The Bronx Ink

by Alec Johnson and Amanda Staab

Serious repairs are underway at the notoriously rundown apartment buildings at 806-808 E. 175th Street in the Tremont neighborhood of the Bronx. Earlier this year, a group of tenants convinced a Bronx judge to replace their negligent landlord with a new manager who would finally make the improvements.

The two adjoining brick structures near the north end of Crotona Park have five floors each and 43 units all together. They are now getting more than just a fresh coat of paint.

A recently installed new boiler ensures that every tenant has heat and hot water. New metal front doors are replacing the old wood ones that were considered fire hazards.

“It’s getting better,” said Gladys Archer, a retiree who has been a resident for nearly 20 years and heads up the tenant association.

Before February, the building had hundreds of violations on file with the Department of Housing Preservation and Development (HPD) that included collapsed ceilings and rodent infestations. But, in February, several residents took their landlord, Ocelot, to Bronx Housing Court, hoping to force the owners to make the necessary repairs.

“That’s what you have to do if you want to live where you’re going to live,” said Archer. “You gather together and you fight.”

She said that Ocelot managers kept promising that repairs would be made soon.

“We promise, promise, promise,” Archer said the owner told residents. “But, meanwhile, they were taking us to court for rent, and the building was coming down.”

Since then, the Bronx Housing Court has appointed a new administrator, Rafael Lara, an experienced manager and executive director of New City View Development, to look after the buildings and their tenants.

“We’ve been renovating most of the apartments,” said Lara. He has a $175,000 bond, forfeited by the landlord, to work with, and repairs have been ongoing since he stepped onto the scene.

In some cases, residents whose apartments have severe mold and mildew problems after years of continuous leaks have received new drywall in their units and even new kitchen cabinets. Some bathrooms have been renovated, and the hallways have been redecorated, wiping away graffiti. “We’ve been correcting it little by little,” said Lara.

Some residents complain that Lara is taking too long with the repairs.

“They’re all complaining he’s slow,” said Archer. “He’s taking care of the leaks, slowly, but it’s being done. February to now, it’s a lot of improvement.”

By Mamta Badkar and Connor Boals

with additional reporting by Donal Griffin

Former Ocelot properties along Park Avenue in Tremont stand defaced by graffiti. The buildings which racked up over 100 "immediately hazardous" violations are being restored by new owner Isaac Hershkovitz. Photo by Mamta Badkar

Four buildings once owned by Ocelot loom over a very different Park Avenue in the central Bronx neighborhood of Tremont. The buildings until recently were ghost-like shells, but are now beginning to stir with the sounds of renovation. Their troubled past, however, still follows them.

The buildings are around 100 years old and among the oldest in the Ocelot portfolio. They are four-stories tall and contain between 20 and 24 units each. The façade has been defaced by graffiti, windows have been smashed in, and parts of the building have been stripped bare by the construction workers who point to sections where there are holes in the floor.

The buildings all have a past full of violations with the New York City Department of Buildings that range from structural instability to defective boilers. Under Ocelot’s management, the Park Avenue buildings racked up over 100 “immediately hazardous” violations by the end of 2008.

Many of the complaints were structural. “Caller says every time the Long Island Railroad train passes the building shakes,” read a Feb. 22, 2007, complaint about 4301 Park Ave. to the Department of Buildings. “From the top to the base of the building is cracked on the outside at the top building.”

Others address fire safety with a touch of the bizarre. “Caller notes the boiler is defective and caught fire on June 14, 2007. Boiler emits soot throughout the apartments,” read another complaint about 4289 Park Ave. filed on the same day as the fire. “And please inspectors take caution due to the large amount of pit bull dogs in basement.”

The now vacant lots are subject to routine inspections by the New York City Fire Department. The market value of each building ranges from $381,000 to $504,000 according to City-Data.com. In all, the four buildings are worth over $1.7 million.

“We aren’t stripping the buildings down, just patching them up,” said Joseph Silberman the current contractor. “These aren’t in Manhattan.” Now owned by Brooklyn-based Paradise Management with financing by Doral Bank, two of the properties are expected to be ready by January 1, 2010. “Only when the properties are fully occupied, will the bank go ahead with the others.”

Around the corner at Western Beef, store manager Jim Frisco said his business was hardly affected by the exodus. Neighbors and a member of the New York City Fire Department worried that at least one of the empty buildings were being used for drug activity.

David Arroyo, the manager of Jochi Auto Repair Inc. who has lived on neighboring Webster Avenue for 16 years, said “the riff-raffs” had been moving out over a period of time but the buildings appeared completely vacant two months ago.

“People were afraid to leave their cars because they were scared people would take their stuff,” he said, referring to the former occupants of the Ocelot properties. “Since they left, it’s gotten quiet and we’re doing pretty good.”

But trouble still follows the buildings, which were part of a package of five buildings bought by OCG VI – an Ocelot company – in June of 2007 for $6.2 million. When Ocelot’s backer, Israeli company Eldan Tech, abandoned the portfolio last last year, investors found a buyer for the Park Avenue buildings in Brooklyn property dealer, Issac Hershkovitz. Eldan Tech now alleges in a civil case filed in Manhattan’s State Supreme Court, however, that Ocelot’s president, Rachel Arfa, carved up the deal with Hershkovitz so that Ocelot only received $350,000 instead of $3 million, while she personally pocketed $300,000. Arfa has denied the allegations and counter-sued in the same court. Both cases are pending.

Eldan Tech also alleges that Hershkovitz has failed to pay the $350,000. The property dealer has yet to lodge a defense.

by Sarah Omar Wali and Mustafa Mehdi Vural

The newly painted pink and blue walls in apartment 52 in the building at 1804 Weeks Ave. give the illusion of a well-cared for living space.  But the bright colors provide only a thin cover for the vermin-infested apartment Fernando Diaz shares with his wife and two young daughters.

Outside, boarded-up windows and broken glass leave the impression that the East Tremont building is abandoned.  Inside, graffiti splashes the hallways, doors are missing, and the shaky staircase is pocked by holes. “Don’t Rent Here,” is scrawled on the doors of empty apartments. More than 20 families, most of them Latino, are attempting to survive in this five-story building,which was bought by an Ocelot entity in August 2007. It has been in foreclosure since April of this year.

Twenty-seven of the 33 apartments are occupied and the rent averages $850 a month.  According to the Department of Housing and Preservation’s (HPD) records, tenants have filed 338 complaints in the past year.

HPD took note of the broken windows, trash strewn floors, lack of security and hot water, and put the building under the Alternative Enforcement Program in early 2008.  The year-old program, was designed to identify and fix dwellings in severe distress.  The law allowed the city to sweep in to make necessary repairs, and then slap the derelict owner with a hefty fine.

Yet this program has had little to no impact on the quality of life inside 1804 Weeks Ave.  According to the program’s report, as of Oct. 2007, the owners owed $19,100 as a tax lien to the city for open violations against the building.  This included a $16,500 fee that was carried over from the previous fiscal year on April 24, 2009.  Under the program’s guidelines, the city charges a fee for violations that remain unresolved. This building currently carries 581 outstanding violations, according to HPD.

Diaz has been living on the fifth floor with his wife, Rosie Benitas, and their two daughters Jacquelin, 7, and Tanya, 4, since February. They used to live in a second-floor apartment, but a fire forced them to move upstairs.

Diaz tried calling the maintenance supervisor in the building, he said. But he was told the super would not do any work in the apartment until he received his paycheck.  Diaz understands the super’s dilemma, but said he is more concerned about the mice and rats that could crawl into his daughters’ beds at night.

Using 311, Diaz has attempted to file formal complaints about rodent problems, lack of hot water and falling ceilings.  However, after months of neglect, he decided to at least try and make the apartment cheery.

Diaz painted the walls in bold hues to cover up the holes around the bathroom knobs.   The girls’ room was given a cool turquoise color to divert them from the windows that don’t open–creating an inferno in the summer.

However, most of the damage cannot be ignored, he said.   His bedroom ceiling leaks when it rains, and the crack is edging closer to the light fixture.  At night he lays in bed, staring at his ceiling, hoping that faulty wires will not cause another fire, and force them out once more.

By Alex Abu Ata and Alex Berg

Vivian Blanco chokes back tears when she remembers the last winter she spent at her 1663 Eastburn Avenue apartment in the East Tremont section of the Bronx.

“To sleep we had to wear socks and scarves and coats,” said Blanco, who lives in one of the 43 apartments in the six-story building. None of the apartments had heat last winter. “It was so uncomfortable to sleep with all those clothes and blankets on top of you because it’s heavy, you can’t even move.”

Most of the apartments suffer a variety of damage, including mold, broken window frames, cracked walls and ceilings, and occasional rodent infestations. The tenants say the building’s decay accelerated after OCG IV – a company linked to Ocelot – bought it for $3.175 million in February of 2007. Ocelot abandoned its holdings less than two years later.

From the tenants’ perspective, Ocelot’s disappearance was a relief.

“We didn’t have any service,” said Blanco, a 55-year-old hospital unit assistant whose grandchildren cannot visit her because of her apartment’s condition. “At least now I can call someone and they’ll pick up the phone.” Blanco said she got the contact information for city workers who were fixing the building and hired them to fix her apartment. But problems keep popping up in the old building. In the last 12 months alone, 295 violations were reported.

Tenants have often had to do the repairs themselves, at their own expense. When the management refused to repair the living room ceiling in Blanco’s apartment, she hired workers and purchased the material herself. The total cost amounted to $2,000 and Blanco had to take a week off work to supervise the repairs.

But maintenance isn’t the only problem. Hector Melo Ramos, a third-floor resident, said in Spanish that his apartment was robbed and there are drug dealers in the building.

By Maia Efrem

From a distance, the building at 2254 Crotona Ave. looks like all the other dwellings in the surrounding blocks. On closer inspection, however, the lock is knocked out on the front door, the windows on the first floor are boarded up and graffiti covers concrete slabs that block the entrance to many apartments in the building.

An Ocelot entity bought the Crotona Avenue building along with four others from Loran Realty X Corporation in July 2007 for almost $7 million. Since then, the six-story, 28-unit structure has gone through three management companies: Ocelot, Hunter Property Management, and now JLP Metro Management, Inc.

Large swaths of graffiti covered the hallways and apartment doors until they were painted by JLP Metro several weeks ago. Tenants are pleased to see the graffiti gone, but they said they still suffer from moldy walls and plumbing problems.

When Ocelot, and later Hunter Property Management, stopped providing maintenance services for the tenants, the conditions swiftly deteriorated. The Department of Housing Preservation and Development (HPD) has 859 open violations for the building, 738 of which are either “hazardous,” or “immediately hazardous.” Complaints include exposed electrical wires, faulty and leaky plumbing, and lack of a working carbon monoxide detecting device.

According to the current superintendant, Victor Garcia, the building had no landlord for roughly six months. Rent was not collected during that period, and the building deteriorated because of lack of upkeep. There was no heat and hot water. “It was chaos, every man to himself,” said Garcia. “There was no one to complain to or answer to.” According to Garcia, some tenants owe as much as $20,000 in unpaid rent.

Altagracia Rogers has two holes in her bathroom, one in the ceiling and one in the floor; both offer her a view of her neighbors and them of her. “We try to cover it up with bags but it doesn’t always work,” she said, pointing towards the ceiling where the gaping hole reveals a blue bathroom upstairs. She has endured several floods in the last year. “No one helps us, we have to help ourselves,” she said.

Because there was no one to pay for the repairs in the building, there was also no one to pay Garcia for his work. “Everything I did I did for free,” he said. “I even bought a five-gallon can of paint, walked away for a minute and a tenant had stolen it to paint her own apartment. I couldn’t even be mad, I just laughed it off.”

By Wanda Hellmund

Additional reporting by Donal Griffin

Residents at 621-627 Manida St. have had a rough year. The list of complaints includes no heat, no hot water, cracks in the ceiling, mold everywhere. More than 3,000 similar conditions have been reported so far. A court-appointed receiver has been slowly carrying out repairs and restoring basics like running water, residents are facing an uncertain future.

The buildings, known locally as the “House of Horrors,” are primed to be sold to a new landlord.  But residents don’t know if that will improve their living conditions. “I won’t believe it, until I see it,” said Carmen Rodriguez, a 35-year-old mother of five who heads the newly formed tenants’association.

Rodriguez and her neighbors have been disappointed in the past. “This building is a mess,” said Asia Ezmonds, 30. “Many apartments are vacant and now they’re occupied by drug addicts.”

All they have to do is kick in a door of an empty apartment.

Building residents formed the tenants association because they said they have had enough. Jill Roche from the Hunts Point Alliance for Children heard about the conditions on Manida Street and is representing  residents as a legal co-counselor with Urban Justice Center since early March. “Living conditions were awful,” Roche said. “Some of the children were not going to school because they could not even take a shower in the morning.”

Parents like Tamara Taylor, 48, worry about their children’s health. Taylor did not have gas in her apartment for a year, making it impossible to cook for her 12-year-old daughter. “The landlords just don’t care about us,”she said.

Residents have stopped paying rent and say they won’t pay again until their complaints have been addressed. “Everything should be gutted,” said Rodriguez. “Otherwise these issues will be coming back again and again.”

This leaves the receiver, Howard Vargas, who is managing the properties until Fannie Mae can unload them, with the task of trying to improve conditions in the building without rent money. Fannie Mae contributed only $100,000 for repairs, $20,000 of which Vargas used to repair the leaking roofs.

Nonetheless, he and his team have so far dealt with over 700 housing violations. “It’s certainly better than it was,”he said. But there is also still a long way to go.

Now, the residents of the Manida Street apartments are hoping to hear that a non-profit organization might come in and buy these buildings. Until then, the apartments continue to deteriorate around them.

How a New York real estate deal went bad, causing a housing crisis for hundreds of low-income families

View Ocelot in a larger map

A map of all foreclosed and bankrupt Bronx properties mentioned in the story. Click on a location to read an in-depth story and watch an audio slideshow for each individual property. If you encounter problems viewing the map, click on the links below to view the slideshows and stories.

= Ocelot buildings currently in foreclosure. On Dec. 1, 2009, Fannie Mae sold the debt to Omni New York LLC.

806 E. 175th St. 1528 Bryant Ave. 1744 Clay Ave. 2254 Crotona Ave. 1663 Eastburn Ave. 1512-1524 Leland Ave. 621-627 Manida St. 1269-1271 Morris Ave. 1804 Weeks Avenue

= Ocelot buildings sold to BXP 1LLC on May 13, 2009. The buildings are managed by Hunter Property Management LLC.

1585-1589 E. 172nd St. 1350 Martin Luther King, Jr. Blvd 1636-1640 Martin Luther King, Jr. Blvd 1268 Stratford Avenue

= Ocelot buildings sold to Bronx Apartments LLC on Aug. 26, 2009.

422 East 178th St. 4289,4301,4305 Park Ave.

By Donal Griffin

Additional reporting by Matthew Huisman, Wanda Hellmund, Sarah Wali, Connor Boals and Yoav Sivan

LOUISE ALVAREZ cannot remember who used to live in the abandoned apartment in the building next to hers on Manida Street in Hunts Point. The mother of four pushed open its unlocked door one morning in October to find cooking pots caked with old food strewn among sneakers, used hoodies and open bags of trash. The stench of stale urine wafted out into the hallway.

Nearly half of the apartments in the four decrepit buildings at 621-627 Manida St in the Bronx are empty. Like Alvarez, the remaining residents live with dangerous mold, vermin and only occasional heat in apartments that suffer from varying stages of decay. Most said their apartments began crumbling around them soon after the last owner vanished nearly one year ago.

Many like Alvarez cannot afford to leave.  She is asthmatic, and has arthritis in parts of her hands and hips. “I ain’t moving,” she said, “let me tell you.”

In less than two years, Ocelot had bought up nearly 800 apartments in the Bronx, including buildings on Manida Street which many of its low-income tenants refer to as the

A similar tale can be told by the tenants in 24 other buildings throughout the Bronx.  The aging apartment blocks have become known as “the Ocelot buildings,” named after the defunct real estate investment company that bought them between 2006 and 2007 at the peak of the housing bubble, only to abandon them in late 2008, as the market collapsed.

Some news outlets have called Ocelot a “phantom” and, indeed, the company’s president could not be contacted for this article. But the consequences of a bitter row between Ocelot’s principals are very real for hundreds of families across the Bronx.

Spending Spree

VETERAN real estate dealer Michael Edery was part of a group in early 2005 that bought 1744 Clay Avenue and 1633 Eastburn Avenue, two low-income buildings in East Tremont. His group paid five times the rent roll for the pair of buildings, and sold them nearly two years later for $6 million, seven and a half times what the rents would yield.

“The market was insane,” said Edery. “If it would have been marketed properly at the height of the market, we would have gotten eight times, eight and a half.”

Various entities surrounded the purchase, but Edery knew the buyer simply as Ocelot Capital Group.

Ocelot appeared to have endless capital, and an endless appetite for apartment buildings in the Bronx.  Backed by a $29 million loan from Deutsche Bank (a debt it later sold to Fannie Mae), the company bought the Manida Street buildings for $7.2 million, Edery’s two buildings for $6 million and 15 more low-income properties in Morrisania, Pelham Parkway and Crotona for nearly $23 million. The Dime Savings Bank of Brooklyn then financed six more buildings in Highbridge and Soundview for $16.6 million.  In less than two years, Ocelot had bought up nearly 800 apartments all over the Bronx.

Inside Ocelot

OCELOT’S president was a respected New York attorney named Rachel Arfa, a graduate of Brooklyn Law School and a member of the New York State Bar since 1979. Arfa is a former partner of an international law firm called Fried, Frank, Harris, Shriver & Jacobson and a businesswoman whose strength is her legal expertise.

Arfa’s father was a Hebrew scholar called Milton Arfa, who lectured in Yeshiva University and established the Israel Matz Fund to distribute grants to indigent Hebrew authors. Rachel Arfa, who lived on Riverside Boulevard in lower Manhattan during the Ocelot episode, is now a trustee of the charity along with Shlomo Sharan, an Israeli academic based in Tel Aviv.

While Arfa managed the buildings in the Bronx, the cash for this costly venture came almost entirely from an obscure Israeli company called Eldan Tech.  According to its annual report, this Tel Aviv-based investment group controlled 80 percent of Ocelot.

The police were recently called on the residents of 1585 E. 172nd Street when they attempted to organize against their poor living conditions. Photo by Matthew Huisman

From Tel Aviv to The Bronx

Arfa had close links to the Tel Aviv business world through her husband, Alex Shpigel. In 2002, the couple had raised $40 million from a group of Israeli investors for a major purchase in Harlem and the Bronx. Shpigel provided the financial fulcrum for the deal with his network of family and personal relationships in Israel, while Arfa used her legal know-how to set up its complex structure of real estate entities.

But in 2007, some of the Israeli investors filed a civil suit in Manhattan’s State Supreme Court alleging that the couple covertly siphoned off $5 million in “secret commissions” from the sellers of the properties. These commissions were then loaded onto the purchase price. According to the same court filing, Shpigel threatened to kill an associate who found out.

Arfa and Shpigel have denied all the allegations, and no criminal charges have been filed against either of them. The couple filed a counter suit in the same court against a former associate, whom they blame for the much of the mess. These tangled cases provide an unfortunate warning for disasters to come.

The Fall

BACK in the Bronx, the trouble began almost as soon as the couple sealed the deal on the Ocelot buildings. Many of their new tenants qualified for city and federal rent subsidies. This meant rent revenue alone would be too meagre to support the maintenance needs in these aging buildings. Money would have to come from elsewhere.

According to the Department of Housing and Development, it never did.  Basic repairs – the responsibility of Arfa and Shpigel – ceased to take place. Thousands of official complaints flooded the city’s housing files listing everything from rat infestations to collapsing ceilings.

Residents who had options began to abandon their apartments. Those who did not, endured a year and more of living in degrading conditions. The buildings racked up “immediately hazardous” violations. Six Ocelot buildings in particular ended the year on the city’s list of “most distressed.” By the end of 2008, nearly every one of the Ocelot buildings was in a state of serious decay.

In response, the city’s Department of Housing Preservation and Development (HPD) took Ocelot to Bronx Housing Court in June 2008. It secured consent orders compelling the company to repair nearly 3,000 violations in six buildings and pay approximately $60,000 in fines. HPD officials claim that Ocelot never addressed the violations—the kind of negligence that could result in a contempt of court ruling, i.e. jail time.

A clogged bathtub in an apartment at 1640 Martin Luther King Boulevard. The tenants of this building have filed 297 complaints with the housing department since November 2008. Photo by Matthew Huisman

Meanwhile, in October of 2008, Eldan Tech directors decided enough was enough. They voted to bail out. By then, the property market was collapsing on a global scale. The Ocelot costs had stung the company’s bottom line. In 2008, Eldan Tech reported “heavy losses of about 53 million shekels ($14.4 million) due to its real estate activities in the Bronx.”

The cost for the Ocelot residents, however, was of a different nature. Broken front doors meant drug addicts could freely roam the halls. In one building, pigeons took up residence on an abandoned baby’s crib.

Louise Alvarez and her children – and many Ocelot tenants all over the Bronx – lost their heat and hot water for the winter of 2008.

Who’s to Blame?

Arfa and Shpigel and their Israeli business partners are now locked in a vicious legal dispute to determine who is more culpable for this human and financial catastrophe.

The Tel Aviv investors claim in their civil suit that Arfa lied about the buildings’ physical condition and financial performance and “incessantly demanded” more cash.

Arfa’s lawyer, David Katz, countered that Eldan Tech failed to supply her with “millions of dollars” of needed maintenance money.   Katz also charged the Israeli company with bribing a senior Ocelot employee for confidential information about Arfa’s and Shpigel’s businesses elsewhere. The couple is now suing that ex-employee for $1 million in New York State Supreme Court.  The employee has denied the charges.

“They’re vindictive,” said Katz of Schlam, Stone & Dolan, referring to Eldan Tech principals. “They’re trying to avoid their responsibilities.”

Enter Sam Suzuki

While the legal squabble continued, Arfa began looking for a way out. Sam Suzuki, a long time property dealer based in the wealthy town of Port Washington, Long Island, emerged as a potential buyer. His company signed a no-cash deal in November 2008 and took on Ocelot’s debt with Fannie Mae.

But Suzuki’s company never made any bank repayments and a lawyer for Suzuki would not explain why. This caused the deal to collapse in early 2009 and Fannie Mae foreclosed on the loans. Court-appointed receivers took over, putting most of the buildings – and their tenants – into a legal no-man’s land, where they remain today.

A Fannie Mae spokesperson, Jon Searles, said that the bank is now “joining the receivers on inspections of the properties and funding much-needed safety repairs.” Such promises don’t wash with the tiny maintenance budgets that the receivers are currently struggling with. One receiver recently sought a court order to secure more cash from the bank for repairs.

Searles also said that Fannie Mae is looking to sell the loan notes on the buildings to “responsible new ownership.” Who that “responsible” new owner might be, remains to be seen. Katz said that Arfa now wants the buildings sold to a non-profit, because the only parties hanging on for a for-profit deal are Eldan Tech and Fannie Mae. One of the interested parties, as it turns out, is Sam Suzuki.

While Fannie Mae is looking for

Financial History

In 1998, a legal firm tried to force Suzuki to declare Chapter 7 bankruptcy over a disputed $77,000 debt, a debt that was settled in 2001. Other trade creditors have also been forced to take Suzuki to court to get paid and one creditor even secured a judgment against him for over $2 million in the New York City Supreme Court in 2004. Suzuki paid the judgment off two years later.

Suzuki has still managed to find the cash to donate thousands of dollars to Democratic politicians around New York over the last eight years, including $6,200 to former Bronx Borough President Fernando Ferrer, $7,450 to U.S. Rep. Gary Ackerman and $9,000 to U.S. Sen. Charles Schumer.

And despite the earlier deal collapsing, a company linked to Suzuki did manage to buy six of the Ocelot buildings in May of this year, including three in Soundview that were not part of the Fannie Mae foreclosure buildings. Conditions in many of them remain appalling.

Residents recently gathered in the lobby of 1585 E. 172^nd St, to protest its dilapidated conditions but their meeting was interrupted by police, who were called by an employee of Suzuki’s. A lawyer for Suzuki said that her client had no problem with the tenants organizing but that the Urban Homesteading Assistance Board members at the meeting were not invited and thus trespassing.

A resident of 1268 Stratford Avenue displays a live mouse caught on a glue trap. Many of the low-income residents have dealt with rats, leaky ceilings and faulty wiring. Photo by Connor Boals

In another Suzuki-owned apartment building on Stratford Avenue, a family of 10 lived without heat for a year before it was only recently restored.  The superintendent at 1636 Martin Luther King, Jr. Blvd. has filed 20 complaints since September of this year, spotlighting everything from water leaks and holes in the ceiling to faulty electrical wiring.

One mother in an Ocelot building at 1585 E.172 St. has to keep her infant son out of her kitchen because of rodents. “No puedo vivir con las ratas,” said Ana Almonte. “I can’t live with the rats.”

The Wait

On Manida Street, Louise Alvarez stays put, waiting for a new landlord and hoping the nightmare may soon be over. She sleeps in her living room so her children can share the bedrooms. “We’re here struggling,” she said. “I guess I’m going to be struggling until God answers my prayers.”
dbg2114@columbia.edu

How a New York real estate deal went bad causing a housing crisis for hundreds of low-income families

By Donal Griffin

Additional reporting by Matthew Huisman, Wanda Hellmund, Sarah Wali, Connor Boals and Yoav Sivan

LOUISE ALVAREZ cannot remember who used to live in the abandoned apartment in the building next to hers on Manida Street in Hunts Point. The mother of four pushed open its unlocked door one morning in October to find cooking pots caked with old food strewn among sneakers, used hoodies and open bags of trash. The stench of stale urine wafted out into the hallway.

The entrance to Manida Street buildings. Photo by Wanda Hellmund

Nearly half of the apartments in the four decrepit buildings at 621-627 Manida St in the Bronx are empty. Like Alvarez, the remaining residents live with dangerous mold, vermin and only occasional heat in apartments that suffer from varying stages of decay. Most said their apartments began crumbling around them soon after the last owner vanished nearly one year ago.

Many like Alvarez cannot afford to leave.  She is asthmatic, and has arthritis in parts of her hands and hips. “I ain’t moving,” she said, “let me tell you.”

A similar tale can be told by the tenants in 24 other buildings throughout the Bronx.  The aging apartment blocks have become known as “the Ocelot buildings,” named after the defunct real estate investment company that bought them between 2006 and 2007 at the peak of the housing bubble, only to abandon them in late 2008, as the market collapsed.

Some news outlets have called Ocelot a “phantom” and, indeed, the company’s president could not be contacted for this article. But the consequences of a bitter row between Ocelot’s principals are very real for hundreds of families across the Bronx.

Spending Spree

VETERAN real estate dealer Michael Edery was part of a group in early 2005 that bought 1744 Clay Avenue and 1633 Eastburn Avenue, two low-income buildings in East Tremont. His group paid five times the rent roll for the pair of buildings, and sold them nearly two years later for $6 million, seven and a half times what the rents would yield.

“The market was insane,” said Edery. “If it would have been marketed properly at the height of the market, we would have gotten eight times, eight and a half.”

Various entities surrounded the purchase, but Edery knew the buyer simply as Ocelot Capital Group.

Ocelot appeared to have endless capital, and an endless appetite for apartment buildings in the Bronx.  Backed by a $29 million loan from Deutsche Bank (a debt it later sold to Fannie Mae), the company bought the Manida Street buildings for $7.2 million, Edery’s two buildings for $6 million and 15 more low-income properties in Morrisania, Pelham Parkway and Crotona for nearly $23 million. The Dime Savings Bank of Brooklyn then financed six more buildings in Highbridge and Soundview for $16.6 million.  In less than two years, Ocelot had bought up nearly 800 apartments all over the Bronx.

Residents of 1585 E. 172nd Street are organizing against their poor living conditions. Photo by Matthew Huisman

Inside Ocelot

OCELOT’S president was a respected New York attorney named Rachel Arfa, a graduate of Brooklyn Law School and a member of the New York State Bar since 1979. Arfa is a former partner of an international law firm called Fried, Frank, Harris, Shriver & Jacobson and a businesswoman whose strength is her legal expertise.

Arfa’s father was a Hebrew scholar called Milton Arfa, who lectured in Yeshiva University and established the Israel Matz Fund to distribute grants to indigent Hebrew authors. Rachel Arfa, who lived on Riverside Boulevard in lower Manhattan during the Ocelot episode, is now a trustee of the charity along with Shlomo Sharan, an Israeli academic based in Tel Aviv.

While Arfa managed the buildings in the Bronx, the cash for this costly venture came almost entirely from an obscure Israeli company called Eldan Tech.  According to its annual report, this Tel Aviv-based investment group controlled 80 percent of Ocelot.

From Tel Aviv to The Bronx

Arfa had close links to the Tel Aviv business world through her husband, Alex Shpigel. In 2002, the couple had raised $40 million from a group of Israeli investors for a major purchase in Harlem and the Bronx. Shpigel provided the financial fulcrum for the deal with his network of family and personal relationships in Israel, while Arfa used her legal know-how to set up its complex structure of real estate entities.

But in 2007, some of the Israeli investors filed a civil suit in Manhattan’s State Supreme Court alleging that the couple covertly siphoned off $5 million in “secret commissions” from the sellers of the properties. These commissions were then loaded onto the purchase price. According to the same court filing, Shpigel threatened to kill an associate who found out.

Arfa and Shpigel have denied all the allegations, and no criminal charges have been filed against either of them. The couple filed a counter suit in the same court against a former associate, whom they blame for the much of the mess. These tangled cases provide an unfortunate warning for disasters to come.

A resident of 1268 Stratford Avenue displays a live mouse caught on a glue trap. Photo by Connor Boals

The Fall

BACK in the Bronx, the trouble began almost as soon as the couple sealed the deal on the Ocelot buildings. Many of their new tenants qualified for city and federal rent subsidies. This meant rent revenue alone would be too meagre to support the maintenance needs in these aging buildings. Money would have to come from elsewhere.

According to the Department of Housing and Development, it never did.  Basic repairs – the responsibility of Arfa and Shpigel – ceased to take place. Thousands of official complaints flooded the city’s housing files listing everything from rat infestations to collapsing ceilings.

Residents who had options began to abandon their apartments. Those who did not, endured a year and more of living in degrading conditions. The buildings racked up “immediately hazardous” violations. Six Ocelot buildings in particular ended the year on the city’s list of “most distressed.” By the end of 2008, nearly every one of the Ocelot buildings was in a state of serious decay.

In response, the city’s Department of Housing Preservation and Development (HPD) took Ocelot to Bronx Housing Court in June 2008. It secured consent orders compelling the company to repair nearly 3,000 violations in six buildings and pay approximately $60,000 in fines. HPD officials claim that Ocelot never addressed the violations—the kind of negligence that could result in criminal charges.

Meanwhile, in October of 2008, Eldan Tech directors decided enough was enough. They voted to bail out. By then, the property market was collapsing on a global scale. The Ocelot costs had stung the company’s bottom line. In 2008, Eldan Tech reported “heavy losses of about 53 million shekels ($14.4 million) due to its real estate activities in the Bronx.”

The cost for the Ocelot residents, however, was of a different nature. Broken front doors meant drug addicts could freely roam the halls. In one building, pigeons took up residence on an abandoned baby’s crib.

Louise Alvarez and her children – and many Ocelot tenants all over the Bronx – lost their heat and hot water for the winter of 2008.

A clogged bathtub in an apartment at 1640 Martin Luther King Boulevard. Photo by Matthew Huisman

Who’s to Blame?

Arfa and Shpigel and their Israeli business partners are now locked in a vicious legal dispute to determine who is more culpable for this human and financial catastrophe.

The Tel Aviv investors claim in their civil suit that Arfa lied about the buildings’ physical condition and financial performance and “incessantly demanded” more cash.

Arfa’s lawyer, David Katz, countered that Eldan Tech failed to supply her with “millions of dollars” of needed maintenance money.   Katz also charged the Israeli company with bribing a senior Ocelot employee for confidential information about Arfa’s and Shpigel’s businesses elsewhere. The couple is now suing that ex-employee for $1 million in New York State Supreme Court.  The employee has denied the charges.

“They’re vindictive,” said Katz of Schlam, Stone & Dolan, referring to Eldan Tech principals. “They’re trying to avoid their responsibilities.”

Enter Sam Suzuki

While the legal squabble continued, Arfa began looking for a way out. Sam Suzuki, a long time property dealer based in the wealthy town of Port Washington, Long Island, emerged as a potential buyer. His company signed a no-cash deal in November 2008 and took on Ocelot’s debt with Fannie Mae.

But Suzuki’s company never made any bank repayments and a lawyer for Suzuki would not explain why. This caused the deal to collapse in early 2009 and Fannie Mae foreclosed on the loans. Court-appointed receivers took over, putting most of the buildings – and their tenants – into a legal no-man’s land, where they remain today.

A Fannie Mae spokesperson, Jon Searles, said that the bank is now “joining the receivers on inspections of the properties and funding much-needed safety repairs.” Such promises don’t wash with the tiny maintenance budgets that the receivers are currently struggling with. One receiver recently sought a court order to secure more cash from the bank for repairs.

Searles also said that Fannie Mae is looking to sell the loan notes on the buildings to “responsible new ownership.” Who that “responsible” new owner might be, remains to be seen. Katz said that Arfa now wants the buildings sold to a non-profit, because the only parties hanging on for a for-profit deal are Eldan Tech and Fannie Mae. One of the interested parties, as it turns out, is Sam Suzuki.

Financial History

In 1998, a legal firm tried to force Suzuki to declare Chapter 7 bankruptcy over a disputed $77,000 debt, a debt that was settled in 2001. Other trade creditors have also been forced to take Suzuki to court to get paid and one creditor even secured a judgment against him for over $2 million in the New York City Supreme Court in 2004. Suzuki paid the judgment off two years later.

Suzuki has still managed to find the cash to donate thousands of dollars to Democratic politicians around New York over the last eight years, including $6,200 to former Bronx Borough President Fernando Ferrer, $7,450 to U.S. Rep. Gary Ackerman and $9,000 to U.S. Sen. Charles Schumer.

And despite the earlier deal collapsing, a company linked to Suzuki did manage to buy six of the Ocelot buildings in May of this year, including three in Soundview that were not part of the Fannie Mae foreclosure buildings. Conditions in many of them remain appalling.

Residents of 1585-1589 E. 172nd Street gather in protest against poor living conditions. Photo by Connor Boals

Residents recently gathered in the lobby of 1585 E. 172^nd St, to protest its dilapidated conditions but their meeting was interrupted by police, who were called by an employee of Suzuki’s. A lawyer for Suzuki said that her client had no problem with the tenants organizing but that the Urban Homesteading Assistance Board members at the meeting were not invited and thus trespassing.

In another Suzuki-owned apartment building on Stratford Avenue, a family of 10 lived without heat for a year before it was only recently restored.  The superintendent at 1636 Martin Luther King, Jr. Blvd. has filed 20 complaints since September of this year, spotlighting everything from water leaks and holes in the ceiling to faulty electrical wiring.

One mother in an Ocelot building at 1585 E.172 St. has to keep her infant son out of her kitchen because of rodents. “No puedo vivir con las ratas,” said Ana Almonte. “I can’t live with the rats.”

The Wait

On Manida Street, Louise Alvarez stays put, waiting for a new landlord and hoping the nightmare may soon be over. She sleeps in her living room so her children can share the bedrooms. “We’re here struggling,” she said. “I guess I’m going to be struggling until God answers my prayers.”
dbg2114@columbia.edu