Tenants & Neighbors' Biweekly E-mail Bulletin notes:
The Mitchell-Lama P.I.E. Campaign (Protections for tenants, Incentives for preservation, Enforcement from supervisory housing agencies) has created a watchlist of predatory developers who use private equity money to purchase and deregulate affordable housing, and has added Larry Gluck of Stellar Management to the top of that list.
Click here for the 2-page flyer showing who's who, and click on "read more" below for more information from Tenants & Neighbors' bulletin.
To date, Stellar Management has acquired and bought out 16 Mitchell-Lama buildings totaling over 4000 units, immediately increasing rents to market-rate or attempting to do so by citing a loophole in the rent laws called "unique or peculiar" circumstances. (See article titled "U&P Update.) Stellar has also acquired two large rent stabilized developments, Park West Village in the Upper West Side and Riverton in Harlem, and other affordable housing in Maryland, San Francisco, and Texas.
Gluck has been able to purchase and convert so many Mitchell-Lama and rent stabilized buildings because of his access to private equity money. Partnering with the Rockpoint Group and the Westbrook Group, Stellar Management has purchased buildings like Riverton using equity from the funds and financing from the German American Capital Company, an arm of Deutsche Bank. Like other predatory buyers, Gluck is betting that he can maximize the return on his investment if apartments can be rapidly deregulated. This creates the pressure to replace low and moderate income tenants with a higher income tenancy or to flip the building to another predatory buyer for a greater sales price. The end result either way is the loss of affordable housing.
Banks like German American Capital are willing to put their money in bets like these because they don't ultimately hold the loans to the buildings. Just like the single-family sub-prime crisis, the banks are securitizing these risky loans and selling them to larger banks or other investors. In the case of Riverton, German American worked with Citigroup to sell the loan to the public.
The P.I.E. Campaign in the coming months will be organizing a campaign to call for greater regulation and accountability. To get involved, contact Amy Chan at amy@tandn.org.
