Condo developer still illegally running hotel, The Real Deal uncovers

By Sarah Ryley | April 08, 2009 11:15AM

 
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