NEW YORK CITY-City Council Speaker Christine Quinn said Wednesday that a task force had been formed to identify multifamily properties where imminent default puts tenants in jeopardy, and to pressure the owners to either maintain their buildings or sell them to responsible landlords. The announcement came on the heels of the successful bid by Omni New York LLC, led by former New York Met Mo Vaughn, for the debt on a 14-building South Bronx portfolio that had fallen into disrepair after its former ownership defaulted.
Known as the Predatory Equity Task Force, the group is intended “to quickly respond to foreclosures around the city, and find creative new policies to prevent problems before they escalate,” Quinn says in a release. It will be co-chaired by Erik Martin Dilan, chair of the council’s housing and buildings committee; councilmembers Inez Dickens and Annabel Palma; and Rafael Cestero, commissioner of the city’s Department of Housing Preservation and Development.
The task force has its basis in the process the Bloomberg administration used to help ensure the sale of debt on the portfolio of South Bronx properties formerly owned by the Ocelot Capital Group. Between 2006 and 2007, Ocelot purchased 781 units in 25 buildings and subsequently defaulted on its mortgage.
Beginning last summer, HPD and Fannie Mae worked with mortgage holder Deutsche Bank to find a responsible buyer for the Ocelot properties, which had gone into foreclosure. The three entities developed a disposition strategy, assembling a bidder pool of candidates with a proven track record of developing, managing and operating affordable housing, as well as dealing with extreme distress situations. The sale to the Vaughan-led Omni New York covers the debt on 14 of the Ocelot properties, totaling 416 apartments.
Of the 14 buildings, 11 were in HPD’s Alternative Enforcement Program, a mechanism intended to alleviate the serious physical deterioration of the 200 most distressed multifamily dwellings in New York City. AEP charges and other emergency repair work done by HPD to fix immediately hazardous conditions at the Ocelot properties now totals more than $1.3 million, according to a release.
Omni bought mortgage debt totaling $23.8 million through the bidding process at a reduced price, which was not disclosed. The developer has committed to invest up to $1 million in emergency repairs and plans to take title to each of the properties, the release states.