What do professional baseball players do with the millions they rack up during their careers? Some, like Maurice “Mo” Vaughn, formerly a New York Mets first baseman (after a longer career with the Red Sux…er, I mean Sox), enter the real estate business. Vaughn’s company (which he formed with his attorney, and fellow managing director Eugene Schneur), Omni New York, develops and revitalizes properties and neighborhoods, working with community groups on social improvements as well as providing affordable housing.
Lately, it’s made a big splash in the distressed real estate market. Yesterday, the Real Deal reported that the firm won an auction for 14 rent-stabilized troubled apartment buildings in the Bronx that held a loan balance of nearly $24 million. Omni initially purchased the notes last year, a deal that was touted by city officials and housing advocates alike. The properties were deemed abandoned by former owner Ocelot Capital Group, and were in such a detrimental state that the NYC Housing Preservation and Development department put all but three of them on the list of worst-maintained buildings in the city. So last year Vaughn agreed to shell out $1 million in emergency repairs, spending about half of that by midyear 2009.
But this wouldn’t be a New York City real estate deal without some controversy. According to some in the market, Omni bought the notes from Fannie Mae through Deutsche Bank at an almost 80% discount, or $5 million. Those contesting the deal say the debt could have garnered a much higher price, and blame political and media pressure, as well as the efforts of a certain nonprofit group, Urban Homesteading Assistance Board of Manhattan, which lobbied for Omni’s purchase.
The group’s goal is to buy or take title to distressed buildings, and rehabilitate and convert them to permanently affordable co-ops. It also lobbies to change affordable housing policies in New York City and Washington, DC. Yet unlike other advocacy groups, UHAB, directed by Dina Levy, owns and manages properties as well.
UHAB played an important role in another, similar transaction also involving former Ocelot Capital buildings. Hunter Property Management landlord and principal Sam Suzuki bought six Bronx assets in May 2009. Now he’s in jail for failing to comply with a judge’s order to repair one of those properties.
Reportedly, UHAB urged to keep the price low for Omni and to penalize Suzuki for his non-compliance. According to the Real Deal, “UHAB, other housing advocates and government officials pushed for the discount because without it the low rents will not support both the millions of dollars needed in critical repairs on top of a high debt level.”
Yet the paper reports that some commercial real estate players are “furious” with the group because it’s pushing down property values and it used housing code violations to get Suzuki arrested, even though the group itself has several violations on its own buildings.
What does all this have to do Mo Vaughn and his company? Well, opponents of the auction’s results say the $5-million price tag for the properties was significantly below market and the seller, Fannie Mae, could have gotten a better price from traditional investors such as real estate investment firms or funds put together to buy distressed assets.
Yet those buildings in question are in need of significant repair, and these days, most distressed buyers aren’t too interested in putting extra capital into properties, but are rather seeking stabilized assets held by distressed owners.
Gotts hand it to Mo.
Photo Courtesy of NY Times
So a genuine real estate player, even if he is a former celebrity, wants to come in and get his hands dirty to revamp these affordable projects. What’s the big deal about that? Any research on the company will show that Omni has been successful; since the end of 2004, the firm has bought and has either rehabilitated or is in the process of rehabilitating some 3,500 units of affordable housing in New York State alone. It also has projects in Massachusetts and Wyoming.
And this is a for-profit, private-sector company. Instead of jetting off to an island in the Caribbean to spend his retirement years, or peddling sports drinks on television, Vaughn (with his partners) is instead spending his time giving back to communities in need. Taking over properties from former slumlords and making them safe, livable environments. One could say he's scoring better as a real estate player than he did in the majors.
Is it the politics behind the deal people are upset about? The price he paid for the portfolio? Both? Who cares? So he got a good deal, but he has his work cut out for him. I don’t know many folks out there that would take on this major-league-sized challenge.
Got Rings?
On a side note, we lost a baseball great today—George Steinbrenner, the overlord of the Evil Empire, passed away at his home in Florida at the age of 80. A visionary who changed the world of sports and turned around a struggling franchise, Steinbrenner was in his 37th year as principal owner of the Yankees. Five years after buying the team (in a consortium of investors) in 1973 for $8.7 million, he helped turn the Bronx Bombers into World Champions once again. At the time of his passing, the Yanks had the winning-est record in baseball, earning 11 American League pennants and seven World Championships during his tenure. Could you imagine if he were a real estate guy?
The Yankees, and baseball, will never be the same. Georgie Boss, you'll be sorely missed.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
