[COMM-ORG] Article: Victory in El Barrio

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From: Movement for Justice in El Barrio 
<movementforjusticeinelbarrio at yahoo.com>


Victory in El Barrio: East Harlem Tenants Win One As British ‘Predatory 
Equity’ Landlord Collapses
By Jennifer Janisch
 From the November 17, 2008 issue | Posted in Local | Email this article
UNMOVABLE: British landlord Dawnay, Day hoped to force rent-stabilized 
tenants like Filiberto Hernandez (Left) out of the 47 apartment 
buildings it purchased in East Harlem in 2007. However, Dawnay, Day’s 
plans went up in smoke after the global financial crisis struck the 
over-leveraged company. [It] is a powerful, rich company, and it has 
fallen as a victim of its own devices,” Hernandez says. PHOTO: JAMIE LEHANE

The global economic crisis that has shaken the real-estate industry has 
one tenant organization in East Harlem celebrating victory over a 
British landlord.
After nearly two years of community organizing, demonstrations, an 
innovative lawsuit and international campaigning, Movement for Justice 
in El Barrio (MJB) — an East Harlem collective of mostly Mexican 
immigrants — is calling its battle with failed financial-services firm 
Dawnay, Day “a triumph of David and Goliath proportions.”
Dawnay, Day purchased 47 buildings in the neighborhood for a quarter of 
a billion dollars in March 2007. It was the British firm’s only foray 
into the U.S. real-estate market, following the lead of several large 
property firms that over-leveraged their investments in New York City 
residential buildings over the last couple of years and are now paying 
the price.
The London-based company, which manages more than $10 billion in assets 
worldwide, has become one of Europe’s most high-profile casualties of 
the international financial crisis. It is now under the administration 
of accounting firm BDO Stoy Hayward and the real-estate advisor DTZ, 
which are charged with restructuring the company and selling its 
property holdings.
Neither BDO Stoy Hayward nor DTZ would comment on the status of the 
transactions. But according to PropertyWeek. com, final bids were 
submitted November 7 by Threadneedle, F&C REIT Asset Management, 
Criterion Capital and Exemplar. Two unknown U.S.-based cash buyers are 
submitting bids as well.

‘INSPIRED BY TENANTS’
Organizing in the buildings began more than five years ago, when they 
were owned by Steven Kessner, who was once named one of New York’s ten 
worst landlords by the Village Voice. Originally, about 15 tenants met 
in the lobbies of their buildings to discuss ways to confront Kessner 
and get him to make repairs. They expanded their initiative to his other 
buildings.
Since they had little experience organizing, the tenants turned to Juan 
Haro, who once worked organizing restaurant workers, to help them 
develop a strategy.
“I was inspired by these tenants who wanted to initiate something and 
really just didn’t know how,” says Haro, the coordinator of MJB. “A lot 
of people have this stereotype that immigrants live in fear and don’t 
want to take on such a battle, but we found the opposite: tenants were 
fed up with the conditions they were living in and ready to take action.”
After MJB held protests to draw attention to Kessner’s negligent 
management practices in East Harlem, he sold his 47 buildings to Dawnay, 
Day. MJB decided to put the British financial firm on notice.
“We held a press conference warning Dawnay, Day, saying ‘Welcome to El 
Barrio. We will not be moved, we are here to stay,’” says Haro. “You may 
not know this, but you bought buildings where tenants are organized.”
Dawnay, Day representatives clearly stated their intentions to the 
British press.
“East Harlem is the last area of the whole of Manhattan being 
gentrified. Our intention is to build up,” Phil Blakeley, leader of the 
firm’s U.S. expansion, told the London Times. “We are not just looking 
at New York — that is just a start. Our aim is to have in excess of $5 
billion within a short period — within a few years.”
Blakeley added that he was attracted by the opportunity to raise rents 
on vacant apartments. “With renovation, a flat could well take $1,700 a 
month once re-let on the open market,” he said, adding that long-term 
tenants could be bought out.
“They were planning to take advantage of New York’s lax rent laws,” Haro 
says.

RATS AND ROACHES
According to some tenants, the negligent maintenance continued under 
Dawnay, Day’s management. (The British firm could not be reached for 
comment.)
Andres Hernandez lives with his family ina Dawnay, Day building on East 
117th Street. He gestures toward a gaping hole in his kitchen wall, near 
the stove. He says the superintendent replaced the apartment’s small 
boiler with an electric heater months ago, but has not yet sealed the 
wall shut.
“People in the building say they want to force all the Hispanics out and 
fill the building with white people,” he says.
Carolina Ortega has lived with her father and her children on East 116th 
Street for decades. She says Dawnay, Day has tried to force them out by 
ignoring their pleas for extermination of the rats and roaches that 
infest their apartment.
“They do things for the new tenants, but not for us,” she says. “We’ve 
taken them to court two or three times, but we haven’t said anything 
lately because my father doesn’t want to fight it anymore.”
MJB has filed a lawsuit against Dawnay, Day, claiming the company 
violated consumer- protection laws by using deceptive business 
practices. Despite the company’s financial turmoil, MJB says it does not 
plan to drop the suit.
MJB’s attorney, Ed Josephson, recently filed a motion to obtain Dawnay, 
Day’s financial records. He says the company was slapping tenants with 
suspicious bills, citing charges they did not owe.
“They invent phantom charges to make us leave here,” says Filiberto 
Hernandez, a mechanic who lives in a Dawnay, Day building on East 106th 
Street and is an MJB member. “They say the rent arrives late and they 
overcharge us.”
Tenants say the company offered them buyouts of $10,000 to vacate their 
apartments. They have also reported that Dawnay, Day charged them for 
ordinary maintenance and for washers and dryers that they do not have.

THE HARDER THEY FALL
Dawnay, Day isn’t the only private-equity company that over-leveraged 
its investments in rent-stabilized apartment buildings. A recent report 
by the Association for Neighborhood and Housing Development (ANHD) 
states that from 2006 to 2007, projected income — not actual income — 
was used to justify inflated loan amounts for an estimated 90,000 units 
of affordable rental housing in New York City.
Perhaps the most notable example was Tishman Speyer’s purchase of 
Stuyvesant Town and Peter Cooper Village from MetLife. The firm bought 
the 80-acre, 11,200-unit complex of mostly rent-stabilized apartments 
for a recordbreaking $5.4 billion in 2006. In late September, Standard 
and Poor’s downgraded ratings on 22 classes of mortgage-backed 
securities related to these properties. It estimates that the complex is 
now worth 10 percent less.
In Harlem, Riverton Houses and Savoy Park are on the verge of default as 
well. Their new owners failed to meet their projections that they could 
double or triple their income by bringing rents up to market rate. 
According to the ANHD report, which cites SEC “Free Writing Prospectus” 
filings, Savoy Park’s landlord had anticipated increasing its net 
operating income (NOI) from $7.4 million to $19 million over a five-year 
period. The owner of Riverton Houses believed it would increase its NOI 
from $5.2 million to $23.6 million in the same timeframe.
Although investors claimed they could turn over the rent-stabilized 
apartments at a rate of 20 to 30 percent each year, the reality is that 
tenants won’t move out voluntarily at that rate, as they know they can’t 
find equivalent affordable housing. The average annual turnover rate is 
3 to 5 percent, making the quick profits these firms envisioned next to 
impossible without employing high-pressure eviction tactics.
ANHD deputy director Benjamin Dulchin says that despite tighter access 
to credit and the bursting of the national housing bubble, he doesn’t 
see a transformation yet. “I think these investments will slow, but 
firms will continue to argue that these assets are undervalued,” he 
says. “They’ll say ‘if only we can get rid of these pesky 
rent-stabilized tenants, we can reap a large profit.’”
Haro says it’s unlikely the tenants will have a cordial relationship 
with another big financial firm.
“We’re more ready than we were before Dawnay, Day bought these 
buildings,” he says. “The tenants know their rights and are ready to fight.”
Members of MJB were poised to travel to London to confront Dawnay, Day 
when they heard the news that the firm was collapsing and had to sell 
its property holdings. They recently held a march in East Harlem to 
celebrate their victory.
Hernandez says the Dawnay, Day tenants aren’t fearful of the future.
“We are very happy,” he says. “We feel it is a great success for us. 
[Dawnay, Day] is a powerful, rich company, and it has fallen as a victim 
of its own devices.
“We are a people that is fighting for the right to live with dignity.”