WVH Article-11 CO-OP Structure | West Village Tenants Association

Following two years of negotiations, the West Village Houses — a 420-unit residential complex between Bank and Morton streets — were converted to a co-op in 2004.

Built in the early 1960s, the residential complex was originally conceived by housing activists as a community-based co-op. But because of rising construction costs, the project did not attract enough buyers and was eventually acquired by private owners as a Mitchell-Lama property in the mid-1970s.[1]

The conversion was the result of a tenant-sponsored initiative that, following the owners’ decision to opt out of the state’s Mitchell-Lama housing program in 2002, sought to fight enormous rent increases and the displacement of hundreds of long-time community members.

Leonard Grunstein, who worked directly with the tenants association, was involved in the creation and financing of the Article 11 co-op structure, which was essential to the success of the tenants’ non-eviction proposal.

According to the agreement, tenants would purchase the complex from the landlord at a discounted rate. Additionally, the city would forgive approximately $19 million in interest on the mortgage loan and approve a tax exemption for 12 years.

Eventually signed by the tenants association, owners, and the Department of Housing Preservation and Development, the plan ensured that existing tenants would be able to either buy into the co-op or continue to rent their units at below-market rates. Relieved of the anxiety stemming from the possibility of 300 percent rent increases, tenants association President Katy Bordonaro applauded the Bloomberg administration’s commitment to affordable housing and its involvement in the project.

New York State Assemblywoman Deborah Glick lauded the conversion, saying at the time, “It’s the first step in what will be a long-term victory for affordable housing.”[2]

 

---

[1] The Villager, “Victory! West Village Houses to become an affordable co-op,” 5/26/04

[2] Ibid.

Grunstein Authors UNICEF Office Condominium Plan

In the fall of 1993, following three years of negotiations between UNICEF and the cities of New York and New Rochelle, the organization’s executive committee voted to remain in Manhattan. The agency, a United Nations international relief program headquartered in the city since its inception, was looking to expand and had considered moving to the Westchester County city, which was in the midst of a major redevelopment of its downtown business district and was courting UNICEF as an anchor tenant.

633 Third Ave Office Condominium

The agency’s decision to stay preserved nearly 1,000 jobs in the City and created  hundreds more, as the organization planned to increase its staff by 600 over the next 20 years. The deal was convenient for UNICEF as well, allowing its offices to remain at the original headquarters at 3 United Nations Plaza and gain more space at 633 Third Avenue, an office tower then controlled by the Travelers Insurance Co.

633 Third Ave Lobby

The city offered financial incentives to persuade UNICEF to stay, granting tax exemptions made possible by Gov. Mario Cuomo, who signed a bill permitting such exemptions for portions of three specific properties in Manhattan — including 633 Third Ave. Leonard Grunstein, who at the time was a partner at Herrick, Feinstein, LLP, authored the Condominium Plan to convert the building, allowing the agency to receive the promised exemptions. The transaction involved the United Nations Development Corp., a City agency, which acquired the UNICEF condominium unit at 633 Third as a part of a financed lease structure with UNICEF. The UNDC also issued bonds, secured by the UNICEF condominium unit and net lease.

Mayor David Dinkins – who lobbied UNICEF to stay – was quoted in a New York Times article saying: “Unicef is important to New York’s identity as an international city.” More importantly, the expansion was a major victory for the city’s economy. As Real Estate Weekly reported at the time, Dinkins “said it is important to keep UNICEF here, so that people don’t perceive New York as a place to leave.”

Grunstein Drafts Historic NYC Condominium Offering Plan

The Ruppert Yorkville Towers is a four-building apartment complex located in the Yorkville neighborhood of Manhattan’s Upper East Side. The Towers were built in 1975 to replace the Jacob Ruppert Brewery, which closed in 1965 and left a 20-acre lot open for development.

Four months after the brewery’s closing, the city designated the property — which occupies the four blocks between 90^th and 94^th streets — as an urban renewal site.

The firm Conklin & Rossant submitted the first plan for development of the site, which called for two high-rise apartment towers and four eight-story buildings, for a total of more than 2,500 high- and moderate-income housing units. Another plan called for a 78-story luxury tower that would have been the world’s tallest at the time.

Eventually, developers settled on a proposal by the architecture firm Davis, Brody & Associates comprised of three separate but stylistically cohesive towers: the high-rise Ruppert and Yorkville Towers and the four-story Knickerbocker Plaza. The plan also included a cobblestone pedestrian mall at 91^st Street, a park and a playground.

The buildings were financed through the Mitchell-Lama Housing Program, a public housing subsidy law that seeks to support the development of affordable and middle-income housing in the city. Mandated by law to accept strict rent limitations, developers are entitled to withdraw from the program after 20 years.

In 2003, the owners of the Ruppert Yorkville Towers withdrew from the Mitchell-Lama program, converting 797 of the 1,258 units into market-rate condominiums. As a partner at Jenkens & Gilchrist, which represented the Towers’ owners, Leonard Grunstein drafted the Condominium Offering Plan and negotiated and then organized the closing of the conversion of the properties to condominiums — reported to be one of the largest such conversions in New York City history.

The agreement with the Tenants’ Association, which was embodied in an Amendment to the Condominium Offering Plan, was reached over the course of a few weeks (a process that would normally take more than eight months). It allowed residents to buy their apartments at a significant discount or resell at market rates.

The arrangement itself was monumental and complex, resulting in the simultaneous closing of most of the 797 sales. Buyers, bank lenders, attorneys and managing and selling agents all had to work together to achieve this result. Widely covered by the press, the conversion was described as a “milestone” by The New York Times. Miles M. Borden, one of Mr. Grunstein’s partners, was quoted saying, “In terms of sheer size and speed, I think this deal was historic.”

Carter Horsley, City Realty

Nadine Brozan, “Residential Real Estate; Big Condo Conversion At Towers on East Side,” New York Times, 3/14/03

Grunstein Creates Subdivision Plan & Financeable Ground Lease Form | Battery Park City Redevelopment

By the 1950s, the once-prosperous Port of Lower Manhattan had fallen into disrepair following the funneling of sea traffic to Port Elizabeth in New Jersey. In the early 1960s, private businesses, with the support of Mayor Robert Wagner’s administration, proposed landfilling and redevelopment of the area in an effort to revitalize the blighted neighborhood.

In 1966, Gov. Nelson Rockefeller, after reaching a compromise with several other groups interested in developing the area, announced the proposal for what is now Battery Park City in a planned community at the southwestern tip of Manhattan.

Two years later, the State Legislature created the Battery Park City Authority (BPCA) to oversee development of the neighborhood, working with the Urban Development Corp. and several other public agencies on the project. In 1972, the landfilling process began, using material from construction sites around the area.

Although developers completed the landfilling by 1976, officials put the project on hold as the city dealt with dire financial problems.

South Cove | Battery Park City

But in 1978, Mr. Grunstein played a key role in jumpstarting the stalled redevelopment of Lower Manhattan. He helped create the subdivision plan, embodied in the Mapping Agreement he drafted and negotiated, and financeable ground lease form used by the BPCA that enabled redevelopment of the land.

A year later, the City – still grappling with severe financial issues — transferred the title to the land to the BPCA. A new plan, designed in 1979 by the architecture firm Cooper-Eckstut, incorporated the development into the existing infrastructure.

Soon after, redevelopment of Lower Manhattan blossomed. The first residential complex was built in 1980, followed by the completion in 1985 of the World Financial Center – home to the offices of companies such as Merrill Lynch and American Express. Development of the neighborhood continued throughout the 1990s, with the construction of more than 30 residential and commercial buildings.

According to the BPCA, Battery Park City is now home to 17,000 residences, 52 shops and services, 36 acres of green space, 20 works of public art, three schools and two hotels. It is also home to the Irish Hunger Memorial, the Museum of Jewish Heritage, the New York City Police Memorial, the Skyscraper Museum and Poets House.

Lenoard Grunstein: Utilizing NYC Real Estate to Aid Fiscal Challenges

For many cities, the go-to strategy when trying to fix the city’s fiscal woes, are to: raise taxes, cut services or a mix of the two.  Leonard Grunstein brings to light a possible a solution that has not yet been considered: utilizing the cities real estate holdings.  If done correctly, this strategy could generate billions in revenue, according to Grunstein.

In the past, to help develop once barren areas of the city, the city worked with development companies that would sponsor the for-profit development program. The plan used “ground-lease” arrangements, which is comparable to a very high-quality, long-term bond.  The high-rise buildings that were developed in areas such as Battery Park, Times Square, and Roosevelt Island and any other improvements made to the land in those areas, secured the rental payments under the tenants.  Secured, so that if the tenant defaults on their payments, all of the investment in the land and leasehold mortgage lenders are at risk.

“As such, these ground leases are extraordinarily valuable and can potentially yield substantial sums of money that can satisfy the city’s immediate and longer-term budget priorities….”

Although these developed areas are not city parks or government owned buildings, at the time, government help was needed to push the for-profit project forward.  But now that the development has long been completed, what is the governments role now?

“The moment is ripe for the city to start monetizing some of these hidden real estate assets. This kind of taxpayer windfall would have a dramatic impact on the city’s finances—not just with regard to containing the city’s looming debt crisis but also for making investments in education, housing and other areas that are needed to secure its future.

It’s time to cash in some chips.”

Read Leonard Grunstein’s full Op-Ed on Crains New York