Another Investors Bank Loan, Another Bad Landlord

Investors Bank is at it again, with signs of concerning lending practices. Investors Bank is based in New Jersey with a growing presence of loans and branches in NYC and is emerging as one of the larger multifamily lenders in the City.

Just six months ago, ANHD blogged about Investors bank putting millions of dollars into five buildings owned by Joel Israel, who, according to multiple media reports, has made a practice of demolishing occupied apartments as a means of forcing tenants to leave. And now, the bank is at it again financing buildings owned by Seth Miller, who has been embroiled in litigation for over a year for refusing to provide adequate heating to tenants in Brooklyn.

According to a major article on the front page of the New York Times’ real estate section, tenants are facing a severe lack of heat in two Brooklyn buildings at 930 and 940 Prospect Place:

Since December 2013, residents of 940 and the adjoining building at 930 Prospect Place have made more than 100 complaints about lack of heat or hot water…. The owner of the Prospect Place buildings, Seth Miller, is on the Public Advocate’s Worst landlord list, too, for two buildings his companies own in the Bronx. (Bronx buildings on the Worst Landlord List are 919 Prospect Avenueand 3805 Review Place).

The NY Times goes on to indicate that Mr. Miller is also trying to remove lower-income tenants:

To the tenants in the suit, most of whom pay below-market rents, the case is about not just heat, but also gentrification. Mr. Miller has brought suits to remove residents from nearly one-third of the buildings’ 32 apartments, challenging their leases’ validity or claiming other grounds.

Tenants in these buildings sued Mr. Miller for the lack of heat in January 2014 to no avail. Public documents show that Investors Bank made a $2.7 million loan on these buildings at that same time, but clearly the problems remain. A year later, tenants are still without consistent heat, without resolution.

The community is taking notice, and the bank’s regulators should take notice, as well. Under the Community Reinvestment Act (CRA), banks are typically evaluated every two to four years on their record of loans, investments, and services that benefit low- and moderate-income people and neighborhoods. While multifamily lending for affordable housing is an essential aspect of a bank’s obligation to meet local credit needs in New York City, bad lending is as damaging as good lending is necessary. We believe that this tenet holds true for all multifamily loans, but is particularly important in low- and moderate-income neighborhoods and in buildings subject to rent-regulation.

Responsibly underwritten multifamily loans must be made to responsible landlords who are committed to maintaining the buildings in good condition and respecting the rights of the tenants. They must be based on actual rental income, and not speculative rents that would only be possible if lower-rent paying tenants were forced to move out and be replaced with higher rent paying tenants; and based on realistic and sustainable management and operating expense budgets.

In making loans to Seth Miller on these buildings, it appears that Investors Bank is not following these best practices.

New York City has already lost thousands of affordable units due to irresponsible lending practices and cannot afford to lose one more. Just as ANHD did during Investor’s CRA exam, ANHD again urges the bank’s regulators at the FDIC to look closely at all multifamily loans in the bank’s portfolio, and particularly any that are being submitted as Community Development loans to ensure that they are providing stable, affordable housing and not having a destructive impact on the tenants or the community.