The ownership of Roosevelt Island's Manhattan Park buildings complex is seeking to restructure its partnership interests and refinance the existing mortgage on the property.
According to this June 11, 2014 memo from Roosevelt Island Operating Corp (
RIOC) President Charlene Indelicato to the RIOC Board Of Directors:
Roosevelt Island Associates (“RIA”) was the ground lessee under the Manhattan Park ground lease. RIA is a general partnership consisting of (i) two managing general partners,Manhattan Park Inc. (wholly owned by Starrett Companies LLC) and Cohen Roosevelt Associates, which, together, hold a 1% ownership interest and a 50% economic interest in RIA, and (ii) an investor general partner, NCC-RIA (an affiliate of Verizon Capital), which holds a 99% ownership interest and a 50% economic interest in RIA. The managing general partners propose to (i) restructure RIA by redeeming NCC’s general partnership interest in RIA for the sum of $126,000,000, and (ii) refinance the existing leasehold mortgage to order to fund the redemption. Upon completion of the restructuring, Manhattan Park Inc. and Cohen Roosevelt Associates will each have a 50% ownership interest and a 50% economic interest in RIA and NCC will have no longer own any interest in RIA. RIA would like to accomplish the redemption and refinancing simultaneously, but it is possible that the refinancing may occur shortly before or after the closing of the redemption.
RIA intends to refinance the existing mortgage with a new loan of approximately $256,000,000- $261,000,000 (the exact amount will depend upon interest rates at the time of closing, projected to be at the end of June.) In connection with the refinancing, the existing mortgage of approximately $113,000,000 will be satisfied. In addition to repaying the existing mortgage loan and related NYC HDC bonds, proceeds from the refinancing will be used to fund the redemption of NCC’s partnership interest, and pay the costs associated with the refinancing. RIA has indicated that any proceeds remaining after these obligations are satisfied will be kept in a reserve fund for future capital expenditures and repairs, and to upgrade the buildings. RIA does not intend to distribute any proceeds from the refinancing to the partners....
The consent of RIOC is required in order for the Manhattan Park restructuring and refinancing to go forward. Manhattan Park ownership proposed paying RIOC $12,600,000 for its consent. Ms. Indelicato's memo continues:
...Under the Manhattan Park ground lease, transfers of ownership interests and refinancing of the sort described above are “Transactions”, for which RIOC’s consent is required, and a Transaction Payment may be imposed. Although the redemption of NCC’s partnership interest and the refinancing may each technically be considered as separate “Transactions” under the Manhattan Park lease, in the instant case, they are part of a single, integrated transaction. RIA has advised RIOC that the redemption of NCC’s interest cannot occur without the refinancing, and that RIA will not refinance the mortgage unless it also proceeds with the redemption of NCC’s interest. In light of the fact that (i) the transactions are part of a single transaction, and neither will occur without the other, (ii) no funds will be distributed to the General Partners as a result of the refinancing, and (iii) excess proceeds from the refinancing, if any, will be put in a dedicated reserve fund to pay for capital improvements for the buildings, RIA proposes paying a single Transaction Payment of $12,600,000 for the redemption of NCC’s interest. RIA has advised RIOC that it cannot proceed with either the redemption or the refinancing if it is required to pay two Transaction Payments, and the statement of revenue and sources submitted by RIA (a copy of which is attached to this memo) confirms that there would be insufficient proceeds from the refinancing to pay more than one Transaction Payment. If RIA does not proceed with these transactions, RIOC will not receive the $12,600,000 Transaction Payment, nor will a dedicated reserve fund be created from excess loan proceeds, if any, to pay for capital improvements to the buildings. RIA has agreed that, if there were a distribution to the General Partners as a result of the refinancing, RIA will make a Transaction Payment of 10% of the amount distributed, in addition to the $12,600,000 Transaction Payment payable in connection with the redemption....
Below is chart showing the Manhattan Park Refinancing Projected Sources & Uses from the Indelicato Memo page 4. As shown at bottom of the chart, there may or may not be any funds available from the mortgage refinancing for building upgrade reserve fund.
Click here for the entire Indelicato memo on Manhattan Park ownership restructuring and mortgage refinancing. Ms. Indelicato recommended that the RIOC Board approve the transaction.
The RIOC Board's consent to Manhattan Park transactions are on tonight's RIOC Board Of Directors meeting agenda.
According to the Roosevelt Island Operating Corp (
RIOC)
AGENDA
JUNE 26, 2014 MEETING OF
THE ROOSEVELT ISLAND OPERATING CORPORATION BOARD OF DIRECTORS
THE MANHATTAN PARK COMMUNITY CENTER,
8 RIVER ROAD, ROOSEVELT ISLAND, NEW YORK
5:30 P.M.[1]
I. Call to Order
II. Roll Call
III. Approval of Minutes
1. May 15, 2014 Board Meeting (Board Action Required)
IV. Old Business
V. New Business
1. Authorization to Consent to Manhattan Park's Refinancing (Board Action Required)
2. Presentation of RIOC's Audited Financial Statements for Fiscal Year 2013-14
3. Approval of Report on Procurement Contracts for Fiscal Year Ending March 31, 2014 (Board Action Required)
4. Approval of Report on Investments for Fiscal Year Ending March 31, 2014 (Board Action Required)
5. Approval of Property Report for Fiscal Year Ending March 31, 2014 (Board Action Required)
6. Approval of Annual Report for Fiscal Year Ending March 31, 2014 (Board Action Required)
7. Ratification of Contract with The Burke Group, LLC for Actuarial Services (Board Action Required)
8. Authorization to Enter into Contract with Thomson Reuters for Access to On-Line Westlaw Legal Research Libraries (Board Action Required)
9. Ratification of Amendment of Contract with Urban Exterminating Company for Pest Control and Extermination Services (Board Action Required)
10. Authorization to Amend the Cell Antenna License Agreement with Sprint (Board Action Required)
11. President's Report
12. Committee Reports
a. Audit Committee
b. Governance Committee
c. Operations Advisory Committee
d. Real Estate Development Advisory Committee
13. Public Safety Report
VI. Adjournment
[1] The RIOC Board Meeting will commence following a public comment period. The public comment period is not part of the meeting.
UPDATE 6/27 - The RIOC Board of Directors approved the Manhattan Park partnership restructuring and mortgage financing at yesterday's meeting. RIOC President Charlene Indelicato said "it was a very good agreement with Manhattan Park" and that the $12.6 million proceeds to RIOC will go into the RIOC General Fund. RIOC Director Howard Polivy reported representations were made that as a result of the refinancing, there will be no rent increases for Manhattan Park tenants nor change in the composition of Manhattan Park affordable apartments.
Here's the discussion.
