According to The New York Times,
a private equity maven and disciple of Michael Milken is leading a wave
of buyout firms scoffing up rent-controlled real estate and strong-arming people out of their homes, all in the pursuit of a fast buck. Of
course, there are some problems with the story starting with the
accusations laid against Leon Black.
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Certainly, it is true that Black worked at Drexel Burnham Lambert
earlier in his career. But when have you recently heard anyone drudge
up an affiliation with Milken and Drexel in a story? The inclusion of
these facts just makes the heart-wrenching story about people losing
homes seem more salacious, and scandalous, and that's why it's there.
However, it's not really relevant to the current story.
As a matter of fact, Black has almost nothing to do with these real
estate deals in question. Apollo Management LP's real estate affiliate
Apollo Real Estate Advisors, which is in fact controlled by William
Mack and not Black, is partnered with one of the three firms in
question, and actually isn't involved in the deals -- most of its
portfolio consists of offices.
And while it may be a heart-wrenching story to read about people who may
be losing there homes, the three "predatory equity" firms in question
only control 75,000, or 6.25%, of the city's 1.2 million rentable
apartments. To pull at the reader's heart strings, the story highlights
the highest vacancy rates in unnamed buildings in three portfolios, but
the story doesn't tell us how many homes are in fact being turned over.
The highest vacancy number was 30%, so if that rate were applied to the
whole inventory of the three firms, then only 1.875% of the city's
homes are affected. The odds that those numbers hold, however, are
slim, meaning fewer homes are likely affected. -
Matthew Wurtzel
