The Real Deal New York

Equity Residential flouting law by running Airbnb-style hotel in Midtown: lawsuit

Tenants at 400 West 37th claim REIT has rented 60 units for short-term guests for past six years

August 08, 2016 03:11PM
By E.B. Solomont

Sam Zell and Hudson Crossing at 400 West 37th Street

Sam Zell and Hudson Crossing at 400 West 37th Street

UPDATED: Aug. 8, 4:15 p.m.: Don’t count Equity Residential among the landlords who fervently oppose Airbnb’s controversial business model. A new lawsuit says the real estate investment trust “brazenly” made money by turning its Midtown rental building into an Airbnb-styled hotel.

In a suit filed Friday, tenants Clifford and Mie Yellen accused the Sam Zell-controlled REIT of “defiantly” flouting a New York law preventing short-term rentals, and instead running an “illegal makeshift hotel” for the past six years at Hudson Crossing, a 259-unit rental building at 400 West 37th Street.

Despite numerous complaints filed with the city, the Yellens alleged Equity Residential TRData LogoTINY has either ignored the violations or treated the fines as de facto operating expenses while they “shamelessly” continued to rent, or permitted third parties to rent, at least 60 apartments at the building.

According to the suit, the REIT has “gone to great lengths to create a hotel-like atmosphere” at Hudson Crossing, including a check-in desk in the lobby with a log of short-term rentals. So-called transient guests fill out “Guest Authorization Forms” linked to an entity known as “Apt. 168,” according to court documents. And a website, apt168.com, lists apartments available for short-term stays, according to the suit. (When The Real Deal looked at the website on Monday, the minimum term to rent the apartments was 30 days.)

The suit further stated that as part of its operation, Equity Residential stores boxes of bed linens, blankets and towels in the building’s hallways — which have become a safety hazard and nuisance. Rents in the building range from $2,775 a month for a studio to $5,170 a month for a two-bedroom, according to the building’s website.

In a statement, a spokesman for Equity Residential said the lawsuit lacked merit. “Equity Residential does not operate Hudson Crossing as a hotel and we do not allow our residents to rent out their units for durations that violate local law,” the statement said.

But the accusations offer a twist on the link between Equity and the San Francisco-based tech unicorn.

Equity Residential was said to be discussing a possible revenue-sharing deal with Airbnb late last year, along with AvalonBay Communities and Camden Property Trust. But as of February, there was no agreement in place and CEO David Neithercut said the company had a “ways to go before anything meaningful comes of” negotiations.

While Airbnb has faced scrutiny here, most of the criticism has come from the hotel industry and landlords such as Related Companies and Stellar Management.

In the recent suit, the Yellens — who’ve lived in a rent-stabilized unit at Hudson Crossing since 2007 — claim the short-term rentals are not just a nuisance, but a security issue since Clifford Yellen’s heavy travel schedule means Mie is often home alone. The couple lives across the hall from one frequently-rented apartment and down the hall from three others. They are seeking $2 million in damages plus six years of rent abatements.

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