J. Christopher Daly:  You’ve already taken the “welcome” out of it.  Boy – that article on the campaign contributions.

WIRE:  Well, that came out of Albany.  It’s what’s in the news at the moment.  I’m sure you were aware of it, because apparently you received letters about it.  That is one of the things I need to ask you about.  Tell me about it.  Do you feel like you’re in trouble, or is that a routine matter?

Daly:  Not at all.  I think it’s very routine.  It happens fairly frequently within the State, and I think the State made a mistake.  They sent the original letter in May to the wrong address.  They didn’t send it to our main office in Hempstead.  When we became aware of it late December; we immediately sent notices to the people that we had given contributions to, which were over, and requested refunds.  So as far as we’re concerned we’re in full compliance with the law.

Henry A. Sheinkopf (public relations consultant):  As a matter of fact, Sheldrake has sought the assistance of the Board of Elections on a constant basis to insure that this doesn’t happen again – to monitor its activity.  And, after all, in reality, any political person who goes, the first stop is real estate anyplace in the country, and why not pick somebody who’s well-known.  And this corporation has supported people who have done a good job in public office.

Daly:  We’ve been doing this since 1989, and we only have – is it two years or three years that...?

Robert J. Klehammer (of Sheldrake):  There are three years that are questionable.  One we have straightened out because it was an improperly categorized in-kind contribution where the candidate had put our name down where we were strictly the managing agent.  So it’s really just, ’01 and ’02 that we’re getting refunds for.

WIRE:  Well, you were a relatively minor contributor in the scheme of things, in the article we did, though apparently the only one they considered to be in violation.

Daly:  Well, again, we’ve been doing this for over 15 years, and two years out of 15, while no excuse, speaks of our record of staying on top of these issues.

WIRE:  Tell me what – with regard to that – to what extent do you think political contributions are important in paving the way for the things you want to do?

Daly:  Not at all.

WIRE:  That’s the answer I would expect, but there’s a strong feeling that political contributions are the lubricant that grease the skids, as it were.

Daly:  I think what greases the skids for us is our record.  We have a 15-year track record of doing good things all throughout the State, and the State actually asking other municipalities and other owners to deal with us, because they like our record.  We’re constantly rated in the highest category for DHCR, which we do our majority of work with.  We’ve got terrific relationships with banks, so I think our work speaks for itself.

WIRE:  DHCR seems to give you high marks.  Let’s talk about Roosevelt Island.  Do you have a deal?

Daly:  Do we have a deal?  We have an understanding with Mr. Lucido.  We’ve put money down as a deposit, and we’re still doing what’s known as due diligence.  One of the reasons why there are people in the building looking and doing examinations since December and early January, so we want to find out what’s there – what needs to be fixed, whether there are any environmental conditions...  We have to know what we’re buying if we go ahead with the deal.  And that’s about the stage we’re at.  It’s going to be a few more weeks, maybe a month or so, until we figure out where we’re going to be.

WIRE:  But your feeling is that this is going to work out.

Daly:  I think so.  There are major issues, still, that I can’t go into right now, but we’d like to be on the Island.  I hope we are.

WIRE:  It seems to me that it fits with your other properties around the State.

Daly:  I would think so.  I think what we do is we typically pick up an asset, put additional monies into it, manage it very well, and try to get everyone happy, and I think we’ve done a good job in that.

WIRE:  You put your own management people in place when you buy a property?

Daly:  No, it’s sometimes if we buy a deal we will keep the existing people in place.  Other times we bring in fresh blood.

WIRE:  You said several weeks, or at least a few weeks, before it will be concluded.  Have you talked with Charles Lucido about any of the commitments he’s made to residents with regard to resident ownership ultimately?  Is that something that is on the plate?

Daly:  Well, I’m not aware...  We have never been told by Mr. Lucido of any promises he made to the tenants, nor do we know of any.

WIRE:  Do any of your properties involve the ultimate possibility or the current possibility of resident ownership?

Daly:  In some of the privatizations we’ve done, yes, we’ve given the tenants the right to come in at some point in time and buy us out, and it’s in the contracts.

WIRE:  Within the Roosevelt Island situation the conventional wisdom has been that, without an extension of the ground lease, you can’t really make a viable deal because you don’t know what your costs are going to be in the ground lease.  So I’m wondering, in your conversations with Herb Berman, have you had any successful exploration of that subject so far?

Daly:  We haven’t had conversations with Herb directly on the ground lease.  We’ve mostly had conversations with people on the Board and sending letters to RIOC as an entity.  So we’re exploring what we can do to help RIOC and what they can do to help us.

WIRE:  With whom on the Board have you spoken?

Klehammer:  Pretty much we’ve spoken to every member on the Board.

Daly:  No, we have not.  No, no.  Really, I would have to say it’s mostly been staff, mostly Sari Dickson, and she’s been a conduit, I think, to get information out to the Board.

WIRE:  Where do you stand on that ground-lease question?

Daly:  We don’t know.

WIRE:  Is that an impediment to the deal?

Daly:  I wouldn’t say it’s an impediment, but it’s something that we need to know about before we go forward.

WIRE:  So you feel you need to have that finalized before you can take any final step, at least.

Daly:  It depends on...  The ground lease is important to us, obviously, because we need to know where we stand.  The ground lease expires in 2028, so it just leaves a question as to how we go forward.  I wouldn’t say that it’s a deal-breaker, per se, but it’s a big question mark.  It’s something we need to know.

WIRE:  What about the tax question for 2007?

Daly:  The taxes increasing?  Another big issue for us that we have to come to grips with.  It’s an enormous hit on the tenants.  Are the tenants aware of it?

WIRE:  Generally, they probably are.  Are they worried about it?  Yes.  Are they able to do anything about it?  I think that they feel they have no particular opportunity to have impact on it yet.  But I can’t speak for them.  I think that when you have an opportunity to meet with them, I’m sure they’ll brief you – both the task forces for Island House and Westview, and the Island House Ownership Committee, I’m sure, will be interested in briefing you on what they see as the possibilities...

Klehammer:  Does Rivercross face the same...?

WIRE:  Yes.

Klehammer:  So what’s Rivercross going to do?

WIRE:  Same problem, same question.

Daly:  It goes up 50 percent, doesn’t it?

Klehammer:  More than that.

WIRE:  It is expected to go up substantially, and the major question is what impact it’s going to have on rents and maintenance.

Klehammer:  The big unknown here is the way the language is.  It just talks about a tax equivalency payment (TEP) based on comparable market-rate housing.  Nobody knows what that is.  There are no assessments on the properties.  The City doesn’t assess these buildings.  So it’s going to come down to doing appraisals.

Daly:  Before we get off the subject, you mentioned a meeting with tenants.  We would like to have a meeting with the tenants when we’re finalized and we know what we can say, and what we’re going to offer.  We’re very much looking forward to meeting the tenants, and we will.

WIRE:  I haven’t checked the numbers, but can you give me some sense of what happens to rent levels in buildings when you take them over?  Do they go up?  Do they stay the same?  What’s the typical...?

Daly:  It depends.  In the privatization deals we’ve done, the tenants’ rent has remained the same, other than a yearly CPI (consumer price index) increase.  We’ve gotten government subsidies to give us the gap that we need to put the money into the deal.  So if someone was paying $250 a month, we would increase their rent by the CPI, every year.  So we would do the same here...  Sorry... I’m not going to say we’re going to do the same here, but what we’ve done in the past is then we’ve gone to government and we’ve gotten some kind of Section 8 or some other kind of assistance that would bridge the gap to a more market-rate subsidized rent.

WIRE:  I’m trying to think how that might impact in the Island House and Westview situation, where there are, as far as I know, no Section 8 housing.  There’s Mitchell-Lama, strictly, as far as I know, and once you privatize, of course, you’re out of Mitchell-Lama, so is the CPI enough of an increase?

Daly:  Well, let me go back.  You’re saying “once you privatize.”  I have not said we’re going to privatize.  We don’t know what we’re going to do yet, because we’re still going through that whole process.  It may be the best thing is to stay in Mitchell-Lama.  We don’t know yet.  Privatization in these other deals was a little different.  We were physically buying the buildings from a government.

WIRE:  And the land.

Daly:  Right.  Here, we are not buying...  We’re buying from an owner who’s a private citizen, who’s a real estate owner, so it’s an entirely different situation.  A lot of the components are the same, but the actual ownership structure is entirely different.

WIRE:  This is an outright purchase – you are buying the package and Charles Lucido will no longer be active...

Daly:  No, the way we contemplate it is that we think Mr. Lucido has a world of knowledge.  He’s been around a long time.  I think he’s respected by the people in the community, and we’d like to see him continue with us to some extent going forward, and certainly that’s his wish, and that certainly is our wish.

WIRE:  Any interest in Eastwood?

Daly: We really don’t know that much about Eastwood.  We haven’t really been exposed to it.  We just don’t know that much about it.

WIRE:  So you haven’t explored that at all.

Daly:  No.  Neither has it been broached to us.

WIRE:  That kind of covers my questions, but I’d like to go back to the whole question of resident ownership.  For many years now – more than ten that I know of – there has been an Island House Ownership Committee, and I know there is similar interest in Westview, in the residents ultimately becoming the owners, through a cooperative arrangement or a condo arrangement, of their apartments, or of the building as a whole, and I know that among our readers in those buildings, that is going to be the question that they’re going to be interested in, from this interview.  So let me ask you to discourse on that a bit if you would, starting perhaps with the question of just what the possibilties might be for resident ownership through a cooperative or a condo in terms of the way Sheldrake does business in this market.

Daly:  Well, I think the entire question is somewhat premature right now, because we need to have the deal in place.  I think once we go through the rest of the due diligence and we see how this deal works, going forward, then I think we determine, do we keep it a Mitchell-Lama, do we keep it as a rental, do we do condo or cooperative ownership, and that’s some kind of process that we’re just getting into now, and we won’t know fully.  But we will have meetings with the residents and we do want to talk to them about these issues, and if there’s a strong groundswell for ownership, I think that’s something that we’d like to discuss with them.  We’ve not ruled anything out.

[Later, Daly added, for the record:]  If we do go forward, the residents will be kept informed of what we’re going to do, and we’ll ask them for their input, as we’ve done everyplace else.  We will not do this without their knowledge.  Everywhere we’ve gone, residents have been frightful or fearful of what was going to come.  And every place I think we’ve quelled those fears, and their worst expectations haven’t come to pass.  What’s actually happened is that the units have been renovated, they’ve had a good quality of life, and I think they’ve been happy where they are.

WIRE:  And you’re making a commitment to keep them informed as best you can.

Daly: I will certainly make a commitment right now, on the record, that I will keep them informed as we go along.  There is no corporate philosophy here of keeping people in the dark.