The Paradigm of the Lousy Landlord: A New York Tale
Dear Landlords &Developers,
2019 has been a curious year for you. The race to funds for opportunity zones, the affordable housing crisis, and most recently, the newly proposed Fair Housing Act laws — all of which have flooded headlines daily with both positive and negative sentiments. Yet, most stories have missed the underlying story: the growing need to widen the scope of real estate development.
Let’s tackle the challenge of housing and tenant issues. The common archetype in New York City: landlords who use scummy tactics to intimidate tenants. To state our case, the subject for today is Raphael Toledano, the poster child for predatory landlords. What makes him the poster child isn’t only because of his intimidation tactics. It isn’t solely how he treats his tenants. It isn’t even about his risky and often unwise financial investments. It’s about his narrow scope of what really matters to the people and in developments and how it perpetuates fallacious stereotypes of professionals in the industry.
Recently, Raphael Toledano settled a four-year-long investigation for a measly $3M. Let’s examine what that $3M is really worth. At the height of his career, he valued his real estate portfolio at $500M. This equates to 0.06% of his portfolio, excluding the other aspects that factor into net worth. If he violates the terms of the settlement, Toledano faces a lifetime ban in the real estate industry as well as a $10M fine, or 2% of his portfolio. The numbers don’t lie — these settlements and penalties are so nominal, they wouldn’t be able to cover all the damage he’s done to tenants and to other people in the industry.
This isn’t his first offense and probably won’t be his last. Toledano has a track record among New York City officials and tenants, predominantly for making big investments in rent-stabilized units and using illegal means to boost his income. The majority of his wealth comes from an acquisition of four walk-ups on the East Side purchased for $35.6M. At the height of his career, his real estate portfolio was valued to be at $500M. The controversial developer also used a fake law firm to solicit business, violated rent stabilization laws, and inhumanely harassed tenants across the city.
The most recent settlement confirms what many New Yorkers already knew: Toledano harassed tenants with threatening buyouts, illegal construction, and failed to make necessary repairs to units. Under the terms of the settlement, Toledano is now required to hire an independent company to manage his properties and is not permitted to have any direct contact with the tenants in his properties. This isn’t to say he doesn’t have any indirect influence over his tenants, as Toledano is still technically managing these properties.
Based on this settlement and the press release about the settlement, it’s still unclear how many properties Toledano still owns and indirectly manages. His Brookhill Properties website is currently inactive, yet he’s still the owner of 444 E. 13th St. between Avenue A and First Avenue, one of the dozens of East Village properties he used to own and many he has foreclosed on.
Experienced real estate professionals have raised many red flags about Toledano’s heavy reliance on debt, but it doesn’t take a professional to know that Toledano is not to be trusted as a real-estate developer or a landlord. In case you’re unconvinced, here are the facts:
- Exhibit A: Jim Markowich, a former Brookhill tenant, stated, “We feel that he consciously and strategically tried to make our lives as his tenants unnecessarily upsetting and difficult. For example, there was sudden, unannounced, slap-dash demolition work that released elevated levels of lead dust into buildings where toddlers were living.”
- Exhibit B: New York State Homes and Community Renewal Commissioner, RuthAnne Visnauskas, said, “These tenants were terrorized by Toledano’s pervasive threats, fraud and scheming which jeopardized their safety.”
- Exhibit C: Attorney General Letitia James stated, “Putting profits over people is unacceptable, and my office will hold any landlord accountable who violates the law to increase their bottom line. Under no circumstance should tenants be subjected to the harassment perpetrated by landlords like Raphael Toledano.”
- Exhibit D: The infamous landlord himself stated in an interview, “I’m worth a fuckload of money, bro.”
Given these testimonies, one can empathize and understand the anger that pierces the air during community meetings for ULURP. The fury from residents, especially those in gentrifying neighborhoods, comes from instances like these; moments where people were taken advantage of and nearly denied their basic human right for housing.
Despite the numerous reasons to antagonize Toledano, he’s not the only one who makes money a primary motivating factor. Many people fall into this trap when making career or investment decisions: equating financial capital with career or personal fulfillment. We buy into this story that money is a measure of success, yet fail to realize that money is only one of many factors that determine wise investments.
There are several forms of capital that are as equally as important as financial capital but the real estate industry doesn’t reflect that. Why? Because there hasn’t been an industry-wide framework that guides a healthy exchange between residents and developers; a framework which, similar to an equation, can exchange financial capital for cultural capital by balancing the needs of both sides.
Our newly launching platform, Synergize Insights, vows to create this framework. A simple tool to shift how the development process starts to reduce the risk for both parties.
Your firm’s brand needs to encompass what people need from the market: social and cultural recognition.
How will people feel when they see or hear your firm’s name? These have an impact on your local government and community approval.
In a complex city like New York, where developers have to jump through several approval processes, connecting with a community should be the easiest.
As developers, what do you have to gain outside of money? What value do you put on culture, human, and social capital?
