June 19, 2004 |
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Island House, Westview on Privatization Path RIOC Memo Promises Attempts at Subsidies for Some Tenants by Dick Lutz |
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In a key step toward privatization of Westview and Island House,
RIOC has set terms for negotiating an extension of the buildings’ ground
leases. On Monday, the RIOC Board issued a resolution and memorandum
of intent outlining how the land will be valued in determining future ground
rent. The Board’s memo also promises an “endeavor” to obtain public-agency subsidies for tenants who meet a key income guideline. It acknowledges that privatization is intended by the likely purchaser, the Sheldrake Corporation. In Monday’s RIOC meeting, Board Chair Mary Beth Labate said, “There will be ample opportunity for debate and discussion. I just ask everyone to view [the memo of intent] with an open mind and, as people get more educated on the process, I think they will understand, in the end, that this could be an extraordinarily favorable thing for those living in Westview and Island House.” There are two major components of the Board’s action, which designates Board members John Mannix and Deborah Beck, a Rivercross resident, as RIOC’s negotiators. One component is the valuation process. The other focuses on possible subsidies for tenants. Valuation Because removing the buildings from the State’s Mitchell-Lama program will require a long-term mortgage, RIOC’s role in the privatization process focuses on extending the ground lease for the buildings to December, 2068. In Monday’s meeting, Beck said, “The part of the deal that RIOC controls is the ground lease... Westview and Island House are privately owned and so it is a [negotiation] with the current owner that would determine who ultimately succeeds in purchasing the two buildings... We have very limited involvement in that process beyond approval of the transaction that is ultimately agreed to.”Separately, John Mannix pointed out that there is a deal under way between the current owners and the Sheldrake Corporation: “We have been asked by the Sheldrake Corporation to negotiate with them. We have had our attorneys review the contract between Sheldrake and the current owners and we are satisfied that there is, in fact, a contract between [them]. Beyond that, obviously, it’s confidential. It has not been released to the Board... Our attorneys have read it and have opined that a contract does exist.” The existence of the contract, and RIOC’s recognition of it, could impact on the latitude available to tenant groups in each building who have long explored the possibilities of tenant purchase. (Leaders of the ownership efforts in each building have not yet responded to The WIRE’s request for comment.) To set the value of the ground under the buildings, an appraisal process is outlined in the memorandum of intent: “The ground rent during the extension term of each of the ground leases is to be based on the greater of the ground rent to be negotiated with the purchasers and the fair market value of the land.” The memo names Jerome Haims Realty, Inc., as the first appraiser. Additional appraisers may be brought into the process, at the option of the parties. The language of the memo indicates that RIOC intends to collect increased ground rent, and adds, “if the projects ... are converted to condominium or cooperative ownership ... a percentage ... of the gross sales price” will also be received by RIOC. The percentage share is specified in the memo as “to be determined” in the negotiations. Subsidies The memorandum of intent says, “RIOC will endeavor to obtain ... funds from public agencies ... to assist existing tenants whose income is below 150% of AMI.” AMI stands for Area Median Income, a federal administrative benchmark set by the Department of Housing and Urban Development (HUD) and commonly used by government agencies in determining eligibility for government-backed mortgages. While AMI is reset periodically, and varies depending on family size, for New York City the 2004 figures are:
Thus, if RIOC is able to obtain a pool of funds from public agencies, the income limit for a family of four seeking a subsidy for rent – or a down payment or maintenance if their building is turned into a condo or cooperative – would be $94,200 by 2004 standards. The number is likely to rise in future calibrations. The memo specifies that “if the [buildings] are converted to condominium or cooperative ownership, tenants who purchase their apartments [with] subsidies will be required to repay the subsidies from excess sales proceeds, if any, over their net purchase price” when they sell. An important parenthetical in the RIOC Board’s memo regarding subsidies is that it will “endeavor to obtain” subsidies “without representation or warranty that the same will be obtained nor as a condition to any obligation [of] the purchasers....” Assemblymember Pete Grannis, who represents the Island, said on Thursday he had reviewed the resolution and memorandum and, “Absent a clear and definitive statement by RIOC that will guarantee protections for the current residents, I will not be able to support the process as set up by RIOC.” Asked about the noncommittal nature of the language, Beck responded by e-mail, “It is only the beginning of the discussions. The document made public [Monday] is the first thing that has been put on paper.” Beck wrote, “One of our priorities is that certain groups of residents now living in Island House and Westview can remain, should the current owner of the buildings be granted an extension of the ground lease by RIOC, enabling that owner to sell the buildings. The new ownership would then have the right to turn the buildings into market-rate rentals and/or owner-occupied units. Should a ground-lease extension be granted and a sale consummated, the groups we hope to assist are fixed-income seniors, disabled, and families with school age children whose incomes fall below the threshold of 150% of median income.” In Monday’s meeting, Labate said, “I think that the most important issue for the residents is the fact that [it is] the intent of this corporation, of the Board, to the fullest extent possible in these negotiations, to provide some level of protection to those making 150% of AMI or below... There is a committment on our part to the fullest extent possible to protect those that we feel could be compromised in any way by the negotiations, and that we’ve defined as – and I think it’s a fairly common definition for affordability purposes when it comes to housing – and that is 150% of AMI.” On that point, in Monday’s meeting, Mannix said, “The protected classes of tenants [intended by the Board’s promise to seek public-agency subsidies] are above and beyond those protected by other law. In fact, we think there will be several classes of protected tenants in addition to [those covered by] the 150% of AMI... It’s been pretty clear in our discussions that there is, with varying degrees of opinions, a clear intent to provide the protections for all of those tenants that need them. I think we’ll have to go forward with the tenant groups as this process goes forward, but I think that intent was stated pretty clearly not just [by Labate] a few moments ago, but over the course of the last couple of months as we’ve tried to get ourselves to today.” Beck also wrote, “John Mannix and I, negotiating on behalf of and with the support of the RIOC Board regarding the extension of the ground lease, are committed to have a transparent process so that residents of the affected buildings will know what we are doing as the talks progress. It will be up to the owners of the buildings to hold meetings with the residents.” She added, “Residents should be aware that these preliminary discussions take a lot of time, and it is likely that it will not be before the Fall that there is anything more to report.” Another resident Board member, David Kraut, though not involved in the negotiations, told The WIRE by e-mail, “People have to understand that there are two steps to the process. First, the current owners of these properties might sell them to the Sheldrake company or to some other entity. We hear a consortium of current residents are also trying to put together a deal of their own. Whomever the current owners decide to sell to – if they so decide – RIOC can do very little at this point in the process.” Mannix concurs. In the Monday Board session, he said, “RIOC has a very limited role here. If the buildings are sold while there’s a ground lease in place, [although] we have approval rights, it’s not something that we have any real direct relationship with. It’s with the extension of the leases to allow for conversion to cooperative or condominium ownership that the corporation finds itself needing to be at the negotiating table.” Kraut wote, “We [could] vote to not allow the sale, but the participants [would] sue us, and we do not have a basis [for such an action], and we would lose, in my personal and non-lawyerly opinion. RIOC has much more to say if and when Sheldrake or another buyer comes to us for the lease extension, which would be necessary prior to a condominium or co-op conversion. At that point RIOC – including both management and the Board – will do everything it can to build necessary safeguards into the lease to protect current residents who need protecting. Personally, I am not serving on this board in order to drive the middle class out of their apartments. I am gratified to tell you that every Board member agrees with me on this score.” In an earlier development on the Westview-Island House matter, RIOC President Herbert E. Berman recused himself from involvement in negotiations. He explained to The WIRE that the Sheldrake Organization had contributed to one of his past political campaigns, and he wanted to avoid any appearance of a conflict of interest. Click here to review the RIOC resolution and memorandum of intent. Click here to review a letter to the New York State Division of Housing and Community Renewal from Pete Grannis, Carolyn Maloney, and Gifford Miller. |