Annual Report 2010Annual Report 2010

The Ocelot Rescue: Address Financial and Physical Distress

The Bronx has come back: make no mistake. The City of New York has invested billions, which has leveraged more billions to make certain of that fact. Thousands of units of affordable housing have been built, crime is vastly down from the seventies, and City services have long since been restored. The situation above, in fact, is a kind of unanticipated effect of the Bronx’s new lease on life.

As the last millennium drew to a close, the borough was enjoying the same economic charge that the rest of the country enjoyed. Private market investors looking to make money in real estate began buying up some of the big multifamily buildings that are a hallmark of Bronx housing stock. During the middle of the Century’s first decade, amid the real estate bubble that defied one prediction after another, investors turned to the Bronx with ambition. Buildings were bought in anticipation of quick profits: often at wildly overheated sales prices spurred by improbable predictions of how rent stabilized tenants would leave their buildings. Sky-high mortgages were approved without taking this into consideration. Rents would be doubled! Tripled!

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In relatively short order, simple math took over. The rental income generated by stabilized buildings covered neither mortgage nor maintenance. Ocelot Capital Group, owner of 25 buildings bought with on this speculation eventually disappeared, swanky offices vacated, phone disconnected. The apartment buildings went without services for a couple of years, with devastating effects. Many of the tenants in these buildings lived at 50 percent to 60 percent of the Area Median Income (AMI), and could not afford to relocate, and their circumstances became dire, a front door removed for drug money, no heat or hot water. Ten of Ocelot’s 25 properties in the Bronx were placed on the City’s worst buildings list in 2007 and 2008, racking up 5,000 serious and immediately hazardous Housing Maintenance Code violations.

A final blow was the discovery that the in absentia landlord would be auctioning off the abandoned and severely distressed properties via the internet, on the DebtX.com website. Tenants and tenants’ rights organizations who had been working for some resolution with these properties knew that this type of auction—on the internet, with any buyer permissible and buyers unfamiliar with the circumstances—would likely generate more financial and physical distress, compounding that which already existed, and residents just barely hanging on would be left homeless.

Foreclosure followed. The City, fearing a repeat performance at the hands of a new owner, weighed in and began working with Fannie Mae to expedite new ownership that would be responsible and responsive to the existing tenants and their needs. Vocal protests from residents, activists and combined with pressure from City and elected officials to preserve these buildings and restore them to good quality, livable affordable housing finally produced the results. The internet sale was canceled, and Fannie Mae along with Deutsche Bank, at the request of HPD Commissioner Cestero, agreed to create a pool of companies that would be eligible to bid for ownership of 14 of the Ocelot buildings.

Included on that list was Omni New York LLC, a housing management and development company known for melding the real estate and social aspects of affordable housing. As the successful bidder in the auction, Omni collaborated with HPD to put together a scope of work and financial plan to bring the buildings back from the brink and into good repair, while keeping the existing tenants in place. “I think this speaks volumes about our commitment to helping preserve affordable housing for families here in the Bronx and throughout New York City,” said Mo Vaughn, co-Managing Director and co-owner of Omni.

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His partner, Eugene Schneur, echoed the sentiment: “The tenants in the Ocelot buildings have lived through some very difficult times over the last few years, and we’re happy to secure the necessary financing to begin the rehabilitation of these properties. Once we’ve finished, I think this will have a tremendous impact on our ability to deal with overleveraged properties throughout New York City.”

Through its LAMP preservation program, HDC stepped up to finance renovations on three of the buildings, issuing more than $8 million in bonds to fund the construction work. The funding sources require that the renovated units be reserved for households earning less than 60 percent of the area median income. Dina Levy, a long-time tenant advocate with UHAB, who had been watching the buildings closely and working with the tenants said, “HDC’s investment in the Ocelot portfolio is bringing relief and long-term housing stability to the hundreds of working class families in the Bronx. The Ocelot rescue also serves as a replicable model for how local government can work with community partners to preserve distressed, overleveraged housing all across the city.”

The rehabilitation includes replacement and upgrading of building mechanics including new boilers and hot water heaters, extensive plumbing upgrades, new electrical and intercom; improving the structural integrity of the building; exterior work to include new roof, brick pointing, new windows, and new building doors; upgrading of all lobbies and common spaces; in-unit capital improvements include new floors, new closet doors, painting, new light fixtures, replacement of kitchen cabinets, energy star appliances, countertops, the replacement of bathroom vanities, sinks, faucets, bath tubs and tiles. An extensive DVR-security camera system will be installed throughout the buildings to ensure safety.


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