Developer buys 17 buildings, sparks eviction fears
By Gerard Flynn
August 30, 2006
Extell Development Corporation's acquisition of rent-stabilized properties in the East Village is giving occupants the jitters and stirring some to organize in anticipation of potential problems with the real estate investor, a number of tenant-advocacy groups said last week.
Speaking from the offices of the Good Old Lower East Side, or GOLES, Wasim Lone, a housing-rights advisor, said he has been fielding questions from worried residents of the properties since news broke of the purchase earlier this year.
"Once tenants heard who the owner is, they started to get anxious," he said. "We can't really fathom yet what their real plans are, but tenants are concerned about demolition being used as a way to evict them, which is happening right now in another building owned by Extell at E. 17th St.," he said.
The East Village parcels were purchased from Merlon Management in January. Seventeen buildings - all five- and six-story walkups - they formed part of a $72 million portfolio deal, according to real estate broker Robert Perl, who played an advisory role in the transaction. Perl said the bulk of the properties are actually in Harlem.
Perl said that although some individual buildings are scattered throughout the East Village, the bulk are clustered on Second Ave. through Avenue B, between 11th and 13th Sts.
Since 2005, Extell has been buying properties all over the city, including major investments in the luxury condo market. Last year, Extell teamed with The Carlyle Group in a blockbuster purchase of Donald Trump's Riverside South megadevelopment project on the Upper West Side. The Carlyle-Extell connection has some East Villagers worried. A powerful multinational investment firm linked to right-wing governments, The Carlyle Group figured prominently in Michael Moore's film "Fahrenheit 911" for its close ties to the Bush family and the Saudi royal family.
"It's crazy that The Carlyle Group may be purchasing a piece of the East Village," said Steven Herrick, executive director of the Cooper Square Committee.
Fearing plans for condo conversions, 10 tenants from the East Village purchase have sought assistance from C.S.C., Herrick said.
Herrick said that although C.S.C. is still probing for signs of Extell's intentions, they have helped tenants form a committee - just in case. They expect to engage executives from the company at an upcoming Community Board 3 meeting in September to learn more of the developer's plans.
"They may file a demolition plan for some of these buildings, that's one of the things we are speculating on, but we really don't know," he said.
Under a provision in the Rent Stablization Law, building owners can evict residents in a rent-stabilized building if they can prove to the New York State Division of Housing and Community Renewal that the building needs to be demolished.
"A rent-stabilized tenant has an automatic right to renew the lease and you are protected, but it doesn't preclude the landlord from pursuing his legal avenues to deal with that," Lone said.
According to Assemblymember Deborah Glick, many landlords have discovered this avenue and it is bringing them all the way to the open doors of D.H.C.R. She and other critics have a name for it: "phony demolition."
In a letter two years ago to D.H.C.R. Commissioner Judith Calogero, Glick warned of the dangers to rent-regulation legislation from a "disturbing trend whereby owners manipulate the letter and spirit of the law to push out rent-stabilized tenants, solely to increase their profits."
Glick urged Calogero to take action against this trend and to ensure that D.H.C.R. "not allow owners to take advantage of the Rent-Stabilization Law and define `demolition' to meet their own interests."
Speaking last week, Glick said that although a rent-stabilized tenant can challenge the eviction order in court, many, especially the elderly, can't afford to retain a lawyer and instead comply with the eviction order.
With the apartment vacant, the owner decides against demolition; instead remodeling it into a luxury unit, which may involve a partial demolition of interior walls or floors.
Or the owner may decide to do nothing. With the rent-stabilized tenant evicted, the unit may be put back into circulation, only this time at market value, which in Manhattan may be four times the previous rent.
The assemblymember said the only way to tighten this loophole is to clean up the agency and introduce legislation that ensures that demolition means exactly that.
"Demolition should be down to the ground, not a partial renovation just to take the apartment out of rent control," she said.
With Councilmember Rosie Mendez, Glick is spearheading a drive to end the issuing of permits for "phony demolitions," and is very critical of the way the governor has handled the agency.
"Frankly, under Governor Pataki, D.H.C.R. has been overtly hostile to tenants' interests," she said.
"This phony demolition is a serious threat to rent-regulated tenants, and people should be concerned not just about the next few months while there is still a Pataki-appointed head of D.H.C.R., but also should be concerned enough to ask questions of gubernatorial candidates after he leaves office," Glick added.
Bob Liff, a spokesman for Extell, denied rumors that the company had any intentions of using the provision to evict tenants in the East Village properties.
"My understanding is that they are going to improve and manage the properties they purchased," he said.
Lone said that since 1997, over 100,000 units in the city have been taken out of the rent-regulation program.
"Right now, all over the city we have heard of 50 cases where it's being used," he said of "phony demolitions."
In addition to investments in New York City real estate, Extell has also been busy making significant contributions to political representatives at the city and state level.
State Attorney General Eliot Spitzer; Melinda Katz, chairperson of the City Council's Land Use Committee; and Council Speaker Christine Quinn have all received generous donations from Extell or its employees, according to Liam Arbetman, a researcher for Common Cause, a nonpartisan watchdog that monitors financial contributions in city, state and federal politics.
He said that since 2004, Spitzer has received over $100,000, Katz, $14,500 and Quinn, $7,500 from Extell.
Despite Liff's denials, tenant anxieties have been aggravated, Lone said, by an ongoing bid by Extell to evict the several occupants from a seven-story loft building on E. 17th St., which it purchased from Ovid Real Estate last year.
One of the tenants, Peter Persoff, who has lived there for over 28 years with his wife, said that having failed by other means to evict him, his wife and a female tenant above them, Extell is now resorting to demolition and has notified him of a recent application filed with the D.H.C.R.
Persoff said that problems with Extell began not long after the building was transferred over.
"Almost immediately, several phone calls from them came, each time saying we would like to buy your lease out," he said. "The first time they apologized and said they won't call again. Then they sent a letter offering $75,000 and then they called again. They were persistent."
A twist in developments occurred on May 30 of this year when he received an envelope with two letters in the mail.
Dated May 26, the first letter informed him that Extell Development Corporation would not be renewing his lease; the second one informed him why: Extell had applied for a demolition permit with D.H.C.R.
At 65 years old, the New York native said that the struggle, which comes on the heels of similar problems with the previous owner, has made life for him and his wife very difficult.
"It's very stressful, as you can imagine," he said. "Over the years, this was a crummy loft when we got it and I have made improvements and have put down a hardwood floor which came from my wife's dance rehearsal studio.
"Imagine if you have done a Sisyphus, imagine, to fix up this place, and now you are being told you are evicted," he added.
Having lost several commercial properties to developers in their lifetime, Persoff and his wife insist that this fight will be different.
"Wherever we are, they are getting us," he said. "I lost my studio to real estate developers and my wife did, as well.. And now our home is being threatened by these people in their attempts to maximize their profits. This is our last stand."