Tenants Are Fighting to Influence the Bank That Funds Their Landlords
Failed Signature Bank is in FDIC receivership, and tenants are seizing the opportunity to push for repairs and stronger regulations around lending.
Tenants in buildings with landlords that took out loans from the failed Signature Bank are demanding a say when the government sells off those loans this summer. For people in buildings with deteriorating conditions, many of whom have long accused Signature of being harmful with its lending, it’s a rare opportunity to push for repairs and stronger regulation of their landlords.
Esther Acosta has lived in her current apartment at 638 160th Street in Washington Heights for over 10 years. When Hurricane Ida struck in 2021, a piece of the ceiling collapsed. There are still cracks, and water slowly leaks in when it rains, causing mold to grow, she said.
The building was owned by Sugar Hill Capital Partners, an uptown real estate firm that spent hundreds of millions of dollars in the late 2010s buying up multifamily apartment buildings. But Sugar Hill, which had purchased the buildings prior to statewide rent reforms in 2019 that made it harder to deregulate apartments, was reportedly falling behind mortgage payments in some of its buildings in 2022.
In an email, Sugar Hill Capital managing partner Margaret Grossman said that she was not aware of cracks or mold beyond wear and tear. The building had facade issues that predated Hurricane Ida that caused interior leaks that it addressed during its ownership, she said. Grossman said that the building was “operationally distressed” when Sugar Hill purchased it, but because of 2019 reforms that made it harder to deregulate or raise rents on rent regulated units, “we were unable to execute our planned business plan at the building” because they would not be able to recoup money for repairs. Grossman said Sugar Hill spent six figures and remediated more than 200 pre-existing building violations.
In January, Sugar Hill sold Acosta’s building to a new landlord, Tyhum LLC. Acosta and other tenants in her building have been on a rent strike for months. But rather than focusing all their energy on the new landlord, Acosta and a group of tenants who have organized under the banner of the Upper Manhattan Tenants Union are taking their concerns to the federal government.
That’s because the bank that lent Sugar Hill the loan, Signature, failed and was taken over by the Federal Deposit Insurance Corporation (FDIC) in March amid a banking crisis that saw several U.S. banks fail and enter federal receivership. As the FDIC prepares to sell off Signature’s assets, including its commercial real estate loans, tenants are hoping for a seat at the table.
They assert that Signature Bank was irresponsible when it lent loans to corporate landlords, which they say can only pay back their loans by deregulating apartments and converting them to market rate, a point that tenant activists have been making about Signature for years. (Grossman said it is “categorically not true” that Sugar Hill couldn’t pay the mortgage on Acosta’s building when it took out a loan from Signature.)
Tenants are asking the FDIC to view what they say are the poor condition of their apartments and want influence in the decision-making process when the FDIC makes its sale. They want the new loan servicer to be more accountable for the behavior of its borrowers and to assure that they invest in the maintenance of units rather than allowing them to deteriorate.
The Upper Manhattan Tenants Union organizes across a portfolio of buildings that are either currently or formerly owned by Sugar Hill capital. Each building within the larger tenant union has its own tenant association and has been encouraged to send letters detailing the conditions of units in their buildings. The entire Tenant Union also plans to send a joint letter to the FDIC requesting a say in the sale of their loans and the terms of any agreement between the FDIC and a new loan purchaser or borrower.
Get a Free Multifamily Loan Quote
Access Non-Recourse, 10+ Year Fixed, 30-Year Amortization
The group has been in touch with the office of Congressman Adriano Espaillat, whose district includes Harlem and Washington Heights, who they said is helping to coordinate a meeting between tenants and the FDIC. Congressman Espaillat’s office did not return a request for comment from Motherboard.
Adam Blazej is the co-founder of Upper Manhattan Tenants Union His building is still owned by Sugar Hill Capital with a mortgage serviced by Signature Bank. He says the tenant union’s demands are, at minimum, “asking that the terms of the mortgages be written in such a way that they don’t allow the current or new owner to continue their harmful practices” and to provide necessary repairs.
Blazej said tenants also want to have tenant-controlled housing, although this would likely require a nonprofit with enough cash to buy the building and turn leadership to tenants.
While his building is still owned by Sugar Hill, Blazej doesn’t feel that conditions would necessarily improve if it were sold to someone else, as he’s seen what tenants have experienced under new ownership. “Everyone I talked to said they didn’t think it could get worse. It’s gotten worse,” he said. “I don’t want them to sell my building to some other vulture or slumlord,” he said.