Gateway rent protections extended 11 more years
By Julie Shapiro
Relief began to spread through Gateway Plaza Wednesday afternoon when Assembly Speaker Sheldon Silver announced that all Gateway tenants would be safe from steep rent increases until 2020.
The 11-year deal Silver negotiated with The LeFrak Organization, Gateway’s owner, and the Battery Park City Authority allows all 3,500 current tenants to stay in their apartments with the same rent protections they currently have, including guaranteed renewals at stabilized rates.
“It’s a great deal,” Silver told Downtown Express in a phone interview.
Linda Belfer, president of the Gateway Plaza Tenants’ Association, called the agreement a success.
“It is a weight that is coming off of everybody’s shoulders,” she said. “People have been very, very nervous about this.”
The deal provides the tenants with the same protections they have been receiving since Gateway opened, with one caveat: New tenants coming in at market rate will no longer have the right to renew their leases at the stabilized rates determined by the city Rent Guidelines Board.
“We would have been happier if it was exactly the same as the other agreement,” Belfer said. “We’re not happy about creating different classes of tenants.”
But Belfer is still glad the deal takes care of all the current tenants, particularly the seniors on fixed incomes who are affected by the economic downturn.
“The people who live here now needed certainty, and now they have certainty,” she said.
This is the third stabilization extension Silver has secured for the Gateway tenants, and it came just in time. The previous four-year agreement expires in June, and LeFrak had been adamant about refusing any more extensions. The LeFrak family has fought to escape rent controls every time one of the Silver agreements was set to expire.
Asked Wednesday how he changed LeFrak’s mind this time, Silver replied, “Talent.”
If talent played a role, Silver still had some leverage at his disposal: LeFrak’s ground lease, or the amount of money LeFrak pays the Battery Park City Authority each year, comes up for renewal in 2023. While that is still 14 years away, LeFrak wanted to lock in a ground-rent deal now, so they could predict their future expenses and make investments in the building, Silver said.
LeFrak currently pays about $300,000 a year in ground rent, among the lowest of all the buildings in Battery Park City.
The speaker, authority and LeFrak are still drawing up the final details of the agreement, which the authority board will have to approve, but the idea is for LeFrak’s ground rent to be capped at about 8 percent of the gross rentals in the building in 2023. That means an increase in revenue to the authority, but it gives the LeFraks financial security and entitles them to a discount on the ground rent percentage. The discount would compensate for the rent protections, giving the LeFraks a credit for the money they put into keeping the building stabilized for the next 11 years, said Jim Cavanaugh, president of the authority.
“There is a firm handshake agreement,” Cavanaugh said. “It’s a done deal, subject to approval of the [authority’s] board.”
Belfer said the deal maintains the key protections that make Gateway’s version of stabilization unique. In addition to giving tenants the right to one- and two-year renewals with stabilized increases, tenants can also choose a three-year renewal.
Also, Gateway’s apartments are not subject to luxury decontrol, which means current tenants’ income will never disqualify them from the program. And Silver pointed out that the Gateway deal is independent of any decisions the state Legislature makes about rent-stabilization in the future.
“It will continue no matter what, whether rent-stabilization continues or not,” Silver said.
Under the deal, LeFrak will also renovate the building lobbies, improve the plaza entrance and do landscaping, Silver said.
LeFrak did not respond to requests for comment.
Silver had less leverage with LeFrak this time around than he did when he negotiated the two previous Gateway stabilization extensions. In the past, Silver had influence because he controls a vote on the Public Authorities Control Board, and LeFrak had to go before the board to refinance its bonds.
Silver is optimistic that the 2020 deal could get extended even further as that deadline approaches in 11 years. LeFrak will need to go back to the authority in 2040 to renegotiate its ground lease, providing an incentive for them to strike another deal with tenants.
But will Silver, 65, still be speaker and sitting at the bargaining table in 2020? “There’s no question about that,” he said.