Under the gaze of Moses, King Solomon, Hammurabi, and Abraham Lincoln (in a mural on the ceiling of the New York County Courthouse rotunda), the latest sad drama in the city’s real estate bust played out this morning with minimal fanfare. Speaking slowly and deliberately, the auctioneer finished his work in a matter of minutes.
Today’s victim: The Riverton, a complex of 12 buildings and 1,230 units on 135th Street in Harlem. Built as a black answer to Stuyvesant Town and Peter Cooper Village — both of which excluded African Americans in their early years — the Riverton was a point of pride for generations of Harlem residents.
About 75 people — tenants, activists, potential buyers, and attorneys — crowded in a tight circle on the marble floor of the rotunda, and saw the Riverton sold for $125 million to a trustee for CW Capital Asset Management, a firm that works closely with Wells Fargo, the bank that holds the mortgage on the Riverton.
An attorney for one other firm, Morgan Capital LLC, started bidding at $50 million then stopped at $120 million.
Alex Guggenheim, a senior vice president for CW, wouldn’t reveal the group’s plans for the complex. “We’ll look at it and determine what to do in the future,” he said.
David Dinkins, the city’s first African American mayor grew up in The Riverton. So did Clifford Alexander Jr., Secretary of the Army under President Carter. A haven of stable, rent-regulated housing for middle-class Harlemites, The Riverton holds in the imagination of many a place somewhere between Abyssinian Baptist Church and Sylvia’s Restaurant.
Cynthia Allen, president of the Riverton Tenants Association said her group will fight to make sure the newest owner is responsive to tenants. “Now we sit at the table and have a discussion,” she said after the auction.
Allen wants CW Capital to work with tenants and local pols to ensure a stable future for the complex — one that’s not predicated on forcing out tenants or flipping to the next sucker. That would require the bank to take a major loss and sell at a steeply reduced price to a buyer more interested in running an apartment complex than in making quick money for investors.
“It’s not our fault that greedy investors paid too much for our homes,” Allen said at a press conference on the issue Sunday. “It’s our fear that there are predatory purchasers circling like vultures, waiting to pick the Riverton clean. We the tenants have the greatest stake in making sure that these homes remain safe, affordable, and stable.”
This morning’s drama was the last act of a familiar real estate downfall saga.
In 2007, investor Larry Gluck bought the buildings for $135 million, way more than their rents could support. The following year, he refinanced with Deutsche Bank for $250 million.
Tenants and advocates warned that the price was dangerously high, that Gluck’s Stellar Management would not be able to pay the mortgage without forcing out long-time tenants in favor of ones who would pay higher rent. And even then, the mortgage would be a burden. “We have a memo from two years ago saying this is insanity,” said Dina Levy, director of organizing at the Urban Homesteading Assistance Board, a non-profit that tracks and advocates for affordable housing. “If the debt had stayed at $130 million, we would not be standing here,” she said.
By early last year, Gluck was unable to make mortgage payments.
Wells Fargo, the bank that by then held the mortgage, moved to foreclose in February.
This morning’s auction was the first of what Harold Shultz, senior fellow at the Citizens Housing and Planning Council, predicts will be a series involving large apartment complexes bought for astronomical prices in the height of the boom. “This is one of the first to go to auction. But will there be more? Surely. Absolutely,” he said.
A November report by the Association of Neighborhood Housing Developers warns that 100,000 apartment units across the city are in danger of a similar fate because their owners paid wildly inflated purchase prices for them. The danger, according to ANHD, is that cash-strapped landlords will stop making repairs, allowing elevators to break and roofs to sag, as happened at the Ocelot buildings in the Bronx. And when a building goes into foreclosure, repairs and maintenance suffer even more; banks generally don’t make good landlords.
The fact that Wells Fargo didn’t accept Morgan Capital’s $120 million bid is a worrying sign, Shultz said. “That means they think they can get more than that for it.” He estimates $77 million as a responsible price for the complex—six times what’s collected in rent.
“That’s the scary thing,” said Levy. “We could be back here in a couple of years, doing this all over again.”