NYC Mayor Eric Adams Sits Down For One On One Interview About Roosevelt Island, He Supports Separate Tram Lines For Residents To Alleviate Overcrowding, Says Coler Hospital Is Not Closing - It's A Hidden Jewel And Wishes Gracie Mansion Could Be Moved To Roosevelt Island

This afternoon I had a 15 minute one on one interview with NYC Mayor Eric Adams. According to the Mayor:

... No matter what we do with Roosevelt Island, we should have the input of the residents  to determine their destiny. I think that's crucial and  I support how those who live there, who have made it a vibrant community, how they believe is the best way to run it....

We spoke about:

• Extension of Roosevelt Island ground lease - it's a long way off he said.
  
• RIOC Governance and Mayoral appointments to the RIOC Board.
• Roosevelt Island Tram boarding preference for residents to alleviate overcrowding which he says is a good idea.
• Future Status of Coler Hospital - it will remain open. Rumors of Coler closing are untrue.
  
• Repair status of Steam Plant and tunnel,
• Impressions of Roosevelt Island - Mayor Adams says it's a hidden jewel and would like to move Gracie Mansion here.  
  

Roosevelt Island Westview Building Ground Lease Extension On RIOC Board Meeting Agenda Tonight - Here Are The Details On Mitchell Lama Exit And Resident Affordability Plan

On July 18, the Roosevelt Island Operating Corp (RIOC) Real Estate Development Advisory Committee met in Executive Sessioin (closed to the public) to discuss the Westview building

ground lease negotiations. As reported that evening:

Following the Executive Session, I spotted RIOC President Susan Rosenthal on Main Street. I asked what happened at the meeting. Ms Rosenthal replied:

Board meeting has been scheduled for Monday...

Translation, a Westview agreement has been reached and will be voted on at Board meeting on Monday.

More details on the Agreement coming soon.

Here are the details.

 It looks like the Westview Affordability Plan, Privatization and Ground Lease Extension will be approved at this evening's RIOC Board meeting. Among the items on RIOC Board Agenda for meeting tonight is:

III. New Business
1. Authorizations Related to Amendment to Westview Ground Lease (Board Action Required)

Below is RIOC CFO Kimberly Quinones July 20 Memo in support of the Westview Ground Lease Amendment to the RIOC Board of Directors:

EXECUTIVE SUMMARY

At its July 23, 2018 meeting, the Board of Directors of RIOC will be asked to consider approval of an amendment (the “Amendment”) to the 1973 ground lease (“Ground Lease”) with NorthTown Phase III Houses, Inc., the owner of Westview (the “Owner”). Approval of the Amendment would enable the Owner to pursue an affordable home ownership conversion plan for Westview (“Affordability Plan”). The Affordability Plan provides for current tenants to be able to purchase their apartments at below market value with non-purchasers receiving guaranteed rent protections. In approving the Affordability Plan, RIOC will need to extend the Ground Lease with increases for Tax Equivalency and Ground Rent payments as provided in the Amendment. Prior to approving the Amendment, the Board will be asked to approve certain environmental findings. Proposed Board resolutions adopting the environmental findings and approving the Amendment are attached.

PROPOSED AMENDMENT

The Proposed Amendment would modify and extend the existing Ground Lease between RIOC and the Owner governing a Mitchell-Lama building with 361 residential rental units (“Westview”). Although the Ground Lease is not scheduled to terminate until 2028, certain changes in circumstances merit the proposed Amendment. The Owner seeks to exit the Mitchell Lama program, as is its right under the State’s Private Housing Finance Law, and pursue a cooperative and condominium conversion (the “Conversion”). The Owner also seeks to refinance the mortgage on Westview. In order to accomplish these goals, the Owner needs to extend the term of the lease. RIOC seeks to preserve affordable housing, consistent with its mission and statutory purpose.

RIOC has worked with the Owner and the Empire State Development Corp. of N.Y. (ESD) the New York State Division of Housing and Community Renewal (HCR) to develop a plan that balances the parties’ goals. In exchange for an extension of the Ground Lease at a below market ground rent, the Owner has agreed to maintain Westview as an affordable housing complex for a period of 30 years pursuant to the Affordability Plan. In exchange for affordability protections, the expiration date of the Ground Lease will be extended from January 31, 2028 through December 22, 2068, and the ground rent payable to RIOC will be less than a full market ground rent unencumbered by the Affordability Plan for a lease term through 2068. In addition, the Amendment will allow RIOC to remain in occupancy of its current office space for a period of up to five (5) years, with no rent being payable by RIOC for the first three years. Finally, the Amendment will permit the Owner to refinance its existing mortgage at advantageous rates so it can make necessary capital improvements to Westview.

AFFORDABILITY PLAN HIGHLIGHTS

The Affordability Plan provides that for the next 30 years at least 55% of the 361 residential units, (199 units) will either be affordable restricted price cooperative apartments or affordable rental units. Affordable cooperative apartments will give existing tenants the opportunity to purchase at a substantial discount while restricting resale prices and instituting income limitations upon subsequent purchasers. Tenants who do not purchase apartments will be provided with rent increases tied to the “Rent Guidelines Board” increased by 6.16% plus a 0% to 5% add-on depending on the tenant’s income. Tenants who do not purchase their units will be provided subsidized rent for as long as they remain up to the next 30 years.

Please note that the cooperative Conversion will require the approval of the NYS Attorney General’s Office. In the event of non-approval, the building will convert to an “Affordable Rental” whereby at least 55% of the residential units will be provided subsidized rents as described above for the next 30 years.

As detailed in the attached Affordability Plan, the Sponsor is required to make an up-front capital contribution to the building’s Capital Reserve Fund.

GROUND RENT HIGHLIGHTS

Under the Amendment, the effective starting annual ground rent would be $325,000 (an increase as Westview does not currently pay ground rent), and would increase by 10% every 5 years during the 30 year affordable period, and thereafter at 4% per year. The ground rent amount is supported by an appraisal of the leasehold encumbered by the Affordability Plan. The ground rent was structured in order to keep cooperative maintenance charges to a minimum. Ground rent will be comprised of three components: Base Ground Rent (paid by the Lessee); Transfer Resale Fees (paid by the shareholders upon re-sale); and Capital Event Fee (referred to as Sponsor Transfer fees in the Amendment) (paid by the sponsor on initial sales). The NPV of the projected estimated revenues comes to approximately 30% of appraisal. The appraisal was performed by Jerome Haims, a highly respected appraiser with many years’ experience with public/private New York real estate. In addition, a Valuation Letter was also obtained from Newmark Knight Frank.

TAX EQUIVALENT PAYMENTS (TEP) HIGHLIGHTS

The Amendment provides for a ten (10) year phase-in of Tax Equivalent payments to market rates for units being sold or rented at market, provided that for the first thirty years, the Tax Equivalent Payments for market rate apartments will be based on 80% of the market based tax equivalent payment. Thereafter, the Equivalent Payments for market apartments will increase to 100% of market based TEP. On July, 2018, the Empire State Development Corp. of N.Y. (ESD) approved the TEP provisions in the Affordability Plan and gave its consent to the ground lease extension.

ENVIRONMENTAL REVIEW

Counsel has advised that the Proposed Amendment is a Type II action under the State Environmental Quality Review Act (“SEQRA”), and therefore does not require environmental review. However, as a conservative measure and for the avoidance of doubt, RIOC staff has worked with outside environmental counsel to prepare the attached Short Environmental Assessment Form and addendums (“SEAF”) to assess any potential environmental impacts that may result from the Proposed Amendment. Based on the SEAF, I recommend that RIOC conclude that the Amendment and implementation of the Affordability Plan will not have a significant adverse impact on the environment. Copies of the SEAF and a proposed negative declaration for Board approval are attached.

RECOMMENDATION
I believe that, in keeping with RIOC’s corporate mission of promoting Affordable Housing on the Island if economically feasible, the proposed ground lease extension accomplishes this and I recommend its approval....

Also, NY State Department of Homes & Community Renewal (DHCR) memo to RIOC in support of the Westview Affordability Plan.

Read more »

Roosevelt Island Westview Ground Lease Negotiations Stalled Delaying Building's Exit From Mitchell Lama Program - Residents Worry About Fate Of Affordability Plan, What's Going On?

Six months after approving an affordability plan to exit the NY State Mitchell Lama housing program, residents of Roosevelt Island's Westview building are worried that no final agreement has been reached between the Westview building owner/sponsor (North Town Phase 111 Associates LP) and various NY State government agencies, including the Roosevelt Island Operating Corp (RIOC), NY State Homes & Community Renewal (HCR) and the Empire State Development Corp.

As reported October 3, 2016:

The last remaining Roosevelt Island Mitchell Lama building, Westview,

took another step closer to privatization and exiting the NY State affordable housing program this weekend with the residents approving an affordability plan negotiated between their representatives, the Westview Task Force  (WTF) and building ownership....

and:

... The Westview Task Force added that the Affordability Plan has the support of local elected officials, NY State Homes & Community Renewal and the Roosevelt Island Operating Corp (RIOC). RIOC is expected to approve an extension of the Westview Ground Lease through 2068 during its January 2016 Board meeting....

 Image of September 22 WTF Affordability Plan Informational Meeting

Roosevelt Island's NY State Assembly Member Rebecca Seawright supported the Westview affordability plan and had this statement:

... Westview is the last building remaining in the Mitchell-Lama program on Roosevelt Island and will exit with an affordability plan supported by Assembly Member Seawright. Seawright acted on the numerous concerns raised by her constituents and worked with public officials Congresswoman Carolyn B. Maloney, Senator Jose M. Serrano, Manhattan Borough President Gale A. Brewer, NYC Council Member Ben Kallos and New York State Homes & Community Renewal’s Commissioner James S. Rubin to ensure the affordability plan was fair for all. The proposed plan, which was overwhelmingly approved, protects Westview residents who chose to continue to rent rather than purchase. The affordability plan specifically protects residents on fixed incomes who simply cannot afford to purchase their apartments or pay market rent. At the same time, this is an opportunity for many middle income Westview residents to become first time home buyers at affordable purchase prices...

But, to date, the Westview building owner/sponsor and the NY State agencies have not reached a final agreement leaving the residents worried and the fate of their homes unknown.

I spoke with Westvew owner/sponsor David Hirschhorn about the current status of the Westview affordability plan and exit from the Mitchell Lama program. According to Mr. Hirschhorn:

The Affordability Plan is essentially a very detailed term sheet that sets forth all of the details for how Westview will withdraw from the Mitchell Lama Program and how it will operate following Mitchell Lama withdrawal. It is modeled on the Island House Affordability Plan and includes: (i) the purchase price to be paid by tenants who elect to purchase their apartments, (ii) the rent to be paid by tenants who elect not to purchase their apartments, (iii) the ground rent and transfer fees to be paid to RIOC, and (iv) the payments in lieu of real estate taxes to be paid to ESD.

Following the Island House template, the Westview Affordability Plan was the product of many years of negotiation and compromise between the Sponsor and the Westview Taskforce. DHCR was involved in every step of these negotiations and used its good offices to ultimately bring the parties together resulting in the Westview Affordability Plan Dated September 1, 2016 - FINAL. The agreed upon Final Affordability Plan was then overwhelmingly approved in a tenant referendum on October 3, 2016. The economic terms were carefully balanced and reflect substantial concessions; therefore, any change will have a ripple effect resulting in multiple changes. Its very complicated.

The sponsor and RIOC were to finalize the Ground Lease extension using the Island House Ground lease as the Westview template. The final approved Westview Affordability Plan provided for the same ground rent and the same transfer fees agreed to by RIOC in Island House to be incorporated in Westview. The Westview Affordability Plan actually states:

This Affordability Plan contemplates the execution of a formal Ground Lease Modification Agreement incorporating the terms of this Affordability Plan. The Sponsor and the New York State agencies agree to cooperate with one another in a good faith effort to prepare and execute such Ground Lease Modification Agreement (and the Sponsor-RIOC Sublease herein described) as expeditiously as reasonably possible.

All of this was supposed to have been completed by January 31, 2017 because effective February 1, 2017, the Affordability Plan provides that the purchase price paid by Westview tenants increases (with additional increases each month thereafter). The Sponsor deferred the February increase, but the March 1st increase is effective. The next increase will take effect April 1st.

I presume RIOC is evaluating whether it will proceed with the ground lease extension on which the Affordability Plan was based (the same as RIOC agreed to in Island House) and approved by Westview Tenants, or whether it will instead require a greater ground rent to be paid by the Coop (which would require that the monthly maintenance fees be increased that could result in the coop not being viable and thus the failure of the entire deal), and/or higher transfer fees from the Sponsor and tenants when apartments are sold. As noted above, any change in one provision beyond what was carefully negotiated, such as an increase to the Sponsor, would result in other changes, such as an increase in the purchase price to be paid by tenant purchasers.

Without a ground lease extension there cannot be a cooperative conversion and tenants would not be able to become homeowners. Remaining a Mitchell Lama is not an option and so Westview would become a market rate rental building. This would be a most unfortunate result.

All of the New York State agencies (RIOC, DHCR & ESD) need to finalize the Westview Ground Lease Extension substantially in the form that these same agencies signed for Island House. This could be done very quickly since the form is actually included in the Westview Red Herring which all of the agencies have had since its filing in 2015. ESD has already stated that they are prepared to move forward using the Island House documentation. So its really up to RIOC and DHCR as to whether they will proceed as provided in the Final Affordability Plan.

I am cautiously optimistic. I believe that RIOC and DHCR are carefully considering what is at stake and they are certainly aware of what was agreed to and the economic terms that everyone (tenants and sponsor) relied upon in compromising upon a final consensus back in September. I do believe they are working hard to make the Westview Affordability Plan a reality. It would be most unfortunate to now upset the apple cart. Island House was a smashing success and as the Sponsor, I would hope that we can replicate and bring that success to the Westview Tenants. Both the Sponsor and the Westview Taskforce desire to conclude the Westview Ground Lease Extension as originally contemplated without further price increases to the Westview Tenants. With interest rates rising, it would be good for the Westview Tenants to get this done very soon.

The Westview Task Force representing building residents issued this March 20 statement:

We were unpleasantly surprised and very disappointed that the effective date of the Westview Affordability Plan did not materialize at the end of January, this after the agencies assured us that a January effective date was achievable as long as we came to an agreement with the Sponsor and demonstrated Tenant support for the Plan. An overwhelmingly positive vote by Tenants was delivered at the end of September 2016 moving the Plan forward for final approval by the agencies.

We have not been provided with any specifics related to the new demands put on the Sponsor by the agencies and we are not part of any negotiations. Therefore, we are not in a position to comment on the status of such negotiations. We have, however, clearly expressed to the agencies and Sponsor our concerns with any potential outcome that might adversely affect the affordable preservation of our homes, and our position that any such adverse outcome would be unacceptable.

We remain hopeful that the affordability terms as of the promised January effective date will be retained and quickly approved by the agencies.

RIOC President Susan Rosenthal responded to my inquiry on status of Westview affordability plan and ground lease extension saying:

RIOC is working in concert with HCR and ESD to negotiate with the Owner. We remain hopeful that the parties will reach agreement. 

The last public statements by RIOC on the subject of Westview ground lease extension and affordability plan occurred during the October 13, 2016 Real Estate Advisory Committee meeting. RIOC President Rosenthal reported to the Committee:

We had a meeting with the Task Force at their request and we also had conversations with Hirschhorn before the vote and I indicated to both groups that we are having an appraisal.  It is very possible that the rent proposed by us will be higher than the Island House rent based upon the increase in market value and they should know that before going forward....

... We're not going to agree to an amount that's not based upon the market value....

RIOC Director Margie Smith added:

There's just so many variables. It is similar to Island House but certainly not the same building. There are so many issues that one building has and not the other one. We should have been involved all along in this, certainly before they voted....

Ms. Rosenthal replied:

HCR did not look at the affordability plan before the vote. ESD has not looked at the TEP payment before the vote. I'm not sure why it was done in this chronology.

Here's portion of the Real Estate Advisory Committee discussion



and the full discussion.



Information on the Island House Mitchell Lama exit here and Rivercross exit here.

Island House Mitchell Lama exit was under an affordability plan, Rivercross Mitchell Lama exit was a market rate plan.

There is currently an arbitration under way between RIOC and Rivercross regarding the Rivercross ground lease extension fee. Not currently known if the Rivercross ground lease extension arbitration effects the Westivew ground lease negotiations.

Westview residents are very worried.

UPDATE 4/11 - NY State Assembly Member Rebecca Seawright adds:

It is in everyone's best interest that Westview exit from the Mitchell Lama program ensures affordable housing for Roosevelt Island residents. We have come so far in negotiations, and I will continue to work with DHCR, ESD, RIOC and the Westview Taskforce to maximize the benefit for the residents. At this time, negotiations are still in progress and there is every reason to believe that the final plan will be affordable and fair for all.

Updates On Roosevelt Island Main Street Retail, Steam Plant and Young Adult Program On Agenda For RIOC Real Estate Committee Meeting Tonight - Also Executive Session On Library Renovation And Southtown Building 7-9 Ground Lease Negotiation

Image of NYC Council Member Lappin, NYPL President Anthony Marx and Roosevelt Island Kids

According to the Roosevelt Island Operating Corp (RIOC)

PLEASE TAKE NOTICE that a meeting of the Real Estate Development Advisory Committee of the RIOC Board of Directors will be held on Tuesday, November 20, 2012 at 5:30 p.m. at the RIOC administrative office, 591 Main Street, Roosevelt Island, New York.

Agenda:

1. Hudson/Related Update on Main Street Retail
2. Steam Plant Update
3. Young Adult Program Update
4. Chair's Motion for Executive Session to Review and Discuss:
a) 504 Main Street Library Renovation Update
b) Southtown Buildings 7, 8 and 9 Ground lease Negotiations Update
5. Any Other Committee Business That May be Brought Before the Committee

An audio webcast of the meeting will be available soon thereafter.

More on Roosevelt Island library renovation at 504 Main Street from previous post.

UPDATE 11/21 - Here's the audio web cast of the 11/20 RIOC Real Estate Committee meeting.

Roosevelt Island Community Space, Garden Club, Food Truck, Pier NYC Among the Items On Public Session of RIOC Real Estate Committee Meeting Tomorrow - Steam Plant, Southtown Ground Lease Extension And Cornell To Be Discussed In Executive Session

Roosevelt Island Food Trucks and Pier NYC From Above This Past Summer

According to the Roosevelt Island Operating Corp (RIOC):

PLEASE TAKE NOTICE that a meeting of the Real Estate Development Advisory Committee of the RIOC Board of Directors will be held on Friday, October 5, 2012 at 5:30 p.m. at the RIOC administrative office, 591 Main Street, Roosevelt Island, New York.

AGENDA

1. Discuss Availability of Additional Community Spaces;
2. Review of the Roosevelt Island Garden Club Permit Status;
3. Status Update on Food Concession Permits and Pier NYC;
4. Chair's Motion for Executive Session to Review and Discuss Negotiations Regarding:
a. Proposed Modifications to the Ground Lease for Southtown Buildings 7, 8;
b. Disposition of the Steam Plant; and
c. Open Issues Related to the Cornell NYC Project
5. Any Other Committee Business That May be Brought Before the Committee.

Sure would be nice to get Food Trucks back to Roosevelt Island on a regular basis.


The Eddies Pizza Truck from The Eddie's Pizza Truck on Vimeo.

Island House Ground Lease Modification Almost Done - Roosevelt Island Operating Corp Real Estate Committee Meeting Tonight To Discuss and Full Board To Vote At September 20 RIOC Directors Meeting - Privatization and Exit From Mitchell Lama Program For Building Proceeding

 Image of Island House Enterance

According to the Roosevelt Island Operating Corp (RIOC)

PLEASE TAKE NOTICE that a meeting of the Real Estate Development Advisory Committee of the RIOC Board of Directors will be held on Tuesday, September 18, 2012 at 5:30 p.m. at the RIOC administrative office, 591 Main Street, Roosevelt Island, New York.

AGENDA

1. Chair's Motion for Executive Session to Review and Discuss Proposed Modifications to the Ground Lease for Island House;

2. Any Other Committee Business That May be Brought Before the Committee.

It appears as though the Island House Ground Lease Extension and Mitchell Lama privatization exit is about to proceed since this item # 7 has been added to the RIOC September 20 Board of Directors meeting agenda

Authorizations Related to Amendment to Island House Ground Lease

Below is the September 20 RIOC Board Agenda.

AMENDED AGENDA

SEPTEMBER 20, 2012 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. July 30, 2012 Board Meeting (Board Action Required)
IV. Old Business
V. New Business
1. Presentation of the Proposed RIOC Budget for FY 2013-2014
2. Authorization to Amend License Agreement with the New York City Police Department Transit Bureau K-9 Unit (Board Action Required)
3. Authorization to Amend the Contract for Construction Management Services for Oversight of the Aerial Tramway Modernization Project with LiRo Engineers Inc. (Board Action Required)
4. Authorization to Enter into a Contract with Streetline, Inc. for Roosevelt Island Smart Parking Program (Board Action Required)
5. Authorization to Enter Into a Contract with Meli Contracting Co., Inc. for Westside Waterfront Sidewalk Reconstruction Project (Board Action Required)
6. Authorization to Enter Into a Contract with Scientific Electric Co. Inc. for Lighthouse Park Lighting & Electric Restoration Project (Board Action Required)
7. Authorizations Related to Amendment to Island House Ground Lease (Board Action Required)
8. President's Report 9. Committee Reports
a. Audit Committee
b. Governance Committee
c. Operations Advisory Committee
d. Real Estate Development Advisory Committee
10. Public Safety Report
VI. Adjournment

More on Island House privatization and exit from Mitchell Lama program including video of Town Hall meeting on subject at previous post.

Proposed Roosevelt Island Ground Lease Extension For Island House and Southtown Buildings 7-9 Ground Lease Modifications Back On Agenda For August 10 RIOC Board Real Estate Committee Meeting - In Executive Session Closed To The Public

 Image of Roosevelt Island's Island House Entrance

Reported previously that a proposed Island House Ground Lease Extension agenda item had been removed from the Roosevelt Island Operating Corp (RIOC) July 29 Board of Directors meeting and asked:

... how the removal of Island House Ground Lease Extension Agenda Item from tonight's RIOC Board Meeting effects the privatization/affordability plan for Island House's exit from Mitchell Lama program....

That question remained unanswered but modifications of Roosevelt Island building's ground lease are back on RIOC's agenda this week. The proposed Island House Ground Lease extension as well as the proposed Ground Lease modifications for Southtown Building 7 -9 are on the Agenda for RIOC's Real Estate Committee meeting this coming Friday. The meeting will be held in Executive Session which means that the public will not be able to attend the meeting. According to RIOC:

PLEASE TAKE NOTICE that a meeting of the Real Estate Development Advisory Committee of the RIOC Board of Directors will be held on Friday, August 10, 2012 at 3:00 p.m. at the RIOC administrative office, 591 Main Street, Roosevelt Island, New York.

AGENDA

1.Chair’s Motion for Executive Session to Review and Discuss:

a. Proposed Modifications to the Ground Lease for Island House;
b. Proposed Modifications to the Ground Lease for Southtown Buildings 7, 8 and 9; and

2. Any Other Committee Business That May be Brought Before the Committee.

More information on Island House Ground Lease Extension/privatization efforts available here. No additional information available on Southtown Ground Lease modification other than Hudson Related has previously announced plans for developing building 7 in early 2013 and:

... Southtown 7,8 & 9 – as noted in the budget for the past two years, the development of Southtown 7, 8 & 9 will have a significant impact on the future cash flow of the Corporation. The developer, Hudson/Related (HR) holds an option to develop the site that expires on December 31, 2012....

Stay tuned.

Roosevelt Island Rivercross Board Of Directors Decide To Exit Mitchell Lama Program Under A Market Rate Plan, Continuing To Negotiate Subsidies With RIOC and ESDC For Affordability Plan Under Parallel Track - Island House and Westview Privatization Updates Too

Image of Rivercross Building Entrance

Last Friday, I learned that the Roosevelt Island Rivercross Tenants Corp. Board Of Directors decided to leave the Mitchell Lama Program under a market rate plan. Yesterday, I asked the Rivercross Board and Roosevelt Island Operating Corp (RIOC):

I understand the Rivercross Tenants Corp Board advised the Rivercross Shareholders last Friday that the Board has decided

• to exit the Mitchell Lama program under a market rate plan,
• to file a Notice Of Intent to leave Mitchell Lama with DHCR and
• to submit an Offering Plan to the NY State Attorney General for review.

Is that true?

If so, does either the Rivercross Board or RIOC Board have any comment to make for a post I am preparing for Roosevelt Islander Online? Also, how does the Rivercross Board and RIOC Board anticipate Rivercross exiting Mitchell Lama under a non affordable market rate plan will effect the Rivercross Ground Lease with Roosevelt Island Operating Corp (RIOC) particularly in view of the recent Island House proposal to exit Mitchell Lama under an Affordable Plan approved by DHCR?

I intend to publish post on subject tomorrow. Please let me know if anyone intends to comment on this issue?

Thank you.

The Rivercross Board responded yesterday by providing a memo which was distributed to their shareholders on July 13 explaining the reasons they are seeking to leave Mitchell Lama under a market rate plan emphasizing that the Board is also following a parallel Affordability plan. An excerpt of the memo follows

The full Rivercross Board July 13 memo is below.



Here's more on Rivercross privatization efforts from previous posts and December 2010 Rivercross ground lease extension from RIOC which appears to be dependent upon Rivercross remaining in the Mitchell Lama program.

In other Roosevelt Island Mitchell Lama news, Island House privatization and Ground Lease Extension will be on the Agenda for July 19  RIOC Real Estate Committee:

... 3. Chair's Motion for Executive Session to Review and Discuss Proposed Modifications to the Ground Lease for Island House;...

and the Westview Task Force met on July 12 to discuss their privatization efforts (will have more on this soon).

Image From Westview Task Force

Additional information on the unprecedented Island House Privatization Affordability Plan here and Westview privatization efforts here.

RIOC Real Estate Committee Meeting In Executive Session Today on Southtown Riverwalk Buildings 7-9 Ground Lease Modifications For Hudson Related - CBRE Hired To Provide RIOC With Roosevelt Island Real Estate Services and Gound Lease Advice

Image From Wall Street Journal Greater New York

The Roosevelt Island Operating Corp (RIOC) Real Estate Development Advisory Committee will be meeting this afternoon in Executive Session (closed to the public) to discuss proposed ground lease modifications for Hudson Related Southtown's Riverwalk Buildings 7 - 9 (shown in picture above as future construction). According to RIOC:

PLEASE TAKE NOTICE that a meeting of the Real Estate Development Advisory Committee of the RIOC Board of Directors will be held on Tuesday, July 3, 2012 at 1:00 p.m. at the RIOC administrative office, 591 Main Street, Roosevelt Island, New York.

AGENDA

1. Chair�s Motion for Executive Session to Review and Discuss Proposed Modifications to the Ground Lease for Southtown Buildings 7, 8 and 9;

2. Discuss Any Other Committee Business That May be Brought Before the Committee.

I do not know yet what type of ground lease modifications for Southtown Riverwalk Buildings 7-9 are being discussed and since the meeting is in Executive Session, closed to the public, will not be able to report on what happens today. More information on Southtown buildings 7-9 development available in RIOC's 2012-13 Budget including (Page 6):

... Southtown 7,8 & 9 – as noted in the budget for the past two years, the development of Southtown 7, 8 & 9 will have a significant impact on the future cash flow of the Corporation. The developer, Hudson/Related (HR) holds an option to develop the site that expires on December 31, 2012. Preliminary discussions appear to be positive although development would depend on market conditions. If development should not go forward the future cash flow would be significantly negatively impacted as detailed on page 13....

and (Page 13):

... Early discussions with Hudsion/Related appear to be positive although development would depend on market conditions. If Hudson/Related did not go forth with development of 7,8 & 9 they would owe the Corporation a de-designation fee of Approx. $1,500,000 and the net effect on projected cash flows would be as follows:....

As reported last April, Hudson Related exercised its option on building 7 and plans to start construction in early 2013.

Roosevelt Island ground lease issues were one of the reasons RIOC Chief Financial Officer Steve Chironis cited for hiring CBRE as a real estate consultant during the June 28 RIOC Board of Directors Meeting. CBRE is replacing RIOC's former real estate consultant Jones Lange LaSalle.

When asked by RIOC Director David Kraut if there is any urgency to approve CBRE as RIOC's new real estate consultant at the June Meeting, Mr. Chironis replied yes. Here's that portion of the discussion



and the full discussion in which Mr. Chironis asks the Board to approve CBRE as RIOC's real estate consultant explaining that CBRE is very experienced in ground lease issues having worked on similar issues at Battery Park City and provided a cheaper bid than Jones Lang LaSalle.

Unprecedented Plan For Roosevelt Island's Island House Building To Exit Mitchell Lama Program With Affordable Home Ownership For Residents, Will It Work? Island House Residents Hold Question And Answer Session To Explain Plan

Image of Roosevelt Island's Island House Entrance

An update on Roosevelt Island's Island House efforts to exit the NY State Mitchell Lama program under a privatization and affordability plan agreed to by the Owner (David Hirschhorn), Residents and NY State.

On May 27, the Island House Tenants Association (IHTA) held a meeting at the Good Shepherd Community Center

with tenants to discuss the privatization/affordability plan and answer questions from residents. In addition to the IHTA Board, Roosevelt Island Assembly Member Micah Kellner, NY State Homes and Community Renewal (DHCR) Assistant Commissioner Richmond McCurnin and IHTA attorney Stuart Saft were in attendance to answer questions.

After an introduction by IHTA Chair Graham Cannon, Assembly Member Kellner gave a brief review explaining to the Island House residents that the Mitchell Lama program was coming to an end and the question is how it will end so that the residents of Island House can remain in their homes either under an affordable plan for home ownership or remaining as renters.

Mr. Kellner then introduced DHCR Assistant Commissioner McCurnin who stated that not a single Mitchell Lama building exiting the program has been saved from going market rate through a home ownership conversion such as the one proposed and agreed to for Island House. If the Island House privatization and affordability plan succeeds, it will be unprecedented said Mr. McCurnin. Also, Mr. McCurnin emphasized that the plan is a result of a great deal of compromise and that everybody is not going to like every single provision but that if this privatization/affordability plan is not accepted, the alternative is market rate housing. Many current Island House tenants would not be able to afford remaining in their homes if a market rate housing plan was instituted.

Here's a video excerpt from the beginning of the meeting (full video of meeting is below).



The IHTA prepared this summary of the plan:

SUMMARY OF THE ISLAND HOUSE PLAN FOR PRESERVATION OF AFFORDABLE HOUSING AND WITHDRAWAL FROM THE MITCHELL-LAMA PROGRAM (THE "AFFORDABILITY PLAN")

Please find attached the Island House Plan for Preservation of Affordable Housing and Withdrawal from the Mitchell-Lama Program.

This is the final version of the Plan,* negotiated and agreed by the owner, DHCR, RIOC, the Empire State Development Corporation, and the Governor's office, that we voted for in September 2009 and by which we "signaled the owner, DHCR and RIOC to move ahead with a ground lease extension and preparation of the offering plan".

We are very pleased with the outcome. As many others have noted, at a point where the owner has the absolute right to withdraw our building from Mitchell-Lama and charge market rents, this is a plan that protects tenant purchasers and continuing renters at affordable levels that will allow us the security of remaining in our homes for many decades to come.

The purpose of the Affordability Plan is to provide a structure for the withdrawal of Island House from the Mitchell-Lama Program on terms that will preserve Island House as an affordable housing project for both existing tenants and future occupants.

The key elements of the plan are as follows:

• RIOC will extend the Island House ground lease until 2068 — we anticipate by July 31 2012 — for the sole purpose of implementing the Affordability Plan.

• Following that vote by RIOC to extend the ground lease, Island House will withdraw from Mitchell-Lama Program and immediately enter the Affordable Rental Program (similar to New York rent stabilization) outlined and required by the Plan. All tenants will initially continue as renters to be covered by the affordable rental program while the portion of the plan allowing tenants to purchase their apartments is submitted to the New York Attorney General as an Offering Plan by the owner (the "Sponsor").

• Once the ground lease has been extended by RIOC, the Sponsor will submit the Offering Plan (the "Red Herring") to the New York Attorney General. The Attorney General will first review the plan then require additional answers and disclosures from the Sponsor before accepting the plan for filing. The Sponsor will then send the final Offering Plan to the tenants and each tenant will have an exclusive period to determine whether or not to purchase his/her apartment.

• Under the Offering Plan, Island House tenants will be able to purchase their apartments at a discount of approximately 65% off the market price. The price of each apartment will be based upon the number of shares in the cooperative apartment corporation allocated to such unit.

• Under the agreement, the aggregate value of all apartments in the coop ($90,252,162) was determined by using an average price of $198 per sq. ft. times the aggregate saleable residential area of 455,819 sq. ft. (exclusive of terraces and balconies). Based upon this aggregate valuation (exclusive of terraces and balconies), the per share price is $164. Shares are assigned to each cooperative apartment based upon a standard formula for Adjusted Apartment Area and relative value, taking into account location, view and height.

• For those Island House residents who do not wish to purchase their apartments, they may remain as tenants for the next 30 years under a rental program mirroring rent stabilization with increases based on the same increases provided to New York rent stabilized tenants (plus a surcharge of no more then 5% for those at higher income levels as outlined in the plan).

• The Division of Housing and Community Renewal (DHCR) will continue to supervise the property to insure that the terms of the Affordability Plan are adhered to.

• Owner contributes $9,600,000 to building improvements and reserves.

• Owner pays $4,500,000 in transfer fees to RIOC

• Ground Lease and Tax Equivalency Payments for affordable units remain low during the 30 year affordability period and thereafter phase into a market level tax payment. (Along with flip tax revenue, this will greatly enhance affordability by keeping monthly costs. in addition to mortgage, as low as possible.)

• After a tenant has made his or her initial purchase of the apartment under the Offering Plan, in order to balance both the investment risk taken by the tenant and provide for affordability for future generations, tenants will be able to resell their apartments at an initial resale price per share of $328 (twice the initial per share offering price to tenants), plus costs of any improvements. This price will be allowed to increase by 7.5% per annum. After the initial sale by the Sponsor to the current tenant, tenants may only sell their apartments to people with incomes under the formula described in the Affordability Plan.....

Among the questions asked by the Island House residents during the meeting was:

• will a single person living in a multi bedroom apartment be able to buy their apartment,

• if you decide not to buy what happens to the price of your rent,

what is the amount of flip tax on future apartment sales and will there be a windfall in profits for sellers,





and why is the Island House plan so unique?



Here's the entire Island House Affordability and Privatization Plan



and full video of May 27, 2012 IHTA meeting.

You Tube Video of Island House Affordability/Privatization Meeting (Part 1)

You Tube Video of Island House Affordability/Privatization Meeting (Part 2)

Following the meeting I asked Assembly Member Kellner if there were any outstanding issues remaining with the Roosevelt Island Operating Corp (RIOC) extending the ground lease on Island House with the current building owner. Mr. Kellner replied that there were no outstanding issues to his knowledge. I sent an email the next day asking RIOC President Leslie Torres:

After the Island House Meeting last night on their privatization/affordability plans, I asked Assembly Member Micah Kellner if there were any outstanding issues remaining regarding the ground lease extension being sought by the building's owner from RIOC.

Mr. Kellner replied that to his knowledge there were no outstanding issues remaining for the ground lease extension.

From RIOC's perspective, is it true that there are no issues remaining to be agreed upon for the Island House Ground Lease extension?

Thank you.

Have not received a response back from RIOC.

RIOC's discretion in granting the ground lease extension for the building is a key component in the affordability plan negotiations. Without the ground lease extension, the building owners would find it very difficult to finance exiting Mitchell Lama. It's going to be very interesting to see how this all plays out and how it impacts privatization/affordability of the other remaining Roosevelt Island Mitchell Lama buildings - Rivercross Coop and Westview rental.

RIOC Issues RFP For Assistance In Negotiating Ground Lease Extensions For Several Roosevelt Island Buildings - Who's Interested?

Image From Lawton Group

Reported previously on Mitchell Lama privatization/affordability plan and ground lease extension issues for Roosevelt Island Rivercross, Island House and Westview buildings.

Last April 25, the Roosevelt Island Operating Corp (RIOC) Real Estate Committee met in Executive Session to discuss Island House issues as well as ground lease modification for the yet to be built Southtown Buildings 7-9 by Hudson Related.

On May 8, RIOC issued a Request For Proposals (RFP) seeking a real estate consultant to assist in negotiating ground lease agreements for several building. According to the RFP:

The Roosevelt Island Operating Corporation (“RIOC”), a NYS Public Benefit Corporation, was established to develop and maintain the 147 acre Roosevelt Island located between Manhattan and Queens along the East River. The Island was leased from the City of New York by RIOC under a 99 year lease terminating in 2068. RIOC seeks to engage a real estate consultant to assist in the negotiation of ground lease extensions for several island buildings....

... The contract will be for a one year with an option for RIOC to renew for an additional two years...

The due date for submissions to the RFP for interested real estate firms is May 29. Full RFP is here.

In December 2009, the RIOC Board had previously approved the hiring of Jones Lang LaSalle to advise RIOC on Rivercross, Island House and Westview negotiations. Who will be next, Jones Lang again or someone else?

Roosevelt Island Westview Building Owner Gives Notice Of Intention To Leave NY State Mitchell Lama Program - Anticipates Negotiating Affordable Purchase Plan With Building Tenants But Market Rate Rentals Remain Option

 As reported in previous post:

... It looks like Roosevelt Island's Island House is about to exit the NY State Mitchell Lama program under an affordability plan agreed to by the Owner (David Hirschhorn), Residents and NY State....

under terms described here.

Now, the owners of Roosevelt Island other Mitchell Lama rental building, Westview, have given notice of their intent to leave the Mitchell Lama program. According to the Westview Task Force (WTF), the Westview owners anticipate negotiating an affordability plan with the WTF over the next few months and will submit an affordability plan to the tenants, Roosevelt Island Operating Corp (RIOC) and NY State agencies within the next 30 days.

Below is WTF communication to building tenants.


According to Westview Owner David Hirschorn's notice of intent letter  to withdraw from Mitchell Lama program (Page 1):

The owner's notice of intent letter is below.



Mr. Hirschhorn is also an owner of Island House.

On other Westview matters, The Westview Task Force April 2012 Tenant Newsletter reports no response from Westview Building Management to a request for:

... justification and rectification of the estimated 20 vacant apartments. Also an explanation on why "internal apartment transfers" have been frozen.... 

More Details On Roosevelt Island's Island House Privatization Exit From Mitchell Lama Program and Affordability Plan - Tenants Can Buy Apartment at 65% Market Discount Or Continue Under Rent Stabilization Like System - Unknown About Current Wait List

Image of Roosevelt Island's Island House Entrance

Reported last week on Roosevelt Island's Island House residents ongoing privatization efforts that are about to result in the building exiting the Mitchell Lama program.

... It looks like Roosevelt Island's Island House is about to exit the NY State Mitchell Lama program under an affordability plan agreed to by the Owner (David Hirschhorn), Residents and NY State....

Roosevelt Island's Assembly Member Micah Kellner provides some additional details on Island House Privatization with this Press Release:

“The Island House Affordability Plan signifies the next generation of affordable housing on Roosevelt Island and it should be used as a template for other Mitchell-Lama conversions throughout New York State,” said the Assembly Member. “This deal ensures affordability for all Island House residents and I am proud to have played a vital role in making it a reality. I will sleep well at night knowing that tenants will be able to keep their apartments – whether they own or rent – for years to come.”

“Our focus throughout this long process has been on maximizing affordability and protection for every tenant so that any tenant who wishes to stay in Island House, either as a buyer or renter, would be able do so,” said Graham Cannon, Chairman of the Island House Tenants Association. “We are delighted with this outcome. This is a very important breakthrough for the tenants of Island House. I especially recognize the efforts of our elected officials – especially Assembly Member Kellner and Councilmember Jessica Lappin – who played such a critical role in moving this forward.”

“The Affordability Plan is the culmination of many years of hard work among all of the stakeholders and was made possible only through the willingness of those involved to work cooperatively toward achieving a delicate balance among competing interests,” said David Hirschhorn, the General Partner of the ownership group.

The plan provides the following:

• Island House residents will be able to purchase their apartments at a discount of approximately 65% off of the market price.
• For those Island House residents who do not wish to purchase their apartments, they may remain as tenants for the next 30 years and will be protected under a rent stabilization- like program.
• The Division of Housing and Community Renewal (DHCR) will continue to supervise the property to insure that the terms of the Affordability Plan are adhered to.
• Owner contributes $9.6MM to building improvements and reserves
• Owner pays $4,500,000 in transfer fees to RIOC
• Tax Equivalency Payments for affordable units remain low during the 30 year affordability period and thereafter phase into a market level tax payment
• During the 30 year affordability period, Island House residents (and future owners) may resell their apartments but are limited to the amount they can charge and are required to pay a significant portion of their profit back to the building, as well as a 1% fee to RIOC
• Roosevelt Island Operating Corporation (RIOC) will receive substantial additional ground rents upon the expiration of the affordability period.

Under the Public Authorities Law, a 90 day notice letter was filed by RIOC on April 27, 2012. The closing of the Affordability Plan is scheduled for July 31, 2012.

The offering portion of the deal must still be submitted to the Office of the New York State Attorney General for acceptance of the cooperative offering plan.

More information on the Island House privatization as well as RIOC's 90 day notice letter available at prior post. I have asked RIOC to comment on the plan but have not received a response. Questions regarding the Island House privatization and  affordability plan remain including from this reader:

What will this mean for those not currently residents of Island House but interested in moving there?  Will the current wait list for rentals be converted to a waitlist to purchase, or will be there a new mechanism for filling future vacancies?

Mobile Food Van Service For Roosevelt Island On Agenda For Tomorrow's RIOC Board Of Directors Real Estate Committee Meeting - Bring Luke Lobster and Other Good Mobile Food Trucks To Restaurant Starved Roosevelt Island

Mobile Truck: Nauti from Luke's Lobster on Vimeo.

Previous post reported on the Luke's Lobster Mobile Food Van being chased off Roosevelt Island despite having all required New York City permits and Licenses. As Roosevelt Island Operating Corp (RIOC) Vice President of Operations Fernando Martinez explained:

Yes, a food vendor will have to provide RIOC with the appropriate NYC licences and copies of insurance.  We will then issue a RIOC permit.  However, please keep in mind that we are not currently accepting any applications for street food vending.

and a subsequent response from the RIOC Board of Directors:

... the Board has placed the issue of mobile food vendors on the agenda for the next Real Estate committee meeting to develop a procedure for handling them in a uniform, and fair way.

The issue of Mobile Food Trucks will be discussed in public at tomorrow's RIOC Board of Directors Real Estate Committee meeting along with an Executive Session closed to the public on the status of Island House privatization and ground lease extension. According to RIOC:

PLEASE TAKE NOTICE that a meeting of the Real Estate Development Advisory Committee of the RIOC Board of Directors will be held on Thursday, December 22, 2011 at 3:00 p.m. at the RIOC administrative office, 591 Main Street, Roosevelt Island, New York.

AMENDED AGENDA
1. Discussion of Street Vending Licenses on Roosevelt Island;
2. Chair’s Motion for Executive Session to Review and Discuss the Status of Privatization/Affordability Plan and Ground Lease Extension for Island House.

Good mobile food trucks, and Luke's Lobster is an excellent one, are a great amenity  and should be allowed to operate on Roosevelt Island under the same rules and regulations as they do in any other NYC neighborhood.

Readers commenting on the Luke's post had this to say:

From Mark:

This is terrible.  If anything, we should be encouraging food trucks to make RI their evening dinner stop.

Cari:

It's so aggravating to be a part of NYC and yet not. Food trucks are an awesome idea to help spice up the food options here on the island. All summer the ice cream truck parks here, why not allow more options. RIOC, you really really are missing the boat on this one...

Cynthia:

Seriously! The RIOC need to get a life and give us all one too. A permit? Unbelievable! RI is the perfect place for food trucks and if the RIOC were smart, they would run events with the trucks every single weekend to draw more tourists to the island. I have lived here since 1979 and I cannot think of one thing the RIOC did to better the life for the residents without trying to squeeze a buck from someone. ARGH!!!!

JPH:

Roosevelt Island: we must preemptively lower the quality of life.

Rob:

This is terrible. Luke's is one of the best food trucks in the city. It's more upscale, and high quality than anything currently on the island, without interfering with real estate.

Roosevelt Island Residents Association Planning Committee Chair Frank Farance commented:

... I recognize that RIOC may control permitting on its properties, such as the sidewalk near the subway.  However, a food truck on a public street (Main Street), I believe, is outside of RIOC's control.

If a mobile food vendor complies with the NYC licensing and permitting requirements:

"http://www.nyc.gov/portal/site..."

AND, Roosevelt Island's Main Street is *not* on the list of restricted streets for mobile food vendors:

"http://www.nyc.gov/html/doh/do..."

THEN, under what authority does RIOC/PSD have the right to ask the food vendor to leave?...

There are more comments here.

During the December 14 RIOC Board of Directors meeting,  Nonno's Focacceria and Riverwalk Bar & Grill owner Alphonse DiCioccio expressed objections to mobile food vendors, such as Luke's Lobster and the Domino's Pizza car at the Farmers Market, being allowed to sell food on Roosevelt Island asserting that it was unfair to existing store owners who pay rent. Here's what he had to say.

You Tube Video of December RIOC Board Meeting Public Session (Part 2)

Commenting on this post, theohiostate writes:

 ...the Food Vendor's should also pay some kind of rent or permit fee.  They shouldn't get to sell here for free.  If that happens, our local businesses - the few that we have - will close, and we will have nothing....

I replied:

The Mobile Food vans should be allowed on Roosevelt Island under the same circumstances and permits that exist in any other NYC neighborhood.

The more food choices Roosevelt Island residents have the better. If residents decide to spend their money at food vans rather than existing restaurants, the answer is for the restaurants to improve their offerings, not work to ban the mobile food vendors.

An audio web cast of the RIOC Board Of Directors Real Estate Committee public session should be available a few days after the meeting. The Executive Session on Island House Privatization will not be made public.

RIOC Real Estate Committee Meeting Today To Discuss Status Of Island House Privatization/Affordability Plan and Ground Lease Extension - In Executive Session Closed To The Public, What's Going On?

Image of Roosevelt Island's Island House Entrance

Received this advisory from Roosevelt Island Operating Corp (RIOC):

PLEASE TAKE NOTICE that a meeting of the Real Estate Development Advisory Committee of the RIOC Board of Directors will be held on Tuesday, September 6, 2011 at 6:00 p.m. at the RIOC administrative office, 591 Main Street, Roosevelt Island, New York.

AGENDA

1. Chair's Motion for Executive Session to Review and Discuss the Status of Privatization/Affordability Plan and Ground Lease Extension for Island House

A previous post discussed the circumstances when the RIOC Board can meet in Executive Session. An excerpt:

... a public body cannot close its doors to the public to discuss the subject of its choice, for the law specifies and limits the subject matter that may appropriately be discussed in executive session. The eight subjects that may be discussed behind closed doors include:

... (h) the proposed acquisition, sale or lease of real property or the proposed acquisition of securities, or sale or exchange of securities held by such public body, but only when publicity would substantially affect the value thereof....

More information on the circumstances under which RIOC is permitted to hold an executive session closed to the public available from the NY State Department of State Committee on Open Government.

It has been extremely difficult to obtain information regarding the privatization/affordability plan and ground lease extension for Roosevelt Island's Mitchell Lama Buildings at Island House, Westview and Rivercross. To date, none of these buildings have been privatized out of the Mitchell Lama program and only the Rivercross Building has received a ground lease extension from RIOC Board of Directors in January 2011. The reason given for Rivercross receiving a ground lease extension from RIOC was so that the Rivercross mortgage could be refinanced at a low interest rate to raise funds for building improvements. According to the January 2011 RIOC Board minutes regarding this issue (Page 9):

... In response to Mr. Kraut’s question, Mr. Leitner noted that, under the proposed agreement, as stated in term sheet item nine, the base ground rent paid to the Empire State Development Corporation (“ESDC”) would remain the same, while the amount paid to RIOC will increase by 4% compounded annually. Mr. Shinozaki noted that the entire building’s rent is less than that of some individual residential units in other buildings on Roosevelt Island. Mr. Kalkin noted that the low rent was consistent with the purpose of Mitchell-Llama properties to create and preserve affordable housing....

Here is the Rivercross Ground Lease Extension Resolution from RIOC and Term Sheet. Some Rivercross residents have expressed concerns that the new mortgage negotiated by the Rivercross Board is a bad deal for residents who plan on staying long term at the building.

None of the 9 RIOC Board members live in Island House or Westview. 4 of the 6 Roosevelt Island resident RIOC Directors live in Rivercross and all 3 current members of the Real Estate Committee live in Rivercross. At the time that the Rivercross Ground Lease extension was granted by RIOC, 2 of the 3 Real Estate Committee members lived in Rivercross.

By noting that 4 Rivercross residents are on the RIOC Board and voted for the Rivercross Ground Lease extension does not indicate in any way whatsoever that anything improper occurred though some residents, not only Mr. Farance, have raised conflict of interest questions concerning this RIOC Board vote.

The conflict of interest question gets asked because so little information is made public to explain what, if any, role the RIOC Board of Directors and Staff have in deciding issues regarding the privatization/affordability plans for the Roosevelt Island Mitchell Lama Rivercross, Westview and Island House buildings, what role New York City and State agencies play in the process and what is the current status of the privatization process?

If anyone knows, please tell.

Roosevelt Island Rivercross Mitchell Lama Co-Op Mortgage Refinancing Terms, 10 years $50 Million Interest Only Loan With Principal Paid At End Of 10 Years - How Repaid Unanswered, Isn't That How The Economy Got Into This Mess?

Image of Rivercross Building Entrance

Very soon, if not yesterday or today, Roosevelt Island's  Rivercross Mitchell Lama Co-Op Building will be refinancing their existing mortgage, made possible by the recent ground lease extension granted to Rivercross by the Roosevelt Island Operating Corporation (RIOC). Some Rivercross residents have expressed concerns with the proposed terms of the mortgage refinancing and unhappiness with what they perceive to be the Rivercross Tenants Corp Board of Directors and management company's failure to adequately provide information on the mortgage refinancing and other issues impacting the Rivercross Building. For instance, a Rivercross resident wrote to me:

...we currently have a 30 yr fixed (I think) 5.45% 25 million dollar mortgage.  The board wants to change to a 50 million dollar mortgage with 25 going to pay off current mortgage, 15 to improvements and 10 to put in the bank to pay real estate transfer taxes "if and when" we leave Mitchell Lama.  The way they want to finance it is with an interest only 10 year 5% mortgage which would take the yearly payment from 1.7 million to 2.5 million.  It is just unbelievable to me that the Board wants to do this, it seems very fiscally inappropriate.  Do they not realize that a 10 year interest only mortgage is a bad idea?

and:

... there is a pre-payment penalty for the current mortgage, which has about $22 million left on it - so $3 million dollars are automatically flushed down the proverbial drain with this new mortgage.  In addition, the board plans to keep the other $10 million in the bank, getting maybe 3% interest while paying 5% interest on it - effectively throwing away 2% of $10,000,000 annually ($200,000 annually) until "if and when" Rivercross privatizes.

Some residents have expressed concern that the terms of the proposed Rivercross Mortgage Refinancing is a very good deal if Rivercross is privatized and a shareholder plans on selling within the 10 year loan term but a very bad plan for those who intend to stay longer as well as any future buyers at Rivercross who will then have to make the $50 million balloon payment or refinance again under very different, the fear is, much higher interest rate environment.

Another Rivercross resident expressed concern over the proposed mortgage refinancing terms this way:

... To pay off the 50 million, it is hoped that money will come in from "flip taxes" should the building privatize. Whatever is not covered by flip taxes or other funds at hand, the building will have to borrow again. If borrowing seems impossible, it is logical to imagine any entity loaning 50 million would have the right to take over ownership of the building.

For people who:

1) are looking to sell their apartment as soon as privatization takes place, or

2) who might have a life expectancy of less than ten years, or

3) have alternate living quarters

there can be less concern over the future of such a loan.

However, any one who would like to continue living in Rivercross, there are four possibilities at the end of ten years :

1) everything works put nicely and "aren't we lucky?"

2) there will be a special assessment to pay off the loan not covered by funds on hand

3) the general economic situation will make a further loan not feasible

4) the building will be taken over by the outfit loaning the 50 million and whatever  ownership equity that came with privatization will disappear.

The proposal seems clever, but is also seems to have a substantial risk level for anyone intending to live here beyond ten years.

One further point, putting the 50 million loan in place practically guarantees privatization, since the overhang of that size loan will be a crusher for sure, without the anticipated flip tax income.

I asked the Rivercross Board to comment and they responded on May 20:

Fact, the interest on the new 10 year loan will be paid every month on a current basis, without raising maintenance.

The principal due in 10 years will be very substantially below the $50 million borrowed, whether Rivercross leaves the Mitchell-Lama Program or not.

If Rivercross leaves the ML Program under the proposed Affordability Plan supported by HCR, accumulated Transfer Fees will reduce the principal due in 10 years by about $15 million.

If Rivercross does not leave the ML Program about $15 million of this borrowing will not be used at the end of 10 years.

In the mean time, Rivercross will have the funds to invest in energy efficiency improvements that will save substantially on its electricity costs and heating bills, not to mention shareholder comfort and environmental benefits, during most of the 10 year period.

Also, the interest rate on the new mortgage will be lower than our current mortgage.

Therefore, this refinancing is good for all Rivercross shareholders, whether they plan to sell their apartments or stay for the long term.

I followed up with the  Rivercross Board including this question:

What is the basis, other than speculation and hope, for the Rivercross Board to conclude that Transfer Fees from future unit shares will reduce the mortgage principal by $15 million in 10 years?

Here is the May 27, 2011 response from the Rivercross Board:

Here is a revised statement from the Rivercross Board regarding the mortgage refinancing. The Board would appreciate it if you would print the statement in its entirety rather than trying to summarize what you think Rivercross is doing. With respect to your question about what happens in 10 years when the principal balance of the loan has to be paid off, this was discussed in detail at the Rivercross annual meeting. The Board intends to issue a follow-up memo for the benefit of shareholders who did not make the meeting in person. When that follow-up memo is distributed to shareholders, we will forward you a copy.

The Board has approved proceeding with replacing the building’s current mortgage (carrying an interest rate of 5.45%) with a new $50,000,000 mortgage. The proceeds of the new mortgage will be used as follows: First, to pay off the existing mortgage (approximately $25,000,000, including prepayment fees); Second, to create a $15,000,000 capital improvement fund to pay for energy-savings investments (new windows, a more energy-efficient heating system and submetering); and Third, to create a $10,000,000 fund to pay the real property transfer taxes that may have to be paid if and when Rivercross leaves the Mitchell-Lama program and becomes a private coop.

The proposed new mortgage would be for a term of 10 years and would only require the payment of interest (no principal) during the ten-year term. As a result, even though the mortgage is for a significantly larger amount, the building’s debt service under the new mortgage (assuming a 5% rate fixed for 10 years on the new mortgage) would only increase in 2012 from $1,768,000 to $2,500,000.

The building would be able to pay this increased debt service without any further increase in maintenance.

This refinancing is good for all Rivercross shareholders, whether they plan to sell their apartments or stay for the long term.

On May 31, I replied:

Thank you for your response. I will publish the Rivercross Board's statement in full and unedited as part of my post on subject.

To clarify the statement, I have been told that there is approximately $22 million left on the existing Rivercross mortgage and that there will be an approximately $3 million prepayment fee on the existing mortgage. Is that true?

Please forward me the Board's Statement on it's plan to repay the mortgage principal when issued. If possible, I would like to include it in Roosevelt Islander Blog post on subject which I will publish this week. If not possible, will publish it when received.

Here I must admit a mistake in that I have not followed up with the Rivercross Board as quickly as I should have to find out how they plan on repaying the $50 million mortgage principal. Having not heard back from the Rivercross Board I sent this email on June 22:

Just following up to see if the Board has issued the memo describing how it intends to pay back the principal balance of the mortgage that you indicated would happen in your message below. If so, can you please forward it to me, as promised, so I can include it in Roosevelt Islander Blog post.

I will publish post on Rivercross Re-financing soon so if there has been any change since last communication or any addition you would like to make, please let me know.

On June 24, the Rivercross Board's representative replied:

The Board has not issued any further memos on the subject.  I expect that there will be a memo issued by the end of next week.

As of the time this post is published, I do not know if the Rivercross Mortgage Refinancing has been executed.

A person who saw my messages to the Rivercross Board objected as unfair the way I phrased the "other than speculation and hope" in regard to the repayment of $50 million mortgage principal question to the Rivercross Board.

I replied to that person:

The question you highlight is not intended to be accusatory nor infer the Rivercross Board is incompetent or trying to mislead anyone.  I am just trying, in a responsible manner, to find out what the facts are regarding this refinancing which I think is of interest to the Roosevelt Island community and contains public policy questions regarding commercial real estate/affordable housing/mortgage lending that has implications beyond Roosevelt Island.

The question is merely intended to obtain a specific basis for the assumptions stated by the RIvercross Board regarding the likelihood of repaying a portion of the $50 million mortgage refinancing with $15 Million in Transfer fees from co-op unit sales over the 10 year period of the loan.

As you know the US and Global economies have been undergoing and are are still undergoing, severe financial difficulties. This is due in large measures to Real Estate Loans that were taken out by borrowers and issued by banks that were based upon very faulty economic assumptions concerning the ability of borrowers to pay back the mortgage. Many of these loans were issued based upon the hope and speculation that the real estate market would continue to rise in value during the following years enabling the faulty loans to be paid off in subsequent sales or refinancings.

I don't think it is unreasonable or unfair to inquire if this lending process is repeating itself on Roosevelt Island. Again, I am not stating or inferring that it is, but asking questions to determine if it is or is not.

As stated before, the Rivercross Board never provided any information, as they promised, regarding how it intends to pay back the $50 million mortgage refinancing principal when it come due in 10 years.

Here is the Rivercross Ground Lease Extension and Term Sheet from RIOC.

UPDATE 7/5 - Received this message from a Reader on July 1:

Board memo received this morning --

"We are delighted to advise you that we have completed the refinancing of the Building's mortgage this morning. .... at an interest rate of 4.64%." Later on in the memo they note "... annual debt service ... will only increase  from $1,768,000 to $2,352,000." without further noting that the first figure includes payments on principal while the second does not.