Rent-stabilized Building Sells At 97% Below Pre-2019 Value

Rent-stabilized distress has already progressed from dismal to dire under the crush of the 2019 rent law.

But an East Harlem deal that closed earlier this month evokes a new descriptor: catastrophic.

The 29-unit building at 312 East 106th Street, an 83 percent rent-regulated property tucked between Central Park and the East River, sold for $285,110 — if you can even call that a sale.

The deal shakes out to a paltry $9,827 per unit.

Assets with a similar share of rent-regulated apartments sold for $110,694 per unit on average in 2024, according to a recent report by brokerage Ariel Property Advisors.

Zoom out and the sale price is a staggering 97 percent discount to the $8.8 million that Emerald Equity Group’s Isaac Kassirer paid for the building in December 2016, property records show, and an absolute steal for buyer Klosed Properties of Great Neck, New York.

Kassirer unwound himself from the deal before this month’s sale. The seller was his lender, Mack Real Estate Group’s credit arm, which signals that a default drove the sale and Mack Real Estate Credit Strategies was eager to get the debt off its books.

A spokesperson for Mack declined to comment; Klosed Principal Steven Kashanian did not respond to a request for comment.

312 East 106th is in many ways another Kassirer blunder. But it’s also a benchmark for how little the market believes rent-regulated deals are worth, given the restrictions imposed by Albany in 2019.

“It may actually be too late to save New York’s rent-stabilized housing from the destruction of vacancy control passed in 2019,” wrote Jay Martin of the New York Apartment Association in a tweet highlighting the sale.

Kassirer made a splash in the 2010s by gobbling up rent-regulated assets to push out tenants, deregulate units, jack up rents and pocket the profits. Rinse and repeat.

When the New York State Legislature illegalized deregulation in June 2019 and effectively blocked any other route to substantially raise rents, Kassirer’s playbook was rendered obsolete. He emerged as one of the earliest losers of the law and, in retrospect, a canary in the coal mine for the distress to come.

Kassirer had snapped up 312 East 106th as part of a mammoth deal known as the “Dawnay Day Portfolio.” Emerald Equity paid $357.5 million in late 2016 for the 47-building portfolio — a whopping $311,00 per unit.

The investor refinanced 39 of those buildings in late 2018 with an $189 million loan originated by Sabal Capital Partners through Freddie Mac’s Small Balance Loan program.

Richard Mack’s Mack Real Estate was a preferred lender in the deal, and would ultimately boot Kassirer and own the properties in early 2023. 18 months later, it was smacked by a flurry of foreclosure filings from Sabal and Freddie Mac — a sign that even Mack’s new management could not salvage the deals.

312 East 106th was excluded from that refi, property records show.

Rather, MREC in December 2018 took over the building’s two notes — one for $5 million, another for $274,000 — from the original lender Trimont Real Estate and lent an additional $666,6667 to Kassirer in the form of a gap mortgage, bringing the total debt to $6 million.

It’s unclear when MREC took control of the building, but city and court records show the property had been teetering on the brink of collapse — literally — for years.

The city in mid-2022 sued to foreclose on the owner of 312 East 106th, alleging it had not repaid the $77,398 the Department of Housing and Preservation had spent to relocate tenants after the building received a partial vacate order.

The city’s Department of Buildings described the property as being “in a state of disrepair with multiple exterior cracks” that rendered 10 apartments unsafe to occupy. That case is ongoing.

Meanwhile, HPD has filed numerous suits in recent years to force repairs in the building, which has been named in a total of 15 legal cases and boasts 114 open violations, most of them hazardous, according to city records.

In the slow-moving train wreck that is New York’s rent-regulated housing stock, 312 East 106th offers another piece of data on how bad things have gotten. The sale is price discovery for a market that is still searching for its bottom.

That is, if there’s a bottom to find.

“I saw a pristine building go for 70K per unit last week,” Martin responded to a commenter on the thread. “The bottom is dropping out.”