Landlords Abandon Overleveraged NYC Buildings; Predatory Investors, Unrealistic Profit Projections, Shoddy Lending Practices Leave Tenants In Limbo

In New York City, The New York Times reports:

• As property owners run into trouble paying their mortgages, neighborhoods around New York City have been witnessing a disturbing consequence: Small and large apartment buildings are being abandoned in a state of disrepair, leaving tenants in limbo without basic services or even landlords.

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• Many of these landlords, particularly those who bought in recent years when the real estate market was at its peak, are struggling to make mortgage payments, let alone pump thousands of dollars into buildings for repairs. Elected officials and tenant advocates place much of the blame for the distress of multifamily apartment buildings not on landlords, but on the lenders who financed many of those now in default, saying the loans for the properties were based on shoddy lending practices and unrealistic projections of rising rents.(2)

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• Many of these overleveraged buildings [...] are made up of low-income tenants in rent-regulated or subsidized apartments. International developers and private equity firms have borrowed hundreds of millions of dollars to buy buildings with rent-regulated units in the belief that they could profit by replacing existing residents with higher-paying ones, a trend tenant advocates call predatory equity.

For more, see Struggling Landlords Leaving Repairs Undone.

(1) The concern is that the poor conditions created by overleveraged buildings not only threaten tenants’ health and safety, but risk destabilizing entire blocks.

(2) A recent New York Post article (see REALTY BUBBLE) reports that 120 properties in Manhattan worth nearly $8 billion are considered "troubled," according to data from Real Capital Analytics. They include 84 apartment buildings, 24 office buildings, eight development sites, two hotels, two retail properties and one industrial building. The outer boroughs and Long Island combined have 78 troubled assets worth $1.7 billion, of which the four New York City boroughs account for $376.8 million. RentSigmaSkimming schumer bronx