In the 1980s, two brothers converted some Bronx and Northern Manhattan rental buildings into co-ops and began selling the units. Then things went sideways.
The owners stopped mid-stream, passing the portfolio to an heir who didn’t resume sales — or do much of anything else. That created the real estate equivalent of a ticking time bomb.
Years turned into decades as the properties fell into disrepair. They had little cash in reserve, were operating at a deficit and had major capital needs.
But with a lazy sponsor subletting many units, the resident shareholders were powerless. Even if they could persuade the scion to make upgrades, what bank would lend to an aging co-op with many units being rented?
Something had to give. In November 2020, it did: Myles Horn’s Glacier Equities bought the 255 unsold apartments in the 499-unit portfolio, re-sold its shares in two of the nine buildings and focused on four Bronx properties with 130 unsold units.
What followed says a lot about what is right and wrong in real estate and politics today.
Ideally, Glacier would have renovated the buildings and given tenants insider discounts to purchase their apartments for about the same monthly payments as their rents. The co-ops — freed from lender-enraging sublets — would have refinanced and put the buildings in good stead.
The properties get spruced up, tenants turn into homeowners, Bronx politicians celebrate working-class housing and Glacier makes money. A win-win.
But this is New York. When told their apartments would be sold, many renters panicked and stopped returning Glacier’s calls. Then they stopped paying rent.
Glacier could neither leave the buildings in limbo nor sell the units with subletters in them. So it filed eviction notices, which any seasoned landlord could tell you is the only way to get some tenants’ attention.
Activists responded by staging a protest demanding that the state pass “good cause eviction,” even though the law wouldn’t apply to non-paying tenants. The demonstration, last February, generated headlines that would later complicate renters’ mortgage applications and one building’s attempt to refinance.
Activists mean well but sometimes give terrible advice. Those who protested Glacier are programmed to fight evictions, yet don’t see homeownership as a solution. They know tenants who lack a down payment or decent credit history struggle to get a mortgage. Unfortunately, they made it even harder by turning the Bronx subletters against Glacier and slamming the firm in the media.
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Glacier, certain that it was acting ethically and had nothing to hide, didn’t even hire a PR firm.
COO Rachel Brill makes a strong case that Glacier has done everything it could to achieve a good outcome. It has spent $8 million on capital improvements, with participation from the other shareholders. It met with the activists and asked for their help in reaching tenants. And it hasn’t evicted anyone.
It’s also forgiving rent arrears for subletters who move out or buy, and is covering some moving expenses. For those interested in buying, it suspends court actions, discounts prices and helps hook up mortgages. Rather than trumpet renters’ failure to pay, Glacier assures lenders they will be current on rent at closing.
“We don’t want to blow their chances,” said Brill.
Then came a Catch-22: Lenders won’t provide mortgages in a co-op where fewer than half of the units are owner-occupied. But how to get more buyers into units if they can’t get mortgages? Glacier had to persuade them to sign contracts, put down deposits and wait until the banks deemed the 50 percent threshold met.
Even then, one lender balked, refusing to close loans at one co-op after Glacier had enough signed contracts.
“A number of tenants and outside buyers had to pull out of their purchases,” Brill said. “It was incredibly frustrating and disheartening.”
She praised two other mortgage providers, both of whom have relationships with Glacier. “Chase and M&T have really come through for buyers recently,” Brill said.
About 85 percent of Glacier’s buyers have never owned a home. The process for first-time homebuyers is stressful and confusing even in the best of circumstances, so imagine persuading them to plunk down thousands of dollars and then wait for months — while mortgage rates soared. Some gave up.
But Glacier has persevered. Of the 130 apartments, 58 are sold or in contract, including 13 to renters in the buildings. They appeared to get terrific deals: One renter paid $150,000 for a one-bedroom listed at $260,000. Another paid $205,000 for a two-bedroom priced at $345,000. Savings from unpaid rent became their down payments.
Some of the insider sales were to subletters who had ghosted Glacier until the firm began a housing court case. One who had ignored the firm’s pleas called the day after the eviction filing and said, “We’d love to buy.”
Fifty units are vacant, being renovated and are for sale. Another 22 are occupied. Moving out subletters who won’t buy or pay rent for their units has been difficult, thanks to the state’s Emergency Rent Assistance Program, which provides no rent assistance but does shield applicants from eviction.
“Some tenants were denied and applied again. Apply again and the case gets stayed,” said Brill. “You have to go through the process all over again. Right before your next court date, they’ll apply again. There are ways to prolong a case for years.”
One subletter who has not paid rent since before Glacier bought the portfolio now owes more than $60,000, Brill said.
Even when subletters do pay, their presence makes refinancing hard, which is a problem for buildings with mortgages coming due or needing new boilers, elevators and roofs. One building that Glacier bought into couldn’t refinance because too many units were being rented.
Another refi nearly fell through because of the bad press from the protest, which was led in part by one of its own shareholders, City Council Housing Committee Chair Pierina Sanchez. The lender eventually extracted major concessions from the co-op board.
Glacier was cast as the bad guy by the activists and the media. But without its intervention, the story would not have ended well for the buildings or its residents.
Activists should have helped the renters work with Glacier, rather than against it, to achieve the dream of homeownership. Banks should have been more flexible in evaluating mortgage applicants, some of whom were rejected six or seven times. Gothamist, The City and The Real Deal should have sat down with Brill instead of rushing to publish articles without the whole picture.
Real estate stories cannot always be told with a headline and a protest photo. They can be complicated and nuanced and have two sides, if not more.
No doubt Glacier made mistakes too. Who knew it needed political and PR strategists to renovate a building? It has been doing co-op conversions for a long time, but did not anticipate how this one would play out.
Lending, politics and the media have changed. A tweet goes viral. A negative article sticks in your search results. Doing business gets harder.
The only choice is to finish the job, tell your story and hope someone listens.