Newcastle Realty was repeatedly accused of violating New York’s old rent laws. Now it says it’s leaving New York because of the new rent law.

Margaret Streicker Porres describes herself in a letter to Gov. Andrew Cuomo as “the canary in your coal mine.”
By Eddie Small | July 17, 2019 02:50PM

Margaret Streicker Porres and 101 West 78th Street (Credit: Linkedin, Corcoran, iStock)

Margaret Streicker Porres and 101 West 78th Street (Credit: Linkedin, Corcoran, iStock)

The president of a real estate company that has been in hot water for allegedly breaking New York’s old rent laws now says her firm will leave the state because of its new rent regulations.

Newcastle Realty Services president Margaret Streicker Porres wrote a letter to Gov. Andrew Cuomo on July 12 severely criticizing the recently enacted rent reforms, telling the governor that they are driving her company out of New York.

“I will not be the last — as many of my colleagues are making similar significant and drastic business decisions in order to comply with these irresponsible laws,” she wrote. “You can consider me the canary in your coal mine.”

But Newcastle, which operates and manages about 2,500 apartments in the city, has been accused of manipulating and violating rent regulations prior to the passage of the new tenant-friendly law.

In 2015, the firm agreed to pay $1.5 million in fines and legal fees (but did not admit guilt) to settle accusations from the New York Attorney General’s office that it was offering rent-regulated tenants illegal buyouts. The company was working on a condominium conversion at 101 West 78th Street, where it illegally induced 12 tenants to leave and prematurely took five units out of rent stabilization, according to the AG’s office.

And in late May, just weeks before the state passed its new rent law, a lawsuit from New York Attorney General Letitia James accused Newcastle’s former head of operations David Drumheller of abusing the Individual Apartment Improvement program to illegally deregulate apartments. Drumheller allegedly inflated the costs of these improvements and took $1.2 million in kickbacks to cover expenses like sports cars, au pair services and country club dues. Another unnamed employee at Newcastle was also implicated in the alleged scheme, and the lawsuit claims Drumheller tried to cover his tracks.

A spokesperson for Newcastle told the New York Times in May that Newcastle was cooperating with the attorney general, and said Drumheller was fired for inappropriate conduct unrelated to the alleged kickback scheme.

Porres’ firm was not named as a defendant in the lawsuit, but James’ office describes the company’s business model as “‘uncover[ing] value’ in rent-stabilized apartments by, among other things, undertaking IAIs in order to deregulate vacant units using high-rent deregulation.”

In her open letter to Cuomo, Porres singles out the recent law’s changes to the IAI and Major Capital Improvement programs for criticism, arguing that new limits on them will make it much harder to upgrade and maintain the city’s aging infrastructure, leading to “a repeat of the 1970s and 1980s when similar rent laws decimated neighborhoods by robbing them of the opportunity to revitalize housing stock.”

“This legislation will have a profound, long-term negative impact on the value of properties,” she wrote.

As others in the real estate community have argued, Porres said in her letter that the state’s new rent law will worsen New York’s housing crisis, force businesses to fire tens of thousands of employees and decrease both investment values and New York’s tax base.

Neither Cuomo’s office nor Porres responded to requests for comment. James’ office also did not comment on the status of the case against Newcastle’s former operations manager.

New York’s real estate has started to fight back in earnest against the state’s new rent law, which was widely viewed as a stinging defeat for the industry. The Rent Stabilization Association and the Community Housing Improvement Program filed a federal lawsuit on Monday challenging the law’s constitutionality,  and a Brooklyn landlord is suing to void a contract to buy a pair of Bronx apartment buildings, arguing that the new law makes the deal impossible to close.