18, No. 20
Oct. 20- Nov. 2, 2005
Company Gobbles Up Bronx Buildings
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
“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
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
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
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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