Troubled Housing Complex to Undergo Immediate Rehabilitation Work
First Residential Units to Be Revamped through the City’s New Proactive Preservation Initiative; Portfolio Originally Identified by the Predatory Equity Task Force
New York, NY – April 26, 2011 – (RealEstateRama) — Mayor Michael R. Bloomberg, City Council Speaker Christine C. Quinn and Department of Housing Preservation and Development (HPD) Commissioner Mathew M. Wambua today announced an agreement that will improve what had become deplorable living conditions for the more than 1,000 residents of the former Milbank housing buildings in the Bronx. The Bloomberg Administration and City Council, led by Speaker Quinn, worked with the property’s tenants and mortgage holder to ensure a responsible landlord would take over the buildings, rehabilitate them and put them on a path toward long-term stability. Finklestein Timberger LLC and its Principal Steven Finkelstein have agreed to pay $27.75 million for the ten buildings and have signed agreements with the City to rehabilitate them and keep them affordable to the current tenants who have endured deplorable conditions caused by mismanagement of past owners. The detailed scopes of repair for each building are being undertaken now, but the rehabilitation is expected to involve work to the windows, roofs, elevators, boilers, plaster and pipes, all of which have posed problems for residents in one way or another. The 548 unit complex is the first to be addressed by the new Proactive Preservation Initiative Mayor Bloomberg and Speaker Quinn announced in January 2011. The Mayor and Speaker were joined at the announcement, which took place at one of the buildings on Heath Avenue, by Council Member Fernando Cabrera, State Senator Gustavo Rivera, Borough President Ruben Diaz Jr., New York City Housing Development Corporation President Marc Jahr and Tenants’ Association President Maggie Maldonado.
“In January, Speaker Quinn and I visited these buildings and committed to taking steps to ensure better conditions at the complex and a brighter future for the New Yorkers who call it home. Today, we have an agreement in place that will make that happen,” said Mayor Bloomberg. “The hard work of rehabilitating the buildings has begun, and the tenants who have suffered through deplorable conditions for too long can look forward to seeing real improvements. The deal is a victory for the more than 1,000 residents who live here, and it is an example of what a big difference our new Proactive Preservation Initiative can make.”
“These tenants have fought Milbank and have fought LNR, and now it’s nice to see that their tenacity has paid off,” said Speaker Quinn. “I’ve stood with them for more than a year during their battle, and the fact that this landlord is agreeing to work with the City to get this building back in livable conditions is a good first step. Moving forward, the City, working with the landlord, will ensure that these repairs will be done properly and in a timely manner. Soon, these tenants will finally have a place they can proudly call home. I want to thank the Bloomberg Administration and my Council colleagues for working on this portfolio to create real change for these tenants.”
“The sale of these ten buildings is the culmination of months of concerted effort on the part many who are concerned about the health and welfare of the tenants and are committed to ensuring that their voices were heard,” said HPD Commissioner Wambua. “In achieving this end, we used every avenue available to gain leverage and force this sale to a more conscientious owner. Thus far, Mr. Finkelstein has kept his word to us and to the tenants. For HPD’s part, we pledge to ensure that he continues to be responsive as well as responsible, and that he adheres to all aspects of the covenants he has made. The real hard work has only just begun, but we are hopeful that the worst is now behind us and that these troubled buildings will once again be maintained as warm and welcoming homes.”
The Milbank buildings were identified by the Predatory Equity Task Force launched by Speaker Quinn in 2009, which monitors problems resulting from the continued fallout of the national housing crisis. Through the City’s new Proactive Preservation Initiative, the City conducted cellar to roof inspections, which disclosed widespread deterioration that had not been reported by tenants. Proactive Preservation is a new, aggressive approach to identify and address deteriorating physical conditions in multifamily buildings before they reach a state that endangers the health and safety of residents and threatens the quality of the surrounding neighborhood.
The City began working with Finklestein Timberger LLC to apprise it of the condition of the buildings and its maintenance needs, which were borne out by the litany of housing code violations issued by the agency as a result of its proactive intervention. During that period and as a result of the intensive inspection cycle, six of the ten buildings entered the City’s Alternative Enforcement Program. The program identifies 200 of the most distressed multifamily residential buildings per year, and provides HPD with additional enforcement powers to ensure that the violations and the conditions that caused the violations are corrected. The Alternative Enforcement Program was born out of City Council legislation signed by Mayor Bloomberg in March 2011 that took a targeted approach at improving the worst living conditions by increasing the pressure on the owners of some of the City’s most distressed residential buildings to bring the buildings up to code.
The agreement with the City stipulates that HPD has the authority to approve the scope of work for all ten buildings in the portfolio. It is expected that Finklestein Timberger will begin to submit scopes of work within the next 30 days. The six buildings that are in the Alternative Enforcement Program must adhere to the mandates of the program and must meet the requirements by July 14, 2011, and the developer has agreed to make necessary repairs on the other four properties.
The developer also took the additional step of engaging the tenants and the advocacy groups who have been representing them. Through additional negotiations with Legal Services on behalf of the tenants, the developer signed an agreement to waive rent arrears for a majority of the tenants. Additionally, tenants who are current on their rent will not pay Major Capital Improvement (MCI) increases for two years.
“This is the start of a new beginning for these Milbank tenants,” said Council Member Erik Martin Dilan, Chair of the Housing and Buildings Committee. “This landlord has agreed to work with the City to correct the buildings’ violations and as always, the City Council and the Speaker will ensure that the best interests of the tenants are served. I want to thank the Mayor and HPD for working with us on this portfolio.”
“Last fall, I joined Speaker Quinn to deliver a clear message that property owners would be held accountable for providing tenants with safe and habitable conditions here in the Bronx, and across our City,” said Council Member Annabel Palma. “Today, I am delighted that after months of tough negotiations, the City has agreed to terms with Mr. Finklestein and I am hopeful that this agreement will finally make these promises a reality for the tenants of these buildings.”
“The sale of the Milbank Properties is a hopeful step in the right direction for the tenants in these buildings,” said Council Member Fernando Cabrera. “With new ownership, it is my hope that the many housing problems that plagued the homes of these families will be brought to quick and sound resolution. This sends a clear message to the entire city that it is unacceptable to force families to live in deplorable conditions and we will stand by our residents to protect their rights as tenants.”
“I applaud the collaborative partnership between the Mayor’s office, my Speaker, Christine C. Quinn, and the private sector to restore the Milbank buildings,” said Council Member Inez Dickens. “It is my hope that the tenants who have fought so hard to maintain their homes will now be able to live in dignity with an affordable rent scale. As a co-chair of the New York City Council Predatory Equity Task Force, I hope that we can continue these constructive collaborations that will benefit tenants, landlords and the financial stability of our great city.”
“The new agreement to put the Milbank housing complex on a new path towards safety and stability is exactly what the long-suffering tenants deserve,” said Congressman José E. Serrano. “I applaud the City, the community and tenants for all the work that they have put in to ensure a positive outcome like this. No one should have to live in a dilapidated and unsafe apartment, and with today’s agreement we have ensured that Milbank tenants are no longer going to be in such a situation.”
“I congratulate Mayor Bloomberg and Speaker Quinn for this program to get these buildings back to livable condition for the approximately 1,000 tenants living here,” said Congress Member Eliot Engel. “The speculators who bought the buildings at the top of the real estate bubble ran when the economy collapsed leaving the tenants and the city to pick up the pieces. The road back begins today with the repair of the thousands of violations in the buildings. These tenants can now look to a better future.”
“For far too long, the tenants of the Milbank portfolio were treated like second-class citizens in their own homes, for no other reason than that their landlord had miscalculated just how much these buildings were worth and was too deep in a financial hole to care about making much-needed repairs. What happened to these tenants, I believe, rose to the level of criminality,” said Borough President Diaz Jr. “Steve Finkelstein represents not only a chance for serious change at the Milbank portfolio, but a fresh start for its tenants as well. I look forward to working with Mr. Finkelstein to help him bring these buildings up to code and to make sure these tenants have the homes they deserve. I thank Mayor Michael Bloomberg, City Council Speaker Christine Quinn and HPD Commissioner Wambua for their hard work on this issue.”
“Unfortunately, stories of intolerable living conditions and unscrupulous landlords are all too common in the Bronx,” said State Senator Rivera. “I applaud Mayor Bloombeg and Speaker Quinn for working with tenants, housing advocates such as the Northwest Bronx Community and Clergy Coalition as well as potential owners for working to bring livable conditions and a safe home environment to Millbank housing tenants. Initiatives like this one are successful because they bring the community together to identify an unacceptable situation and then work together to bring positive, long-term change.”
“For us this is a hope for a brighter future and a new beginning” said Tenants’ Association President Maggie Maldonado. “We are excited to finally have a landlord to work with to ensure we get the repairs our tenants desperately need. This shows there is nothing we can’t do when we organize.”
“With the Milbank portfolio finally in new hands the light at the end of the tunnel just got a lot brighter,” said NWBCCC Board Member Desiree Pilgrim-Hunter. “First and foremost this is a victory for the tenants, and it is also a clear example of our commitment at Northwest Bronx Community & Clergy Coalition to organizing the community to help protect our neighborhoods and housing resources. We will continue to work with our partners in the Mayor’s office, at HPD, and with Speaker Quinn to put bad landlords and irresponsible banks on notice that we will continue our fight to live with dignity.”
Preserving and protecting the City’s affordable housing stock is a key priority for the Bloomberg Administration. Under the Mayor’s New Housing Marketplace Plan the city has created and preserved 112,178 units of affordable housing, with 34,566 units throughout the Bronx. The units in the Milbank portfolio however, will not count towards the housing plan’s ultimate goal of 165,000 affordable units because no city funding or subsidy was needed in this preservation deal. Utilizing the Proactive Preservation model the City was able to craft a comprehensive approach to identify, intervene and successfully help move these properties into responsible ownership.
Through Proactive Preservation the city uses its own data and partners with local elected officials and advocate groups to identify at risk buildings. HPD worked with the Northwest Bronx Community and Clergy Coalition to indentify the 10 Milbank properties and engage the tenants throughout the process. HPD’s partnership with Northwest Bronx Community and Clergy Coalition was critical in gaining access to the 548 units in all of the properties in order to do roof-to-cellar inspections which started in November of last year and ultimately providing a more accurate account of the needs of this troubled portfolio. The increase in violations pushed six of the ten buildings into the Alternative Enforcement Program, allowing the City to order large-scale systems replacements to correct the underlying conditions causing many of the violations.
California based Milbank Real Estate purchased the rent stabilized properties in 2007, and ultimately defaulted on the $35 million mortgage. Already in a state of distress, the condition of the buildings rapidly declined under Milbank’s watch, leaving the tenants to suffer in deplorable and hazardous living conditions. In March of 2009, the mortgage holder, a $3.78 billion commercial mortgage-backed security trust controlled by Wells Fargo and serviced by LNR Partners, Inc., initiated foreclosure proceedings. The Bloomberg Administration, Speaker Quinn and her colleagues and housing advocates all voiced their strong concerns about LNR’s plans to sell the property to an undisclosed bidder. In addition to pushing LNR to make the badly needed repairs, they called on the servicer to find a responsible owner with a proven track record of managing distressed properties. The attempt to sell the portfolio to the unnamed entity ultimately failed, and soon after Finklestein Timberger LLC entered into negotiations.
Through the Predatory Equity Task Force, Speaker Quinn, along with Council Members Erik Martin Dilan, Inez Dickens and Annabel Palma and HPD, are focused on finding alternative solutions to the issues posed by overleveraged buildings across the five boroughs. It is currently exploring opportunities to close legal and policy gaps through federal, state and local legislation, encourage banks and other lenders to work with developers and property owners to realistically appraise buildings, and find appropriate plans to deal with specific problems at individual buildings.
MEDIA CONTACT:
Stu Loeser/Andrew Brent (Mayor) (212) 788-2958
Jamie McShane/Kim Thai (Council) (212) 788-7116
Eric Bederman (HPD) (212) 863-5176
