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Fannie Mae Cancels Bronx Multifamily Auction
Fannie Mae has canceled an online auction of decrepit Bronx apartment buildings that was scheduled for next week, the company said. The 25 buildings had been owned by Ocelot Capital Group, which had fallen into foreclosure and left the buildings in disrepair, with buckling ceilings, missing front doors and broken locks. Ten of the buildings were placed on the city’s worst buildings list in 2007 and 2008, racking up 5,000 serious and immediately hazardous violations of housing maintenance code.
Fannie Mae purchased the mortgages from Deutsche Bank, the originator of the mortgages, after Ocelot declared bankruptcy. Local officials and tenant advocates had become concerned when Fannie Mae put the portfolio of Bronx properties up for sale. They feared that the properties would be bought by predatory investors who might try to over a high purchase price by squeezing rent out of them while they failed to maintain them properly.
The auction was originally scheduled for Wednesday, but it was canceled earlier this week, said Jon Searles, a spokesman for Fannie Mae. It is unclear how the buildings will be sold, but tenant groups have indicated a hope that the properties could be passed to nonprofit organizations. The goal is to transfer the mortgage loans to a responsible owner; exactly how we are going to get there is something we are still working with the city on,” Searles said.
He added that both Deutsche Bank and Fannie Mae would work with the court-appointed receivers to address safety issues at the Ocelot buildings. Rafael Cestero, the commissioner for the Department of Housing Preservation and Development, said his agency had sent out information about the Ocelot properties to 15 long-term owners of properties, both nonprofit and for-profit organizations.
“There are people who do this and we do this all the time,” Cestero said. “We know how to get the right kind of owner in place who can take care of these properties.” He said all 15 had indicated some interest. Formal responses are due Monday. Senator Charles E. Schumer, who has been personally lobbied the head of Fannie Mae to cancel the auction, said in a statement, “This is great news for the Ocelot tenants and everyone who has been involved in the fight to preserve these buildings.”
Source: Fannie Mae Cancels Auction of Bronx Buildings, Jennifer 8. Lee, New York Times, 8/7/09
To make this property more attractive to potential non-profit or other preservation minded purchasers, Fannie Mae really should stay in this deal and not simply auction it off. Fannie Mae does not advertise the flexibility that they have to structure deals like this with responsible buyer/borrowers, but my organization deals with this daily and we know they can do it. However, before Fannie agrees to take the write down and let this project go, the new buyer is going to have to show a real and viable strategy for addressing the capital needs at the property. Once that is in place, I think Fannie Mae could do the right thing and help this project go to a responsible party.
For all the tenants involved, let’s hope this is the case.