Yet, in the same building, there are dozens of people living in rent-controlled or rent-stabilized apartments, and there is at least one tenant who pays no rent at all. In exchange, that longtime resident gave up a rent-controlled apartment elsewhere in the building that had nearly a dozen rooms.
“I remember buying a tenant out early on who was paying $ 275 a month for a 4,000-square-foot apartment,” said Gary Barnett, who purchased the landmark building in 1994. “So I bought him a house in the suburbs.”
The Belnord is a building of extremes, and it bears the distinction of having one of the most fraught real estate histories in all of New York City. It has seen a rent strike that touched three decades, a troubled $ 375 million mortgage and a most unusual agreement through which several dozen tenants voluntarily bowed out of rent regulation. That agreement is now having its day in court.
“I was living in Belgium; I had Belgian investors,” said Mr. Barnett, president of Extell, now one of the city’s most powerful development companies. “I didn’t know any better, so I bought it.”
The entire building, which has more than 200 apartments, cost him only $ 15 million. But it also came with an extraordinary menagerie of physical problems — a crumbling roof; enormous leaks; unreliable heat; unreliable hot water; unreliable water, period — and some 200 open court cases.
“I didn’t really know how bad things could be here with the politics and the litigation,” Mr. Barnett continued in a subsequent interview. “I have since found out.”
The Belnord, which stretches from 86th to 87th Street between Broadway and Amsterdam, was completed in 1909, one year later than the Apthorp, another behemoth landmark building that takes up an entire city block just a few streets away. Mr. Barnett bought the building from a woman named Lillian Seril, whose era as landlord was filled with venomous animosity between her and her tenants. (A Manhattan Housing Court judge once told the two sides they “deserved each other.”) Longtime residents still tell stories of heaving new refrigerators up the stairs in the middle of the night or sneaking in repairmen and kitchen tiles, because Ms. Seril would not allow home improvements.
A rent strike that began in 1978 with nearly half the tenants stretched on for 16 years, ending only when the building was sold. And by then, according to Thomas Vitullo-Martin, head of a tenants’ group called the Belnord Landmark Conservancy, the building needed every major system replaced except the water.
“It was decrepit,” said Mr. Barnett, who estimated his company had put over $ 100 million into the building over the past 19 years.
That sort of investment, however, comes at a price for controlled and stabilized tenants, whose rents can rise precipitously when their landlords spend money on major capital improvements. So in 2006, in a deal approved by the New York State Division of Housing and Community Renewal, a group of tenants in 68 apartments negotiated away the rent-regulated status of their apartments.
In the agreement, those tenants paid certain increases but were insulated from capital improvement charges and offered a cap on their rent. Their major concession was that they sharply limited the ability of relatives to inherit their apartments.
Even by Mr. Barnett’s own admission, the agreement is highly unusual. But some have also questioned whether it is legal. The agreement is being challenged by Jonathan Vincent, a grandson of a tenant who signed the contract.
“I’ve never seen anything like this,” said Robert Grimble, a partner in Grimble & LoGuidice, the firm representing Mr. Vincent.
“That’s the law, that’s what the legislature enacted,” Mr. Grimble said of rent control. “The parties can’t agree to change a law.”
But so far, the court has rejected his arguments, and Mr. Vincent has appealed.
In general, however, recent problems for owners of the Belnord have been less of the litigious or the physical variety, and more financial. A 2009 court decision found that any building receiving a tax abatement called J-51, which the Belnord was, could not remove any units from rent regulation.
Extell was already struggling with the building’s $ 375 million mortgage, said Frank Innaurato, a managing director at Morningstar Credit Ratings, and that court decision did not help. (In 2006, when the loan was originated, 119 of the building’s 215 apartments were still under rent control, according to Morningstar, and 22 others were rent stabilized. The average rent for a rent-controlled apartment at the time was $ 1,154, while the average market-rate rent was $ 14,266.) The loan was transferred to a special servicer in 2011 for delinquency.
The most ominous clouds appear to be lifting for Extell at the Belnord. Earlier this year, it modified its mortgage for a few more years and with more favorable terms, and Mr. Innaurato said the loan, though still under a special servicer, was current. The tax abatements that prohibit deregulation will expire in about two years.
But the building still has some fight in it. Refurbishments and facade construction that Mr. Barnett expects to cost about $ 10 million are currently under way.
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