- Real Estate
- Under Cover
- Special Editorial
- In Pictures
Reviewing the arguments for and against privitization of Southbridge Towers.
NO — By VICTOR J. PAPA : Shareholders of Southbridge Towers (S.B.T) are now poised to vote in a referendum that will ultimately determine the fate of their 1651 units of over 40 consistent years of state-regulated Mitchell-Lama affordable housing. It remains one of the last vestiges of affordable housing in Lower Manhattan.
The gradual demise of certain Mitchell-Lama projects from the roster of such housing developments, built throughout the city and state since 1955, has marked the permanent end of thousands of regulated rental and cooperative affordable housing units. The program, in its genius, thrived and provided countless middle-income families with the means to live comfortable lives while raising children.
Straddled alongside the Brooklyn Bridge in an area which was once blighted and forbidden, and since revitalized in the early ’70s, Southbridge was built through an urban renewal plan. At the time of its opening in 1970, prospective residents had to be practically enticed to consider living there, which is why the first residents of Southbridge are known to be the true pioneers of frontier residential living in Downtown Manhattan.
If urban renewal projects were meant to reverse the flow of fleeing middle-income families from Manhattan, Southbridge residents are the evidence of its overwhelming success.
For over 40 years, the people here have built and maintained a vibrant integrated community, characterized by a lively neighborhood spirit long before Manhattan’s highest residential tower, the 76-story Gehry Beekman Tower, was built directly across the street. Dominating the skyscape as it overshadows S.B.T., and existing in an exclusive world of its own, this luxury steel and glass tower, and others sprouting all over Downtown Manhattan, seem to provoke the inevitable significant question Southbridge Towers’ shareholders are now facing: maintain housing that is affordable, or convert it to market rate housing, subjecting it as if a commodity, to the vagaries of the market.
Ideology and philosophy aside, a vote for the dissolution is fraught with risks, as itemized prominently in the Special Risks Section found in the front pages of the prospectus we received a month ago. The risks not only affirm the worst fears of the opponents, they have converted once ardent supporters of privatization into vocal advocates against. Among one of the major risks is the uncertainty about whether the proposed reconstitution triggers both the city and state real property transfer tax, which at the point of dissolution, could cost the shareholders up to $27.7 million. The uncertainty lies in the pending Court of Appeals case between Trump Village and the city, which will likely be decided after our vote on reconstitution.
There are also other uncertainties, which diminish overall shareholder confidence and cast doubt about whether a required affirmative vote from at least two-thirds of shareholders can be realized.
One is the 7-year period it took the sponsors to complete the prospectus, mainly caused by long delays the sponsors took to repeatedly respond to the state attorney general’s office to more than 500 deficiencies which that office cited over 5 years. Some of these deficiencies were comprised of: facts not adequately disclosed, risks explained in vague language seeming to veil the degree of risk, and deficiencies expressed either as overly speculative or absolutely deceptive.
This is not meant to diminish the difficulty of formulating a 903-page prospectus and calculating, to exactitude, the hundreds of projections under at least two scenarios. But how much confidence can be generated in the veracity of a “Black Book” when, after publishing it, some schedules within it contained serious errors, later revised and contained in an amended booklet shareholders received. Subsequently, errors were found in those same schedules regarding the equity calculations. The shareholders now await yet another revision, delaying even further the referendum (probably in the fall) which they voted to allow back in 2007.
Ultimately chipping away significant confidence is that the sponsors, for whatever reason, recently attempted to ban the use of the Southbridge community room to certain groups, including the SBT Cooperators for Mitchell-Lama, for free, open, independent shareholder forums on the subject, necessitating the state Division of Housing and Community Renewal to contravene the ban almost immediately.
Ultimately the Black Book speaks for itself thanks to some tenacious shareholders, Southbridge’s Mitchell-Lama group, who sought and obtained multiple revisions from the attorney general’s office and from D.H.C.R. It’s now free from unwarranted speculation and it discloses all of the risks of leaving Mitchell-Lama.
Victor J. Papa was president of Southbridge Towers’ board of directors 1992-99, and is a founding member of SBT Cooperators for Mitchell-Lama.
YES — By JESSE MANDEL: One wonders if there is anybody anywhere, outside of Southbridge Towers possibly, who would prefer to say they live in a “public housing development” or in “subsidized housing,” rather than that they own their own home in a very desirable location.
Homeownership has traditionally been considered a virtue, a source of pride. A home is usually the largest asset or source of financial security most homeowners ever possess. The equity in one’s home is often a key or essential element in the ability to relocate, should a homeowner want or need to. What if a move to an assisted-living facility becomes necessary? What about getting a home-equity loan to help your children with education expenses? How about if you need a home-equity loan for any reason? What if you want to leave an inheritance to a loved one, to your child? How does Mitchell-Lama’s “limited equity” help with any of that? It doesn’t, not at all.
So why should Southbridge shareholders have any qualms about really owning our very valuable property? Obviously Mitchell-Lama home “ownership” is not true homeownership. If you can’t sell or bequeath your property, even to your own family, what strange kind of “ownership” can that be?
Contrary to the long-term fear-mongering by opponents, the Black Book’s most reliable budget forecast, and the history of similar “limited equity” co-ops which have reconstituted, indicates that maintenance will not increase after reconstitution. Incidentally, have reconstitution opponents failed to notice the 46 percent rise in maintenance at Southbridge since 2001 under Mitchell-Lama?
And as to the infamous $26 million real property transfer tax, it currently does not exist. It’s been struck down in two different court rulings, one by the New York State Supreme Court Appellate Division, the other by the New York City Tax Tribunal — both rulings indicating the tax is inapplicable to Southbridge’s circumstances — and the tribunal further finding that the use of fair-market value to determine the tax is without basis.
It’s extremely unlikely either ruling will be overturned on appeal. But it’s budgeted for, under any circumstances with a contingent, 33 percent, rather than 28 percent, transfer fee (flip tax) on first-time free-market sales post-reconstitution. Transfer fee revenue is a key factor in maintaining small maintenance for the majority of shareholders who wish to remain at Southbridge. A very modest increase from the historical, and unprofitable, apartment turnover rate assures a budget surplus with no maintenance increase.
Southbridge Towers is extremely valuable real estate in a superb neighborhood. Manhattan, like London, England, is an internationally-prized location for real estate investors. It’s an island, so capacity for further expansion is limited. Long- or short-term, the tremendous value of Manhattan real estate is unquestionable.
Fortunately, Southbridge shareholders have the ability to determine for ourselves what’s in our own best interest. We need not be misled or misinformed by local propagandists with their own agendas. Understand reconstitution, and how successfully it’s worked elsewhere, and you’ll vote yes when the time comes.
Jesse Mandel has been a resident of Southbridge Towers for 37 years.