Condo developer still illegally running hotel, The Real Deal uncovers
April 08, 2009 12:00PM By Sarah Ryley
127 Madison Avenue (left) and 17 Orchard Street
Cardinal Investments, developer of the luxury condominium M127, appears to be illegally renting unsold apartments in that building for nightly hotel stays despite visits from city inspectors, which were prompted by The Real Deal's February article exposing this activity.
Like many developers in Manhattan, Cardinal has struggled to sell its newly constructed condo units in the face of a downturn that has no clear end. Only two of the nine apartments at M127 have sold, and none have sold at Cardinal's 17 Orchard Street in Chinatown, another place for nightly stays mentioned in the February article.
In February, Trevor Stahelski, a partner at the company, told The Real Deal that his company was renting unsold apartments in the two projects as fully furnished, short- and extended-stay hotel suites.
"You've gotta pay the mortgage, you've gotta keep the lights on," he said, "so we furnished the apartments and rented them."
Cardinal still advertises nightly availability at the building, located at 127 Madison Avenue between 30th and 31st streets, on its Web site and the listing service VRBO.com, or Vacation Rentals by Owner. The VRBO.com advertisements for nightly stays at 17 Orchard have since been removed.
Last week, an undercover correspondent for The Real Deal inquired about a stay in M127's sprawling, SHoP Architects-designed duplex penthouse, previously listed for sale for $3.4 million.
Cardinal agent Janine Walker said the penthouse could be rented for roughly $1,542 per night, with taxes and fees included, during the last two weekends of May. Walker even gave the go-ahead to have a party in the room.
"We've accommodated people who have had functions at the penthouse before," she said.
Walker told another undercover reporter yesterday that one of the two-bedroom, two-bathroom apartments could be reserved from May 4 to 6 for $600 per night, plus a $1,000 deposit payable by check, wire transfer or credit card.
The other dates requested, May 7 through 10, were already booked, Walker said.
When this was brought to the attention of Stahelski, he insisted that all apartments in M127, including the penthouse, are currently leased on a month-to-month basis. He said 17 Orchard Street is completely unoccupied.
But Paul Romero, the manager at the Hotel Roger Williams next door, which handles check-ins at M127, contradicted Stahelski.
"They have [hotel] guests all the time," Romero said.
Marc LaVorgna, spokesman for the Mayor's Office of Special Enforcement, said inspectors visited both buildings in February, but only gained entry to 17 Orchard Street. He said there were no signs that 17 Orchard's apartments were being rented on a nightly basis.
Regarding M127, LaVorgna said: "We are going to be sending somebody out there again soon."
It is illegal to rent by the night depending on the zoning, certificate
of occupancy, and the offering plan, because nightly rentals constitute
a transient use. A zoning and buildings code expert analyzed the certificate of
occupancies for M127 and 17 Orchard Street in February and said that it was illegal to
operate a hotel at the two buildings.
If city inspectors are unable to gain entry after repeated attempts, an entry warrant would be issued. In order to qualify as a violation, the developer would have to be caught in the act of renting an apartment as a hotel unit, rather than simply advertising rooms on the Internet. The first offense carries a fine of up to $800, and can exceed $2,000 per additional offense.
Complaints on potentially illegal hotels have been up and down over the past three years, according to the mayor's office. This past quarter, there were 62 complaints regarding 26 locations filed with the city. In the first quarter of 2008, 56 complaints were filed on 14 locations, and in the first quarter of 2007, 94 complaints were filed on 20 locations.
Additional reporting by Stephen Rex Brown and Ashley Duffy
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Comments
Anonymous
Maybe the Apthorp should go into this business.
Comment #1 Posted By: Anonymous 04/08/09
Anonymous
Who cares? Why can't they rent out units?
Comment #2 Posted By: Anonymous 04/08/09
Anonymous
TRD how are you gonna keep selling ads if you don't make nice nice with the RE community? now, just shhh on this
Comment #3 Posted By: Anonymous 04/08/09
Anonymous
The developer will be fine, I have rent stabilized tenants in my buildings who do the exact same thing (rent out their apartments as hotels) and no matter which lawyers I hire, documentation I provide, and months of surveilancce tape I show in court a judge has yet to rule in my favor. So why would the law apply any differently to the developer?
Comment #4 Posted By: Anonymous 04/08/09
Anonymous
When I walked past this builing last week and saw the "VRBO" sign, I thought it looked strange. Thanks TRD for the report.
Comment #5 Posted By: Anonymous 04/08/09
Anonymous
TRD...who do you think you are sherlock holmes?
Comment #6 Posted By: Anonymous 04/08/09
Anonymous
who cares TRD.
Comment #7 Posted By: Anonymous 04/08/09
Anonymous
You would care if you lived in the bldg. Paying maintenance etc to have transients in your bldg. Not to mention who would pay top dollar for an apt that was used as a hotel type room. These guys are from the West Coast and are young. I met with them and knew they would get their --- handed to them. They know half of what they think they do. Getting rolled!!!
Comment #8 Posted By: Anonymous 04/08/09
Anonymous
Property owners across the city have been involved in this scam for years. Renting residential apartments as hotel rooms in buildings zoned for residential occupancy poses a fire and security risk for legal residents. Hotels must have fire and security systems not required in residential buildings. Tourists renting illegal hotel rooms in residential buildings have already caused fires and other safety hazards. When one of these incidents leads to death or serious injury, our city officials will wring their hands and claim they didn't know anything about this dangerous activity. City agencies refuse to prosecute property owners who are involved in the illegal hotel trade. The Mayor's Office of Special Enforcement has yet to shut down one of the city's many illegal hotels. Their spokespeople always make the same impotent claims. Many owners who receive J-51 and 421a tax abatements openly defy the regulations that govern these taxpayer subsidized giveaways and operate illegal hotel business in their buildings. See the Illegal Hotel Working Group's June 2008 study entitled "Room by Room" to confirm all of the above.
Comment #9 Posted By: Anonymous 04/09/09
Anonymous
The other two buyers in the building care. They paid the developer top dollar for their units and the developer never said they would have to live with transients. The developer may get sued by the other owners.
Comment #10 Posted By: Anonymous 04/09/09
Anonymous
So, out of the already small amount of open house attendees... some are actually story seeking TRD agents? Now that's gonna thrill some brokers right there. But at least they make an effort to boost some statistics! In other words, make the business appear busier than it actually is.
Comment #11 Posted By: Anonymous 04/10/09
Anonymous
Is this the same developer that paid to advertise in your magazine? Read the New York Times and try to write what they don't write. Your magazine will flourish, while the New York Times...
Comment #12 Posted By: Anonymous 04/14/09
Anonymous
karma.
Comment #13 Posted By: Anonymous 04/16/09
Anonymous
Stop giving ideas to BUCKET HEAD aka Kent "Pig" Swig
Comment #14 Posted By: Anonymous 04/27/09
Anonymous
Trevor is a Turd
Comment #15 Posted By: Anonymous 04/29/09
Anonymous
Comment 1 saays the Apthorp should go into the hotel business. Thjey already have as will be evident to the residents. They canot rent apartments at exorbitant rents, cannot sell at crazy prices, (what a combo, renting to bimbos and selling to the elite all at high prices) and the construction hammer adds to the drama day and night.
Comment #16 Posted By: Anonymous 04/30/09