HPD COMMISSIONER CESTERO ANNOUNCES NEW INITIATIVE TO RESCUE SEVERELY DISTRESSED RESIDENTIAL BUILDINGS AND KEEP NEW YORKERS IN THEIR HOMES

City Housing Agency Creating Short List of Qualified Preservation Purchasers to Acquire Financially and Physically Distressed Multifamily Properties

New York, NY – NYC Housing Preservation and Development (HPD) Commissioner Rafael E. Cestero, in partnership with the New York City Acquisition Fund announced today that they have issued a Request for Qualifications (RFQ) inviting real estate developers and managers with a track record of responsible ownership to participate in the newly created Multifamily Preservation Program. The program will allow HPD to use a list of prequalified developers to quickly indentify a candidate with the necessary experience to purchase and manage a distressed property – when necessary – with the goal of keeping tenants in their homes and maintaining the long-term affordability and physical viability of the property. Through the RFQ, HPD will evaluate and compile the list of developers that will be prequalified to receive financing for the acquisition and, if necessary, rehabilitation of distressed multifamily properties.

Preserving the City’s affordable housing stock and keeping homes in good repair for the tenants is a key tenet of the Bloomberg Administration’s New Housing Marketplace Plan (NHMP). On track to build and preserve 165,000 units of affordable housing for half a million New Yorkers by 2014, the NHMP is the most productive and comprehensive municipal housing plan in the nation, having financed more than 100,000 affordable units to date.

“At the end of the day what matters most is keeping families in their homes, keeping those homes affordable, and ensuring that the buildings and apartments are well maintained,” said HPD Commissioner Rafael E. Cestero. “The Multifamily Preservation Program will give us the resources we need to help put the most vulnerable properties in the hands of responsible developers and managers who have a track record of working in the best interests of the tenants. We’re doing more than saving buildings, we’re making good on the City’s promise to strengthen families, stabilize neighborhood, and keep New York viable and affordable for generations to come.”

“This initiative underscores the importance of our commitment to preserving existing affordable housing,” said HDC President Marc Jahr. “It is critical that troubled multifamily buildings with deeply flawed financing are transferred in a timely manner to responsible owners with the proven ability to manage these properties—affording the existing tenants the opportunity to live in safe, quality housing, and helping to preserve the stability of the surrounding neighborhood.”

During the recent real estate boom, certain speculative transactions, fueled by access to easy credit, resulted in some properties carrying a level of debt that far exceeds income from rents, maintenance or common charges. These buildings are commonly referred to as being overleveraged. In cases where the financial distress results in physical distress, the tenants bear the burden of this overleveraging. To avoid foreclosure, some owners try to illegally raise rents and vacate apartments or divert revenue intended for property maintenance to paying the mortgage. As the agency responsible for enforcing the City’s Housing Maintenance Code, it is HPD’s responsibility to act in the interest of the tenants and to preserve this housing as an affordable, sustainable resource. The new Multifamily Preservation Program is designed to get these properties into the hands of responsible ownership, and not another speculative purchaser. By quickly identifying a qualified developer, and providing the financial tools to assist that developer in competing in the open market for the acquisition and/or rehabilitation of the property, HPD can act more proactively to intervene in the sale of a distressed multifamily building.

Candidates responding to the RFQ may be individuals and organizations, both not-for-profit and for-profit, who have the experience, financial resources, and capacity required to rehabilitate, maintain, and manage multifamily housing. In addition to qualifying developers for the program, the RFQ will assess applicants for pre-qualification for loans from the City’s Acquisition Fund which will work in coordination with the Program to provide qualified developers with financing for the purchase of mortgages or land. Properties targeted for inclusion in the program include distressed buildings that are currently in foreclosure, are in danger of foreclosure, or were foreclosed upon and owned by the federal Department of Housing and Urban Development (HUD). 

HPD will accept applications for this RFQ beginning on June 17 through August 2, 2010. The agency expects to have a first draft of the prequalified developers list by mid September. After the first round of Applicant reviews, applications will be accepted and reviewed a rolling basis.

Under the guidelines of the Multifamily Preservation Program, when an eligible building becomes available for acquisition, HPD and the Acquisition Fund will refer to the list of prequalified developers that was created through the RFQ, and may select one who has the necessary experience to acquire and manage the building. The selected developers may apply to receive loans or support for the acquisition and rehabilitation of the building and to be the developer and/or long term owner of the building.

$750 million in funding, which was announced by Mayor Bloomberg in his State of the City address earlier this year, will support the program. The fund includes $500 million of bond financing from the Housing Development Corporation (HDC) to restructure debt, $150 million in lending capital from the Acquisition Fund for purchase of distressed buildings, and $100 million in HPD subsidy to facilitate the rehabilitation of physically distressed properties. To obtain a copy of the RFQ and for further details about the Multifamily Preservation Program, visit: http://www.nyc.gov/html/hpd/html/developers/rfp.shtml

The strategy of creating a prequalified list of responsible preservation developers has already been successfully used in rescuing distressed properties in New York City, and is the basis for the creation of the Multifamily Preservation Program. The prime example concerns a portfolio of occupied distressed properties in the South Bronx owned by the Ocelot Capital Group, which defaulted on their mortgage last year, prompting foreclosure proceedings. To ensure the properties ended up in the hands of a responsible developer that would invest in and maintain the affordability of the apartment buildings, HPD worked collaboratively with Fannie Mae and Deutsche Bank to assemble a bidder pool of several non-profit and for-profit property entities, creating   shortlist of experienced candidates to participate in the bidding process. Each of these entities had a proven track-record of developing, constructing, rehabilitating, managing, and operating affordable multifamily properties in New York City. Omni New York LLC, a development company founded by former New York Met Mo Vaughn, was chosen as the successful bidder. Omni plans to close on construction financing in the fall, and has already invested nearly $500,000 in repairs and maintenance.  

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About Mayor Michael R. Bloomberg’s New Housing Marketplace Plan:

New York City’s affordable housing program to build or preserve 165,000 units of housing — enough to house half a million New Yorkers — is the most ambitious and productive in the nation—creating housing as well as jobs for New Yorkers. In April, 2010 the City reached the critical benchmark of 100,000 units financed—representing an investment of $4.5 billion to date by the City, not including roughly $5 billion in bonds issued by HDC.

Led by HPD Commissioner Rafael E. Cestero, the Plan has been recast to maintain momentum while confronting head on the economic challenges facing the City, the State, the housing industry, the financial sector and individual New Yorkers and their families. In order to fulfill the NHMP goal of 165,000 units, HPD and HDC are responding to market realities and focusing on three primary goals: strengthening neighborhoods, expanding the supply of affordable and sustainable housing and stabilizing families by keeping them in their homes. To read more about the NHMP, please visit http://www.nyc.gov/html/hpd/html/about/plan.shtml 

About the NYC Department of Housing Preservation and Development (HPD):

HPD is the nation’s largest municipal housing preservation and development agency. Its mission is to promote quality housing and viable neighborhoods for New Yorkers through education, outreach, loan and development programs and enforcement of housing quality standards. It is responsible for implementing Mayor Bloomberg’s New Housing Marketplace Plan to finance the construction or preservation or 165,000 units of affordable housing by 2014. Since the plan’s inception, more than 100,000 affordable homes have been created or preserved. For more information, visit www.nyc.gov/hpd

About the New York City Housing Development Corporation (HDC):

The New York City Housing Development Corporation (HDC) provides financing for the creation and preservation of multi-family affordable housing throughout the five boroughs of New York City. HDC’s programs are designed to meet the wide range of affordable housing needs of the City's economically diverse population. In partnership with the NYC Department of Housing Preservation and Development, HDC works to finance Mayor Michael R. Bloomberg’s New Housing Marketplace plan to create of preserve 165,000 affordable housing units by 2014. HDC is rated AA by S&P and Aa2 by Moody’s and is the nation’s #1 issuer of multi-family bonds.