A Bushwick non-profit that took on a billion-dollar finance company in court says it has reached a settlement that will allow it to keep 190 units of housing in Brooklyn affordable "forever."
On July 1, RiseBoro Community Partnership announced it had reached an agreement with Blackstone—a listed investment banking company that acquired three Bushwick affordable housing properties from AIG in 2021—that will give it a majority interest in the properties.
"Now they are under our control, and we have basically full decision-making rights on anything related to the buildings," RiseBoro CEO Scott Short told BK Reader Thursday.
"RiseBoro has committed to permanent affordability, so it is my anticipation that these will remain affordable forever."
The properties covered under the agreement are "Renaissance Estates" at 10 Forrest Street and Bushwick Avenue, "Rheingold Gardens" at 555 Bushwick Avenue and "Stockholm Manor" at 420 Stockholm Street, which have a total of 190 units of housing in them.
Backdrop to a legal battle
RiseBoro originally sued AIG-owned company SunAmerica in 2018, alleging the investment company was contractually obligated to turn the property over to it after a 15-year period. RiseBoro said at the time that the company decided not to when it saw "dollar signs" in rapidly-gentrifying Bushwick.
But the fight began originally 1999, when RiseBoro entered into an agreement with SunAmerica to renovate 420 Stockholm Street. The agreement was made under the federal Low-Income Housing Tax Credit (LIHTC) program of 1986.
The program gives investors tax credits to provide starting capital for affordable housing projects, while a non-profit partner develops the property and manages it once it is complete.
Congress created the program so that non-profits would eventually assume full ownership of the affordable housing units, New York Attorney General Letitia James said in a 2021 legal brief on the matter filed in support of RiseBoro.
She said Congress built in the "right of first refusal" for the non-profit partner to purchase the property off the investor after 15 years for a fixed, below-market price.
SunAmerica allegedly agreed under the program to transfer its ownership stake in the Bushwick property to RiseBoro after 15 years. However 15 years later, it didn’t want to, RiseBoro alleged, and debated the definition of the "right of first refusal."
The non-profit sued SunAmerica, and a federal judge initially sided with SunAmerica.
RiseBoro filed an appeal, and has now reached a settlement that does not give it full ownership of 420 Stockholm, as it had asked, but instead restructures the partnership interest to give it a majority stake.
Short told BK Reader he could not share with the public what percentage of the properties RiseBoro now holds, nor could he share the settlement agreement.
"I cannot tell you the breakdown, but it gives RiseBoro effective control," he said.
'A strong message'
As the case played out in court, affordable housing advocates feared the case could set a dangerous precedent for the way developers handle affordable housing investments nationwide.
James said that if other private investors were to follow SunAmerica’s lead and try to hold their interests in affordable housing properties, it would eventually lead to properties being converted to market-rate rents, putting them beyond the reach of low-income New Yorkers.
Her office did not respond to a request for comment on the settlement.
However, the settlement sends "a strong message to investors" pursuing the tactic of trying to deny non-profits the right of first refusal that there are other options, Short said Thursday.
"One of the most prominent private equity investment firms in the country has found a way to reach a deal with a non-profit, and that is a win-win for both sides," he said.
"It respects the original purpose of these properties and preserves affordability. It's a strong message being sent by the settlement."
Blackstone has also committed to donating $1.2 million over 15 years to fund RiseBoro’s resident support services, as part of the agreement.
“We have been impressed by RiseBoro’s deep commitment as stewards of the communities they serve and we are proud to deepen our relationship for the benefit of residents," Blackstone Real Estate Global Co-Head Kathleen McCarthy said.
"This agreement is another example of our commitment to maintain and expand affordable housing."