Deadline Close for Westview Privatization Plan

Written by Briana Warsing. Posted in Volume 37, Issue 1 - September 10, 2016

The owner of Westview has until Thursday to reply to a Notice of Deficiencies from the State Attorney General (AG) regarding the building’s proposed cooperative offering plan. The deadline for Westview Acquisition LLC, owned by Hirschorn et al., has already been extended four times since October of last year.

Back Story

In May 2015, tenants of Westview received their red herring, common parlance for the thick book containing a proposed cooperative offering plan – in this case, the structural outline that is intended to take the building out of New York State’s Mitchell-Lama program and into private ownership by both tenants and landlord. Though long-awaited, and anticipated by a notice from the Westview Task Force (WTF) two days earlier, the red herring surprised tenants, many of whom bemoaned a lack of prior communication about the nature of the plan, and the task force in general.

A few days following the red herring, the WTF distributed a letter to tenants saying that the red herring should not have been distributed – charging Hirschorn (the sponsor) with trying to bypass negotiations by sending the red herring to the New York State Department of Law, which rules on the legality and correctness of such offering plans.

Tenants, however, say the WTF has always defended the deal. One tenant recalls that at a meeting in the Good Shepherd Center last June, the WTF said, “This was as good a deal as we were going to get. At the time they told some tenants that, if they wanted to fight the rent increase, they were going to have to do that themselves.”

Considering the turbulent start of the process, tenants were surprised to learn that the WTF sent a letter to the New York State Department of Homes and Community Renewal (HCR) objecting to the red herring’s proposed rent increase of 14.9 percent in the first year of conversion, and requesting it be 7.5 percent.

Notice of Deficiency

Some of the unaddressed issues at the heart of this ongoing failure were the focus of the eight-page letter by the AG. Namely, the AG requests an update on negotiations with RIOC on extending the Ground Lease and demands an explanation on why there are vacancies in the building if it is still in the Mitchell-Lama program. Meanwhile, RY Management insists the Westview list is closed and every apartment is occupied. Similarly, the AG requests clarity on whether tenants would be given the opportunity to transfer apartments prior to privatization. According to tenants, the transfer list has long been closed. The AG also requested an update on the proposed Affordability Plan, sub-metering of electricity, and the rights of existing rental tenants.

Westview Task Force

Tenants say the WTF, their elected advocates, hasn’t kept them informed: meeting minutes are often not posted on the WTF website; some meetings go immediately into executive session (July); some are cancelled altogether, as in August. If the black book, the formal offering, follows this red herring, tenants will have only 90 days to decide whether to buy or stay as rental tenants. After that, the opportunity will go away. (At Island House, there was a short last-minute extension, but Westview tenants can’t count on that.) Lack of knowledge makes planning for that future difficult. It also impacts trust between the WTF and the tenants.

Miscommunications can completely eliminate the entire transition. For the plan to become effective, 15% of tenants (55 apartments of the 360) would have to accept the offer and buy in. (Every member of the WTF was contacted for this article. None responded.)

Concerns

A year after the red herring was dropped at tenants’ doorsteps, the WTF created a presentation to educate residents on the proposed offering. In it, they shared that Westview is currently encumbered by a mortgage of $22.9 million. The task force is concerned that if a new mortgage cannot be found, the co-op owners would be jointly responsible for paying off the principal in order not to lose the collateral (the building). That would amount to about $83,000 per apartment.

Another issue is that the current land sublease ends January 31, 2028. The owner is seeking an extension to 2068, the year that the ground lease from NYC to RIOC expires. While not stated in the red herring, WTF opines that RIOC is using the Ground Lease as leverage to ensure provisions are made for middle-income tenants. This has not been elaborated upon or resolved to tenants’ satisfaction.

WTF also expressed concern about the power of the sponsor after conversion: the sponsor, as initial owner of all residential units, would control the entire co-op board until either five years after the first closing, or until less than 50 percent of shares remain unsold. After that, a new board will be elected.

The sponsor will always be able to appoint one member to the board as long as it owns shares for any apartment. The sponsor wields broad veto power for the first five years, impacting apartment/common area alterations, assessments for reserve funds, and other areas. For renters, the first lease offered after the end of the current lease will increase the rent by 14.9%. HCR independently reviewed and determined the appropriate level of rents, and changed the rent adjustment to 6.16%. The sponsor, however, has refused to accept HCR’s rent determination.

And... Westview tenants continue to wait for answers.

Tags: Housing Briana Warsing Westview

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