Stringer: City allowed Allure to exploit power “vacuum” to take over Rivington House

The city missed out on millions of dollars worth of property taxes

A new report by city Comptroller Scott Stringer slams City Hall for creating a “vacuum” that allowed the Allure Group’s Joel Landau to take control over the Rivington House and to deprive the city out of millions of dollars in property taxes.

The report states that “a lack of vigilance” on the city’s part allowed the developer to get the deed restriction lifted at a far lower cost than it was worth and to sell the property without any objections raised by city, according to the report released on Monday. The city’s lack of attention and communication, in part, caused officials to undervalue the Rivington by at last $32 million, Stringer said. To appraise the value of the Rivington House sans the deed restriction, the city used real estate sales prices that were two years old — in a neighborhood that was seeing rapidly rising prices. The Lower East Side properties the city used to assess the Rivington averaged $604 per square foot, compared to a more accurate $770 per square foot — meaning that the city valued the nursing home at $58 million instead of the more accurate $90 million, the comptroller’s report found.

The report, released Monday, paints Landau’s actions as calculated and acutely aware that if the city started paying closer attention to his plans for the property, his $116 million sale of the nursing home could be in jeopardy. The developer “plotted for months,” even before he bought the property, to turn the Lower East Side nursing home into luxury condos or a hotel, according to the report. But he let local stakeholders think that he planned to build a healthcare facility, Stringer states. He kept his deal with Slate Property Group [TRDataCustom] and others hidden and actively worked to make sure that those involved also didn’t speak publicly about the sale. In a May 2015 email, his attorney told investors to “KEEP THEIR MOUTHS SHUT,” about the deal, the report states.

Landau also allegedly planned out the sale so that he could save $17 million in property taxes, according to the report. He delayed the sale of the property to February 5, 2016, because he had to own the property for at least one year in order to qualify for a long-term capital gains rate of 20 percent, instead of the ordinary income rate of 39.6 percent. When the sale closed, he had owned the Rivington House for one year and two days.

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There were many points at which senior city officials failed to step in and stop Landau, the report states. For instance, City Hall knew as early as January 2014 that the Department of Citywide Administration Services might lift the deed restriction, but didn’t adequately notify the agency that the city preferred to that the property be used as a healthcare facility. Memos from DCAS went unread by city officials, according to the report. Residents had contacted the mayor’s Community Affairs unit on Dec. 1, 2015, expressing fears that the facility was being sold to luxury condo developers. But no one told Mayor Bill de Blasio — until the sale was finalized 72 days later — that the deed restriction had been lifted. The DCAS also didn’t tell City Hall or the local community board that Landau had complained that $16 million was too high a price to lift the deed restriction, that if forced to invest so much in the property, he would not be able to operate the facility as a nursing home.

“The  comptroller’s report confirms that Allure never lied to or misled city officials about the potential sale of Rivington House,” Andrew Levander, an attorney for Allure, told The Real Deal in a statement. “To the contrary, the report acknowledges that Joel Landau told City officials that if Allure had to pay $16.15 million to remove the deed restrictions, it would be forced to develop housing or flip the property.”

A representative for the mayor’s office did not immediately return requests seeking comment.

Stringer’s report comes on the heels of another damning report released earlier this month by the city’s Department of Investigations. That report also found that a Slate representative had urged employees to not discuss the deal.

The new owners of 45 Rivington Street announced plans in February to redevelop the 150,000-square-foot building into roughly 100 luxury condominiums. Federal and state officials, including U.S. Attorney Preet Bharara and New York Attorney Eric Schneiderman have since launched investigations into the removal of the deed restriction. These probes have also stalled Allure’s efforts to buy a Harlem nursing home.

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