The following is an article by the NY Times (Link Below) New York City has launched a new plan to rescue moderate-rent apartment buildings that were swept up by private equity firms during the financial boom, then left to deteriorate as they drifted toward foreclosure when the new owners were unable to repay their loans, The New York Times’s Cara Buckley reported.

Under the program, the city’s housing agencies will have $750 million to lend over five years, to enable new, responsible owners to buy and repair buildings that are in the most financial and physical distress.

About $150 million will go toward quickly providing capital for new owners to acquire such buildings; $600 million in New York City Housing Development Corporation bonds and city capital go toward buying and repairing distressed buildings. The New York City Housing Development Corporation will issue mortgages itself.

The city, through the Department of Housing Preservation and Development, plans to concentrate on the most beleaguered apartment complexes in the city — 267 buildings containing 3,564 apartments that are deep in a state of disrepair and in or close to foreclosure. Roughly 100,000 apartments citywide are in buildings that are carrying too much debt, with the money owed on them greater than their current worth, according to the department.

The former New York Mets player Mo Vaughn will be among the first developers to participate in the new initiative. Last month, Mr. Vaughn’s company, Omni New York, made the winning bid at a foreclosure auction for 14 buildings in the Bronx that had been abandoned by their owner, the Ocelot Capital Group, and had fallen deep into disrepair.

Rafael E. Cestero, the city’s housing commissioner, would not estimate the number of buildings that might be rescued by the program. But he said his agency planned to focus first on repairing and repopulating the most imperiled buildings.

“Tenants are living in conditions that are unacceptable and need to be corrected,” Mr. Cestero said. “And buildings in that kind of physical deterioration have destabilizing impacts on other neighborhoods.”

He said that after identifying distressed buildings, his agency would work with lenders and with experienced owners with good track records who are interested in buying the properties. The old, delinquent, owners would be pressured to sell because of housing code violations and tax liens issued if emergency repairs were made.

Tenants’ advocates praised the city’s rescue program, which was announced on Wednesday by Mayor Michael R. Bloomberg in his State of the City address.

“They’re being strategic and forward-thinking,” said Benjamin Dulchin, executive director of the Association for Neighborhood and Housing Development, a consortium of nonprofit housing and community development groups.

Mr. Dulchin’s agency has tracked the fallout of the financial crisis on moderate-cost apartment buildings throughout the city. During the boom, private equity investors bought many such buildings in anticipation of pushing out some existing tenants, renovating the vacant apartments, then drastically raising the rents. But they let the buildings fall into disrepair when the economy crashed and higher-paying tenants failed to materialize.

“It’s a chance to rein the private market back in,” Mr. Dulchin said, of the city’s new program, “and pull the buildings out of the speculative cycle.”

Yet Howard Husock, vice president for policy research of the Manhattan Institute, a conservative policy group, questioned whether the $750 million would be money well spent in such lean times. It would be better, he said, to let the buildings go through bankruptcy proceedings, which he said would best determine what they were really worth.

“If owners aren’t given an expectation of a bailout,” he wrote in an e-mail message, “they will take their losses now and get buildings into hands of new long-term management.”

(http://www.nytimes.com/2010/01/22/nyregion/22housing.html?dbk)