The Real Deal New York

CIM sues BridgeStreet over extended-stay hotel

Developer was investigated and fined over the building by the state's AG

November 17, 2015 09:01AM

Richard Ressler 47 East 34th Street

From left: Richard Ressler of CIM and 47 East 34th Street in Murray Hill

Updated: 12:42 p.m., Nov. 18: CIM Group is suing temporary housing provider BridgeStreet for $5 million, seemingly attempting to pass on the cost of fines levied on CIM by the state’s attorney general in connection to an illegal extended-stay hotel that BridgeStreet operated at the CIM-owned rental building at 47 East 34th Street.

CIM was investigated and fined by the AG over the illegal hotel in February, and ordered to pay $4.4 million, along with an additional $275,000 to cover the cost of the inquiry. 

The 36-story, 106,000-square foot Murray Hill tower benefits from a 421a tax abatement, meaning its owners pay no property tax for a set period in exchange for their commitment to maintain affordable apartments there. Operating a hotel is a violation of those terms, the New York Observer reported.

CIM bought the building, which contains 110 units, in October 2011 in a foreclosure auction for $54 million.

In March 2012, CIM leased the property for two years to BridgeStreet, receiving $4.9 million. CIM terminated that lease in December 2014, effective March of this year.

The lease obliged Bridgestreet to maintain the building’s 421a eligibility, including a requirement to not rent units for terms shorter than six month, according to the complaint. [NYO]Ariel Stulberg

A previous version of this article included a quotation from an agreement CIM signed in 2011 that indicated BridgeStreet couldn’t be held liable for failing to maintain the building’s 421a eligibility. But that agreement was superseded by the 2012 lease.