the two buildings that NYCHA transferred to the SPV included 930 Halsey Street and 55 Saratoga Avenue in Bedford-Stuyvesant, which, between them, comprised 251 apartments. The buildings were just down the block from the Halsey Street stop on the elevated J train. The immediate neighborhood lacked the new construction of the Melrose section of the Bronx. One of the buildings, 55 Saratoga Avenue, faced Saratoga Park and offered a huge yet empty parking lot to its rear, and 930 Halsey Street had a large, adjacent sitting park.
At these buildings, known collectively as Saratoga Square, it was readily apparent that Triborough could conceivably exercise its rights conveyed to it under the transaction agreements to develop housing on the properties, because of the vast, open land that Triborough acquired with Saratoga Square.
Triborough is being paid very generous HAP Rents for the apartments in Bedford-Stuyvesant. The 50 studio apartments were discounted from the legal rent of $1,638 to $1,365, and the 200 one bedroom units were discounted from $2,142 to $1,785.
A young man in sweat pants and house slippers stood on the stairs leading to 55 Saratoga Avenue when a reporter approached the building on a cold, blistering morning. When asked by a reporter about the conditions in 55 Saratoga Avenue, the man said he did not live in the building.
A search of Google maps showed that as recently as September 2014, both 930 Halsey Street and 55 Saratoga Avenue were wrapped in scaffolding with workers on a platform hoisted along the front of 930 Halsey Street, according to images published by Google Street View, begging the question : How could NYCHA not have the money to properly maintain some of the properties, specifically, Saratoga Square, if NYCHA had already spent its own money to spruce up some of the buildings before the sale ?
Amongst the questions submitted to NYCHA, which the agency failed to answer, was how much money did the agency spend on maintenance on the properties from June 2013, at which time the request for proposals were issued by the administration of former Mayor Michael Bloomberg, up until the date of the closing of the sale.
Due to the media blackout by the secretive de Blasio administration, details about the extent of the refurbishing that the buildings received prior to their sale are not known.
A review conducted by Progress Queens of online records about 930 Halsey Street maintained by the city’s Department of Buildings showed three open complaints, three open DOB violations, and two open ECB violations. One of the complaints was in respect of two elevators that continue to become inoperable, one of the DOB violations pertained to hazardous materials, and the two ECB violations pertained to construction that a supposed cash-strapped NYCHA was conducting in 2010.
If the private real estate developers were allowed free reign to cherry pick some of the best NYCHA properties, or properties that NYCHA had already invested money into improving, then that would seemingly contradict the rationale for the urgent need to make the sale, some government reform activists told Progress Queens.
During a City Council hearing held after the transaction agreements had been signed, Councilmember Ritchie Torres (D-The Bronx), the chair of the public housing committee New York City Council, said the properties had $48 million in unfunded capital needs over the next five years and expected to have zero funding from the federal government. Circumstances like that, Councilmember Torres said, would lead to “demolition by neglect,” in defending the urgency around the sale of the properties.
When the sale of the 900 NYCHA buildings were first announced, Mayor Bill de Blasio (D-New York City) said, in part, “I'm not familiar with the specifics” about the transaction, according to a report by Dana Rubinstein in Capital New York, even though it was noted that Mayor de Blasio appoints all seven members to NYCHA’s board.
The sale of public assets, like project-based, Section 8 housing to real estate developers hearkens back the sale of other public assets, like hospitals, to real estate developers, which created political liabilities for both the Bloomberg-Quinn and de Blasio-Mark-Viverito administrations, something that Mayor de Blasio doesn’t want to further engender as NYCHA considers future potential sales of its other properties and the administration oversees the sale of public libraries to real estate developers.
The sale of public assets to private business interests is also incongruent with the mayor’s often-repeated, self-annointed image as a progressive, and Mayor de Blasio has apparently sought to deflect responsibility for the NYCHA sale by forcing Councilmember Torres and NYCHA officials to defend the controversial sale of the properties in his stead.
A request made by Progress Queens to interview Steven Stein Cushman, acting corporation counsel, and an official with the de Blasio administration was not answered by the press office of City Hall. In his capacity as an administration official, Mr. Cushman signed off on at least one of the transaction agreements.
In an interview conducted last week by Progress Queens, Councilmember Torres defended the sale of the properties, saying that, “Even though I support it as a necessary evil, it brings in the money” to properly maintain the properties, Councilmember Torres told Progress Queens. Otherwise, the “buildings would have become unlivable in 10 to 15 years,” Councilmember Torres said.
Councilmember Torres also defended the holding of a farcical City Council hearing, which was held after the transaction agreements had long been executed, saying, in part, “The hearing brought more transparency,” Councilmember Torres said, adding that, “The public has a right to know. The right thing to do is to hold a hearing. That strikes me as reasonable.”
Councilmember Torres told Progress Queens that he first became aware of the sale in or around November 2014, saying that there was little he could do about the sale, adding that, “The City Council has no authority over NYCHA but does have oversight.”
Councilmember Torres, a freshman municipal legislator, has benefitted from campaign contributions made by real estate interests. His 2013 campaign committee had received a contribution of $2,750 from the Taxpayers for an Affordable New York, an anti-tax group of big business interests that included the Business Council of New York State, REBNY, and the Rent Stabilization Association.
Councilmember Torres’s campaign also indirectly benefited from $377,867 in spending from the Jobs for New York, Inc., a Super PAC funded primarily by members of REBNY, according to online records of the New York City Campaign Finance Board. This astronomical amount was spent by REBNY’s Super PAC to support Councilmember Torres’ campaign and to defeat the campaign of his primary challenger, paving the way for Councilmember Torres’ election.
Both L&M Development Partners Inc. and BFC Parnters, L.P., are members of REBNY. The force of REBNY’s influence is so great that it always gets what it wants, even if it may mean flirting with corruption. Notwithstanding former Public Advocate de Blasio’s campaign rhetoric against hospital closings, most notably the closure of St. Vincent’s Hospital, that didn’t stop Mayor de Blasio from courting the real estate developer, William Rudin, who some activists say is responsible for essentially driving St. Vincent’s into a downward financial spiral before its untimely closure. As a Councilmember, Mr. de Blasio also voted to allow another member of REBNY, Extell Development, to install “poor doors” at some of its developments, which have forced low-income tenants to use entrances segregated from high-income tenants. In the 2013 mayoral campaign, candidate de Blasio also received real estate contributions from Extell Development and other real estate developers once under investigation by the now shuttered corruption fighting panel known as the Moreland Commission. Extell Development is also reportedly under federal investigation for campaign contributions it made while seeking tax breaks in connection with the $2 billion One57 luxury condominium tower overlooking Central Park. Another member of REBNY, Glenwood Management, has figured prominently in an unrelated federal corruption case against former New York State Assembly Speaker Sheldon Silver (D-Lower East Side).
East 4th Street
Two adjacent buildings at 277 and 279 East 4th Street were amongst the properties transferred to the SPV. Between the two, the buildings offer 25 apartments. The buildings are essentially on the trendy border between the East Village and Alphabet City.
Triborough is being paid bountiful HAP Rents for the apartments at 277 and 279 East 4th Street. The two studio apartments were discounted from the legal rent of $2,100 to $1,750, the three one bedroom units were discounted from $3,000 to $2,500, the 17 three bedroom units were discounted from $5,280 to $4,400, and the three five bedroom units were discounted from $6,960 to $5,800.
A review conducted by Progress Queens of online records about 277 and 279 East 4th Street maintained by the city’s Department of Buildings showed that each building had three open DOB violations, and that each building’s oldest violation dated back to 2002 pertaining to the buildings’ façade.
East 13th Street
Another 269-unit building, located at 205 Avenue C, was also transferred by NYCHA into the SPV. This building was nestled amongst other NYCHA buildings. This particular building was situated diagonally across from a large ConEdison substation near the East River. The sale includes an expansive park and parking lot on a section of East 13th Street that was closed off to traffic, where, similar to Saratoga Square, it offered sufficient space to conceivably serve as developable land.
Triborough is being paid the highest HAP Rents for the properties at the apartments at 205 Avenue C. The 44 one bedroom apartments were discounted from the legal rent of $3,360 to $2,800, the 88 two bedroom units were discounted from $4,440 to $3,700, the 90 three bedroom units were discounted from $5,640 to $4,700, the 28 four bedrooms units were discounted from $6,720 to $5,600, and the 18 five bedroom units were discounted from $7,800 to $6,500.
A review conducted by Progress Queens of online records about 205 Avenue C maintained by the city’s Department of Buildings showed three open DOB violations, the oldest one dating back to 2002, relating to violations in the building’s façade.
The Milbank-Frawley Houses
Two buildings sharing two Madison Avenue addresses (1780 and 1782) and two buildings sharing an address at 4-20 East 117th Street were transferred by NYCHA to the SPV. Combined, the buildings offer 80 apartments. Retail stores on the ground floor of one of the buildings have been emptied, probably in anticipation of the sale. Included in the sale appears to be a sliver of an empty lot that serves as an entry to a courtyard shared by many buildings on that block.
Two of the buildings, 1780 and 1782 Madison Avenues, recently underwent refurbishing, according to photographs dated September 2014 and published by Google Street View. Due to NYCHA's media blackout, the costs and the details of the refurbishing received by 1780 and 1782 Madison Avenues are not known.
Triborough is collecting HAP Rents at the Milbank-Frawley Houses at substantially lesser amounts than it is collecting at 205 Avenue C. The three one bedroom apartments were discounted from the legal rent of $2,220 to $1,850, the 28 two bedroom units were discounted from $2,760 to $2,300, the 11 three bedroom units were discounted from $3,592 to $2,993, and the 37 four bedroom units were discounted from $4,284 to $3,570.
In that section of Spanish Harlem, redevelopment is in full-swing. The entire block to the north of the buildings has been redeveloped with red brick townhouses, some with gated alleys that serve as private parking. A new apartment building is going up adjacent to the sliver of the empty lot along Madison Avenue, at the corner of East 116th Street. West from 4-20 East 117th Street is a new yellow brick building with faux limestone accents on the ground floor.
As the area further becomes gentrified with higher-income earners, there will be greater pressures on Triborough to find low-income tenants with higher incomes than their current tenants. In addition to the upward income trend in demographics, the trend in real estate values in undoubtedly upward, meaning any improvements that Triborough makes to the four buildings will result in appreciated real estate values for the Milbank-Frawley Houses, which Triborough will get to keep.
A review conducted by Progress Queens of online records about 1772 – 1782 Madison Avenue maintained by the city’s Department of Buildings showed seven open ECB violations dating back to 2008 to 2010, including 2 ECB violations for work without a permit one violation for failure to have posted signs at a construction job site. There is a stop work order issued by the Department of Buildings for these addresses.
A review regarding 4 East 117th Street showed three open DOB violations pertaining to the façade of the building, including one hazard violation, and five open ECB violations, including three violations for failure to document corrections to unsafe conditions, for construction work dating from 2006 to 2009. A review of 20 East 117th Street showed no violations.
East 120th Street
The complex of 42 apartments that share the addresses of 438 and 444 East 120th Street in Spanish Harlem were transferred by NYCHA into the SPV. The buildings were a long hike from the Lexington Avenue IRT station at East 116th Street. That distance, however, belied the gentrification already taking place in that far-off pocket of Manhattan. A long block of rehabilitated brownstones on East 120th Street between First and Second Avenues served as an introduction to a neighborhood that was aspiring towards higher real estate values. A nearby vacated corner building appeared ready for demolition. On the same block as 438 and 444 East 120th Street are rehabilitated red brick walk-up buildings and even a boutique luxury rental building named The Stamford, which is being marketed by Corcoran.
In spite of the added distance from the subway, Triborough is collecting HAP Rents at 438 and 444 East 120th Street at rates near those being collected at the Milbank-Frawley Houses. The 15 one bedroom apartments were discounted from the legal rent of $2,100 to $1,750, the 14 two bedroom units were discounted from $2,700 to $2,250, and the 12 three bedroom units were discounted from $3,840 to $3,200.
As with the evident pressures of gentrification in the Melrose Section of The Bronx and that which encircles the Milbank-Frawley Houses, the changing demographics in this far-off pocket in Manhattan may inevitably influence the tenant population at 438 and 444 East 120th Street.
The only draw-back may be the very long hike to the Lexington Avenue IRT station at East 116th Street, a situation that will obviously change once the Second Avenue subway is extended northward As a reporter made the treck back to the subway, walking south on First Avenue until East 116th Street, then turning west, one could see to the south the luxury condominium tower at 432 Park Avenue as one crossed Third Avenue, a landmark for luxury real estate speculation that is pushing up the prices of apartments in New York City, a situation not too dissimilar to what is also happening to NYCHA’s own properties.
A review conducted by Progress Queens of online records about 438 and 444 East 120th Street maintained by the city’s Department of Buildings showed only two DOB violations, both pertaining to the buildings’ façade, with the oldest one dating back to 2007.
Politically-connected real estate interests
As Progress Queens has previously reported, some real estate lobbyists that were involved in the NYCHA transaction have close ties to the de Blasio administration, who, in turn, has close ties to the overall real estate industry. For example, Mayor de Blasio appointed a lobbyist, Jonathan Greenspun, from the lobbying firm, Mercury Public Affairs, to serve on the New York City Commission on Human Rights. Mercury Public Affairs was paid to lobby on behalf of BFC Partners, L.P., one of the NYCHA real estate investors. A lobbyist for one of the wealthy landlord members of REBNY will now be amongst the commissioners, who decide how the city protects residents against housing discrimination by landlords.
As was written in an editorial by Progress Queens :
“Such a conflict of interest and potential for self-dealing appears to matter not to the de Blasio administration, which is keen on developing and fostering close ties to influential real estate developers. Indeed, during his campaign for mayor, then Public Advocate de Blasio accepted the campaign and fund raising assistance of another real estate lobbyist, James Capalino, who lobbied on behalf of Rudin Management Company for the luxury condo conversion of St. Vincent's Hospital in the West Village. Another lobbying firm, BerlinRosen, advised the real estate developer behind a zone-busting project anchored at the Domino Sugar refinery in Brooklyn at the same time when the lobbying firm was advocating for the mayor's expansion of prekinder classrooms. Further enmeshing Mayor de Blasio with BerlinRosen, the same lobbying firm also served as campaign consultants to Mayor de Blasio's 2013 campaign committee. (BerlinRosen would appear to later represent both sides in the sale of the Pacific Branch of the Brooklyn Public Library, as well.)”
Mayor de Blasio’s reliance on lobbyists and real estate developers for support of his political campaign committee has revealed that he may have motivations other than for the public good to embrace relationships closer than arm’s length with real estate interests, rendering as suspect his suggestion that he did not know the details of the NYCHA sale, especially given the involvement of politically-connected campaign supporters.
Allowing the for-profit motive to influence the rents of project-based, Section 8 housing
According to prepared marks delivered by NYCHA CEO Shola Olatoye at the City Council hearing about the sale of the properties, Ms. Olatoye said that, according to NYCHA statistics, tenants of the properties transferred to the SPV earned approximately $19,000 each year, which, in turn, turns out to be approximately $4,000 less per year than tenants in NYCHA’s other public housing developments.
If Triborough sought to cherry pick the properties where gentrification would influence the area medium income, then there would be no incentive for Triborough to rent its stock of approximately 900 apartments to tenants earning too much less than than 60 per cent. of the area median income, in order to keep improving the economics of its building demographics. What is more, as the actual rents for the units demonstrate, Triborough is being paid generous HAP Rents. For some of the properties, HAP Rents are comparable to or exceed rents, for purposes of comparison, in some rent-regulated buildings in the Historic District of Jackson Heights, Queens.
If Triborough is motivated to replace the lowest-earning of low income New Yorkers with higher-earning low income New Yorkers at these NYCHA properties, then that may potentially drive former project-based, Section 8 tenants to homelessness, an inexcusable result for which, some government reform activists say, Mayor de Blasio must be held to account, in addition for having disenfranchised New Yorkers by sidestepping the ULURP process and by allowing politically-connected real estate developers to essentially cherry-pick some of the best public assets from NYCHA’s portfolio of buildings.