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Bronx complexes going Co-op and the tenants are behind it

Bronx complexes going Co-op and the tenants are behind it

New York Times 2/23/2006

The tenants of two large working-class apartment complexes in the Bronx announced yesterday that they had arranged for a group of real estate investors to buy the buildings, turn the units into co-ops and sell them to current residents at prices they can afford — a development with few precedents in the overheated New York housing market.

The two complexes, built under the state’s Mitchell-Lama program as subsidized housing for moderate-income New Yorkers, had been so poorly managed and had fallen into such disrepair that the state took control of the buildings in the late 1980’s, and the tenants began a 15-year campaign to stop vandalism of elevators and playgrounds, clean the place up and eventually own it.

That campaign culminated in yesterday’s announcement by the tenants associations of the Lafayette-Morrison and Lafayette-Boynton complexes, along with Apollo Real Estate Advisors and a nonprofit housing development group, that the 1,865 apartments would soon become moderately priced co-ops and offered for sale to tenants at a discount.

“The people who live here, they’re low-to-moderate-income people; they can’t afford a rent increase every year,” said Doris White, 60, the president of the Lafayette-Morrison tenants’ association. “Our vision and our dream was to be able to own the apartments ourselves, and to run them ourselves and control them ourselves.”

The announcement comes at a time when many Mitchell-Lama buildings are becoming eligible to leave the program and enter the open market — an enticing option for owners in neighborhoods where real estate values have shot up. State and city officials have scrambled to find ways to protect the tenants, sometimes inducing owners to remain in the program or finding other ways to fend off steep increases in rent.

“Where it’s possible, we think this is a great model,” said Shaun Donovan, commissioner of the city’s Department of Housing Preservation and Development. “What it does is give those renters who have been there for a long period a stake in that community that’s very different; they now have a positive stake in the increase in value, rather than being hurt by it.”

Only one other Mitchell-Lama building in the city, West Village Houses in Manhattan, has been converted to a co-op under a tenant-sponsored plan. The Lafayette conversion is the first that is entirely privately financed.

The complex, to be renamed Lafayette Estates, includes eight 19-story buildings on 31 acres beside Soundview Park, near the Bruckner Expressway and the Bronx River Parkway. Some of the units have views of Long Island Sound. Rents for a two-bedroom apartment range from $750 to $900. The tenants include police officers, correction officers and nurses — families with incomes of $30,000 to $60,000 a year.

Richard Mack, a managing partner at Apollo, said the units would be offered to current tenants for prices at least 25 percent below market rate.

Claire Haaga Altman, the founder and president of Housing and Services Inc., the nonprofit housing group involved, said a buyer’s mortgage and maintenance would be “roughly what they are paying for rent or slightly above.”

As Mrs. White tells it, by the late 1980’s the buildings had been severely neglected. In addition to vandalism and graffiti, damage from leaks was common. Even laundry rooms had been ruined. Starting in 1991, she said, the tenants’ association worked to impress upon residents that if they took care of the property, their rent money could be spent not on repairs but on improvements.

“We were able to get all of that under control,” Mrs. White said. “They don’t even allow people to walk on the grass. If a tenant sees you walking on the grass, they’ll say, ‘Please don’t walk on the grass.’ It’s a very pristine place. They like that. They say they feel proud when they come home to it.”

When the buildings’ owners died in 1999 and 2000 and the property was to be put on the market, the tenants decided to try to enter the bidding. Mrs. White contacted Ms. Haaga Altman, whose group had begun exploring ways of preserving formerly subsidized moderate-income apartments as moderate-income rentals or co-ops. She enlisted the support of the government agencies involved in the Lafayette buildings. She also introduced the tenants to Apollo, a group of investors and developers that was a co-developer of the Time Warner Center. With the help of an investment management company and Morgan Stanley, Apollo bought the property last December for a total development cost of $100 million.

“You have the tenants working with a nonprofit working with private sector partners,” Ms. Haaga Altman said. “I think we were able to pay close to the market price. And everybody did their bit. The tenants agreed to a modest rent increase. They were at the table discussing which repairs were going to get made first. Every Monday for an hour or so there was a conference call of 15 to 20 people.”

The group has moved to leave the Mitchell-Lama program and is filing papers with the state attorney general’s office to convert the property to a co-op.

Apollo, along with Housing and Services, has invited banks to assign credit counselors to the Lafayette buildings to help tenants learn how to qualify for loans. They are also working with the state and the city to get first-time homebuyer assistance. Tenants who choose not to buy can continue to rent; their rents will fall under the rent stabilization program.

James H. Simmons III, an Apollo partner, said the complex was expected to remain affordable to moderate-income tenants “for at least 25 years.”