The Department of Housing Preservation and Development on Monday subpoenaed records on the Milbank portfolio, a group of 10 Bronx buildings that have become a focus for concerns about a looming foreclosure crisis affecting multiunit buildings with low-income tenants.
The HPD subpoena asks for documents relating to the finances and rent roll of the 10 buildings. It named Milbank, the former owner of the buildings, and LNR Partners, who currently holds the mortgage. Also named was Consolato Cicciu, the appointed receiver for the property.
HPD also wrote to LNR urging that whoever buys the properties "be qualified to turn around distressed rental housing."
In October, Cestero toured three of the ten buildings with tenants organized by the Northwest Bronx Community and Clergy Coalition. He found collapsed ceilings, tubs sinking into the floors and water pouring down walls, he said, conditions tenants have been raging about for ages. HPD inspectors wrote 173 code violations in the three hours Cestero spent in the buildings.
The Milbank portfolio has become something of a poster child for the dangers of over-leveraged rental buildings—properties that private equity-backed firms bought up during the real estate boom, often at prices unsupportable by existing rents—and quickly found themselves unable to maintain the buildings and meet mortgage payments.
Bought in 2007 for $35 million, Wells Fargo began foreclosure proceedings on the Milbank properties in March 2009.
HPD and the City Council are now struggling to unwind dozens of such deals across the city, a task hampered by the fact that neither have the legal authority to intervene in private real estate transactions.