Tag Archives: bad lending

This is What a Bad Loan Looks Like

Tenants, community advocates and policy makers have been ringing the alarm bell about bad mortgage lending in mutlifamily buildings. Over the past few years, we have opened up an important dialogue with regulators and banks who understand that bad lending is a direct threat to our neighborhoods. Based on our research and analysis, we define “bad lending” as mortgages that may be speculative because they appear to be underwritten based on the assumption that rent-regulated tenants paying modest rents will leave at an unusually high rate. We also define “bad lending” as loans to developers with a documented history of harassment and displacement of tenants as a business model.

Sometimes, the warning signs of a bad loan are subtle. Sometimes, the warning signs are obvious. Here is an obvious example of what we believe is “bad lending”:

The Real Deal recently reported on a new loan by Signature Bank to Icon Realty to enable them to purchase a building in Manhattan. Even the industry raised an eyebrow at the deal, saying “More than half of the apartments at 199 W. 10th St. are rent-stabilized, though the high price would not seem to reflect low rents.”

Here are two obvious warning signs that make us concerned about the loan:

• The Underwriting: Signature loaned Icon $9.5 million towards a total purchase price of $17.5 million. From the existing publicly available data, this price looks to be nearly 40 times the rent roll. This is more than triple a commonly accepted rule of thumb for a responsible rent-roll multiplier. From what we can determine from the publicly available information, the total debt service coverage ratio of the building may also be significantly below 1.2X, a commonly accepted standard for responsible underwriting indicating that the current income on the property can pay off the mortgage without improperly or quickly raising the rents. The concern is clear: this loan appears to be underwritten based on the assumption that the low-rent paying rent-regulated tenants will be quickly pushed out of the building.

UPDATE as of April 23, 2018: On April 12th, Representatives from Signature bank and Icon Realty told tenants directly that the loan was underwritten to the in-place rents, with a commitment to protect in-place tenants and not charge MCIs.  We and the tenant organizers will be vigilant in holding the bank and landlord to those commitments

• The Borrower’s History: The press reported this year Icon was under investigation by the Tenant Harassment Prevention Task Force, and in late September, they reached a $500,000 settlement in response to their alleged tenant harassment and the hazardous living conditions they created. This joint task force is comprised of the Governor’s Tenant Protection Unit, the New York State Attorney General (NYAG), and New York City’s Department of Housing Preservation and Development (HPD) and Department of Buildings (DOB). Icon was the first landlord they investigated together.  

Prior to the investigation by the Governor’s Joint Task Force on Harassment, tenants across Icon buildings combated these practices collectively as Icon Community United, which is supported by Cooper Square Committee and St. Nicks Alliance. As one Icon tenant in a “construction as harassment” poster-child building told a community organizer: “Icon purchased my building in March of 2015. Since then, my neighbors and I have lived through a constant barrage of demolition construction, causing insurmountable noise, frightening vibrations, and incessant, unconquerable dust. In my home, I’ve experienced extensive water damage and multiple ceiling collapses; in one instance, an entire load of construction debris, which hadn’t been properly disposed of during renovations, fell through my bathroom ceiling. In my eyes, and in speaking to other ICON tenants, their practices since the Attorney General’s investigation remain unchanged.”

As one of the largest multifamily lenders in the city, Signature’s lending practices matter and have consequences when not done responsibly. The tenants in buildings owned by landlords whose poor treatment of tenants have made headlines – including Raphael Toledano, Icon Realty, Ved Parkash, and others – know this first-hand. They have reported facing aggressive buyout offers, lack of heat and hot water, dangerous construction and lead poisoning, rats, vermin, and more.

The principals of best practices for responsible multifamily lending are straightforward: responsible underwriting, appropriate vetting of borrowers, and responding to issues in buildings when problems arise. ANHD and our member groups have been meeting with Signature Bank to discuss these issues, and we appreciate the genuinely meaningful effort the bank has put into these open and productive conversations about best practices in mutlifamily underwriting and lending.

But the recent loans by Signature Bank to Icon Realty and Ved Parkash fly in the face of best practices. ANHD and our member groups call on Signature Bank to commit to the full set of best practices. And where “bad lending” has already occurred, we call on the bank to proactively ensure that tenants in these buildings and others they hold are protected from any future harassment or displacement.

Jaime Weisberg, ANHD’s Senior Campaign Analyst

Bad Landlord, Bad Lending Continued

Signature Bank continues to finance known bad-actor landlord Ved Parkash

A bad landlord damages a community, sometimes with serious consequences. In the case of Ved Parkash’s 750 Grand Concourse, the building’s long-term rodent infestation problems recently flared up into a major public health scare. Tenants in Parkash’s buildings have been dealing with problems for years, including poor conditions, vermin, and scores of potentially meritless eviction proceedings for nonpayment of rent. He is a regular on the Public Advocate’s Worst Landlord List. Then things got much worse. Last week, newspapers reported that the building is stricken with a rare rat-transmitted illness that sickened two people and killed one.

But conditions like these are nothing new with Ved Parkash. His lender – Signature Bank – should have known better.

Tenant organizers at New Settlement Apartments Community Action for Safe Apartments (CASA) and the Northwest Bronx Community and Clergy Coalition (NWBCCC), along with legal support from the Urban Justice Center (UJC), have long been working with tenants in multiple buildings owned by Ved Parkash. Tenants from these organizations publicly announced the formation of the Parkash Tenants Coalition in June 2016, which includes residents in over 10 buildings who are working collectively to address issues in their homes.  The coalition is currently suing Parkash in housing court over four buildings where Signature Bank holds the mortgage, including 750 Grand Concourse, 1530 Sheridan Ave, 2454 Tiebout Ave, and 315 East 196^th St.

But, as we’ve said before, bad landlords cannot do it alone: they need financing. Signature Bank made an $11.6 million loan to Ved Parkash for 750 Grand Concourse in March of 2016. At that time, Ved Parkash was named number one on the NYC Public Advocate’s List of 100 Worst Landlords, which “according to the list, the worst buildings in the Bronx include 2075 Wallace Ave., 750 Grand Concourse, 20 West 190th St. and 875 Longwood Ave.”

In addition to being on the list, conditions at 750 Grand Concourse and other Parkash buildings were covered by the press before this loan was made, including a January 2016 Bronx News 12 story. “At another of Parkash’s buildings, this one on Grand Concourse, another tenant’s ceiling is falling apart due to a leak,” the story reported. “Alice Funmilayo, 70, says that the damage returns every winter. Nothing, she says, is permanently fixed.” Signature Bank was notified about both of these buildings in ANHD’s letter to the bank and its federal regulators at the time of their 2016 Community Reinvestment Act (CRA) exam. One month later, the bank made the loan.

Tenant organizers at CASA have been working in 750 Grand Concourse since September 2015.  Organizers have witnessed serious leaks, rampant vermin, paint peeling (including lead paint), bathroom appliances detached from the walls, and shoddy repair work.  One woman’s toilet and sink were removed and dumped in her bathtub in order to “replace tiles,” where they remained for several days. While holes get loosely patched over, tenants have been without access to their laundry room for over a year because Parkash has not fixed a gaping hole there.

An April 2016 Daily News article about a tenant-led housing court lawsuit leads with the rat problem; “Inside a building on the Grand Concourse blocks from Yankee Stadium, Rico Moreno hears rats scratching at his rotting bathroom tiles when he tries to take a shower,” the article read.

While the number of HPD violations may have gone down in recent months, especially after tenants sued Mr. Parkash for repairs, this February 2017 New York Times article about the recent tragedy outlines longstanding issues in the building, as well as the fact that the Department of Buildings Commissioner reported 750 Grand Concourse as having “some two dozen open violations against the property.” The article also describes how tenants have suffered through his behavior for years.

Yet, Signature ignored the problems, and even continued to work with him by financing his most recent purchase of 2905 Kingsbridge Terrace and 2988 Kingsbridge Terrace with a $16.5 million mortgage. UPDATE: And in early February, Signature made another $5 million loan to Parkash to finance his latest purchase of 11 West 172 Street.

The Toledano Tenants Coalition has also asked Signature Bank to be accountable for their lending. They represent tenants from buildings owned by known bad-actor landlord, Raphael Toledano. Signature made a collateral loan to Madison Realty Capital backed by these buildings.

Lenders must be held accountable for the impact their lending to bad-actor landlords has on communities. This is especially true for lenders like Signature Bank that are covered by the CRA since banks can get CRA credit for loans on apartment buildings where the rents are affordable to lower-income tenants. But regulators are becoming increasingly aware of the problems caused by bad landlords and bad underwriting, and will sometimes not give CRA credit if the buildings are in bad condition or if the loans lead to displacement or a loss of affordable housing. This is clearly the case with 750 Grand Concourse and other Parkash loans. It is time for Signature Bank to reform its practices and make a stronger commitment to responsible multifamily lending in New York City.