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The High Cost of Leaving

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A good chunk of today's buyouts can be chalked up to Sherwin Belkin -- a landlord attorney who untangles rent-regulation issues for the Milsteins, the Rudins, Harry Macklowe, and Trump. A tall, soft-spoken lawyer who publishes a newsletter with tips for landlords looking to take every advantage of the rent-regulation rules, Belkin figures that his firm single-handedly evacuated 500 apartments in 1998. He expects the same kill rate in 1999. "In my experience," he says, "it's the very rare tenant who has no price."

This spring, after almost two years of wrangling, Belkin paid to move the last tenant out of a twelve-unit building in the East Fifties. The final buyouts were six figures per tenant. "Had they fought me and had I won," he says, "I still would have had to pay each of these people $60,000" -- following the formula set by the law governing the demolition of rent-regulated buildings. "I paid more. Why did I do that? The hearing could have taken months, and then more months for a decision. The appeal could take a year or more. Tenants could then appeal it to State Supreme Court." Unwilling to watch the boom blow by, Belkin's client ponied up.

The mammoth Cottages settlement -- now something of a Holy Grail for tenant lawyers -- is just an inflated version of the same story: Itching to break ground, a developer was willing to pay a bundle for the ability to build right away. In situations like this one, Rozenholc bases his bargaining not on what the apartments are worth but on what the developer has to lose. "Let's assume a landlord is sitting there losing value on a $10 million investment that he's doing nothing with," Rozenholc says. "He's losing a potential revenue return of, say, 9 percent on that $10 million, or $900,000. In addition, he's paying to maintain the existing building and insure it, so he's losing about a million a year. Then I calculate what it costs the landlord to keep the tenants there for five years -- $5 million. In addition, he's missing out on the stock-market and the development boom. If there's a 50-50 chance I'll win, then I make a decision -- I weigh what my clients are giving up, and I weigh what I'm giving him."

Divide $5 million among five tenants, and you get a million dollars apiece. Rozenholc got each of the Cottages tenants more than that -- minus his one-third commission. Good deal, right?

Tell that to Leslie Youngblood, the 79-year-old retired Navy commander who gave up his Cottages apartment in return for a check and a "comparable" rental apartment. He now lives in a sixth-floor one-bedroom on York Avenue. Instead of a vast garden, he has a view of Sotheby's.

"I despised those bastards and still do," Youngblood says of RFR. "I want nothing to do with them. I mean, what the hell -- I had 625 square feet at the Cottages, and with the garden outside, I had another 200 square feet. In good weather with the door open, I could have 50 people in there. They gave me this mealy-mouthed promise: 'We're going to do everything we can to get you a comparable apartment.' I said, 'What do you mean? There's no such thing as this kind of garden apartment in New York City anymore!' "

For almost two decades, the Jack Parker Corporation has all but ignored the hundreds of rent-stabilized apartments in its inventory. They were leftovers from the family-owned real-estate company's lucrative co-op conversions -- anybody who didn't want to buy back in the late seventies and early eighties was allowed to stay and keep renting. About 400 of these rentals are in prime Manhattan neighborhoods. But last year, the company tried an experiment: Vice-president Robert Skolnick picked five tenants at random and sent them an innocuous letter about "exploring any options available" regarding their units. "Some of the rents we receive don't even cover the maintenance we pay to the co-op board," Skolnick says. "Any prudent owner would want to stop the bleeding."

Four of the tenants turned down buyout offers right away. But one elderly couple in a two-bedroom, two-bathroom apartment on the Upper East Side took the bait. After months of negotiations, they moved out of town in March, with Jack Parker picking up the tab. Skolnick won't divulge the amount of the buyout, but it stopped the hemorrhage: The couple's rent-regulated existence was losing the company $700 a month (or $8,400 a year) on maintenance and taxes -- not even counting the potential market-rate-rental income.


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