Both buildings are the subject of a contract between the current ownership group, headed by Charles Lucido, Esq., and J. Christopher Daly’s Sheldrake Organization.  The ground under them, owned by New York City but leased to New York State along with most of the rest of Roosevelt Island, is the subject of a June 14 resolution by the Directors of the Roosevelt Island Operating Corporation (RIOC).  It would extend the sub-lease on the ground, which would make the purchase practical for Sheldrake by smoothing the way to removal of the buildings from the Mitchell-Lama program, under which the State Division of Housing and Community Renewal (DHCR) sets rent rates for apartments in the complexes.

A timeline, with recent developments:

• Jan. 10, 2004:  The Main Street WIRE reports that Sheldrake is the likely buyer of Island House and Westview.

• Mon., May 3:  The State Attorney General sends a “no action” letter to counsel for the Westview tenants organization, authorizing certain activities aimed at tenant purchase of the building.

• Mid-May:  Lucido asks DHCR to allow Sheldrake to take over management of the buildings from Roosevelt Island Housing Management Corporation (RIHMC) without competitive bids for the contract.

• Tue., May 25:  Lucido notifies RIHMC that its management contract will not be renewed when it ends June 30.

• Wed., May 26:  A DHCR official tells The WIRE that grant of the no-bid waiver is routine and expected by mid-month.

• Thur., June 10:  Assemblymember Pete Grannis, Representative Carolyn Maloney, and City Council Speaker Gifford Miller write to DHCR objecting to the management change at Island House and Westview without competitive bidding.  The letter cites newspaper articles about Sheldrake problems meeting payments on other privatized buildings it owns in New York State.

• Mon., June 14:  Sheldrake responds, saying past problems have been solved and claiming a solid track record in improving the buildings it has acquired.

• Mon., June 14:  The RIOC Board authorizes two members, John Mannix and Deborah Beck, to hold discussions with Sheldrake on extension of the ground leases.  (An extension from 2028 to 2068, when the State leasehold on Roosevelt Island ends, would make mortgage borrowing possible.)  The RIOC Board is told by RIOC attorneys that a valid contract exists between Lucido and Sheldrake.  A Memorandum of Intent accompanying the resolution says RIOC will “endeavor to obtain” public subsidies for rent or apartment purchases for tenants falling below a recognized income standard, in the event of privatization of the buildings.

• Wed., June 16:  The head of the Westview tenant group, Opher Pail, writes to Governor George Pataki alleging a “secret agreement” between RIOC and Sheldrake, asking that the ground-lease extension be denied, and suggesting that the State risks “destroy[ing]” the Roosevelt Island community “by secretly dealing with well-connected outside private investors.”  The letter points out that the “key” to resolution of the matter is extension of the ground lease controlled by RIOC.  (The Governor appoints RIOC’s President and Board members.)

• Fri., June 18:  Attorneys for Westview tenants write to DHCR objecting to Sheldrake’s management takeover.

• After a meeting with tenants, DHCR delays a waiver for Sheldrake to take over management of Westview and Island House without the competitive bidding required for Mitchell-Lama buildings.

• Thursday, June 24:  Lucido, Daly, and Robert J. Klehammer, Executive Vice President of Sheldrake, meet with tenant representatives from Island House and Westview.

• Friday, June 25:  A Lucido letter is distributed to tenants explaining decisions leading up to the planned Sheldrake purchase.  “I can understand why tenants and employees are concerned,” he writes, but says benefits will result from Sheldrake involvement, asserting that tenants “will see that Sheldrake has the professionalism, experience, and tenant orientation to surpass the tenants’ expectations.”

Resident concern about the deal stems from the likelihood that a RIOC grant of a ground-lease extension for the properties will make privatization of the buildings practical, and that once they are out of the Mitchell-Lama system, rents may rise, or significant profits may be sought in turning the buildings into condominiums or cooperatives.

Klehammer, the Sheldrake Vice President, says that in the meetings with tenant leaders, he heard their anxieties in “a frank exchange” he characterized as “good.”  He said, “It probably was something we should have done earlier.”  He says Sheldrake promised stronger communication links with tenants in the future.  “We may argue, we may disagree, but we are committed to talking with them to resolve issues in a professional, businesslike manner.”

Island House tenant representatives did not respond to WIRE requests for comments on the meeting.

But Opher Pail, head of the Westview tenant organization, is taking aim at the ground-lease extension.  “Without the ground-lease extension, the building is essentially worthless, and any agreement to sell the building is equally worthless.  It is very likely that the Lucido-Daly agreement will be void, by its own terms, if the ground lease is not extended.”  Pail continues, in a statement to The WIRE,“Indeed, the ground lease, controlled by the State, is the key for the future of this great community.”

Pail characterizes the Sheldrake proposal in stark terms:  “The current Sheldrake proposal, which includes unregulated market rents and unspecified government subsidies for only a handful of qualified tenants, is in fact a massive eviction plan.”  He says a tenant-sponsored privatizaton plan “will preserve affordable housing without government subsidies while the State will meet its ground-lease objectives.”

Pail added, “We are very pleased that the leadership of DHCR agreed to meet with us, and that RIOC’s Board agreed to take a fresh look at the ground-lease matter, and we are looking forward to meeting with them soon.”  The WIRE could not confirm that a “fresh look” by RIOC might consider a resident bid for the Westview ground-lease extension.  But Mannix said he is unaware of any meeting scheduled with the Westview Task Force.  The authority granted to Mannix and Beck seems, by its language, to limit their brief to negotiating with the current owners and Sheldrake.

Pail cites the May 3 letter from the Attorney General as authorization for Westview tenants to explore a purchase with Lucido.  But Lucido told The WIRE last week that, “We have a firm, binding contract with Sheldrake, which was entered into a while back and, to the extent that the tenants are able to negotiate, they may not be able to negotiate with me, but they can negotiate with Sheldrake.”  He added, “One of the many reasons the deal was made with Sheldrake is that the tenants and I didn’t feel we were equipped to go through the elements of a public offering.  And if we did, we’d have ordinary income from a tax standpoint,” a financial disadvantage to the sellers.

Klehammer responds to concerns about “mass eviction” by saying, “In every other Mitchell-Lama dissolution, there has been some kind of negotiated agreement with the residents...  There is give-and-take and compromise, and they’ve all resulted in protections to specified groups.”

Klehammer points out that in three years, the buildings face a hike in tax-equivalency payments when the buildings’ tax abatements will end.  He estimates that the tax bite could be “at least” $200 to $500 per month per apartment, “which can only be paid through a rent increase.”  He expressed an eagerness to work with tenant groups to mitigate the effects of such an increase.

Meanwhile, the RIOC Board’s commitment to “endeavor to obtain” subsidies for residents whose income falls below a federal standard has only begun, according to Board member Beck.  “We do not have definitive commitments as to the amount or how the subsidy would ultimately be provided,” but “it is only the beginning of the discussions, not the end.”  She also wrote, responding by e-mail to WIRE questions, “John Mannix and I, negotiating [for] 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.”

But a Mitchell-Lama buy-out takes time, and Beck added, speaking of the ground lease and the endeavor to obtain tenant/buyer subsidies, “It is likely that it will not be before the Fall that there is anything more to report.”