Two Buyers Blocked: 57 Bed-Stuy Units Go to a Nonprofit Instead

A Brooklyn nonprofit tried to auction four Bed-Stuy apartment buildings to pay down its debts. The state stopped that sale, the nonprofit filed for bankruptcy in the Eastern District of New York, and the trustee proposed selling the same buildings to the same developer. The state stopped that too, and then a second proposed buyer after it. On September 16 the Attorney General announced that 57 units instead went to IMPACCT Brooklyn, financed by a $3,000,000 loan from New York State Homes and Community Renewal.

Why it matters

Distressed nonprofit housing looks like an accessible acquisition channel. Buildings are old, balance sheets are thin, and a bankruptcy trustee has a statutory duty to maximize recovery. This case is the counterexample worth filing. Under New York law a charitable owner cannot transfer housing assets without approval from HCR, HPD and the Attorney General, and that approval turns on whether the buyer has affordable housing management experience. A developer who wins the auction and cannot clear that test does not own the buildings.

The practical read for anyone underwriting this kind of stock: the trustee’s acceptance is not the closing condition that matters. Tenant counsel, in this case the Legal Aid Society and Legal Services NYC, were asked by the state to find a replacement purchaser, and they did. Two market buyers spent more than two years on a deal that was never available to them.

The numbers

The portfolio is 201 Pulaski Street at nine units, 709 Lafayette Avenue at 24, 327 Franklin Avenue at 16 and 335 Franklin Avenue at eight. The city tax record tells it slightly differently: four lots totalling 49,628 sq ft of building on 18,764 sq ft of land, 61 residential units rather than 57, with 709 Lafayette recorded at 28 units, and two of the four listed under side street addresses, 326 Throop Avenue and 355 Greene Avenue. Combined assessed value is $2,407,950.

Against that, the $3,000,000 HCR acquisition loan is roughly $60 per sq ft of building, or about $52,600 per unit on the announced count. All 57 units stay affordable for at least 30 years, and HPD will fund a complete rehabilitation of buildings dating to 1905, 1910 and 1931.

What’s next

Watch the HPD rehabilitation award and the scope that comes with it. See our coverage of a $39M Bronx loan on 290 apartments hitting pre-foreclosure and the New York market.