So Long, Solaire

Another Battery Park City Rental Building Faces Condo Conversion

The Solaire, built as a rental apartment tower (with 293 units) in 2003, received a State-financed mortgage of $165 million, plus millions more in annual tax abatements, in exchange for affordability protections, primarily in the form of rent stabilization. But now the building's owners have taken the first steps to convert it into a condominium, which may raise questions about ongoing affordability for the building's rental tenants.The Solaire, built as a rental apartment tower (with 293 units) in 2003, received a State-financed mortgage of $165 million, plus millions more in annual tax abatements, in exchange for affordability protections, primarily in the form of rent stabilization. But now the building's owners have taken the first steps to convert it into a condominium, which may raise questions about ongoing affordability for the building's rental tenants.
Tom Goodkind

Tom Goodkind

At the June 18 meeting of the Housing Subcommittee of Community Board 1(CB1), chairman Tom Goodkind announced that, “there’s another condominium conversion happening in Battery Park City. The Solaire building, which is rent-stabilized, has filed with the Attorney General’s office.”

This was a reference to the apartment tower located at 20 River Terrace (near Murray Street), which contains 293 units. All of these homes are legally subject to rent stabilization, as a result of the developer, the Albanese Organization, having received a package of financial incentives (including a $165 million mortgage guaranteed by the State of New York, and annual tax breaks in excess of $6 million) in exchange for limits on rent increases.

Although current tenants at the Solaire are protected by these limits (set each year by New York City’s Rent Guidelines Board), they nonetheless pay some of the highest rents in Battery Park City. A three bedroom unit in the Solaire is now being marketed on the website StreetEasy.com for $9,900 per month.

Even so, a tenant who can afford these prices is protected by the rent stabilization program from having them climb much higher, at least in the short term. In April, the Rent Guidelines Board capped increases at 3.75 percent, City-wide.

But that protection may be called into question by the “red herring” letter recently filed by the Albanese Organization with the office of the State Attorney General, which regulates condo conversions.

A 2014 condominium conversion of the former rental building at 22 River Terrace, next door to the Solaire, saw hundreds of tenants forced from their homes. The handful that tried to remain eventually left, as several years of construction work made the building uninhabitable. Similar scenarios played out a few years earlier at a pair of buildings on Rector Place: 225 Rector (which was rebranded Parc Place) and 333 Rector (now known as One Rector Park)

Persuading rental tenants to leave can translate into a windfall in several ways for a rental building owner embarking on the process of condominium conversion. First, construction work to remodel the building is faster and less expensive if no accommodations need to be made for people currently living there. Second, condominium apartments are often more valuable (and easier to sell) if they are offered empty, rather than encumbered by an occupant, toward whom the unit purchaser may have all the legal obligations of a landlord.

CB1 chair Anthony Notaro responded to these developments by observing, “it is regrettable that renters and neighbors will lose the protection they have had since this building opened, and will now be forced to find a reasonable replacement in Lower Manhattan. And that will be a challenge that no one wants to face, in uprooting families and a support network.”
“The root cause in this case may be the benefits that developers received,” he added, the terms of which appear not to prevent, “a unilateral exit. That needs to be addressed legislatively. Additionally, the land lease in Battery Park City must also be addressed. CB1 is building the competency to work on this with our elected officials and the Battery Park City Authority.”

Chairman Anthony Notaro

Mr. Goodkind, chair of CB1’s Housing subcommittee, noted that, “I see three problems with this conversion — first, for the folks who live there: When stabilized and or affordable rentals convert to condos or co-ops, these rental tenants are generally protected, until move-out. But as owner renovations get underway, the rentals can become uninhabitable, and alternative living spaces are offered only for complete demolition.”

Second, he noted, “for those who are financing a condo, a new federal tax law in effect for 2018 caps the deductibility of local real estate tax, along with other state and local taxes, for owners to $10,000, creating a possibly non-sustainable tax burden. ”

Finally, he observed, “condos may have a large group of investor-owners who rent out their apartments. Once this takes hold, the building may have a large population of short-term, unprotected renters, a group that may not take pride and responsibility for the rules of the building, and the need to build a community. The board may not be able to attain a quorum for important capital improvement projects.”

The Solaire condominium conversion may also represent a tipping point for the Battery Park City community as a whole, which was once comprised entirely of rental apartment buildings. Through the early 2000s, even while more new buildings were erected as condominiums, it remained a neighborhood in which the majority of the inventory of apartments (numbering slightly more than 8,500 units in total) were rented, rather than owned by their occupants.

But with the conversion of 22 River Terrace, this balance began to shift. The 324 units in that building brought the ratio to 52 percent of all apartments being rentals, and 48 percent being condominiums. Moving the 293 apartments in the Solaire from the “rental” to the “condo” column will add another three percentage points to the latter, meaning that approximately 51 percent of all apartments in Battery Park City will be owned, rather than leased.

22 River Terrace

This may also emblematic of a related shift. Battery Park City was originally, more by default than by design, an affordable place to live. Decades before Lower Manhattan had acquired cachet as residential enclave, developers needed to create an incentive for people to move to what was perceived as a frontier. That incentive took the form of lower costs: For many years, a square foot of living space in this neighborhood cost less than equivalent footage in other Manhattan neighborhoods with ready access to the waterfront and transportation infrastructure, along with plentiful park space. For middle class families, Battery Park City became an address that was both desirable and economical.

But communities that are comprised of more owners than renters are different. They are less welcoming to people with limited financial resources. They tilt more to upper-, rather than middle-class residents. And for better or worse, they necessarily have fewer of the striving young families whose improvised campaigns of community-building (which brought schools, libraries, and youth athletic leagues to the area) helped to create the place where so many more affluent people now wish to live.

 

Noting this dichotomy, Battery Park City Authority president and chief executive officer Benjamin Jones observed that, “Battery Park City is about more than just the buildings. The character of this neighborhood is important to the Authority, and that is in large part attributable to the people who live here, condo owners and renters alike.”

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