And just like that, a once-massive portfolio of rent-stabilized buildings owned by a Related Cos. affiliate is almost entirely in different hands.
On Friday, in one fell swoop, Related Fund Management, a fund closely linked to the luxury developer, unloaded nearly three-dozen multifamily buildings in the Bronx for $195.5 million, according to a source involved in the transaction, which has not yet hit the city register. The properties make up about a third of the nearly 100 similar sites once owned by the fund, which has now almost entirely exited the sector.
As with other transactions by Related Fund Management in the last couple of years, a time when investors have been stung by changes in tenant laws that limit rent increases, the sweeping deal came at a loss.
Sites that traded include 2160 Bolton St.., a 6-story, 71-unit Art Deco rental near the Bronx Zoo; 3013 Valentine Ave., a 49-unit postwar offering; and 2780 University Ave.; a 101-unit mixed-use version with a retail space.
Indeed, the 34 properties, which have 2,021 total units in neighborhoods such as Wakefield, Norwood and University Heights, were acquired in a series of deals in 2014 for a total of $253.4 million, based on a Crain’s analysis.
So the sites, which were purchased by Longacre, a partnership of New York-based real estate companies PH Realty Capital and Rockledge, came at a loss to the Related fund of about 23%.
But the fund’s exposure was even greater. It has invested $32 million in capital improvements since 2014, including for new boilers and elevators, and lobby improvements, according to PH Realty President Peter Hungerford.
Although Related Fund Management did invest in some apartment improvements too, it did not remove any of the 2,021 units from rent-regulation, he added. Renovations used to be an indirect way of removing homes from regulation and making them into more lucrative market-rate homes. But 2019’s pro-tenant Housing Stability & Tenant Protection Act closed much of that loophole and also capped other hikes.
“There are not a whole lot of buyers for this sort of product right now,” said Hungerford, who added that he plans on holding the sites until mortgage and insurance rates and the regulatory environment improve.
“We are buying at a basis with an expected cash flow that allows us to sit for a long time and wait for some combination of things to get better,” he said. “But New York is an unsustainable system right now.”
A Related spokeswoman declined to comment.
Backed by city pension money, Related Fund Management came out of the late 2000s financial crisis and began acquiring outer-borough rental properties as part of the rebuilding effort following 2012’s Superstorm Sandy. Most of the buildings were technically owned by shell companies with some version of “Sandy” in their names.
Pre-2019, the fund did sell some sites at double-digit profits, including some Kingsbridge sites in 2017, the analysis shows. But the dozens that have traded in recent years have not done so well.
Related Fund Management still owns some properties in Brooklyn and Queens, including 32-48 48th St., a 3-story rowhouse in Astoria.
The signature of Matthew Becker, a senior vice president at the Hudson Yards-headquartered Related Cos., a $60 billion global powerhouse, appears on many of their deeds.
Midtown-based Longacre, whose other principals are Rockledge’s David Kaye and Joe Listhaus, says it will also work on installing tenants in the 264 of the 2,021 units that are currently vacant. Average rents in the portfolio overall are about $1,500 a month, the firm added. Since 2022, Longacre has acquired nearly 5,000 units.
