NY judge orders foreclosure sale of middle-class Harlem housing complex

Middle-class NYC housing complex to be sold

NEW YORK — A judge has ordered the foreclosure sale of the historic Riverton Houses, a middle-class Harlem apartment complex that plummeted in value amid the housing downturn.

The decision by State Supreme Court Justice Richard Braun, released Tuesday, called for the auction of the gated community and its 1,232 apartments, which were built in the 1940s. With the property now valued at a fraction of the mortgage price, it appeared unlikely that the creditors that financed the $225 million deal would recoup all their losses.

The investment group that bought the complex, Stellar Management, purchased the property in 2005 and took out the nearly quarter-billion-dollar mortgage. But by September of last year, it was worth just $108 million, according to one analyst estimate.

Residents have included jazz pianist Billy Taylor; former Mayor David N. Dinkins; and former Motown Records vice president Suzanne de Passe.

The court decision echoed the failure last week of the most expensive real estate deal in U.S. history. Owners of Manhattan’s Stuyvesant Town and Peter Cooper Village handed the massive affordable apartment complexes over to creditors and said they could no longer make payments on the $5.4 billion purchase.

Like the Stuyvesant Town owners, Stellar Management had banked on quickly converting many rent-regulated units to market rates, but found the process was slowed by reluctant tenants and local laws preventing the company from forcing them out or raising their rents by more than a small amount each year. A Stellar spokesman declined to comment.

Many tenants have an interest in staying at the property, a gated enclave with a long grassy mall, tree-shaded playground and marble lobbies.

A number of large-scale defaults have been happening around the United States as owners grapple with the aftermath of the housing-bubble collapse, a fragile economy and constrained credit markets.