New York – Deteriorating Rental Apartments To Get Bailout From Uncle Sam

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    New York – First it was the banks and automakers that got a helping hand from Uncle Sam — and soon some New York City apartment complexes could get one, too.

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    A bill winding its way through Congress proposes to prop up deteriorating apartment complexes by injecting $2 billion from the Troubled Asset Relief Program into an effort to stabilize multifamily properties in default or foreclosure.

    The bill, which is called the TARP for Main Street Act and was sponsored by House Financial Services Committee Chairman Barney Frank (D-Mass.) and Rep. Nydia Velazquez (D-Brooklyn and Manhattan), would use TARP funds that have been returned by banks and plow it into programs that, according to the bill, would create “sustainable financing” for the complexes as well as provide funding for property rehabilitation.

    The House is considering the measure, which focuses on apartment buildings with units that are either rent stabilized or receive government subsidies.

    Many developers during the housing boom bought rent-regulated apartments by borrowing against the properties themselves and betting they could make hefty returns by converting them into market-rate buildings.

    However, thanks to the recession and the collapse of the real estate market, many developers are now struggling to make mortgage payments, let alone finance repairs and upkeep of the properties they own.

    “Just about everyone who purchased an asset in 2006 and 2007 is under water, especially the rent-stabilized complexes bought in upper Manhattan, the Bronx and Brooklyn,” said Dan Fasulo, managing director of Real Capital Analytics, a real estate research and consulting firm.

    There already have been casualties. Larry Gluck of Stellar Management and partner Rockpoint Group last October defaulted on their loan for Riverton Apartments in Harlem.

    More recently, developer Kent Swig lost control of Sheffield57 to hedge fund Fortress Investment Group after he defaulted on loans used to convert the former rental building into a condominium.

    According to data released last month from Real Capital Analytics, 120 properties in Manhattan, including 84 apartment buildings, were considered “troubled.”

    Dina Levy of the Urban Homesteading Assistance Board said 70,000 New York City apartments, or about 6 percent of the city’s roughly 1.2 million rent-regulated units, are at risk of deterioration in part because of the market crunch.

    Despite those numbers, Gluck, who in addition to Riverton also bought 16 Mitchell-Lama buildings , told The Post that the situation facing developers isn’t as dire as some would believe.

    Indeed, Gluck said many loans don’t need a bailout because large local lenders are working with developers to prevent complexes from defaulting.

    Nevertheless, Gluck, who stressed he maintains his properties, said the bill sounded like a good idea, and that real estate developers might as well collect from the government since everyone else was already getting handouts.

    “As long as there is a long list of people out there with their caps in hand, why should everyone else be getting a free run?” Gluck said. “If it staves off some bank foreclosures, it is good for real estate and good for tenants.”


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    7 Comments
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    Anonymous
    Anonymous
    14 years ago

    Let them callapse give the other guy a chance and if they do thid you gotta be stupid not to invest, goverment will bail you out. This is what is called MORAL HAZARD.

    Hershkowitz
    Hershkowitz
    14 years ago

    If I had this money; I could have been successsfull

    AuthenticSatmar
    AuthenticSatmar
    14 years ago

    Another handout to the rich folks.
    Who let these politicians out of the asylum?

    Yehuda
    Yehuda
    14 years ago

    Big problem with this bailout. You can invest in buildings & then say hey I’m losing money on this investment give me money so I can be risk free.
    Sheer stupidity on the part of the government for all these bailouts. The only one who tloses on their risks is the poor middle guy who inveted in stocks of companies that tanked. That includes stocks of companies that were bailed out.

    AMG
    AMG
    14 years ago

    let the rental market collapse and the rents will become affordable for midddle class workers who earn between $25,000.00 and $70,000.00 a year which make up a majority of the working middle class population of New York City who earn under $120,000.00 a year.