The RIOC staff has been working at cross-purposes with the RIOC Board of Directors on the minischools condo conversion project.

At its meeting last week, the Board told the staff to get back in line.

At its June meeting, after a parade of residents blasted the proposed addition of partial second floors to the minischool buildings, the Board of the Roosevelt Island Operating Corporation (RIOC) stopped short of giving final approval for developer Diane Wilson's plan to turn the Island's three west-shore minischools into luxury condominium residences.  Attempting to create a hurdle that might be too difficult for Wilson – who is considered an inexperienced developer and whose plan to add a second floor to the minischools is controversial – the Board instructed the RIOC staff to set short-term deadlines for her to have full financing worked out.

Last week – some four months later – the staff reported back.

"We've finished our negotiations on the final designation letter," staff attorney Kenneth Leitner told the Board.  "It contains many of the terms that were in the Board resolution."  He then mentioned several provisions, but none for full financing.  A Board member then asked him directly: "Does [it] provide for a financing commitment that will cover the entire project?"

"The time frame that we set was for financing for at least one," Leitner said.  That set off a series of exchanges of a kind rarely seen in the RIOC Board's meetings.

"The financing commitment should be for completion of all the projects," said Board member Leo Kayser, who had authored the idea of imposing tight deadlines.  "You're going to end up high and dry.  You shouldn't have us at that risk.  They could end up with just one of the projects...  There's economies of scale which you'll be losing if they default on the rest."

Leitner responded, "Well, the time frame that we did set was a 60-day time frame...  We wanted to allow them to get the first project off the ground."

[Transcript.]

RIOC President Robert H. Ryan then told the Board that "certain title problems are slowing down any loan agreements on the other building sites."  (The one conversion near ready to go is apparently Westview.) Asked if he meant property-line problems described in a letter from architect Marc Diamond, Ryan responded, "Uh... no."  Part of the project might extend beyond the footprint of the school buildings, Leitner then explained.

Kayser told Leitner, "The Board has instructed you to make sure that you have financing commitments in place...  You're going to make sure that the whole project is financeable, and not just part of it."

RIOC's consulting counsel, Barbara Gordon Espejo, then volunteered her view that Wilson's attorney "made a very plausible case for the fact that these were going to be condominiums built on spec, so that we would try one building at a time...  Let's prove we got one of them done..."

When resident Board member David Kraut voiced a concern that one building might be converted, only to find that the others cannot be done because of title or other problems, Espejo explained the reasoning: "Each of the minischools will be a separate condominium.  They will not be under one leasehold.  Each will have its own lease...  We have never done a condominium lease on Roosevelt Island.  The Condominium Act provides that there can only be two leasehold condominiums in this State...  in Battery Park and Roosevelt Island...  This is a test case.  We want to do the first one, and make the client subject to the first one."

Kayser responded, "They need their financing in place for all three projects, in order to get their rights vested.  They're not economical if you just do one at a time.  That's why the developer wants a commitment for all three, but... the idea was that the marketplace should function so that they can go out and get their financing and come back in a certain period of time and we would accept the [decision of the] marketplace.  But they can't use RIOC to tie this up on some special basis... just squeezing people out because we're going to be patsies on this thing..."

"May I suggest that that is the way we always do business here?" Espejo responded.  When residents laughed, she quickly added, "Since 1975 we've financed one building at a time."

"From what I can see," Kayser said, "we've been entering into a number of agreements where the risk has been on this public authority and you sacrifice things with respect to the people who are out here on the Island when you shift that risk to the public authority from the private.  You've got to negotiate at arm's length...  We're going to have to approach this on a businesslike basis...  The project itself is controversial enough, but the Board's saying we're going to let the marketplace operate here, [and if] these people don't have their financing in place, they're getting special subsidy, in effect.  They get a free option without having financial wherewithal, and that's not right."

Board member John Mannix joined in the discussion at that point.  "I hate to be the one to say, 'I told you so,' but we're talking about a 15-unit development that now needs to be phased.  I mean, compared to [Southtown], this is not right.  That's a 2,000-unit project.  If what we're hearing now is that the developer is unwilling or unable to put enough credit behind this deal [or] that the market can't absorb 15 units, I'm not surprised...  I interviewed the developer well into the process, and my feeling was she did not have the wherewithal to get this project financed.  I'm surprised to hear today at this meeting that it's now a phased, five-unit-per-phase project, and perhaps what I'm saying is that RIOC is doing its best to accommodate the developer and either her reticence about going forward into the market with 15 units, or her financial inability to put up enough credit to do so.  So the major concern I have... is that the developer is a weak developer, and if she can only finance five units of this project – then I think it proves the point."

In the end, the RIOC staff people were instructed to provide a report on the advantages and disadvantages of doing the project in phases.  No action was taken.  This week, RIOC's Ryan told The WIRE that Wilson has been told of the Board's concerns.

There was a further exchange regarding the MiniCondo project after resident Board member (and RIRA President) Patrick Stewart asked about the developer's discussions with residents whose views would be degraded by the project's second-floor additions.

Kayser said residents had failed to show up for discussions in response to letters from the developer.  Letters to a half-dozen Rivercross residents offered the equivalent of four months maintenance payments (typically something less than $5,000) as compensation, which one resident, Suzanne Wolfe, characterized as not just "a low offer," but "insulting and offensive."  (The exchange between Wolfe and Kayser is part of the transcript.) There was no information on how renters in Westview and Island House might be compensated, if at all, for loss of views.