Google founder Sergey Brin has reportedly exited a NYC real estate investment for 6 cents on the dollar. The widespread reporting blames progressive housing policies that have capped rent increases, and implies that a fed up Brin said “sell,” but this seems like a misrepresentation. The truth may be a bit more nuanced.
There are many details about this investment that are missing, such as:
- What was the original investment thesis?
- When did the investment begin? Have investors received any distributions from the investment?
- Are investors required to make capital contributions?
- Are there other reasons for realizing the loss such as offsetting gains elsewhere?
- Most importantly, no real comment from Brin
While neither side has revealed all of the details, the following appears to be confirmed:
- This was a “long time” investment in rent stabilized housing
- The initial investment was $79 million, and the stake was sold back to the sponsor for less than $5 million
- The sponsor, A&E Real Estate, owns and operates 5,900 rent stabilized apartments across a large portfolio of buildings. A&E was the target of recent pressure by the Mamdani administration as one of the city’s “worst landlords” and agreed to pay a $2.1 million fine
News reports on Brin’s exit has couched it in a political light, attributing the 94% loss to the 2019 rent stabilization laws, Mamdani, and the recent rent freeze. There could be a little more to the story:
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This was a risky investment from the outset. The investment thesis was most likely to find ways to de-regulate as many units as possible and realize a significant boost in rents and valuations, or to convert to condos and sell off the units at substantial profits. Even before the 2019 laws this would have been a high-risk / high-reward strategy. Rent regulated units (includes rent control, rent stabilization, SROs and other regulated housing) have long traded at substantial discounts to free market units for good reason.
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There were likely other reasons for taking the loss. Another investor in the fund — the University of California, which had invested $115 million — wrote down their investment by 50%, which is a substantial loss but far from 94%, which would imply that the investment was worth more than 6 cents on the original dollar invested. If there were any possibility of a rebound, it would arguably make more sense to wait it out. But here are some reasons to sell anyway:
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Capital Calls – Certain investments require the participants to make additional contributions upon request. In the case of real estate, if the income is not covering operating costs or there is a large unexpected expense, the partners have to cover the shortfall. It is possible this already happened and they decided to stop throwing good money after bad.
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Loss of Confidence – If the business has been trending downward for some time, the leadership team may have made repeated promises to turn things around. They have already fallen way short of the returns they originally projected. If you have no confidence in leadership, it is time to exit.
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Offsetting gains – An investor like Brin has massive gains in his portfolio. It is likely his loss in this investment offsets taxable gains being harvested elsewhere.
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Politics – The articles imply that there was a political message to his exit, that Brin was throwing his arms up at progressive policies and Mayor Mamdani. Given the lockups and notification period required by most funds, the request to liquidate and negotiations on the buyout took place over months. The transaction reportedly took place in December 2025 (A&E’s own spokesperson has said November — the discrepancy is unresolved in public reporting). That was well before the Rent Guidelines Board (RGB) froze rents on regulated apartments, and even before Mamdani took office. I doubt that Brin cares that much that he would burn millions of dollars just to make a very muted political point, and his representatives did not comment on the news. Nonetheless the politics around housing may have contributed to the decision to exit.
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There is an old saying in investing to cut your losers and ride your winners, and that may be what we are seeing here. For someone worth $280 billion, an investment that is less than 1% of 1% may not have even been on his radar. But what if $79 million was a substantial percentage of his portfolio? Looking for a turnaround might have been his only option. Here are a few avenues to a turnaround:
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Existing Pathways to Deregulation – There are now almost no avenues to deregulating apartments systematically, but some may still exist.
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Substantial Rehabilitation – In some cases a building may already be in poor condition and partially vacant. In that scenario the owner may be able to declare substantial renovations are required and file to de-regulate the building, and may be given the power to remove any remaining tenants.
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Condo Conversions – Generally only applicable if the building is vacant, a stabilized building might be converted to a condo building and be forever removed from rent regulations. The sale of the condo units could represent a substantial windfall.
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The Supreme Court Hail Mary – Others have tried unsuccessfully to overturn New York’s rent stabilization laws, but some now see an opening. The court has a current 6-3 conservative leaning, and while they have recently passed on housing cases they have signaled that they are open to investigating the question “in an appropriate future case.” Others have pointed to the 2019 HSTPA and the new mayor’s aggressive housing policies as creating the right conditions to bring a strong case to SCOTUS.
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Government Assistance – Mayor Mamdani has promised some landlords will be able to receive financial assistance to improve low-income housing. There are indications that the same officials who attack “bad landlords” recognize that many landlords also need help.
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We are already at the bottom – If the market value of rent regulated buildings has indeed fallen 94% and the RGB just voted for a two-year rent freeze, for landlords the situation could not be much worse. Any landlord that sells now would potentially be selling at the bottom. But the buyer could be entering with a substantial built-in cushion.
The Politics
Regardless of what Mr. Brin’s political motivation may or may not have been, the NYC housing landscape has transformed under progressive policies, Mayor Mamdani being a recent addition to the conversation. Elected officials have been openly antagonistic towards large landlords and institutional investors (aka Wall Street). Progressive policies like the 2019 HSTPA are hitting them where it hurts, in the pocketbook. While these elected officials have taken victory laps and received “attaboys” from their supporters, the reality is that these policies may be the equivalent of an “own goal” in sports. The landlord of a rent stabilized building proactively leaned into and invested in rent stabilized housing, where most other investors have steered clear. Compared to public housing which costs taxpayers billions of dollars to create and maintain, privately owned regulated housing pays modest taxes generating revenue for governments while providing affordable housing to the public. Slashing the equity of these properties diminishes their ability to borrow and repair these buildings. Freezing the rent may mean the buildings cannot be self-sustaining. If the city has to step in with financial assistance to landlords, or take full ownership of these buildings, it will cost taxpayers billions more. Many regulated buildings are in fact very old, and do require substantial renovations to make habitable. Some of these buildings are as small as 6 units. The best affordable housing is new housing: clean, modern, up to all of the building codes, in large, dense buildings. Preserving old, deteriorated buildings as affordable housing is madness if you do not allow the owners the means to invest in them.
Currently there are about 153,000 NYCHA units, plus another 25,000 or so Section 8 units, housing about 500,000 New Yorkers. There are over 900,000 privately owned rent stabilized / rent controlled units. There are in total about 2.3 million renter-occupied units in NYC, so about half are under rent regulation.
If the privately owned affordable housing stock were to collapse that would be a disaster. Our fellow New Yorkers, teachers, police, doormen, bus drivers, delivery, taxi drivers, nannies, aspiring entertainers and artists, and everyone else who helps make New York the greatest city on earth, depend upon access to affordable housing to make living here a possibility. That is something we need to keep writing about.
