PUBLISHED BY MOSHOLU PRESERVATION CORPORATION

Vol. 18, No. 20 Oct. 20- Nov. 2, 2005



     
 

Company Gobbles Up Bronx Buildings
Troubling Track Record

By HEATHER HADDON

A major city real estate company with questionable management practices shelled out millions of dollars for more than 30 Bronx apartment buildings, including eight area ones, over the past year. Tenants could face substantial rent hikes if the company’s documented strategy is any guide.

Joel Wiener, an investor with deep pockets, purchased the Bronx buildings last summer as part of a $200.5 million deal that included properties in Harlem and Washington Heights, according to the New York Post and financial industry reports. The 51-building package amounts to 2,576 apartment units and 78 stores.

Local properties listed by the city Department of Finance include two on both DeKalb and Sedgwick avenues; one each on East Gun Hill Road, East 196th Street and West 190th Street; and the Botanical Square building.

Wiener purchased the buildings in partnership with the Praedium Group, an investment fund that capitalizes on undervalued real estate in the U.S. and Canada. The Pinnacle organization, a long chain of related limited liability companies which Wiener heads, manages the buildings.

Praedium and Pinnacle first came to the Bronx in 2002, buying seven former Mitchell Lama buildings scattered around Riverdale, Parkchester and Williamsbridge, according to news reports. The properties were well maintained and affordable, but that changed after the $42 million deal was sealed.

“It’s to the point where he’s making everyone in the buildings homeless,” said Carmella Price, the housing specialist for state Senator Ruben Diaz. A former resident of one of the properties, Price has gotten scores of complaints from tenants, especially seniors and those using housing benefits, who accuse Pinnacle of forcing them out with rent hikes related to major capital improvements (known as MCIs). Price said that Pinnacle has passed an undue share of the improvement costs on to tenants.

“He [Wiener] doesn’t follow the law of New York State whatsoever,” she said.

After the apartments are vacated, their rents have been doubled, according to Price.

A veteran Bronx real estate professional, who asked not to be named, also decried Pinnacle’s management practices. The company’s motive is to quickly increase the revenue from the buildings, not to serve tenants, he said.

Several Pinnacle administrators did not return calls for comment. The city Department of Housing Preservation and Development (HPD) was aware of the purchases, but a spokesperson said they are still gathering data about Pinnacle.

Praedium is part of a new crop of real estate investors that seek to quickly profit from their properties. The companies typically make numerous repairs up front and then raise the rents, as documented by a 1999 Crains article. Within two to five years, the buildings are sold.

“Our goal is to buy a property with a problem we can fix, reposition it, lease it up and then sell it,” said Russell Appel, president of Praedium Group, in Crains.

Real estate is always driven by financial gain, but this new breed of investors appears to have little, if any, concern for tenants. The companies typically carry sprawling portfolios of buildings with massive mortgages, with those turning a profit subsidizing those not yet up to speed.

“These buildings are now seen as commodities,” said John Reilly, executive director of the Fordham Bedford Housing Corporation. “[They are] not small businesses that need to be individually managed.”

HPD looks favorably on management companies that make improvements and eventually sell their buildings, but does not support the quick flipping of properties. “This is usually a symptom of owners who have a speculative interest only,” said Carol Abrams, an HPD spokesperson.

Pinnacle has been especially forceful in overhauling its purchases. The superintendents working in the former Mitchell Lama buildings were fired promptly after the takeover, and employees received curt letters instructing them to vacate their homes immediately, according to a Daily News story. The move was so egregious that, nine months later, the city passed a law preventing new owners from firing building workers within 90 days.

Things are rapidly changing in the local buildings. At the outset, it’s for the better. Many improvements have been made to the properties, which range from ones that were neglected to those in very good shape.

Kemal Jadadic, Botanical Square’s custodian, counts off a long list of work done to the Bedford Park building this year, including new doors, hallway lights and security cameras.

“We’ve done a lot of big stuff here,” said Jadadic, who planted rows of impatiens and shrubs in the building’s courtyard. Repairs were also made to the sidewalks, and Jadadic said the elevators will be replaced.

Residents of 6 W. 190th, which had over 360 code violations listed by the city, are pleased to see the improvements. “It’s much more clean, and overall, is nicer than before,” said Manny Ruiz, a resident, who pointed to new lighting and a beefed up exterior lock.

Security cameras have also been installed outside 60 E. 196th St. in North Fordham. Over at 215 E. Gun Hill Rd., a resident reported that the lobby had recently been renovated. The floors and walls in the Norwood building were shiny and spotless. Last week, a repairman was busily fixing the front entrance.

Stephanie Pierce, a Botanical Square resident, is happy to see fewer rats and more flowers in her building, but she worries about the long-term prospects. “There are rumors they are going to make it into a co-op,” Pierce said.

Tenants can legally opt out of a co-op, but rents can be raised when MCIs are made. It’s uncertain what will happen to the local buildings, but Price expects the worst. “What he’s doing there is outrageous,” said Price, who has repeatedly tried to contact Wiener. “This man needs to be stopped.”

Jordan Besek and James Fergusson contributed to this article.


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