Real Estate Predators Tried to Cash In on the Pandemic. Then Tenants Fought Back


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Source: Mother Jones

Early in March of 2021, Anh-Thu Nguyen called her Brooklyn landlord to add a new housemate to her lease. It was a mundane request, one that the 39-year-old labor organizer had made a handful of times since moving into her three-bedroom apartment in Park Slope on the heels of the last financial crisis.

Nguyen’s home is on the second floor of a prewar building directly across from one of the borough’s largest parks and surrounded by houses worth between $3 million and $5 million. The spot had become a financial refuge for Nguyen and various roommates over the years—creatives, advocates, and other strivers like her whose salaries didn’t keep pace with the city’s soaring cost of living, but who could afford to stay by living there together.

For a couple of weeks, Nguyen’s landlord avoided her calls and emails. Then someone slipped a letter under her door stating that their building was under new management. When she dialed the number on the letter, the person who picked up—someone named TJ—told her that he represented the new landlord, and they were refusing her housemate request. It didn’t make sense to add someone now, he said, because the new owners—a mysterious LLC named after the building’s address—wouldn’t be renewing their lease, even though the housemates had never once missed a rent payment or caused any trouble. A written notice came by email the same day. They had 90 days to vacate the premises.

It was the one-year anniversary of the pandemic’s start in New York City—one year since panicked shoppers emptied grocery shelves of basic supplies and the shock of silence pierced by ambulance sirens overtook the city’s soundscape. The coronavirus was once again raging in New York, and eviction protections remained active. While this was not technically an eviction, it would amount to the same thing: displacement in the middle of a pandemic.

All of this—the appearance of a new corporate landlord and the abrupt end of Nguyen’s lease—was part of a shift that extended far beyond her apartment walls, and even her building. As Covid held Americans hostage, the nation’s private equity investors were trying to capitalize on the distressed New York City real estate market. The same cruelty that awakens after every financial crisis had reappeared: Everyday people suffer while a select world of financiers use the crash to acquire greater wealth.

Nguyen knew none of this yet. But she did know that she didn’t want to leave her home at 70 Prospect Park West. So she did what she’d been trained to do in law school and during her decade of working with employee co-ops and labor advocates: She researched, compiled information, and then hollered from every possible platform until somebody finally listened.

The written notice that Nguyen received in March 2021 was signed by a man named Fred LeCao. She took to Google and figured out that LeCao worked in real estate investing at BlackRock during the 2008 financial crisis, when the mammoth investment firm cashed in on the deluge of foreclosures that engulfed millions of families during the Great Recession by buying up bad mortgages on the cheap using the government’s money, and then waiting for those investments to appreciate. Now, LeCao was a principal at a Manhattan investment firm called Greenbrook Partners—a self-described “vertically integrated real estate operating company” that seeks to “maximize value” by “redeveloping properties” in New York City—and more and more of Nguyen’s neighbors in the building were getting notices from him.

It didn’t take long to piece together the rest: Greenbrook—with funding from a private equity real estate investment firm called NW1—had bought their building and had plans to turn a tidy profit by converting their homes into upscale rentals as the pandemic boiled over. Their previous landlords hadn’t done much to make the building especially luxurious, but it was decent and they’d kept the rents mostly below market, often going years without an increase: Nguyen and her housemates paid $3,350 for a three-bedroom place, only $150 more than the rent when Nguyen arrived in 2009, and a steal in a neighborhood where luxury three-bedrooms can rent for more than $6,000. This made their building a prime target for investors. “They’re pushing people out and jacking up the rent,” Nguyen told her neighbors at a building-wide meeting in June. NW1 had pitched its plan with a more elaborate spin: The company planned to “form a programmatic joint venture…to acquire walk-up, brownstone multifamily properties in Brooklyn’s most in-demand neighborhoods, capitalizing on the area’s attractive demographic trends.”

Nguyen, her housemates, and some of their neighbors commenced a full-on research operation. They suspected that if this was happening to their building, it must be happening elsewhere, too. Pretty soon their sleuthing through real estate records revealed that Greenbrook had purchased at least 52 Brooklyn apartment buildings, 34 since the pandemic began. (As of this writing, those numbers have risen to at least 111 buildings and as many as 146, with the exact total obscured by the opaque ownership structures of some of the LLCs used to purchase the properties.) The neighbors meticulously documented each one in a spreadsheet so detailed that an early version contained the latitude and longitude of the buildings, which were clustered in two areas of Brooklyn: Bushwick, a majority-Latino neighborhood where rising rents have been pushing out longtime residents for years, and their own neighborhood, Park Slope, a swishy stroller enclave with eye-popping home prices thanks to 30-plus years of gentrification. (Sen. Chuck Schumer lives just a few blocks away from Nguyen’s building.) This, along with New York City property records, suggested a two-pronged investment strategy: One part targeted undervalued homes in ritzy neighborhoods, and the other would take active part in gentrifying areas adjacent to brownstone Brooklyn.

A handful of the tenants started knocking on doors and handing out flyers: “Your building was sold to the same developers…who recently bought our building,” they read. “We are fighting back.” As they met more and more tenants, the residents of 70 Prospect Park West, or 70 PPW, found out that Greenbrook had refused to renew leases across many of its purchased buildings, and that hundreds of tenants had already vacated during the pandemic, unaware that they might be able to fight back. They also figured out from New York property records that Greenbrook had secured some major partners: On at least 36 of its properties, it held mortgages in collaboration with Carlyle, one of the nation’s largest private equity firms. Meanwhile, Greenbrook’s flipping strategy was already making money: Within a month of one household’s exit at 70 PPW, their three-bedroom had been spruced up and rented for $7,595 per month, according to its listing on the local website StreetEasy—nearly double the previous rent. (The Carlyle Group did not respond to requests for comment.)

The tenants’ question remained, though: Who was Greenbrook making this money for? They had pieced together that private equity firm NW1 was bankrolling some of Greenbrook’s pandemic buying spree. But private equity funds invest other people’s money: Their investors are typically large institutions, like pension funds or university endowments. So who was the source of all this cash?

The full answer is still unclear. But as Nguyen dug through obscure real estate trade publications, she came across an article that mentioned that NW1 had raised $100 million from an unnamed US investor. NW1’s co-founder called the money a “catalyst” for his young firm, which was founded in 2016 and previously had only about $300 million under management, according to federal disclosures. Another article identified the mystery investor. It was the Texas Permanent School Fund (TPSF), a $50 billion portfolio overseen by the state’s board of education to finance the state’s public school infrastructure. It also happens to be one of the largest sovereign wealth funds in the United States.

The discovery brought the situation at 70 PPW into sharp relief: The pressing public education needs of Texas were being pitted against the pressing housing needs of middle-class Brooklynites. The financiers who had engineered these real estate deals, however, had a stake in neither. They had little to lose and so much to gain.

On a Zoom call in June, a consultant hired to evaluate the Texas school board’s portfolio could not stop gushing about the fund’s private equity investments. Other holdings had faltered in the pandemic-battered economy, but private equity had been the fund’s “boon”—“the real star.” The TPSF’s portfolio was up 29 percent, to nearly $50 billion. “It is generating just gobs of excess return,” he told a conference room full of people in Austin. “Really, private equity has been your home run.”

The audience in the room—which included six members of the Texas State Board of Education—mostly nodded quietly along with his presentation as he pointed to charts and rattled off numbers, his patter dotted with enthusiastic finance-speak.

Over the prior several weeks, the board members had been inundated with letters from tenants in New York City about exactly this private equity strategy, begging them to disinvest from Greenbrook. “We’re alarmed that the Texas public school system is being funded through the mass eviction of tenants in Brooklyn,” wrote one pair of tenants to Tom Maynard, chair of the school board committee overseeing the TPSF. “Greenbrook has already caused significant harm in the midst of a pandemic and your board has the ability to stop them from further uprooting people’s lives.”

The next day, a few concerned members asked the board to discuss what was happening in Brooklyn. Aicha Davis, who represents the Dallas–Fort Worth area, was one of them. “I understand that in some kind of way, we invest in one company that’s funneling the money to another company that’s taking away multifamily housing units,” she said. “We don’t want to take homes away from anybody.” Two other members also tried to sway their colleagues. “Couldn’t we look around for some other kind of investment that doesn’t give us the reputation of benefiting from the misfortune of people in a community far away from us?” asked Rebecca Bell-Metereau of San Marcos, while Ruben Cortez Jr. of Brownsville called on the board to stop financing “predatory rental practices.”

But the investment advisers at the meeting assured the board that this framing was all wrong. What they were doing was typical for the real estate business—and actually helping people. “It is absolutely not predatory,” said Steve Novick of the private equity firm StepStone Real Estate Group, which had been hired to consult for the TPSF on its real estate investments. “The business strategy is not in any way to evict anyone. It is to improve the quality of living for renters in New York City.” (StepStone Group declined to comment for this story.)

Back in Brooklyn, the quality of living for Greenbrook’s tenants had not improved. During construction ordered by Greenbrook to flip the apartment directly above Nguyen’s, the ceiling in her shower collapsed, just minutes after her housemate had used it. (There’d been a long-standing leak that the previous landlord had patched, and Greenbrook had ignored warnings from Nguyen and her housemates that the upstairs construction had exacerbated the problem.) In another Greenbrook building, the firm commenced simultaneous renovations on nearly half of the building’s units, stirring up so much construction dust that tenants wore masks in common spaces. One tenant with asthma was hospitalized for four days from the pollution, according to a summary from local lawmakers. A couple with a newborn found themselves in another Greenbrook property without heat and hot water after the new landlord began demolition to renovate the unit above theirs. Other tenants in Greenbrook buildings filed reports with the local buildings department about contractors disposing of debris from a fire escape, leaving it in common spaces, and doing noisy construction without permits during prohibited hours.

At 70 PPW, as with many all-renter buildings in coveted NYC neighborhoods, tenants and their old landlords had struck a delicate balance: The tenants humored some maintenance delays and inefficiency in exchange for below-market rent on solid homes in an unbeatable location. Greenbrook upended this arrangement by not only trying to kick tenants out but also beginning construction projects, seemingly unconcerned with disturbing them.

At Nguyen’s direction, the tenants of 70 Prospect Park West expanded their counterattack. They managed to get the attention of Brad Lander, their district’s representative on the city council and a longtime tenants’ rights advocate. (Lander was later elected to serve as New York’s comptroller in November 2021.)

Council member Lander’s office—in cooperation with a member of the New York State Assembly and a member of the city council in Austin, Texas—put together a 12-page memo outlining Greenbrook and NW1’s strategy in plain language. They compiled the findings of the 70 PPW tenants, who by now had identified 54 Greenbrook buildings with more than 1,000 tenants. The officials contacted tenants in a dozen of those buildings. “In every case, the story is the same,” they wrote. “Greenbrook’s business model is to evict rent-paying tenants from their homes.” They surmised that Greenbrook and NW1’s profit motive revolved around the pandemic: The firm seemed to be trying to buy up as many multifamily buildings as possible, just as the rental market was set to rebound upon the reversal of New York’s Covid exodus.

The council members sent their memo to the Texas Permanent School Fund, and asked the fund to divest from NW1 and Greenbrook, “to stop the financing of a business model premised on mass eviction,” they wrote. “The evictions are not an unfortunate side-effect of their strategy; they are the fundamental logic that drives it.” On the same day, Lander joined tenants of 70 PPW for a rally outside their building to formally launch the push for Texas to divest.

The suggestion that Texas pull its $100 million investment caught the attention of David Boyle, NW1’s managing partner. A few days later, Boyle sent Lander an email.

“Dear Councilman Lander,” he wrote. “I am the son of two career social workers in New York. I am certainly not out to hurt anybody, but simply improve the quality of rundown housing with poor infrastructure in your district to make better living experiences for families.” He explained that Park Slope housing conditions were often slipshod, left to deteriorate by absentee owners. His firm had purchased “free market units,” and their investment would improve buildings’ environmental efficiency, not to mention subsidize lower rents for those who “truly” could not afford to stay otherwise. “There is no free lunch—we need to invest for progress and to help the truly less fortunate.”

At their meeting a couple of weeks later, the 70 PPW tenants were incredulous. Park Slope is one of the most coveted neighborhoods in Brooklyn, and their building—with its marble accents, tall ceilings, and a chandelier in the lobby—is far from the hovel Boyle seemed to be implying he’d so charitably invested in.

“He’s basically saying that they’re taking properties that are neglected, and that through the process of basically evicting some of us they’re subsidizing rent-controlled units and helping the truly needy?” said one tenant, trying to suppress a chuckle. “That doesn’t make any sense.” (Eight units at 70 PPW are protected by a city program that limits rent hikes. Greenbrook has not asked those rent-stabilized tenants to leave, though it has attempted to force out stabilized tenants in other buildings.)

Boyle made no such claims in comments about his plans to the press. There was no mention of public service or affordable housing. Rather, the goal for Texas’ $100 million investment was to pursue profitable “opportunities” arising from “Covid-19 induced market distress.” In partnership with Greenbrook, he said, NW1 would pour $25 million of that money into Brooklyn apartment buildings, in anticipation that they would eventually soar to $150 million in value—a 500 percent gain to be shared among all parties.

When Nguyen stumbled across Boyle’s statement during her research, the plainspokenness of his description made a lasting impression. “I’m amazed by how brazen it is, and that this is happening in plain sight,” she says. “You don’t know what you don’t know—until it happens to you.”

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