Controversial landlord ramps up in the Hudson Valley

E&M Management — a longtime multifamily owner known for buying rent-stabilized buildings in Manhattan, Brooklyn and the Bronx and converting them to market rate — is finding greener pastures beyond the city.

The controversial landlord, which owns and manages more than 3,000 apartments in the boroughs, is aggressively expanding its portfolio to upstate New York, where taxes are lower and rental laws are far less stringent.

E&M pounced on the Hudson Valley rental market in March 2018 when it bought two multifamily complexes in Kingston, Lakeshore Villas and Sunset Gardens, for $44 million. The firm is also set to close on another rental complex in Kingston for $28 million and has plans to buy a six-story senior residence in Newburgh.

E&M is “out of the city,” said managing partner Daniel Goldstein, who has taken over the company’s day-to-day operations, while its founder, Irving Langer, spends most of his time in Florida.

The landlord is on track to own and manage more than 850 units upstate. At the same time, E&M has been selling off dozens of properties in the city, reportedly including two Harlem portfolios last year that went for north of $300 million combined.

Goldstein said the upstate expansion was a natural move for the company for several reasons: Negative media attention in the city was causing publicity problems, while hefty regulations and property taxes were putting a squeeze on E&M’s bottom line, among other factors.

But tenants and public officials accuse the landlord of foul play — from aggressively pushing out tenants to failing to provide basic maintenance in areas like heating and plumbing. An E&M subsidiary was a subject of an extensive New York Times exposé last year for evicting 15 low-income renters and suing 250 rent-regulated tenants at a property in East Harlem.

And the company may soon face similar pressures in Ulster County, as two bills in the state Senate could extend the reach of New York’s rental laws and hinder the firm’s plans to corner the Hudson Valley market.

James Quigley III, the town of Ulster’s supervisor, said E&M is directly responsible for tenants in Kingston seeking to expand statewide rent regulations in Albany.

“New York City management styles don’t translate to our local market,” he said. “This was a nice quiet community.”

Upstate ambitions

Though E&M specializes in rent-stabilized buildings, the firm is taking a different approach in the Kingston area, where the units it has acquired are all market rate, Goldstein told The Real Deal.

“That’s what we do, that’s what we’ve always done. It hasn’t changed,” he noted. “What’s changed is Kingston: The portfolio isn’t stabilized, but we know the market.”

Goldstein said he was also interested in the area because residents from the city can find cheaper rents and a greater sense of community in Ulster County. He likened the new development and the changing demographics of Kingston to the gentrification seen in Downtown Brooklyn in recent years.

“You always see people there going out shopping, people walking around, so it gives you a feeling, like ‘Wow, I want to be a part of this community, I want to be there,’” he said. “And that’s really what got us into Kingston.”

Jeffrey Seidenfeld, a managing director of Eastern Union Funding who brokered the financing on all of E&M’s acquisitions in Ulster County, spoke about another part of the company’s strategy. He said E&M was able to go to a district that was previously untapped, invest in the properties and convince tenants to pay more.

In some cases, Seidenfeld said, the rent increases are significant, largely due to the Major Capital Improvements program. MCIs allow landlords to raise rents on stabilized units by dividing the costs of some major investments, like new boilers and roofs, among tenants.

“The same tenants who were paying $700 or $800 are now paying $200 more,” Seidenfeld said, noting that many were not used to seeing those kinds of investments in their buildings.

Goldstein acknowledged the rent increases for some existing tenants, which he attributed to pet fees, new amenities and bringing prices up to market rate. “When we get a vacant unit, we tear out the carpet, we put new appliances in, we change the bathroom, we put LED lights in …,” he said. “We built a swimming pool and installed a playground for $120,000.”

Sunset Gardens in Kingston

But that playground has been condemned since it was installed in October and remains cordoned off because it is unsafe for children to use, according to the Ulster County buildings department. An E&M spokesperson said construction on the playground took longer than expected.

There was also a protracted sewage backup last year soon after E&M purchased the 217-unit Sunset Gardens complex at 45 Birch Street, another sewage backup this past March and the recent evacuation of a dozen tenants from the same complex by the Ulster Fire Department after a gas leak was detected, according to reports.

And 16 apartments at Sunset Gardens had heat outages in February, public records show. The Ulster County DOB says E&M has not provided urgently needed repairs, while elected officials say the landlord is aggressively pushing tenants out of their apartments.

E&M has issued a dozen eviction notices across its upstate complexes, mostly for nonpayment, since it acquired the Kingston-area properties, records obtained from the Ulster County sheriff ’s office revealed.

“We need just cause evictions here in Ulster County,” Juanita Amador, an E&M tenant who was evicted this May, said at a public assembly in Kingston. “Landlords should be held accountable for what they do.”

Tenant backlash

John Mortenson, who worked as an emergency medical technician in New York City for 15 years, moved to Kingston and bought a home when he retired in 2000.

After his wife was diagnosed with breast cancer in 2010 and leukemia in 2012, they lost their house when they had to choose between paying medical bills and making mortgage payments. So he said he was relieved when he found an apartment complex that would accept his three emotional support animals: two Chihuahuas and a cat.

But when Sunset Gardens changed hands in March 2018, things took a turn for the worse, Mortenson said. Signs were posted notifying tenants that their homes had been bought by E&M Management, the on-site maintenance office was immediately closed and tenants were given a Brooklyn phone number to call for maintenance requests.

The on-site maintenance office was closed to enlarge the gym, according to the landlord.

Sunset Gardens had several violations before E&M acquired the rental complex from Morgan Properties, said Kathryn Moniz, the town of Ulster’s sole building inspector. But the violations were all dismissed after a scheduled reinspection in March 2018, just before E&M took possession of the complex.

Moniz said she now has to spend one day a week at the complex dealing with maintenance requests.

A photo of backed-up sewage in Juanita Amador’s apartment at the time, taken in March

Tenants were outraged when the first sewage backup at Sunset Gardens left a tenant unable to use her apartment for six weeks, the local news outlet Hudson Valley One reported. Moniz said the sewage in the laundry room was not adequately cleaned up and that tenants were left to pay for the benefit of an amenity they couldn’t use.

After the incident, Mortenson joined with some of his neighbors and began to hold meetings about forming a tenant association to address their collective concerns. And when he took to Google to write an unfavorable review of his apartment, he said, he was told by a property manager, who has since been fired, to keep quiet.

“They work off of intimidation,” said Mortenson, who’s since moved further north to Rensselaer County. He added that some tenants may feel nervous about speaking out, since E&M is now one of the biggest landlords in Ulster County and some worry that they’ll have nowhere to go if they can’t get a lease with the company.

E&M’s spokesperson said the landlord has made several staffing changes over the past few months and that it strongly encourages its employees to treat all residents with kindness, empathy and respect.

Mixed reviews

Benny Goldstein, Daniel’s younger brother, who handles leasing and management for the Kingston complexes, wrote his own Google review in October complimenting Sunset Gardens.

That review, which he confirmed he wrote, gives the troubled complex five stars: “I just moved here, great place, highly recommend, management is amazing!” The review has since been deleted.

Benny, who said he got his broker’s license after moving to Sunset Gardens, reached out to this publication unprompted to give his thoughts on E&M’s tenants.

“Lakeshore Villas oversees the beautiful lake, you have higher-quality people,” he said in a WhatsApp voice memo sent to TRD. “In Sunset Gardens you have lower-quality people because they bus to work or walk to work across the street.”

Benny later said he regretted his statement and clarified that he does not value people differently because of where they work or how they get there. (Leasing agents in New York are not allowed to discriminate against tenants based on their sources of income — an expansion of protected classes under the state’s Human Rights Law signed into law by Gov. Andrew Cuomo in April.)

John McGovern, Ulster County’s chief civil administrator, who’s responsible for scheduling and executing evictions in Kingston, said the larger problem is “professional tenants” who pay the first month’s rent, give a false name and stick the landlord with the bill.

“There’s a reason I moved upstate, where there’s no rent control or rent regulation,” McGovern said. “Up here you don’t have to give leases with terms. Everything is at-will. Leases with terms only benefit the tenant.”

But state Sen. Julia Salazar, who beat real estate favorite Martin Dilan in a Democratic primary last year, is pushing to make it harder for landlords to evict tenants statewide. In January, she introduced her “good cause” eviction bill to extend protections to tenants across New York state.

“Perhaps there was a time when rapidly increasing rents was just an NYC issue, but that time is long over,” Salazar told TRD. “Upstate, tenants have virtually no protections under the law, and my bill would expand rent protection to market-rate tenants.”

Public opinion on “good cause” is largely positive, according to a recent poll of more than 1,100 registered state voters by the liberal think tank Data for Progress. But the bill’s impact on E&M and others in the real estate business could make it a difficult sell upstate, some industry insiders say.

Another bill, introduced by Sen. Neil Breslin, would expand rent stabilization upstate by lifting geographic restrictions and allowing municipalities with low vacancy rates to opt into rent stabilization and convert some market-rate units.

That bill would spell disaster for rental property owners, Daniel Goldstein argued. “With a bill like that, you’re talking about stepping on basic rights,” he said. “Telling a private developer who owns a six-unit complex, ‘Good morning, we just forced you into rent stabilization’? You can’t do that.”

McGovern said evictions in Kingston have been mostly stable over the years. But public data from Ulster County shows that 2018 saw the highest number of eviction notices ever in the city.

The sudden increase, coupled with a rental vacancy rate of less than 1 percent, caught the attention of Reynolds Scott-Childress, the majority leader of the city’s Common Council. Scott-Childress called the housing situation in Kingston acute and said E&M is at the heart of the problem. The landlord is moving dozens of renters to month-to-month leases while it does shoddy repairs, he claimed.

Ten of the 12 evictions that have occurred in E&M’s Ulster County portfolio were for nonpayment, according to local county records, while the other two were over squatting and poor apartment conditions.

Goldstein said his firm only evicts upstate tenants for just cause. “We want to help tenants,” he said. “It’s not like in Harlem, where yes, we do want to evict a tenant to get the apartment out of stabilization. It doesn’t make a difference to us in this case.”

Different venue

E&M’s managing partner said he isn’t losing any sleep over possible changes to state rent regulations. Despite what tenant advocates argue, Daniel Goldstein said he’s a lot more optimistic about his ability to influence politics in Albany than in the city.

“New York state is much more open, much less hostile,” he maintained. “It’s different up here — if you want to go speak to someone, you walk into the office, you make an appointment and they see what they can do to work with you.”

He did, however, voice frustrations with the media and tenants who “always complain about the little things and paint us in the worst light.”

His brother, Benny, also expressed his agitation over the company’s tenants. “You have to cater to 700 or 800 people,” he said in another What’s App voice memo. “You can’t please all of them. There’s always work to do to appease everyone.”

Still, others say, E&M’s upstate buying spree — including the 60-unit senior housing building the firm is in talks to acquire in Newburgh — is likely to continue.

“There is a lot of outside capital coming into Hudson Valley cities,” said Tom Collins, managing director at the brokerage SVN Deegan-Collins Commercial Realty in Kingston. “Low vacancy rates put upward pressure on rental rates. Landlords feel they can raise rents, because there aren’t a lot of options out there.”

Peter Wolf, an associate broker at Select Real Equity in Huntington, who worked with E&M on its recent acquisitions, said the company’s rent increases are pegged to improved management. “I get that sense at most of the properties they’re involved in,” he added.

But Moniz, the town of Ulster’s building inspector, said she wishes E&M would pack up and invest its money elsewhere. “I’ve seen firsthand their lack of management and lack of empathy,” she said.