Nonprofit Eyeing Distressed Buildings Faces Tenant Resistance

Print More
112 E 103rd St is one of the buildings in the portfolio that Hope Communities aims to acquire.

Photo by: Marc Fader

112 E 103rd St is one of the buildings in the portfolio that Hope Communities aims to acquire.

East Harlem affordable housing giant Hope Community LDC wants to buy a collection of troubled buildings laid low then abandoned by Dawnay, Day, a British investment firm. But some neighborhood activists are hoping to block the sale.

Hope Community is courting tenants and is in talks with the city’s Department of Housing Preservation and Development for help purchasing all or part of the 47-building portfolio, which entered foreclosure proceedings last year.

Dawnay, Day bought the portfolio in 2007 for $235 million–an astronomical sum, considering the modest rents most tenants pay. The goal was to bring in wealthier tenants. When that didn’t happen and the firm was unable to keep up with mortgage payments, the owners withdrew services, failed to make necessary repairs and in short order defaulted–leaving tenants with collapsed ceilings, rats, leaks and broken elevators. Now Hope wants to step in.

“These buildings are in the neighborhood where our buildings are, sometimes right next door. Our interest is to preserve affordable housing, to keep this resource for the community,” says Walter Roberts, Hope Community’s executive director.

The Hope LDC has a long history in El Barrio. It owns 74 buildings with 1,300 apartments for low-income tenants and employs 500 people. Founded in 1968 to reclaim abandoned and deteriorating housing, Hope also provides below-market commercial space to local businesses and has partnered with private developers to build mixed-income housing, including a series of townhouses on East 120th Street with $1 million sale prices.

Owning and managing buildings for people who aren’t poor is a departure for the city’s nonprofit housing industry. But Roberts says providing for a diversity of people who want to live in East Harlem is important. He says safe, decent affordable housing remains the groups’ core mission. If Hope acquired the Dawnay, Day portfolio it would keep the buildings in rent stabilization and rent to low-income tenants, Roberts says.

Buyer meets skepticism

But Juan Haro, an organizer with the Movement for Justice in El Barrio, which has been organizing Dawnay, Day tenants since 2004, isn’t so sure.

Movement for Justice (MFJ) members say Hope Community runs buildings rife with safety violations and that a steady schedule of gut renovations has displaced vulnerable tenants and raised rents in a neighborhood hard-pressed by gentrification.

“We don’t want Hope Community because we know that they are a bad landlord,” says Maria Mercado, 49, who lives in one of the Dawnay, Day buildings and has been active with MFJ for the past year and a half. “There are a number of Hope tenants who’ve come to our meetings and who’ve marched with us,” she says.

One of those is Jan Morales, 60, who says she lived in a building on East 109th Street when Hope took it over in 1995. The next year Hope moved her to another property so they could do a major renovation. But Morales claims she was never permitted back into her original apartment and that rent was far higher in the new one. When Morales lost a rental assistance benefit tied to her daughter last year, and her $697 a month in supplemental social security income wasn’t enough to cover the rent and groceries, Hope evicted her. Morales, who has been living in a homeless shelter on 125th Street since April, claims Hope never offered her assistance in finding a job, applying for an alternative subsidy or getting a less expensive apartment.

Roberts says he can’t comment on things that happened before he became executive director in January. “We do everything we can to make sure tenants aren’t inconvenienced during rehabilitation. But have their been mistakes? Of course. What program runs without some mistakes?” he says.

He insists that renovations currently underway in five Hope buildings will not result in higher rents or any tenants being displaced. “Everyone retains the lease to their original apartment and they’ll go back to it, without a rent increase,” he says.

Roberts says Hope Community has tried, without success, to communicate with Movement for Justice in El Barrio. Hope is working with Community Voices Heard, another community organizing group, to try to win the support and cooperation of Dawnay, Day tenants, Roberts says. (CVH did not return a call for comment.)

In order to get an accurate picture of the portfolio’s financial condition to negotiate a sale price with the bank, Hope needs to find out what people are paying in rent–and what sort of repairs are needed inside apartments, Roberts says. “A lot of it depends on the cooperation of tenants,” he says.

A troubled portfolio

Some of those tenants have already lived through two controversial landlords. In 2004, the largely Mexican immigrant tenants of the 47 buildings began organizing against then-landlord Steven Kessner, who was named one of the city’s ten worst by The Village Voice. The group became Movement for Justice and they take credit for forcing Kessner to sell.

But new owner Dawnay, Day–a private equity-backed London-based real estate investor–was even worse, Haro says. Starting with 10 tenant organizations in Dawnay, Day buildings, MFJ grew to a sturdy force with associations in every building. Hoping to pressure Dawnay, Day to make repairs and respond to tenant concerns, MFJ launched the International Campaign In Defense of El Barrio and partnered with citizen’s groups in the United Kingdom. With the help of several pro-bono attorneys, it has filed a series of legal actions against the buildings’ owners. By the time Dawnay, Day walked away from the properties in late 2009, tenants were well organized, united and clear about what kind of landlord they want.

“We want these buildings to belong to a good landlord, a landlord that will respect the rights of the tenants and treat them with dignity,” says Filiberto Hernandez, 34, a mechanic and nine-year Dawnay, Day resident. MFJ is writing a contract delineating tenant rights and expectations that it intends to present to any potential new landlord, Haro says.

At least one potential alternative buyer, American Properties has already contacted MFJ, saying it wants to work with tenants. American Properties is a for-profit real estate firm with residential and commercial properties in mid-town Manhattan, Dallas, Dubai and England. In 2006 it bought two East Harlem buildings and is currently working on bringing a full-service supermarket to the neighborhood, according to a letter to MFJ.

Haro also says MFJ has also had friendly discussions with Centerline, the special servicer that is in charge of the Dawnay, Day buildings during the foreclosure process.

Hope Community has tried unsuccessfully to talk to Centerline, Roberts says. “They are very much playing a poker face on this,” he says. “It’s really all up to them and the bank whether they go through with an auction or sell to someone who will preserve the buildings as affordable housing.”

Haro says Centerline told MFJ members that it wants to sell to someone tenants support. Centerline did not return a call for comment.

For its part, the Department of Housing Preservation and Development is trying to negotiate with the lender to lower the sale price to one that will permit a new owner to repair the buildings and maintain them with low rents, a spokesman for the agency says.

As with a series of other big rental buildings in financial straits, HPD wants to ensure the next owner of the Dawnay, Day properties will break the cycle of over-leveraging and neglect. The agency is also beginning to assemble a go-to list of developers who are interested in and qualified to act as rescuers for financially troubled buildings such as the Dawnay, Day portfolio.