The Real Deal New York

City releases its first predatory landlord “watch list”

Deals with Toledano, Stellar Management are included
By Kathryn Brenzel | October 30, 2018 09:30AM

From left: 237 11th Street in Park Slope, 125 West 16th Street, and 3430 Broadway (Credit: Google Maps)

The city on Tuesday released its first “Speculation Watch List,” a roundup of properties whose tenants might be vulnerable to harassment.

The list includes rent-regulated multifamily properties sold this year for more than $10,000 that have a capitalization rate below the median cap rate for their respective boroughs. The first iteration of the watch list has 51 properties — roughly 100 short of the number of buildings that are expected to be added to the list each year.

Though the list doesn’t rank buildings in any particular order, the most expensive of the deals mentioned was the sale of a 105-unit mixed-used building at 237 11th Street in Park Slope for $81.2 million, which Trinity Place Holdings bought from Adam America Real Estate in May.

A few deals involve landlords who’ve previously been accused of tenant harassment or violating rent-regulation laws. For instance, Stellar Management’s purchase of a 57-unit building at 3430 Broadway for $26.2 million made the list. In 2014, a group of rent-stabilized tenants at 50 and 70 West 93rd Street filed a lawsuit accusing Stellar of pressuring them to move out. Last year, another lawsuit alleged that Stellar overcharged dozens of rent-stabilized tenants.

“Stellar Management commends the City in its efforts to support and protect tenants’ rights throughout New York City. However, the firm has never, nor will ever, harass any of its tenants,” a spokesperson for Stellar said in a statement. “As a long-term owner of residential properties, Stellar Management endeavors to provide all of its residents with excellent service and is committed to the care and well-being of the neighborhoods its buildings are located in.”

AAK Acquisitions’ purchase of a 39-unit building at 125 West 16th Street from Raphael Toledano also made the list. In 2016, Toledano agreed to pay $1.2 million to settle claims that he harassed rent-stabilized tenants to force them out of 444 East 13th Street.

Other deals include Vornado Realty Trust’s $45 million sale of a 27-unit residential building at 27 Washington Square North to New York University. The list doesn’t appear to account for portfolio sales since it separately includes two buildings A&E Real Estate Holdings bought from Treetop Development — 132-57 Sanford Avenue and 41-40 Denman Street in Queens for $40.4 million and $36 million, respectively — which were part of a seven-building portfolio.

“While we fully support the intent of the list and strongly protecting tenants and their rights, the methodology of this list is flawed,” said Loren Riegelhaupt, a spokesperson for Trinity. “We purchased the newly constructed building less than six months ago when it was still only partially occupied. No stabilized building cap rate could be derived from NOI on a partially leased building. Moreover, we have absolutely no desire, intent or history of ever doing anything other than what’s right for our tenants. This list wrongly suggests otherwise.”

The remaining landlords mentioned could not immediately be reached for comment.

The City Council passed legislation last November to create the list as a way to flag properties with potentially predatory landlords. The list, compiled by the city’s Department of Housing Preservation and Development, aims to protect tenants from landlords eager to free their buildings’ units from rent regulation.

“We are working on multiple fronts to protect tenants from harassment and safeguard affordability for our city’s residents,” HPD Commissioner Maria Torres-Springer said in a statement. “The Speculation Watch List harnesses the power of data to gather information about where tenants are most at risk from the threat of predatory investment.”

But some landlords have voiced concern that the city’s methodology is flawed. In particular, there’s concern that the list doesn’t account for differences in return rates from neighborhood-to-neighborhood, since it relies on borough-wide median cap rates. In addition to the watch list, HPD also released a broader list of all sales of rent-regulated apartment buildings so far this year.