Volume 22, Number 06 | The Newspaper of Lower Manhattan | June 26 - July 2, 2009
Gateway rent talks like ‘Whac-A-Mole,’ authority says
By Julie Shapiro
The agreement to extend rent-stabilization at Gateway Plaza has hit a series of roadblocks, which could leave the building without a deal when the previous rent-stabilization agreement expires next week.
In April, Assembly Speaker Sheldon Silver announced a handshake agreement between the Battery Park City Authority and The LeFrak Organization, which owns the building, to extend rent protections for current tenants until 2020. Tenants hailed the deal as a victory, but more than two months later, the lawyers are still wrangling over the details.
“There are a lot of little sticking points, and we are slowly addressing them one by one,” Jim Cavanaugh, president of the authority, said Monday. “It’s starting to remind me of Whac-A-Mole — every time you think you’ve nailed it down, another one pops up.”
Cavanaugh still expects to have a final agreement signed by the June 30 deadline, but if July arrives without an official deal, LeFrak will legally be allowed to increase rents to market rate.
Cavanaugh said he did not think it likely that LeFrak would raise rents on the complex’s 1,705 units if a deal is not signed by next week.
“It would be extremely bad faith for LeFrak to act in any way other than under the assumption that this deal is going forward,” Cavanaugh said.
LeFrak normally sends out lease renewals 60 days in advance but has not sent out renewals for leases rolling over in July and August.
“I’m very, very disappointed and very anxious and very worried,” said Ruth Ohman, a leader of Gateway’s senior tenants, when she heard the deal had still not been signed. “I wish nobody had told us that everything was fine.”
Ohman said all of Gateway’s residents, but especially the seniors, had been “on tenterhooks” in the months leading up to the deal announcement this spring, and then they finally thought they could relax. Now she is concerned despite Cavanaugh’s reassurances, because she said she has heard similar words before.
“I’m going to force myself not to think about it, but there’s still a pit in the bottom of my stomach,” Ohman said.
Under the handshake deal, all current tenants of Gateway Plaza would have the right to renew their leases with stabilized increases until 2020. New tenants would come in at market rate and have no right of renewal. In return for the continued protections, the Battery Park City Authority will give LeFrak a break on the ground rent LeFrak has to pay, an abatement that is supposed to equal the $80 million cost to LeFrak of keeping the complex affordable. Without the deal, LeFrak’s ground rent could jump from $300,000 a year to $30 million a year in 2023.
The B.P.C.A. board approved the deal’s broad terms in early May and then sent their lawyers to work with LeFrak’s lawyers on the specifics. Cavanaugh said the authority is “being as cooperative as we can,” but he did not say the same of LeFrak.
“They are trying to spin some last-minute interpretations that may not have been contemplated in the handshake deal,” Cavanaugh said. “That’s the nature of business.”
LeFrak and Gateway management did not respond to requests for comment.
Silver, who brokered the handshake agreement, has spoken to Richard LeFrak, the company C.E.O., several times since the initial deal, said Judy Rapfogel, Silver’s chief of staff.
“He’s working hard to ensure full protections for the residents of Gateway Plaza,” Rapfogel said. “Shelly’s feeling very optimistic — it’s just about there.”
Caryn Adams, Silver’s spokesperson, said she was confident that the deal would be signed before June 30.
Linda Belfer, president of the Gateway Plaza Tenants’ Association, also thinks LeFrak and the authority will reach an agreement soon.
“I don’t think LeFrak would ever be stupid enough to walk away from this deal,” Belfer said. “It’s a good deal for him. It gives him financial certainty.”
Belfer is also not worried that LeFrak would increase rents if a deal does not come through immediately.
“I seriously doubt that The LeFrak Organization would insult the speaker to such a degree,” Belfer said.
While Belfer said tenants should not worry, Cavanaugh said he wished the deal could have been signed earlier, to spare any concern.
“I do regret it taking this long,” he said.
by Josh Rogers