Kushner’s most aggressive moves yet on the Lower East Side

Strategy underscores value in rehabilitating space, challenge of moving out low-paying tenants

rom left: Jared Kushner, 170-174 East Second Street and Brandon Kielbasa
rom left: Jared Kushner, 170-174 East Second Street and Brandon Kielbasa

Kushner Companies is hitting a few road bumps as it undertakes its most comprehensive rehabilitation since it began its aggressive purchase of rental apartments in the Lower East Side, one of the city’s hottest neighborhoods.

As the firm carries out renovations with the intent of raising rents at a pair of century-old buildings at 170 and 174 East Second Street, it is running into headwinds, including a surge in reported housing code violations and pushback from legal-savvy tenants.

The Midtown-based Kushner, headed by CEO Jared Kushner, and various partners went on a spending spree for rental buildings starting in 2012. Kushner and partners now own more than 500 apartment units in the Lower East Side.

Kushner bought these two buildings, the 34-unit 170 East Second Street and the nine-unit 174 East Second Street, for a combined $17 million. The properties also have four retail units, which are all vacant.

Last fall, according to sources, the average monthly rent per apartment was just over $2,000, but today StreetEasy shows nine active rental listings with an average price of $3,987 per unit.

An estimated 34 units were occupied when the buildings were purchased in December. Today that’s down to 11, according to a count by Brandon Kielbasa, lead organizer for the Cooper Square Committee, a tenant advocacy group.

“It’s very alarming,” Kielbasa said in an email. “We know that this firm has very deep pockets and we are concerned that this is the type of investing they intend to continue doing” in the Lower East Side.

“If that is the case, there will be fierce contention between them and the community,” Kielbasa predicted.

Some saw this as part of a long-term struggle between tenants and landlords.

“This has been going on for years,” Robert Goldstein, a partner at Borah, Goldstein, Altschuler, Nahins & Goidel, said. He was not involved with this property.

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Kushner Companies, through a spokesperson, declined to comment.

To maximize rents, the company has used buyouts and other economic incentives to induce four rent-regulated and six free-market tenants to leave their apartments, according to an account cited by Fredy Kaplan, a tenant in 174 East Second Street.

Goldstein described this as a common tactic, but many housing advocates view it as controversial.

An industry source said Kushner’s representatives speaking at at local Community Board 3 meeting in 2013 said tenants were free to make deals with the landlord.

‘If at any time a tenant wants to make a private arrangement with the property owner, it is their right to do that. And now, some tenants are taking management up on that,” the source said.

But Steve Herrick, the executive director of Cooper Square and a member of CB 3’s land use committee recalled that the representative said the company would not be soliciting tenants for buyouts.

In addition, the Kushner ownership entity has also aggressively turned to the courts. Since acquiring the buildings, they filed suits in New York’s Housing Court against tenants in seven apartments among the 43.

Some have resulted in tenants vacating, while other residents have fought back.

In addition, the construction in the smaller building, 174 East Second Street, has generated problems. The city’s Housing Preservation and Development agency, which regulates housing stock, since March slapped the building with 34 violations that remain active. Eight of them are for the most dangerous kind of violation — for instance for repairs to a stone retainer wall — which are supposed to be repaired within days, but remain on the HPD website weeks after they were issued.

Housing insiders believe this is the first major rehabilitation in the Lower East Side for Kushner’s management company, Westminster Management, which has generally run the company’s properties as they were acquired.

Advocates such as Kielbasa said they see this as Kushner’s first major foray into rehabilitation, a difficult and delicate undertaking. 

Kushner, a diversified real estate company, owns and manages about 3.5 million square feet of office and residential space in New York City, according to the firm. The company is also an experienced developer.