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Kicking People out and Raising Rents Ultimately Led to Foreclosures

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It was a cascade of troubles – first it hit Riverton Houses at Harlem and then went on to blight Stuyvesant Town and also Peter Cooper Village on the East Side of Manhattan.

Now it is the turn of another complex constructed by Metropolitan Life during the 40s for the veterans as well as the middle class household. Speculators had purchased during the recent housing boom but now there are rumblings of financial trouble.

Those who own Parkmerced Apartment Complex located in San Francisco said that they would no longer be able to pay for their $550 million mortgage that is due in October.

A partnership comprising of Stellar Management and Rockpoint Group had already surrendered Riverton Houses to foreclosure last March. Laurence Gluck of the partnership issued a statement recently point to troubles of Parkmerced that comprises of 3,221 units. The blame was put on the current health of the economy.

Speaking on behalf of the owners P.J. Johnston said that the scenario had suddenly changed with the economy being badly hit. The result is that many properties are now defaulting.

The Parkmerced’s owners like that of Riverton and Stuyvesant Town had taken advantage of the hot market to replace the usual tenants by others who could pay more fancy amounts. In all three instances, the owners invested heavy amounts in giving aging structures a new facelift. But finally they did not succeed in increasing sufficient revenue to make up for the debts incurred. The recession was of no help.

Andrew Florio of Red Capital Analytics commented, “It’s pretty interesting that they have all ended up in the same place. People assumed they could boost revenues by kicking people out and raising rents.”

The 60,000 tenants of Parkmerced covering 115 acres were informed by Stellar that their lives would not be disturbed. They were having talks with the lenders (including Deutsche Bank) to restructure the debt. Once this is done they would proceed as usual with their expansion plans involving $1.2 billion. The present units would increase by three times when the programme would be completed.

The statement added that all phone calls would be attended to and problems addressed. The maintenance department would execute all the work orders and the leasing section would continue with renting out the new apartments. This assurance was given by Seth Mallen of Stellar.


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