The developer of a high-profile middle-class Harlem apartment complex has lost its ownership after defaulting on the mortgage.
A lawyer for Laurence Gluck confirmed on 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 (Dh459m). Wells Fargo topped a cash bid of $120m.
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 who cares about long-term affordability, who isn't trying to displace people," said Dina Levy, director of organising and policy for the Urban Homesteading Assistance Board.
Gluck's Stellar Management purchased Riverton Houses in 2005 for $130m. A year later, the company refinanced with a $25m loan and $225m mortgage. But by September last year, the property was worth only $108m, 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.
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 $120m 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.