Property Grunt

Tuesday, May 27, 2008


You can discover what your enemy fears most by observing the means he uses to frighten you.

Eric Hoffer

Greetings good people. I hope you all enjoyed your weekend. And what a great way to start the summer with some more real estate chaos.

New York Times
has published a detailed story on the Tishman Speyer crackdown on violators of rent stabilization laws. Its not pretty.

Tishman Speyer has hired an army of lawyers and private investigators on tenants who are targeting abusers of the rent stabilization system. The problem is that alot of innocent tenants are caught in the cross fire.Here are two quotes that are of interest.

Tenants and their lawyers say they do not doubt that in some cases in which tenants gave up their apartments, the tenants had been abusing the rent-stabilization system. But they also believe that many of them were legitimate tenants who wanted to avoid, or were intimidated by, a potential legal battle with their landlord.

Referring to Tishman Speyer, Mr. Fishman, Ms. Shapiro’s lawyer, said, “They realize that a certain percentage of tenants will get this notice and simply pack, because they’re afraid.”

The objective of this pogrom is simple. Get the rent stabilized tenants out and replace them so you can charge market rates for the rent. But it begs two questions. Why is Tishman acting in this manner? Does it really make sense to do that in a market where New York City economy is getting eviscerated? Rent stabilized tenant or not, you need a cashflow if you are a landlord. And if you have a vacant apartment then you are not getting any cashflow no matter how much rent you are charging. The second question is Tishman really doing this?

I speculate that Tishman is in the process of preparing for a sale in the future. Yes. I know they just bouught Stuy town but I suspect the reason why they are going through with this pogrom is to beef up their balance sheets and to also make it more attractive to potential buyers.

Or it could be they need more money and that by clearing out the rent stabilized flotsam they could get a better loan.

It is a risky manuver because these tenants could ban together and file a class action suit. Or worse. Intiate a rent strike. Then Stuy town will never get these people out.

And another surprise is that more Wall Street jobs have been wiped out.

May 27 (Bloomberg) -- It's as if the entire workforce at Goldman Sachs Group Inc. and Morgan Stanley vanished in less than a year.

From Tokyo to London to New York, financial companies announced plans to shed more than 83,000 jobs since last July as revenue and compensation pools evaporated, according to figures compiled by Bloomberg. The dismissals range from 90 jobs, or 0.1 percent of the total, at London-based HBOS Plc to about 9,160 jobs, or 66 percent of the workforce, at New York-based Bear Stearns Cos., which is being acquired by JPMorgan Chase & Co.

The cuts add up to 3.3 percent of employees at the 28 firms eliminating positions. That's significantly less than the market slump from 2000 to 2003, when 17 percent of banking and securities jobs in New York were wiped out, data from the Bureau of Labor Statistics show. Given the record-breaking losses of the past year -- banks and brokers have taken $383 billion of writedowns and credit losses -- some economic forecasters and industry veterans expect the number of dismissals to increase.

``My guess is there's probably more to come,'' said Sanford ``Sandy'' Weill, chairman emeritus of Citigroup Inc., who worked on Wall Street for 53 years, in a May 21 interview. ``I think this is tougher'' than the last market decline, Weill, 75, said.

New York-based Citigroup, the biggest U.S. bank by assets, has announced 15,900 job cuts worldwide, about 4 percent of its employees.

The big surprise is that this appears to be just the beginning of something bigger and scarier.

``My guess is there's probably more to come,'' said Sanford ``Sandy'' Weill, chairman emeritus of Citigroup Inc., who worked on Wall Street for 53 years, in a May 21 interview. ``I think this is tougher'' than the last market decline, Weill, 75, said.

Since reading The True Believer, I have become quite an avid reader of his work. He has knack for being able to cut the social that holds up the meat of society.

Hoffer's quote about fear definitely applies to these two articles. It appears these Masters of the Universe are simply laying down the hammer in their respective domains. Their minions scampering away to find cover, running past the carcasses of the unlucky ones.

But remember, tables can turn on these Masters of the Universe. Remember, they are doing all of these things to deal with their desperate times. We are all scared.