The Wall Street Journal - 28.10.2019

THE WALL STREET JOURNAL. ** Monday, October 28, 2019 |A10A

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Richard Ellenbogen, top, installed solar panels at his factory, allowing him to sell about $21,000 in solar renewable-energy credits a year. The factory makes plastic packaging for a variety of goods.

of one group of these properties around East 117th Street could have jumped 30% in just five years, according to a prospectus circulated to investors. The previous law allowed virtually unlimited rent in-

creases for apartment-renova- tion work and other rent bo- nuses awarded to landlords during vacancy periods. Vacancies could be achieved by paying tenants to leave. At one Harlem property, Emerald

GREATER NEW YORK

Hill started missing payments on the loans over the summer, according to bond records and people familiar with the matter. “Like many property owners and lenders, we are simply ad- justing to the new regulations, and that will take some time to do,” said an Emerald spokesman. Industry experts expect other landlords to fall into financial trouble as the rent laws push down income and property values. “These are not isolated incidents,” said Ofer Cohen, president of TerraCRG commer- cial real-estate brokerage. “We expect to have more of those in the next 18 to 24 months.” Meanwhile, the dollar vol- ume of rental-apartment building sales in New York City fell 51% in the third quarter from a year earlier, according to a new report from brokerage Ar- iel Property Advisors. Between 2016 and 2018, Isaac Kassirer’s Emerald acquired hundreds of affordable rental apartments in Harlem with a plan to raise rents through methods then allowed by law. If successful, the appraisal value

paid a tenant $6,500 to per- manently vacate a rent-stabilized, two-bedroom apartment that leased for $1,095 a month, far below the market rate for the neighborhood, investor documents show. After the buyout, the rent doubled. Now, Mr. Kassirer’s firm is delinquent on loans totaling $86 million on its East 117th Street properties, as well as on $85 million in mortgages on a 209-unit rental-apartment portfolio in the Manhattan Valley neighborhood. After Mr. Kassirer bought the Manhattan Valley properties in March 2018, he planned to deregulate 97 rent-stabilized apartments, an investor prospectus said. Sugar Hill, a Harlem-based landlord and developer, missed mortgage payments on rental apartment buildings on Cen- tral Park West. Loans to both firms were packaged into collateralized loan obligations, a type of se- curity that is similar to the mortgage-backed bonds that contributed to the financial cri- sis and recently regained popu-

larity with investors. LoanCore has agreed to buy back the delinquent loans out of the securities offering, records show. Emerald and LoanCore are in talks to resolve the matter, and it is possible the loans will be restructured or the lender will end up taking over the properties, according to a per- son familiar with the matter. Because the outstanding loan balance is about one-third less than what Emerald paid for the properties, the lender likely would only lose money if their value drops significantly. Shimon Shkury, president of Ariel Property Advisors, said he anticipates some foreclosures on landlords across New York City, but in most cases borrowers and lenders will agree to renegotiate loan terms. “The lenders will try to work it out any which way they can before it comes to fore- closure,” he said. Investment funds and family offices are lin- ing up to buy distressed buildings, he noted. “They see the possible opportunity of lower prices, something they’ve never seen before,” he said.

Two New York landlords with
large portfolios of rent-regu-
lated apartments are behind on
payments on more than $
million in real-estate loans, a
sign that new state rent laws
are starting to hurt investors.
The new laws, which took
effect soon after passage in
June, made it significantly
harder to raise rents on apart-
ments subject to regulation,
thwarting the business plans of
speculators who acquired prop-
erties under the previous laws.
The loans, issued by asset
manager LoanCore Capital LLC
and packaged into securities, fi-
nanced more than 600 rental
apartments in Upper Manhat-
tan, some owned by Emerald
Equity Group and others by
Sugar Hill Capital Partners. The
owners bought the properties
in recent years with plans to
renovate or deregulate rent-sta-
bilized units and drive up rents.
But after the state legisla-
ture passed its rent-reform
package, Emerald and Sugar

BYWILLPARKER
ANDKONRADPUTZIER

New Rent Laws Squeeze Some Landlords

A 107th Street building in Manhattan owned by Emerald Equity.

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A New York Police Depart- ment officer who was hit with a metal chair and fatally shot the attacker during a vi- olent confrontation Friday is improving after he was placed in a medically induced coma, a police official said. The uniformed officer was attacked Friday at about 5: p.m. while he and another officer were attempting to arrest a man who had an open warrant for trespassing and had been urinating inside a nail salon in the Brownsville section of Brooklyn, the officials said. During a struggle to arrest the suspect, another man came into the shop and be- gan fighting with the officers, according to NYPD Chief of Patrol Rodney Harri- son. A police official identified the suspect who was killed as Kwesi Ashun, 33 years old. A relative didn’t respond Sun- day to a request for com- ment. The NYPD hasn’t identified the officer who was attacked. A police spokesman said the 21-year veteran is assigned to the 73rd Pre- cinct. On Sunday, a police official said the officer had im- proved and was in stable condition at Brookdale Uni- versity Hospital and Medical Center in Brooklyn. “This police officer spent his career in our busiest pre- cinct, serving the community, and he was set upon for no reason,” Patrick Lynch, president of the Patrolmen’s Be- nevolent Association, said Friday at the hospital. Dewayne Hawkes, the man who allegedly urinated in the salon, wasn’t shot during the incident, the spokesman said. The 26-year-old was arrested and charged with criminal trespass, disorderly conduct and interfering with govern- mental operations, the spokesman said. His next court appearance is Nov. 25. Mayor Bill de Blasio said Saturday that the incident was under investigation. “This is a very serious sit- uation, but the one thing that we know from the infor- mation that we have so far is a civilian assaulted a police officer violently, and that is not acceptable,” the mayor said at an unrelated news conference. The attack was the sixth incident in the past few weeks in which NYPD officers shot a suspect. On Sept. 29, NYPD Det. Brian Mulkeen was killed in a Bronx firefight that also claimed the life of a suspect he was trying to restrain, officials said. Since then, there have been five police-involved shootings in New York City, with four suspects being killed, according to police officials.

BYKATIEHONAN

Officer Is

Improving

Following

Attack

Andrew Cuomo, whose admin- istration has blocked pipeline applications for environmental reasons, in July signed a bill that committed the state to re- ducing its greenhouse-gas emis- sions by at least 85% by 2050. Mr. Ellenbogen acknowledged that many wouldn’t consider plastic manufacturing to be environmentally friendly. But he said his business is making a univer- sally used product in the most

sustainable way possible. “Being a closely held company that doesn’t have to answer to share- holders, I made a decision to take the long view,” he said. “We have to leave something for fu- ture generations so that they can have a viable planet to live on.” When he renovated his building, Mr. Ellenbogen installed a cogeneration system that makes electricity and heat with very little thermal-energy

loss. He now pays $39,000 a year for electricity and natural gas for his 55,000-square-foot building, which he said is about the same amount he spent on electricity two decades ago when his factory was about a quarter of the size. He also installed solar panels, which allow him to sell about $21,000 in solar renewable-energy credits a year. That, and the proceeds from Allied Con-

verters’ recycling program, have reduced the company’s total waste-removal and energy costs to a net $6,000 a year, he said. From a financial standpoint, the amount Mr. Ellenbogen saves on energy expenses has made all the difference in high-cost Westchester County, where the number of manufac- turers fell to 561 in 2016 from 711 a decade earlier, according to the U.S. Census. John Ravitz, executive vice president and chief operating officer of the Business Council of Westchester, said more businesses are embracing envi- ronmentalism as a way of low- ering energy costs. But he said the state needs reliable energy supplies in the meantime. Con Ed says businesses can apply for natural-gas hookups if they switch to an alternate source when demand gets too high. “We believe the steps we are taking will help us main- tain safe, reliable service as we transition to renewables,” a spokesman said. Mr. Ellenbogen says he’s proof that businesses can reduce their fossil-fuel dependency, but he doesn’t think New York can avoid building more pipeline. “I don’t disagree with what the environmentalists are trying to do,” he said. “I disagree with how they’re trying to do it.”

NEW ROCHELLE, N.Y.—
Plastics manufacturer Richard
Ellenbogen has found a way to
keep the lights on: He makes
his own electricity.
Mr. Ellenbogen’s business,
Allied Converters, has been
making plastic packaging here
since his father started the
company in 1954. The factory
makes between 4 million and 5
million pounds a year of plas-
tic packaging.
An electrical engineer con-
cerned about climate change,
Mr. Ellenbogen started reno-
vating his building nearly 20
years ago with the goal of re-
ducing its environmental im-
pact. As a result, he saves elec-
tricity and money at a time
when the broader business
community in Westchester
County is sounding the alarm
over what some say is an im-
pending natural-gas shortage.
“Basically, our energy usage
over 20 years has gone down,
while everybody else’s has
gone up,” he said. “That’s how
we’re able to stay here.”
Consolidated Edison Inc.,
which delivers gas via 4,
miles of pipes to 1.1 million
customers including most of
Westchester County, stopped
accepting new applications for
natural-gas hookups in March,
claiming existing demand has
stretched the limits of its
transmission pipeline. Energy
supply also is being squeezed
by the impending shutdown of
the nearby Indian Point nu-
clear power plant.
Con Ed’s moratorium
sparked an outcry among local
elected officials and business
leaders, who warn developers
won’t want to build in
Westchester if they can’t hook
up to natural gas, which is
cheaper and considered more
environmentally friendly than
oil. Business advocates, in par-
ticular, are pushing the state
to allow for the building of
new pipeline, a move opposed
by environmentalists who fear
it will deepen the state’s de-
pendency on fossil fuels and
pollute the state’s waterways.
New York hasn’t allowed
new construction in years. Gov.

BYKATEKING

Plastics Maker Leads Clean-Energy Push

STATE STREET|By Jimmy Vielkind

Early Voting Change Expected to Boost Turnout

It is still a
week before
Election Day,
but New York-
ers are able to
cast their votes
at early polling sites for the
first time—a move supporters
say will increase turnout and
alter campaign strategy.
State lawmakers enacted
early voting in their last leg-
islative session, delivering a
victory to open-government
advocates such as Common
Cause Executive Director Su-
san Lerner.
The law requires counties
to establish one early polling
place for every 50,000 regis-
tered voters, with a maxi-
mum of seven. Some coun-
ties have exceeded this
requirement: Nassau County
has 15 sites, and New York

City has 61. There are nine days of early voting, ending on Sunday Nov. 3—two days before Election Day. The new system will help election officials work out bugs and help people with rigid schedules, Ms. Lerner said. “It takes the stress off Election Day,” she added. Election officials said they wish they had more time to prepare for early voting. Some counties purchased electronic poll books and printers, technologies that haven’t been widely used. There also were complaints about the cost—part of which was covered by the state— from county officials and Re- publican State Committee Chairman Nick Langworthy. Bruce Gyory, a political consultant at Manatt, Phelps

& Phillips LLP, said he expects whatever turnout gains occur to cut across political lines. “When a constituency is energized but has trouble making the polling hours, it will help,” he said. “It’s probably going to help blue-collar workers. If you’re in a rural white area, that will probably help more conservatives. If you’re in an urban area, it will probably help minority voters and single moms.” Doug Forand, a founder of Red Horse Strategies, a political-consulting firm that usually works for Democrats, said campaigns will be able to devote more time to get- out-the-vote operations, while continuing their work to persuade voters. The im- pact in this year’s elections, where state and federal of-

fices aren’t on the ballot, will be minimal, he said. WFP CHANGE:Bill Lipton, who has led the New York State Working Families Party for the last five years, will pass the reins to someone else as he takes on a new role with the national party focus- ing on the Green New Deal. WFP National Director Maurice Mitchell said he had tapped Mr. Lipton for his new role, which already has begun, and that he would be bringing on a new state director. Mr. Lipton will continue to work closely on New York matters as a strategist and consultant, Mr. Mitchell said. Both men said this past year has been one of signifi- cant gains for the left-lean- ing party. It backed progres- sive candidates who won

Democratic primaries against six of the eight senators in the GOP-allied Independent Democratic Conference. Democrats last year won enough seats to capture the state Senate majority—and by extension, all levers of New York government—for the first time in a decade. Mr. Mitchell said he is looking to build on the mo- mentum. Mr. Lipton said he sees the change as an opportunity to bring more political talent into New York. Messrs. Lipton and Mitchell said Mr. Lipton would focus on building a coalition to fight for the Green New Deal. “We see this as a seminal fight— perhaps the seminal fight—of our time,” Mr. Lipton said.

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The Wall Street Journal - 28.10.2019

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