A New York City landlord is locked in a legal fight with veteran multifamily investor Sentinel Real Estate over an alleged scheme to inflate the value of five Washington Heights apartment buildings.
The landlord, an LLC connected to Michael Aryeh’s Heritage Realty, says Sentinel and its affiliates misrepresented the rent-stabilization status of dozens of apartments, allowing the company to sell the properties at artificially high prices, according to a lawsuit filed in state Supreme Court. Aryeh claims he overpaid by at least $50 million when he purchased the buildings for $85 million between 2016 and 2017.
The case has been winding its way through the courts since 2023. Sentinel is seeking to dismiss the lawsuit based on the statute of limitations. A Kings County judge threw out a similar case against Sentinel involving a different landlord.
“The allegations in this lawsuit are baseless and legally flawed,” a Sentinel spokesperson said. “Another court has already dismissed identical claims in a separate lawsuit based on the same allegations, and we are confident in our position.”
Heritage alleges that Sentinel and Newcastle Realty Services — a firm founded by Margaret Streicker, daughter of Sentinel’s late founder John Streicker — engaged in a years-long practice of inflating renovation costs in order to deregulate rent-stabilized apartments, according to the suit.
By overstating the expense of so-called Individual Apartment Improvements, the companies allegedly pushed rents past the legal threshold for deregulation and then marketed the units as free market, the complaint alleges. The buyers argue that they relied on fraudulent rent rolls, leases and state filings when agreeing to the deals, the complaint says.
The allegations mirror findings by the state Attorney General’s Office, which in 2022 reached a settlement with Sentinel affiliates over similar conduct. That investigation concluded that Newcastle employees solicited kickbacks from contractors, fabricated renovation costs and manipulated rent registrations, according to a press release from Attorney General Leititia James. Sentinel paid $4 million to a tenant protection fund but did not compensate subsequent owners who bought the buildings.
In 2023, James ordered Aryeh to re-regulate 46 units across the five properties — a move that the suit says further slashed the buildings’ value. The Attorney General acknowledged that the current owners did not commit the violations but required them to comply with rent laws going forward, according to the suit.
“This case was brought to hold Sentinel accountable for a widespread fraud from which it profited and is consistent with the findings of the New York Attorney General who already found the building purchasers, like the plaintiffs, to be victims of the fraud,” Aryeh’s attorney Leah Kelman said in a statement.
The landlord is seeking damages of at least $50 million, plus attorneys’ fees and interest. A judge denied an attempt to have the court rescind their purchase contracts.
Making matters worse for Aryeh, the value of rent-regulated apartments has plummeted since 2019, following a New York State rent law that essentially illegalized deregulation and capped landlords’ abilities to raise rents on stabilized units.
Sentinel, which manages more than $9 billion in assets, exited the rent-stabilized market last year after selling a 1,300-unit portfolio to Peter Hungerford’s PH Realty and a group of partners for $180 million, an approximate 40 percent discount to what Sentinel paid between 2013 and 2019.
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