I asked Greg Corbin, whose firm markets bankruptcy sales, if he’s seeing a lot of business from rent-stabilized properties. “We’re getting hired on these every week or two and it’s going to get far busier in 2025,” he said. “We’re on the market with a dozen of them and have half a dozen in contract.”
It stands to reason that bankruptcies are becoming more frequent for rent-stabilized buildings, because interest rates for new loans are much higher than for expiring ones, and operating expenses have outstripped rent revenue for this asset class since the 2019 rent law passed.
But it would be nice to have data to see what’s actually happening with rent-stabilized bankruptcies. The city’s Rent Guidelines Board and state’s Division of Homes and Community Renewal don’t appear to track them. Doing so would require checking bankruptcy filings against the RGB’s list of properties.
Unfortunately for landlords, the mission of these agencies is not to prevent rent-stabilized bankruptcies. Although the Rent Guidelines Board monitors the financing environment, it does not count debt service when it calculates operating expenses.
Some tenant advocates consider that appropriate. In their view, if mortgage payments put a building into the red, it means that the owner borrowed too much against it, and that the market will reset the value when it is sold in foreclosure.
Some commentators blithely state that owners would not have to worry about interest rates if they just paid for buildings in cash. Which is kind of like saying tenants wouldn’t have to worry about making the rent if they just paid for the entire lease up front.
This is not to say that bankruptcies must be prevented. As former astronaut Frank Borman famously said, capitalism without bankruptcy is like Christianity without hell. If someone overpays for a building, he or his lender will eventually have to swallow a loss so the property’s finances can be stabilized.
Owners of rent-stabilized buildings don’t disagree. Their argument is that the drastic changes to the law in 2019 were wholly unpredictable if not unconstitutional, and have been compounded by a run-up in operating costs that far exceeded the rent increases they have been allowed.
While that debate rages on, Greg Corbin’s phone keeps ringing.
What we’re thinking about: If Macy’s market capitalization is $4.6 billion and its real estate is worth $5 billion to $14 billion (not including this recent sale), does that mean its stock is undervalued? Send your thoughts to eengquist@therealdeal.com.
A thing we’ve learned: In the past month, Congress has considered 36 bills restricting property ownership by foreign entities, and 34 states have considered another 128 such bills, according to Committee of 100, New York-based Chinese American nonprofit.
Elsewhere…
Behind many of the property records that pop up on The Real Deal’s tracker are interesting stories — too many for us to pursue. Appearing Thursday morning on ACRIS was a $9.75 million mortgage on 267 Sixth Avenue in Park Slope. Various websites have a fascinating backstory on the row house, which at 7,200 square feet is perhaps the largest two-family in the neighborhood.
It looks unassuming from the front but is twice the size of its neighbors because it just continues across what would normally be the back yard.
In about 1912 the brownstone, built in the 1870s at the corner of Garfield Place, became the home of the Swedish American Athletic Club. It featured a 90-foot-long ballroom and a bowling alley. It remained a “neighborhood locus of athletics, socializing and entertainment” until about 1970, when the club folded, StreetEasy reported.
Charles Bell bought it in 1973 and sold it to a neighbor in 1979. Either Bell or the new owner converted it into a triplex with a street-level, three-bedroom rental below. Its “spectacular” interiors and roof garden were featured in the New York Times and “Eyewitness News” in 1980. The owner listed it for $6 million in 2018 but did not sell. He has now owned it for 45 years.
StreetEasy credits the renovation to the prolific architect Karl Fischer, who died in 2019.
Red Hook had no bank branch for 10 years until Spring Bank opened one Nov. 26 at 356 Van Brunt Street. The same bank is the first one in 25 years to be headquartered in the South Bronx. It’s a certified B-corp — the first such bank in the state.
A small portion of the land in cities powers their economies. The economic engines are called walkable urban places, or WalkUPs. They make up an average 3 percent of the land mass of 15 cities in a Cushman & Wakefield study, but account for 26 percent of real estate valuation, 37 percent of property tax revenues and 57 percent of the cities’ GDP.
Closing time
Residential: The priciest residential sale Thursday was $10.25 million for a 3,194-square-foot condominium unit at 39 West 23rd Street in Flatiron. Corcoran Sunshine had the listing.
Commercial: The largest commercial sale of the day was $155 million for Yellowstone’s auction purchase of a 697-room former hotel at 541 Lexington Avenue in Turtle Bay. The Real Deal reported on the transaction in October.
New to the Market: The highest price for a residential property hitting the market was $49 million for a 7,310-square-foot townhouse at 122 Waverly Place in Greenwich Village. Nicole Gary of Keller Williams NYC has the listing.
Breaking Ground: The largest new building application filed was for a 212,152-square-foot, 26-story, mixed-use project at 32 Thompson Street in SoHo. Christopher Fogarty of Fogarty Finger filed the permits on behalf of Madigan Development.
— Matthew Elo