Middle-class NYC Apartment Complex Sold at Auction

NEW YORK - The developer of a high profile middle-class Harlem apartment complex has lost ownership of the property after defaulting on the mortgage.

A lawyer for Laurence Gluck confirmed Friday that Wells Fargo, acting as a trustee for bond holders, won the auction for Riverton Houses with its own credit bid of $125 million. Wells Fargo topped a cash bid of $120 million.

Alex Guggenheim, senior vice president for CWCapital Asset Management, the special servicer acting on behalf of the trustee, declined to comment on plans for the property.

But tenants and activists were hoping the bank assumed control of the property, rather than go to an investor looking to make a profit.

"Our goal is to get Riverton into the hands of someone responsible who cares about long-term affordability, who isn't trying to displace people," said Dina Levy, director of organizing and policy for the Urban Homesteading Assistance Board.

Gluck's Stellar Management purchased Riverton Houses in 2005 for $130 million. A year later, the company refinanced with a $25 million loan and $225 million mortgage. But by September of last year, the property was worth only $108 million, according to one analyst estimate.
State Supreme Court Justice Richard Braun ordered the foreclosure sale of the gated community and its 1,230 apartments last month.

Riverton was built in the 1940s; notable residents have included jazz pianist Billy Taylor; former mayor David N. Dinkins and a former Motown Records vice president Suzanne de Passe.

The complex is one of a few massive affordable apartment communities to face difficulties amid the housing downturn.

The owners of the largest of the city's affordable-housing complexes, Stuyvesant Town and Peter Cooper Village recently gave up the property when they could no longer make payments on the $5.4 billion purchase.

Like those owners, Stellar Management had banked on converting rent-regulated units to market prices. But the process was slowed because of reluctant tenants and local laws that prevented the company from forcing them out or raising their rents by more than a small amount each year.

Stellar did not return repeated calls for comment.

Harold Shultz, a senior fellow at Citizens Housing and Planning Council, is concerned that whoever ultimately purchases Riverton Houses will also default, noting that the $120 million bid was higher than the appraised value. Wells Fargo may be banking on getting more than that for the property, he said.

Shultz said if Riverton "gets into the wrong hands," the homes could deteriorate, resulting in a potential increase in crime and a decrease in property values for surrounding buildings. Financially-strapped landlords could stop making repairs.  But Robert Knakal, chairman of Massey Knakal Realty Services, said there is no correlation between a building with too much debt and the risk to tenants. He points out that there are buildings with no mortgage that are not kept up well.

Cynthia Allen, president of the Riverton Tenants Association, said she is hoping to work with CWCapital and Wells Fargo, if and when the property is sold.  "Someone who is looking to preserve affordable housing is the best thing for us," she said of the next owner. "We don't want to find ourselves in same situation we were in with Larry Gluck."

By Megan K. Scott

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