Great Neck-based landlord Bahram Hakakian, who was on a “slumlord” watch list and who has racked up more than $512,000 in emergency repair charges from the city, sold a dozen troubled multi-family properties to Long Island City-based Alma Realty for $22.5 million. At the same time, Hakakian refinanced five other Manhattan apartment buildings in recent weeks.
In fact, as of this week, there were 3,020 housing code violations on the 334 units in the formerly complete package of 17 buildings, or about nine violations per unit, according to an analysis of city records by The Real Deal.
The conditions in five of the multi-family buildings Hakakian-affiliated entities owned or refinanced were so bad that the city included them this year in its Alternative Enforcement Program run by the Department of Housing Preservation and Development, which each year targets 200 apartment buildings with the high levels of housing code violations for repairs.
Despite the poor conditions in the majority of the portfolio, the properties were sold or refinanced with a debt level about the same as before, raising the question of whether the new owner will be able to repair the violations.
Today, Hakakian owns five properties in Manhattan, including 200 Audubon Avenue and 501 West 167th Street, which he refinanced in March, meanwhile Alma’s purchase of the 12 buildings in January included 1461 Amsterdam Avenue in West Harlem and 1911 Southern Avenue in the Bronx. Alma and Hakakian did not respond to requests for comment.
The rise in the sales and refinancing of troubled buildings has at least one tenant advocate concerned the buildings will remain in poor conditions, only now with a new owner.
“Banks are allowing buildings to become distressed by too much debt and then dumping them into a universe that is more of the same,” Dina Levy, director of organizing and policy at Urban Homesteading Assistance Board, a non-profit housing group, said.
Many of those violations, but not all, were filed with the city’s HPD while New York Community Bank held the notes. The bank said in a statement it intervenes when it can, but its options are limited.
“The loans under discussion are not at all indicative of who we are as a lender; in fact, they represent a significant deviation from the lender we are,” New York Community Bank said in a statement to The Real Deal. Tenants in a Bronx building last month picked out New York Community Bank for criticism, citing 34 poorly-maintained apartment buildings in the borough. Hakakian’s affiliates bought the 17 properties between 1997 and 2003, including the 19-unit 1627 Amsterdam Avenue in Hamilton Heights; and the 19-unit rental in the Bronx at 554 East 149th Street. He had borrowed from New York Community Bank a total of $21.9 million in multiple loans covering the 17 properties, according to an analysis by UHAB.
Violations mounted in the buildings. In 2009, when de Blasio was a candidate for public advocate, he singled out Hakakian on his Slumlord Watch List. Today, Hakakian’s 200 Audubon Avenue in Washington Heights is on Public Advocate de Blasio’s list which was renamed “NYC’s worst landlords watchlist.”
As the market for notes improved, New York Community Bank sold the loans to Madison Realty in June 2010, property records show. The amount of a discount — if any — off the principal was not disclosed, and Joshua Zegen, managing principal of Madison Realty, declined to comment.
Then earlier this year, Alma Realty bought 12 of the properties from Hakakian for a total of $22.25 million, financing those properties with loans from Signature Bank totaling $16.8 million, city property records show. Alma has been very active this year, in January paying $21.5 million for a stalled construction site in Long Island City where Edward J. Minskoff Equities once planned to build a 19-story dormitory. Amit Doshi, executive director at Besen & Associates, represented Hakakian and brought buyer Alma to the deal, he said.
But Alma did not buy all the properties whose notes were purchased by Madison Realty. An affiliate of Alma, an Astoria-based lender called Alma Bank, refinanced the loans for the properties that are still owned by Hakakian, paying Madison to extinguish the mortgages.
Those loan sales are part of a broader trend of banks unloading notes as the market for multi-family real estate improves and buyers pay closer to the face value of the mortgage.
“We are going to see more note sales because the bid-ask spread has tightened quite a bit allowing banks to remove the loans [from their books] with much more reasonable haircuts,” Matthew Kelley, an analyst and managing director at Alabama-based Sterne Agee, a financial holding company. He tracks banks including New York Community Bank.
The fact that four properties that Alma bought were in the alternate enforcement program makes them of particular interest to the city. HPD plans to contact Alma and keep an eye on the building conditions.
“We will be reaching out to the new owners in the coming days to express our concerns, and will be watching closely and monitoring their progress,” Eric Bederman, a spokesperson for HPD, said.
Robert Knakal, chairman of Massey Knakal Realty Services, said last month that the number of note sales in 2011 would remain at about the same level as last year, totaling some $6 billion or $7 billion.