The city is set to buy 17 properties from the notorious Podolsky brothers so it can convert homeless apartments into affordable housing — but the price tag, initially thought to be between $40 million and $60 million has risen to a whopping $173 million, a city official confirmed Thursday.
The deal, which multiple government sources predict will be finalized by late March, involves the city financing the purchase of buildings in Brooklyn and the Bronx. Non-profit groups would then take over the day-to-day management of the properties.
The units — many of which are now being used as “cluster site” homeless shelters — would be converted to city-subsidized apartments.
Mayor de Blasio announced in January the deal would be put on hold after the Daily News revealed the Podolsky brothers — who pleaded guilty to more than a dozen offenses involving other properties in 1986 — were the landlords selling the property.
That pause apparently has been lifted — and so has the expected price of the properties.
Early in the city’s consideration of the deal, it estimated the buildings’ market value to be between $40 million and $60 million, according to a knowledgeable source.
But a city official said on Thursday that the Law Department retained a third-party appraiser, Metropolitan Valuation Services, to figure out the properties’ value.
That appraisal put their worth at $143.1 million.
The Podolsky brothers apparently got the city to raise the price. They valued the 17 properties they wish to sell at around $200 million — and sought that price from the city.
But the brothers have refused to rectify outstanding alleged building violations, pushing the properties’ price down to the $173 million figure, said the knowledgeable source.
Another factor is that the city leveled the threat of taking the properties through eminent domain, which would mean a court battle. That might have increased the city’s costs beyond $173 million.
A Podolsky spokesman said the brothers are “delighted” to have arrived at a “fair resolution.”
Now City Hall officials are sweating bullets trying to figure out a way to justify the properties’ $173 million price to the public.
“They’ve very conscious of that,” the source said.
According to the source, the city’s PR team plans to use the luxury apartment on Central Park South recently purchased for $238 million as an illustration of how a property’s appraised value can differ substantially from what it would fetch on the open market.
City officials are eager to complete the purchase. “They’re rushing to push through the deal,” said the city government insider.
One concern has been news coverage of the sale — including a Daily News story in January that reported that not even the supers in the squalid buildings know that the Podolskys are the owners.
“Everyone is uptight about the articles that were done,” the government insider said of The News’s coverage. “It just seems like they’re bumbling their way along.”
In February, the Daily News made Freedom of Information requests for any appraisals associated with the deal, but those have not yet been fulfilled.
“The city does not give out appraisals as a policy,” de Blasio spokeswoman Jaclyn Rothenberg said Thursday.