[NYtenants-online] NY Tenants Online 5/4/03

[Tenant]

NYtenants Online/TenantNet                                 5/4/03
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IN THIS ISSUE ...

1. Tonight's HOUSING NOTEBOOK: RGB Report - May 5th

2. BOOM! The Sound of Eviction to be Broadcast in May

3. Tuesday (May 6th) Press Conference calls for Rent Freeze

4. City-Wide Task Force on Housing Court Annual Conference 5/16

5. Landlords snap up apartment buildings as '97 decontrol
    provision boosts profits (Crains NY Business)

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HOUSING NOTEBOOK: RGB Report

Tonight's Monday's Housing Notebook (on WBAI, 99.5 FM and www.wbai.org at
8:00 P.M.) will feature a live report from the NYC Rent Guidelines Board
meeting. At the Monday meeting, the RGB will set a preliminary rent
increase guideline affecting over 1 million rent stabilized apartments in
New York City. The final guidline will be approved in June.

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BOOM! THE SOUND OF EVICTION BROADCAST
Status:

BOOM! The Sound of Eviction will air on Rent Wars News during the month of
May starting May 4th at 6pm in Manhattan (TW Ch. 67 RCN Ch. 110) and May
5th at 10:30am and 6:30pm (TW Ch. 34 and Cablevision Ch. 67).

The critically acclaimed film premiered in New York City last year. This
version was edited for television into 4 segments by Ronin Amano of Rent
Wars but otherwise is the complete version. The last segment to air also
features interviews of two of the film's creators.

BOOM! tells the story of the displacement battles in San Francisco and has
received widespread critical acclaim. For more information about the film,
go to http://www.boomthemovie.org

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PRESS CONFERENCE CALLS FOR RENT FREEZE

TUESDAY, May 6, 2003
11 A.M.

There will be a press conference calling for a rent freeze on rent
stabilized apartments on the steps of City Hall 11 A.M. Tuesday, May 6th.
Sponsored by QLOUT (Queens League of United Tenants), Citywide Tenant
Coalition and Councilman Hiram Monserrate. For more info, email
jeanie@phri.nyu.edu or call Ida at (718)343-4030.

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THE CITY-WIDE TASK FORCE ON HOUSING COURT
2003 Annual Conference

The Importance of Rent Regulation: More than Just the Rent

May 16, 2003
Fordham University School of Law
James B.M. McNally Amphitheatre
140 West 62nd Street
New York, New York

Agenda

Registration & Breakfast (8:00 - 9:30)
Morning Session (9:00 - 11:30)

Opening Remarks
'The Albany Perspective - Address by Assemblyman Scott Stringer and State
Senator Liz Krueger
Panel Discussion: How Rent Regulation Laws Protect NYC Tenants

Afternoon Session (11:30-1:30)
Borough Breakout Sessions
Keynote Speaker - NYC Administrative Judge - Hon. Fern Fisher
Closing Remarks

Lunch (1:30-3:00)

Directions: Take the A, B, C, D, or #1 or #9 IRT train to Columbus Circle
Entrance to the Law School is on 62nd Street, between Amsterdam and
Columbus Avenue
All advocates, attorneys, and law students are invited.

Please register prior to the event at (212) 962-4266.
Suggested Donation for Materials/Lunch: $5.00.

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OWNERS EMBRACE REGULATED SPACE
Landlords snap up apartment buildings as '97 decontrol provision boosts profits
Crains NY Business
By Jacqueline S. Gold
May 05, 2003

While owners of commercial office buildings and the landlords of luxury
residential towers fight to find tenants, Robert Nelson polishes the shine
on his "no vacancy" sign.

As the proprietor of 1,000 apartments located in Brooklyn, Manhattan and
the Bronx, he is smack in the middle of one of the hottest segments of the
New York real estate market: multifamily, rent-regulated apartment buildings.

"This is a unique time in our industry," says the president of Nelson
Management Group Ltd. "Even people who don't understand the market are
getting into it."

There are several reasons for the rush into rent-regulated buildings: The
stock market is volatile, and commercial real estate is too risky for many
investors. Financing is cheap. Rent-regulated buildings offer a consistent
return.

But the most important reason is legislation enacted six years ago that
allows building owners to significantly raise rents for many vacant
apartments. The vacancy decontrol provision is boosting owners' profits
because it's moving an increasing number of units out of the regulated
system. Some even say that if the laws remain unchanged, New York City's
rental market will be virtually decontrolled in 20 years.

"There's demand for residential housing in New York in good times and bad,"
says Mark Teitelbaum, chief operating officer of Argent Ventures, which
owns 600 rent-regulated units in Manhattan and the other boroughs.
"Decontrol just accelerates your upside."

Estimates vary widely on how many rent-regulated apartments have been
decontrolled since the laws went into effect, but the best guess puts the
number at 80,000. Since the loosening of the rent laws, units have been
moving up to market rates at an ever-accelerating pace. The number of units
being decontrolled is approaching 50,000 a year.

Whether the trend will continue depends in part on what happens in Albany
over the next few months. The laws regulating rents expire on June 15, and
Assembly Speaker Sheldon Silver says his top priority is eliminating
vacancy decontrol provisions.

Landlords respond that vacancy decontrol is the sole gift they've been
granted under a system that heavily favors tenants. The measure has made it
possible for owners to invest in their properties and improve the city's
housing stock.

"If you hamstring owners like you did under rent control, it will
inevitably lead to the abandonment of housing and the takeover of buildings
by the city," says Mitchell Posilkin, general counsel for the Rent
Stabilization Association, a landlord group. "That's what happened in the
1960s and 1970s, and it is imperative that it not occur again."

Vacancy decontrol allows landlords to permanently deregulate any empty unit
that has reached $2,000 in rent. This relatively recent innovation is
tinkering with a system that harks back to the wartime price controls of
1943. A severe housing shortage after World War II led to the extension of
rent regulations in 1947.

In 1969, the City Council passed rent-stabilization measures, and 1997
reforms allowed automatic 20% rent hikes for vacant apartments and the
deregulating of units occupied by tenants with incomes of $175,000 or higher.

The rent regulation system allows for an end to limits on rent once the
citywide vacancy rate reaches 5%. But that is unlikely to happen anytime
soon, since vacancies recently fell to 2.9%, down from a high of 4% in 1996.

About half of the apartments in the city, or 1.1 million, are
rent-stabilized, and another 60,000 are rent-controlled.

The fact that the supply of rent-regulated housing is diminishing makes
owning such buildings extremely attractive.

BELOW REPLACEMENT COST

Mr. Teitelbaum of Argent figures that 400 apartments on the Upper West Side
that his company bought in 1999 have since doubled in value. "It's very
hard to reproduce stabilized buildings in the five boroughs," he says. "You
are buying at a fraction of replacement cost."

While there are several ways to value a multifamily, rent-regulated
building, the two most important are capitalization rate (which divides the
annual rent roll, minus the landlord's expenses, by the building's price)
and gross rent multiple (a building's price divided by the rent roll).

Cap rates for rent-regulated buildings are running between 5% and 7.5%,
while gross rent multiples are between 8% and 12%.

One company reaping the rewards is Great Neck, L.I.-based Jonis Realty
Management Corp., which owns and manages 30 rent-regulated buildings, most
of them in Manhattan. In March 1998, Jonis owner Nathan Halegua, along with
partners Martin Newman and Ira Fishman, paid $7.7 million for a 64-unit
building at Second Avenue and St. Marks Place.

When they bought the property, the cap rate was 7.5%. But since then, six
apartments have been decontrolled and rents have gone up substantially due
to renovations. Now, the annual rent roll is $1.4 million, the cap rate is
10.5% and net operating income is at least $900,000 annually.

"If you can make that kind of money in these buildings, why do anything
else?" Mr. Halegua asks.

Those kinds of returns are attracting larger and more diversified players
into the market for rent-regulated buildings.

Denver-based Apartment Investment and Management Co., the nation's biggest
real estate investment trust, is scouting for properties in New York. It
plans to boost profits by bulk-buying products and services like heating
oil, extermination and insurance.

The Praedium Group, another recent investor, now owns buildings with a
total of 4,000 rent-regulated units throughout the five boroughs. It
started buying five years ago on behalf of pension plans, insurance
companies, banks and university foundations.

"Demand in this market is strong, whereas the office market is very, very
weak," says Russell Appel, president of Praedium. "Prices of these
buildings have been going up," he says. "We thought we saw an opportunity."

But life is not all rosy for landlords. They have been squeezed in the
short term by spiking fuel costs, rising real estate taxes and skyrocketing
insurance premiums.

DOUBLE-DIGIT RENT HIKES

Based on these escalating expenses, landlords expect to win double-digit
increases from the city's Rent Guidelines Board this spring. If they are
successful, more apartments will become deregulated sooner, since the
increases will move more units near the $2,000 threshold.

The rollback of vacancy decontrol is a real possibility, however. Tenant
groups are already picketing the offices of downstate Republican state
senators in an effort to put pressure on Senate Majority Leader Joseph Bruno.

"We are very well-positioned to get some changes in Albany this year," says
Michael McKee, associate director of the New York State Tenants & Neighbors
Coalition. "Shelly Silver and the Assembly Democrats have been very
forceful and very supportive."

Owners say they are not particularly worried right now because the
Legislature is overwhelmed with the state budget process. Landlords trust
that lawmakers will have little time or inclination to pass anything but a
straight reauthorization of the rent regulations, which would leave the
system intact.

"Very few people in Albany are concerned about this right now. The need for
changes in the rent laws exists only in the minds of tenants and owners,"
says Dan Margulies, senior vice president at brokerage Georgia Malone & Co.