The bidding took about twelve minutes, and by some estimates, Robert Manocherian, the trim, dashing young nephew of New York Health & Racquet Club owner Freydun Manocherian, paid about a million more than he should have. But it isn't every day that the city unloads an apartment building on Park Avenue. A handful of the people living in the run-down thirteen-story tower on a tony block near 75th Street showed up at this municipal auction, back in the spring of 1994, and watched as Manocherian beat out three other investment groups with his $4.175 million bid. And afterward, when he shook hands with the tenants whose below-market rents had helped propel this building into tax debt in the first place, the new owner of 823 Park put his best face on. "I'm very pro-tenant," Manocherian told them. "Really, I'm a nice guy."
But within weeks, Manocherian filed an application with the state asking permission to kick everyone out and demolish the place. And since then, as that application has inched its way through the state bureaucracy, the fortyish landlord has methodically set about the grim but entirely legal business of purging the building. After a slew of successful eviction proceedings and deaths by natural causes, the population of 30 at 823 Park has dwindled to 16. To the remaining holdouts, Manocherian is dangling a couple of carrots: for the thirteen rent-stabilized tenants, a check for $1.75 million to divvy up; for the three rent-controlled tenants, lifetime leases in nearby luxury buildings. "Let's understand one thing: We gain absolutely nothing from a delay," says Manocherian's lawyer, Gary Rosenberg. "Every day this goes on, we lose money."
To some of these tenants, a buyout might seem like a get-out-of-jail-free card; New York's rent-control and rent-stabilization laws have changed in ways that have made it harder and harder to hang on to a cheap apartment. But so far, they've snubbed his offers. Instead, they've hired David Rozenholc -- a former partner at the politically connected law firm Fischbein Badillo -- who made his bones foiling the plans of developers like Donald Trump and Peter Kalikow.
In 1997, the stout, bearded lawyer won million-dollar buyouts for each resident of a brownstone blocking the Museum of Modern Art's expansion. And last summer, he scored what could be the biggest per-apartment buyout in history, getting $1.14 million for each of the five remaining rent-controlled tenants of the Cottages, a Depression-era garden-apartment community on Third Avenue.
James Austrian, a consultant hired by developers to negotiate tenant buyouts, calls Rozenholc "one of the toughest S.O.B.'s in the business." Says Michele de Milly, a real-estate-P.R. executive who has worked for the Manocherians in the past, "When any landlord hears that he's involved in a project, they moan."
"If I had a Park Avenue apartment," Rozenholc says coyly, "I wouldn't give it up, either."
There are hundreds if not thousands of these deals being haggled all over Manhattan. Chinks in the state's amended rent-protection laws have helped put rent deregulation well within the grasp of local landlords. And it couldn't have happened at a better time, with the rental market oven-hot. Hefty apartment buyouts that once seemed preposterous now look like win-win deals to landlords who are dying to see turnover in their buildings.
Tenant attorney Sam Himmelstein has brokered buyouts ranging from $10,000 to six figures per apartment, with the most common figure ranging between $25,000 and $30,000. But the potential to maximize profit is astonishing. "I've seen apartments go from $1,800 a month regulated to $10,000 unregulated," he says. "Let's say you pay a tenant $60,000. You can raise the monthly rent by $5,000 and get this money back in one year. If you knew for sure you could invest that on Wall Street and make this kind of money in one year, wouldn't you?"