Related Fund Management Sells Rent-Stabilized at Discount

If there are rent-stabilized deals you want off your books, who you gonna call?

Peter Hungerford.

The head of PH Realty Capital, and possibly the city’s most prolific rent-regulated buyer of late, teamed with David Kaye and Joe Listhaus’ Rockledge to close on another monster portfolio last week, Hungerford told The Real Deal.

The deal, which comprises over 2,000 units spread across five neighborhoods in the Northern Bronx, is the latest sale by Related Fund Management, which has been grinding to cut its exposure to the troubled asset class. Eastdil Secured brokered the transaction.

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At $192.5 million, the purchase price represents a 24 percent discount to the $253 million Related paid in 2014, according to property records. The megalandlord was aiming to break even when it started shopping the 34-building portfolio in 2023, GlobeSt. reported.

Related’s appetite for loss, particularly after spending $30 million on renovations, is just the latest indicator that owners and lenders are desperate to ditch their rent-regulated holdings after the 2019 rent law blocked any path to profit.

The legislation effectively capped building revenues for nearly six years. Meanwhile, expenses have surged, arrears mounted and interest rates jumped, dragging more owners underwater.

It’s a nightmare many landlords just want to end — regardless of the loss.

Until recently, Related Fund Management was quietly ditching rent-stabilized deals. As of January, the firm or its affiliates — Related Companies, for example — had shed about two dozen assets over the past few years, a Crain’s analysis found.

In April, it upped the ante, letting five go for $18 million, or 45 percent of what it paid in 2015.

“They’re pushing the eject button,” Hungerford said. “They don’t want to deal with the asset class anymore.”

A spokesperson for Related Fund Management declined to comment.

Hungerford, meanwhile, has been busy picking up those discards.

Last year, his firm teamed with Rockledge, Alma Realty and an unnamed pension fund on a $180 million deal for 1,300 units. Sentinel Real Estate sold the portfolio for 40 percent of what it paid before the rent law passed.

PH Realty has also been feasting on the sector’s distressed debt. In another partnership with Rockledge, it paid PIMCO 45 cents on the dollar for a $61 million loan book backed by six rent-regulated buildings in the Bronx.

And Hungerford is hungry for more. As values keep dropping and lenders scramble to offload bad loans, the principal said the rent-regulated market is increasingly swinging in buyers’ favor.

“There are a lot more sellers with the same number or virtually no buyers,” Hungerford said.

The lack of interest stems from the industry’s thesis that rent-regulated assets will remain in decline: Unless Albany amends the law to let owners raise rents when a tenant vacates, for example, landlords won’t be able to pull the revenue needed to keep buildings above water.

Hugerford’s proposition: at a low enough basis, the buildings have upside, particularly if they’re in as good of shape as he describes the Related portfolio to be.

“I think we’re pretty much the only folks making this bet right now,” he said.