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Mayor Mamdani’s administration is backing a bid from a developer to preserve a portfolio of 887 rent-stabilized units in East Harlem, in a test of the mayor’s housing goals.
Pinnacle part two?
Mayor Zohran Mamdani’s administration is trying to influence the outcome of another real estate auction, this time for 887 units of rent-stabilized housing in East Harlem.
Some tenants living in the apartments, once owned by Emerald Equities’ Isaac Kassirer—a former member of the city’s worst landlord list—have been living in squalor as ownership of the buildings has remained in limbo for years.
It’s the second time Mamdani’s team has gotten involved with the sale of troubled rentals. In January, the administration intervened late in the bankruptcy process for a 5,000-unit rent stabilized portfolio of buildings owned by Pinnacle realty. The administration was ultimately unable to stop the sale of the portfolio to a new owner.
City Hall is breaking out the Pinnacle playbook again in East Harlem, part of an aggressive approach to cracking down on bad landlords and stewarding affordable housing. This time, four sources with knowledge of the discussions say that the city’s preferred bidder is a developer called Spatial Equity, which promised to preserve the properties.
“We are quite confident that this is going to work. We have the backing of the mayor, we have the backing of HPD [the Department of Housing Preservation and Development] and the El Barrio Community Land Trust,” said Victoria Washington, an Emerald Equities tenant on East 103rd Street, where she and her neighbors hope their homes will be repaired and turned over to a community land trust.
The mayor’s office declined to comment.
The foreclosure auction for the portfolio was delayed until at least September and has yet to be scheduled. Whether the city will be able to successfully steer the troubled properties to their preferred buyer remains to be seen.
Indeed, an initial offer from Spatial Equity of $68 million was rebuffed, with creditors arguing it was too low, according to sources briefed on the negotiations.
The first debtor on the loan, California-based Sabal Investment Holdings, did not respond to requests for comment. Nor did Spatial Equity’s CEO Teghvir Sethi.
The mayor’s ambitions to steward private housing into community ownership, outlined in his housing plan, have drawn criticism from real estate interests, who say that significant distress in the rent-stabilized housing stock is a result of New York’s rent regulation laws—and will be exacerbated by the mayor’s own rent freeze.
On East 103rd Street in East Harlem, tenants in six of the portfolio’s 39 buildings formed the East Harlem Tenant’s Union and have been working with the city and Spatial Equity to help them turn their homes over to El Barrio Community Land Trust.
In his housing plan, the Mamdani administration pledged to support community land trusts like El Barrio—nonprofit entities with a tenant board that governs the buildings.
Now the city has taken a side, with tenant chief Cea Weaver standing with tenants at their rallies.
“Buildings like these can come together to put their building on a path to stable and different ownership. And the city is proud to stand with you all today,” said Weaver at a mid-May press conference with tenants on East 103rd Street.
Why are the properties in foreclosure?
Tenants and landlords disagree.
Tenants say that Emerald Equities made a bad bet on the buildings after 2019 changes to the city’s rent laws made it harder to hike rents and remove units from rent stabilization.
Over the years, the properties struggled financially. Now the buildings are in tough shape after years of neglect, tenants say.
They’ve complained of black mold, roach infestations, and stolen security deposits. In February, a rear retaining wall collapsed, blocking fire exits that required hiring round-the-clock fire guards in the building.
Organizers at Community Voices Heard, a grassroots group working with the Emerald tenants, said that there were approximately 2,300 open housing code violations in the 39-building, 887-unit portfolio—nearly three per unit.
“Tenants in this building have been ignored, harassed, and neglected. While our landlord collected rent and let our homes fall apart,” said Washington.
Mayor Mamdani and administration officials visited the properties in March.
“We saw apartments with no floors, we saw buildings and apartments with no sinks. We saw a retaining wall completely collapsing behind the building, putting residents at risk of fire and limiting their egress. It’s not safe,” said Weaver, the executive director of the Mayor’s Office to Protect Tenants, in a May interview with City Limits.
Stewarding the buildings, the city argues, is part of its charge to protect tenants.
Amid the building’s foreclosure and administration by a court-appointed receiver, tenants won a half a million dollar settlement from Emerald Equity late last year, as City Limits first reported, money that went towards building repairs and returning security deposits.
To building owners and real estate groups, the distress in yet another large portfolio of rent-stabilized buildings is a sign of a wider crisis. A recent report from the Furman Center suggested that buildings with 90 percent rent-stabilized units were declining in value.
“You have the Pinnacle portfolio, you now have the Emerald Equity portfolio… everything is pointing to the 2019 rent laws that have destroyed the rent-stabilized housing stock,” said Kenny Burgos, CEO of the New York Apartment Association.
Burgos and other landlord groups say 2019 rent laws that limited opportunities to raise stabilized apartment rents are responsible for the poor conditions of buildings like those owned by Emerald Equity. He thinks Mayor Mamdani’s rent freeze, which is now being challenged in court, will only worsen the issue.
‘Buyer beware’?
Tenants say that the troubled portfolio should be bought by a responsible owner. And they think they can leverage the city’s support to get what they want.
Residents in the building had been organizing for three years. “Before the mayor showed up, I think some of the tenants of these buildings, especially those who’ve been here for generations, with decades under their belt, were hesitant and a little bit trepidatious about the idea that change is possible,” said Washington.
Officials and tenants described the foreclosure auction as a moment of opportunity.
“We hope to make known today that we hope that we will become part of the East Harlem Community Land Trust, a nonprofit who truly has our interests in mind and who have committed to fixing our buildings from the ground up,” said Alex Mason, an Emerald Equities tenant for 10 years, at a May press conference.
Tenant leaders said they were unfazed that the first bid was rejected.
“These buildings are in disrepair,” said Washington. “They are far overvaluing the buildings. They have overvalued the buildings at every turn when they have lent the amount of money that they’re hoping for at some point deregulation to occur, and that deregulation is never going to come,” she added, referring to the 2019 laws.
But auctions, as the city learned with Pinnacle, are unpredictable. Spatial Equity could still get outbid by a private buyer—though it’s not clear if any are interested.
“If the big boys come in and look to acquire the entire portfolio, then we’re priced out of the auction,” said Brian Peters, the community land trust’s director.
Peters hopes that a winning bid from Spatial Equity—which its owner describes as a “social-impact real estate developer,” and which Mamdani recently tapped to develop affordable housing on an NYPD parking lot in the East Village—will move six buildings to El Barrio CLT’s control.
When the Mamdani administration got involved in Pinnacle’s auction in January, there was already a buyer lined up, the private Summit Gold Inc., making City Hall’s intervention a bit of a longshot.
“There’s also no guarantee that a new owner would be any less shitty than our previous owner,” said Caroline Schettler, a tenant in the building.
Tenants say they have started organizing at other buildings in the Emerald Equities portfolio and are continuing a 311 campaign to document repair issues at their buildings.
“We have a message for anyone trying to buy our buildings,” said Washington “We are organized, we are watching, and we are not going anywhere.”
The city’s big swing
The forthcoming foreclosure sale could be a chance redemption after the administration failed to steer the Pinnacle portfolio to their desired owner.
In that case, administration officials nonetheless claimed a partial victory after Summit promised to invest millions in repairs in bankruptcy court. And while some back rent was forgiven last month, some tenants say the new owner still hasn’t fulfilled their promise.
Mayor Mamdani’s housing plan, released near the end of May, calls for increased use of city programs that steward distressed housing, like those in the Emerald Equities portfolio, to community ownership.
“HPD will work with vetted, responsible landlords who can immediately stabilize and improve portfolios under new ownership—including, where appropriate, with community land trusts,” the plan reads. “HPD can facilitate these sales with capital investments and discretionary tax abatements.”
HPD declined to comment.
Others are wary of the mayor’s strategy, which they say will drive more rent stabilized buildings towards financial distress.
Burgos and others have argued that any owner—whether a nonprofit or mission-oriented owner or a for-profit landlord—won’t be able to make repairs and keep the buildings stable without a huge cash infusion from the city.
“The rents do not cover the full needs of the building, and [the receiver] is only keeping it habitable up until a lender can gain title, and the lender will then offload this property for a loss, and then someone else will then bear the burden of trying to fix these properties under the exact same political constraints,” said Burgos. “We will run into these circles again until the administration and mayor recognize this is a math equation.”
He said that the city does have some tools at its disposal to change the math, by helping property owners with taxes and insurance burdens, perhaps.
“Despite its vast resources, [the city] does not have the scale to handle it at the level at which this crisis is at right now,” Burgos said.
In the meantime, tenants are left in a holding pattern in substandard conditions.
“It sticks you in a tough place between hope and reality,” said Schettler. “The community land trust feels in the galaxy of far away hopes and dreams, and a landowner that just takes care of the building also feels like you’re reaching for the moon.”
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