The Real Deal New York

AG cracks down on CIM Group’s illegal Midtown hotel

Hotel will be closed by March 10 and the building's units will become rent-regulated

February 26, 2015 09:10AM

From left: 49 East 34th Street and Richard Ressler

From left: 49 East 34th Street and CIM Group co-founder Richard Ressler

The state’s attorney general’s office is closing a 36-story, illegal hotel owned by an affiliate of 432 Park co-developer CIM Group.

The property at 49 East 34th Street was supposed to be a condominium, but its owners — who received millions in tax breaks for the creation of affordable units — turned it into a hotel instead, charging $239 per night for a studio and $359 per night for a two-bedroom unit, according to the New York Times.

The owner will pay back $4.4 million that will go into a city fund geared toward creating affordable housing, according to the newspaper. The hotel is slated to close down on March 11 and the building’s 110 units will become rent-regulated apartments. In addition, CIM Group will have to pay $275,000 to cover the cost of the state’s investigation.

The attorney general’s office is looking into the abuse of the 421a tax abatement that offers tax breaks to developers. The investigation also focuses on other buildings that were turned into illegal hotels. Hotels are not eligible for tax breaks under 421a. [NYT] — Claire Moses

  • Josh Hollywood

    Enjoy the lovely CIM Group New York. A gift from Los Angeles to you. They love to steal from the public coffers and never pay their fair share back. As quickly as you turn an eye… they will always violate their deal with the public. Just rotten ethics here.

  • Anon resident

    They build an illegal hotel, our city agency has press releases indicating how hotels are doing wonderful, yada yada…tourism is great. But, how do they track these #’s when we have illegal hotels, air B&B and other smaller hotels that are not members of their organization.

    • comment flagged

      Hotels are doing great and tourism is at an all time high and illegal hotels and AirBnB are symptomatic of that. The city doesn’t included illegal hotels in the hotel numbers, but if they did, then the number would be even higher. There are more visitors to New York than there are legal places for them to stay.

  • really?

    $239 night X 110 rooms = $26,290 per night X 365 days = $9.6M a year X 4 years = $38M – 4M fine = profit . NOT BAD CIM.

    • comment flagged

      According to the Times article, Bridgestreet Corporate Housing leased the apartments in the building for $4.9M/year from CIM. The previous property owner brought in Bridgestreet. CIM purchased the building and honored the lease that violated 421-a rules. Coincidentally, Bridgestreet was bought by a private equity firm last year.

  • comment flagged

    Sounds like a good time for CIM to cash out.

  • NYorker

    Real Estate in NYC is like a cartel. Its just a matter of time Preet Bharara’s office starts putting these suckers who cheat behind bars.

  • guest

    What a shame, people need housing.
    There should be more stringent oversight, enforcement 421A program.
    Are there others taking advantage of tax credits and depriving affordable homes to families?

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