Sergey Brin, worth $268 billion, took a massive loss on a New York real estate bet. He sold his stake in a rent-stabilized apartment fund for pennies on the dollar. The fund's problems show how hard it is to make money on rent-controlled housing in New York City.
A&E Real Estate bought back Brin's entire stake for six cents on the dollar of his original equity. His stake was tied to properties worth $79 million gross, but the fund's troubles had already sunk its value.
"A&E bought out one of our long-term investors, who was willing to accept six cents on the dollar on their original equity investment to divest itself from the New York City multifamily sector," an A&E representative said.
The fund owned nearly 5,900 apartments across four boroughs of New York City. At its peak by 2021, A&E had more than 15,000 units under management. Now it is shrinking fast.
Rent-stabilized apartments are units where the city controls how much a landlord can raise the rent each year. In 2019, New York passed a law that sharply limited those increases. Then the pandemic hit, followed by rising borrowing costs and higher insurance premiums.
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A&E's operating expenses have increased by more than 78% over the last decade. On Thursday, the Rent Guidelines Board voted to freeze rent increases for roughly 1 million rent-stabilized apartments in New York, a central promise of Mayor Zohran Mamdani's 2025 campaign. The freeze leaves rents unable to keep pace with rising costs.
Today, A&E is carrying $84 million in unpaid rent. Wells Fargo & Co., acting as trustee, started foreclosure proceedings against A&E on a $506 million loan. The University of California wrote down its $115 million investment in the A&E fund by 50% last year.
City officials have also turned up the heat. In January, Mayor Mamdani criticized A&E for "overt cruelty" to tenants and a history of violations. The city announced a $2.1 million settlement involving A&E properties to address tenant harassment and hazardous conditions in 14 buildings.
Around the same time, Public Advocate Jumaane Williams named A&E executives New York's two "worst" landlords over their management of 60 buildings. Of those 60 buildings, A&E owned 41 through the fund in which Brin had invested.
A&E says it has invested more than $800 million to replace boilers, improve elevators and make other capital improvements in its buildings. It has cleared 35,000 building violations, many dating from before it acquired the properties.
"The simple and deeply troubling fact for renters is that institutional capital - both equity investors and lenders - are fleeing New York City's rent-stabilized apartment sector," the A&E representative said. "They understand New York is in a doom loop."
Institutional investors and lenders are leaving New York's rent-stabilized market. With roughly 1 million such apartments in the city, the clash between tenant protections and landlord costs is far from over.
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