Some 1,900 market rate rentals in East Harlem and Roosevelt Island will be converted to affordable apartments for low-income New Yorkers.
L+M Development Partners and Invesco Real Estate are behind the venture with their purchase of a $1.2 billion residential portfolio from Brookfield Asset Management and Urban American, according to the buyers. The transaction was first reported by The Wall Street Journal.
The purchase includes about 2,800 apartments in total, two-thirds of which will go affordable and all of which exist in five former Mitchell-Lama developments that left the program in 2005. The Mitchell-Lama program, enacted in 1955, brought income-restricted rentals and limited equity co-ops to formerly blighted neighborhoods.
The developments acquired in the deal were built between 1975 and 1980 and include River Crossing at 1954 First Avenue, The Heritage at 1295 Fifth Avenue, The Miles at 1990 Lexington Avenue, and The Parker at 1890 Lexington Avenue in East and Central Harlem, and Roosevelt Landings on Roosevelt Island.
It’s unusual to see market-rate apartments be converted into affordable apartments these days, but L+M is banking on the property tax breaks that come along with creating the rent-regulated apartments to make the deal financially worthwhile to them. “It’s defensive and more cycle-resistant than conventional executions where you are relying on market forces,” L+M’s managing director Eben Ellertson told the Journal.
The acquisition was funded through the L+M Workforce Housing Fund, which was established to make investments in affordable and workforce housing primarily in the New York metro area.
“More than anything, this deal is win for tenants in these former Mitchell-Lama properties that had been lost over the past decade to the free market,” said New York City Council Member Diana Ayala, whose district includes East Harlem and parts of the Bronx. “Thanks to this agreement, nearly 3,000 units will be protected under a regulatory framework, residents will remain in their homes, and upgrades will be made that can be enjoyed by all tenants.”
L+M and Invesco plan to work with the office of Housing Preservation and Development to enact a regulatory agreement that will extend to existing tenants in the East and Central Harlem properties, and work with the office of Homes and Community Renewal to extend the same protections to Roosevelt Landings, which is governed under state authority.
The preservation framework means not only L+M and Invesco, but future owners of the properties, will have to commit to long-term regulation at the sites. It will also restrict any future new development at the sites to 100 percent affordable housing.