Wednesday, December 16, 2020

NY AG: Madison Realty Capital to pay more than $1 million for victims of fraud and tenant harassment

The legal fallout from Raphael (Rafi) Toledano's brief yet soul-crushing stint as an East Village landlord continues.

Yesterday, New York Attorney General Letitia James announced an agreement that secures more than $1 million in rent credits for harassed tenants and provides housing placements for 10 homeless families. 

The agreement with private equity firm Madison Realty Capital comes after James found that the company aided and abetted tenant harassment and other fraud by Toledano.

"Today's agreement stands up for all the tenants harassed and pushed out of their homes by a fraudulent landlord and the lender that financed his unlawful operation," James said in a statement. "Madison Realty Capital aided one of our city's worst landlords in his unlawful scheme, but we're holding the company to account and delivering real relief to the many victims through rent credits and housing placement."

Here's more of the background and current narrative via the AG's office:

With the financial backing of Madison Realty Capital, Toledano harassed tenants through coercive buyouts; executed illegal construction practices; and failed to provide tenants with utilities, repairs, and other necessary services. 

Even with this track record, in 2015, Madison Realty loaned Toledano over $100 million to purchase a 15-building portfolio in the East Village, despite his limited experience in managing a portfolio of this size, evidence of prior tenant harassment, and plans to continue to vacate rent-stabilized tenants and renovate units in violation of law.

Attorney General James’ investigation found that Madison Realty Capital knew or should have known of Toledano’s history, that the proposed conversions were unlawful, and that the aggressive schedule for buyouts and renovations was likely to result in tenant harassment. 

As a result of the loan that allowed Toledano to take over management of the East Village Properties, Toledano did exactly that — harassing hundreds of tenants, engaging in dangerous construction practices, and failing to provide basic services. In March 2017, the East Village properties filed for bankruptcy.

Under the terms of this agreement — which also resolves claims filed against Toledano’s former business entities in New York bankruptcy court — Madison Realty Capital must now take ownership of the 15 buildings in the East Village portfolio subject to $1.05 million in rent credits. 

These rent credits will be shared among the remaining tenants who suffered through Toledano’s mismanagement of these properties. The owners of the buildings will also ensure placement of 10 formerly-homeless families and will adhere to tenant health and safety protections during construction there. 

Under the settlement agreement with the AG's office, Madison wasn't required to admit wrongdoing.

"We are pleased to have resolved this matter without admitting or denying any of the allegations raised, and will continue to work with the tenants and community stakeholders to continue to improve the buildings and bring positive change to the community," a spokesperson for Madison said in a statement obtained by The Real Deal.

In June 2019, James announced a settlement with Toledano to put an end to his harassment of tenants and to prevent him from engaging in speculative real-estate deals designed to profit by violating New York's rent-stabilization laws.

In previous years, Toledano purchased 28 buildings in two separate portfolios from the Tabak family for a total of $140 million. Experienced real-estate players raised red flags about Toledano's heavy reliance on debt.

In an interview with The Real Deal in June 2016, Toledano, then 26, made "frat-tastic boasts about his wealth," including: "I’m worth a fuckload of money, bro."

Previously on EV Grieve:
• Tenants call out Madison Realty Capital: Stop warehousing rent-regulated apartments

• Report: Raphael Toledano files for Chapter 11; $145 million deal for EV portfolio is off the table 



Game over, bro.

Anonymous said...

The reporting on Toledano's real estate management of his highly indebted portfolio has been straight forward tenant harassment to force rent regulated tenants to give up their leases, tenant endangerment, tenants required to make a decision to fight landlords while living in deplorable conditions created by the landlord or give up the lease and move to safety. This happened for years and everyone knew about it. Why Toledano and others responsible are not usually criminally prosecuted is a head scratcher. At least there is now an agreement for the tenants. I would not have been able to hold on and fight for justice like some of them did. I doubt a million dollars covers it, I hope it does.

Giovanni said...

Unfortunately, this settlement will do little to stop the kind of predatory real estate practices that victimizes tenants while making landlords richer. For some reason, real estate is the one business which can be used by owners to openly harass, intimidate and endanger people without any fear of criminal prosecution. The only time the owners go to jail is when their buildings literally blow up and kill people due to their own negligence and greed, and yet the owners still get to keep the profits by selling the scene of the crime to the next profiteer.

Gojira said...

Nowhere near enough money. And why do so many of these obvious guilty parties get to settle without having to admit to any wrongdoing? They should be nailed and exposed for the criminals they are.

Anonymous said...

Why no admission of wrongdoing? Toledano AND Madison Effin' Realty should ALL be in prison for a good long time.

And while a million dollars is not chicken feed, it won't ever make up for what those tenants went through.

They should force Toledano & his partners-in-crime go live in a 3rd world slum without any running water for about 6 weeks.

Anonymous said...

$1 million, that's it? This AG is a joke.

Scuba Diva said...

At 6:43 PM, Anonymous said:

They should force Toledano & his partners-in-crime go live in a 3rd world slum without any running water for about 6 weeks.

Only 6 weeks?

Anonymous said...

A million dollars is permission for them to do it again

Chaz said...

Really what the city should do is to seize the property and give no compensation to Madison, and auction it off with the legal agreements to improve the conditions, with the punishment that it can be seized again.

LPIFLY said...

Tenants look up Regina vs DHCR decision.
This recent ruling was slipped out in the midst of the pandemic and seriously threatens our abilities to catch and pursue charges against these landlords by limititing HPSTA law. To all pursuing justice from years of fraud to illegally deregulated units pay attention!

Anonymous said...

What price on the adverse effects he caused for so many people. Evidently the price is $1M. What a joke.

Anonymous said...

Seems to me (as a tenant of one of Toledano's buildings that is part of this settlement):
Leticia James is guilty of aiding and abetting Toledano and Madison.
Madison doesn't have to admit they knowingly set Tolendano up to fail and now become owner of the 15 buildings, even though they are known to be just as bad as Tolendano. 327 E12th Street remains without gas and Madison says the building must be unoccupied in order to restore the cooking gas line's. Madison's Silverstone was in charge of the cooking gas line restoration at 325 East 12th Street, next door to 327 E 12th St and the building remained occupied throughout the entire job. 325 East 12th Street has 37 apartments while 327 E12th Street has 22 apartments. $1.5 million isn't much compared to how much tenant's suffered in those 15 buildings for years.
Has Raphael Toledano gotten out of his $3million settlement that Leticia James bragged about in December 2019? These tenants get nothing from Toledano directly following this recent settlement?
If so, it's another NYC disgrace.
These 15 buildings will, most likely, be demolished and replaced. The present tenants, many who have lived in these buildings for decades, will be relocated and offered their current rents for only 7 years. That's the NYC housing law that doesn't protect tenants. Once this 7 years are up, the tenant's Leticia James claims to be looking out for will have to pay market rate for their apartments.
NY Rent Control and Rent Stabilized Tenants Beware!!! NY is not looking out for you and the settlement Leticia James will only worsen tenant's rights in the near future.

Anonymous said...

Where does this guy call home?