The Daily Dirt: A rent-regulated portfolio in peril?
An analysis of New York's top real estate news
The new rent law changed the calculus for many multifamily investors. Some are trying to finagle their way out of financial peril.
When Emerald Equities bought the East Harlem portfolio known as Dawnay Day in 2016, it was a different world. The company paid $357.5 million for the 1,181-unit portfolio — $302,000 per unit — and planned to convert the rent-stabilized apartments to market rate. But with the June 2019 overhaul of the rent-stabilization law, landlords who relied on a buy-and-convert business model are trying to figure out how to stay in the black. The law has crimped Emerald’s ability to deliver the returns that its investors and lenders, including Sabal, Mack Real Estate and LoanCore, had expected.
That’s why Emerald is seeking a tax break dubbed Article XI, Georgia Kromrei reports. The incentive is offered to new construction or affordable housing in need of rehabilitation. The Department of Housing Preservation and Development conducts an audit to determine the level of exemption needed based on what would allow the property to “remain financially viable.”
“We are exploring all options, with the objective of ensuring quality and sustainable building operations for our current residents, now and into the future,” Emerald’s Isaac Kassirer said in a statement.
It’ll be interesting to see if other landlords apply for Article XI in t
he rent law’s wake, as many developers did after 421a expired in 2016. (If you’ve got any leads, let us know!)
It looks like prevailing wage will make a comeback this session. But it’s not yet clear what that will look like.
Bronx Sen. Luis Sepúlveda and Laborers’ Local 79 held a rally Thursday to reignite a push for a bill that would require prevailing wages be paid on projects receiving public funds.
New York’s constitution defines public works as state-financed projects. But private projects that receive tax breaks and other types of public funding typically aren’t required to pay prevailing wages, which are determined by the state Department of Labor and based on union rates.
Legislators have repeatedly tried to change this, but efforts fell short in 2015, 2018 and again last year, when the bill was sponsored by Sen. Jessica Ramos and Assembly member Henry Bronson.
Sepúlveda wants to include some sort of incentive to make it easier for minority- and women-owned businesses to cover the increased costs associated with mandating prevailing wage. He also wants to strengthen rules to ensure these wages are paid regardless of workers’ immigration status.
“I made a commitment to meet with stakeholders in order to make important updates to the bill,” Ramos said in a statement. “We’re working diligently to incorporate changes as those conversations continue.”
Gov. Andrew Cuomo could also include a version of the public-works bill in his state budget. He’s a major union ally and has pushed for the measure in the past. He did not, however, call for it during his State of the State address this month. Nor did he give a shoutout to Building and Construction Trades Council President Gary LaBarbera, as he has in previous speeches. That may be because LaBarbera largely stepped back from pushing the legislation last session, leaving the fight mostly to the state chapter of the BCTC.
What we’re thinking about: What did you think of this year’s REBNY banquet? Any surprises? Send details on drama and intrigue to firstname.lastname@example.org.
Residential: The priciest residential closing recorded Thursday was for a condo unit at 23 Perry Street in the West Village, at $14.1 million.
Commercial: The most expensive commercial closing of the day was for an office buildings at 434 Broadway in Lower Manhattan, at $98.3 million.
The largest new building filing of the day was for a 40,000-square-foot parking garage at 397 Kingsland in Greenpoint. Broadway Stages filed the permit application.
NEW TO THE MARKET
The priciest residential listing to hit the market Thursday was for a townhouse at 355 Bleeker Street in the West Village, at $10 million. Compass’ Shaynon Gramling has filed the permit application. — Research by Mary Diduch
A thing we’ve learned…
Hong Kong property tycoon Cheung Chung-kiu (张松桥) agreed to buy a $262 million-plus home in London’s Hyde Park, breaking the United Kingdom record for priciest home sale. Cheung got his start in business with an inheritance from his grandmother, a Chinese Vietnamese who relocated to Hong Kong. He then started buying electronics in Hong Kong and reselling them on the mainland for as much as 10 times what he paid. Thank you to Kevin Sun for unearthing this tidbit.
Elsewhere in New York
— Not everyone loves Robert Moses as much as Andrew Cuomo does. Assembly member Daniel O’Donnell proposed a bill to form a committee to rename Robert Moses State Park, Gothamist reports. Among other rationales for the legislation, a memo notes that Moses “repeatedly abused his power to entrench racial and economic segregation.”
— After his first pick didn’t work out, Mayor Bill de Blasio has tapped City Hall staffer Aloysee Heredia Jarmoszuk to lead the Taxi & Limousine Commission, the New York Post reports.
— Under the mayor’s proposal, the city’s budget could soar to $95 billion next year, the New York Post reports. Stay tuned.