New York, NY —
The current real estate boom is attracting major investment in some of the most unlikely places. Over the last several years large real estate groups, often backed by the deep pockets of Wall Street firms are buying up blocks of rent stabilized buildings in poor neighborhoods such as East Tremont and Highbridge in the Bronx. Even foreign groups have gotten into the game investing in this cheap stock of housing that’s far from luxurious. WNYC’s Cindy Rodriguez has more:
REPORTER: It’s a steamy day on 103rd street in East Harlem. Competing boom boxes – one playing hip hop, the other meringue – blast in the background. Several tenants sit outside their old rundown buildings socializing…
RICARDO: (English translation) That one that’s 328, it’s also there’s and this one here it’s 312 , and the one that follows
REPORTER: Ramon Ricardo is out here too. He points out his building. It and several others were recently purchased by a multi-billion dollar London based Private Investment group. In total Dawnay Day spent more than 200 million dollars on 47 buildings in East Harlem. Most are rent stabilized. Ricardo’s new landlord makes him nervous:
Ricardo: (English translation) This is the first time they buy in the United States. I think they see it just as land not as a place with residential buildings.
REPORTER: But it’s not like Ricardo’s prior landlord was so great.
Inside his tiny one bedroom apartment he shows me the shoddy repairs made only after taking the old building owner to court. He shares the space with his wife and two baby daughters. The couple pays 860-dollars in rent. Ricardo belongs to a tenant group that would often picket outside the offices of the prior owner, Steve Kessner. They call him a slumlord and the city acknowledges he ran several troubled buildings in the neighborhood. Still Ricardo finds him less threatening:
RICARDO: (English translation) The London company, when they bought the buildings they said in the newspaper over there that they had bought the 47 buildings with the intention of renovating them ….to raise the rents.
REPORTER: There’s nothing new or illegal about trying to aggressively raise rents in the New York City rent stabilized market. Private landlords have been doing it for decades. But Benjamin Dulchin from the Association for Neighborhood and Housing Development says when real estate is viewed only as a commodity, the pressure to turn a quick profit is intense:
DULCHIN: If the asset that’s in your portfolio is residential real estate the way you are making your return is by pushing out the low rent paying tenants and replacing them with the high rent paying tenants so there’s a human side to this.
REPORTER: Dulchin says large investment groups with vast financial resources have brought to the table a whole new set of strategies in the form of mass lawsuits. He says many are frivolous and baseless but are effective when a tenant is not sure how to fight them.
LONGUA: As aggressive as they might want to be they are going to be constrained by what they are allowed to do
REPORTER: Larry Longua is a real estate professor at New York University and disagrees with Dulchin saying most savvy investors know it takes time for rent stabilized apartments to turn over and for rents to increase. Plus, he says strict rules govern rent stabilization:
LONGUA: They can’t just raise rents and push tenants out as long as tenants are in compliance with the requirements to maintain those units as stabilized units.
REPORTER: But, Longua does agree that more big firms are buying rent stabilized housing stock in poor outer borough neighborhoods and gentrification is spreading.
According to the Real Deal a New York Real Estate news source, Black Rock, a well known money management firm recently backed the purchase of more than 36-hundred rent stabilized apartments in the Bronx. And on its website a group called City Investment Fund listed its recent purchase of 22 buildings in neighborhoods such as Kingsbridge and University Heights. The fund uses pension money from New York City cops and firefighters to make its investments.
Back in East Harlem, Ramon Ricardo is ready to organize his fellow tenants and fight. So far though, there’s been no frivolous lawsuit or any other tactics waged against him and his family but other tenants he says are being harassed. Dawnay Day declined to be interviewed for this story but the brokers who arranged the real estate deal did talk. Jeffrey Troy is the Senior Director of Eastern Consolidated. He says tenants can expect a better management style from their new foreign based landlord
TROY: A landlord that wants to help if someone has a problem that they don’t have to wait two or three days to go over there and fix things. And I think that’s what they are going to see here. This new landlord will get things done over here as needed quickly.
REPORTER: Troy says the reason foreign investors such as Dawnay Day are investing in East Harlem and the outer boroughs is likely two fold – first because the euro and the pound are so strong and second because the properties are so cheap – far less than prime Manhattan. Troy says the gritty streets of East Harlem did not deter Dawnay Day:
TROY: The group that bought in East Harlem they already have property in Germany. They’ve been in India for a long time. They are in Russia, Kiev, St. Petersburg and they are really pioneers, roll up your sleeves type of guys. They get their hands dirty and renovate the buildings and do what has to be done to create more value.
REPORTER: Ramon Ricardo considers himself a pioneer too. He says he’s lived in East Harlem for over ten years and endured drug dealers peddling on his front steps, rat and roach infestations and battles with his old landlord. While there are still problems, the 35 year old also sees the value in East Harlem and says he’d rather stay than move to Brooklyn, Queens, or the Bronx. For WNYC, I’m Cindy Rodriguez.