As Rent-Stabilized Properties Encounter Difficulties, NYC Firm Forms Division to Provide Third-Party Services

Kaled Management Corp. announced it has formed a division to provide third-party asset and property management services to owners of rent-regulated apartment properties in New York City.

The division, Kaled Residential Asset Management, will be spearheaded by Jordan Platt, the company’s vice president of Operations.

“We are uniquely qualified to take over the management of stabilized apartment buildings on behalf of lenders and institutions that are now holding the keys to assets that are among the most complicated and challenging to run profitably and well,” said Edward Kalikow, president of Kaled Management.

During the financing-fueled commercial real estate bull-run of the mid- to late-2000s, many investors purchased large portfolios of rent-stabilized properties in New York City at high prices and aggressive future income projections. Many of these properties are now facing difficulties in covering their debt costs.

Stuyvesant Town and Peter Cooper Village was reportedly the largest portfolio purchased, by Tishman Speyer in 2006 for a record $5.4 billion. By Sept. 2008, The New York Times reported, the company had spent $224.4 million out of its $400 million interest reserve fund.

Kalikow tells MHN there are at least 20,000 units of stabilized housing in various stages of foreclosure in New York City.

Kalikow said his fourth generation family firm has more than 30 years experience in “this very particular niche of ownership and management – despite onerous rent laws, aging structures and equipment, and complex tenant relations.”

“It is a tightrope walk that requires vigilance, knowledge of bricks-and-mortar as well as rules and regulations, and a hands-on approach to maintain the highest possible occupancy rates,” said Kalikow.

Kaled Residential Asset Management said it will serve owners of individual apartment buildings and portfolios of rent-stabilized housing to “insure the successful maintenance of the property and enhance each asset for long-term ownership or disposition.” The division offers accounting and back-office operational services, as well as on-site property management, and asset maintenance, including the planning and execution of capital improvements.

“We bring an owner’s perspective to property management,” said Kaled Residential Asset Management’s Platt. “This means that we keep a keen focus on the bottom line as well as maintain the property at the highest level to enhance its value year after year.”

Rent stabilization was created in 1969. The city Rent Guidelines Board sets the rents and the rent increases. About 300,000 units have been removed from rent stabilization since 1993 when lawmakers changed some of the laws. Many of the most aggressive purchases made in the 2000s by investors were based on the assumption that they could convert more of the units to market-rate, a strategy that has not been as successful as projected.

“There have been a number of opportunistic investors that viewed rent-stabilized housing as a treasure trove opportunity, with overly aggressive plans to destabilize the units into market-rate rentals,” said Platt. “But we view these assets as serving an important purpose—providing work force housing to New Yorkers—and also provide an evergreen, conservative income when managed by people who know what they’re doing, and how to work well with their tenants and within the confines of the complex stabilization regulations.”