The New York State Attorney General has settled with CIM Group, requiring it to pay $4.4 million for operating 47 East 34th Street as an illegal hotel while receiving tax benefits under the 421 program, Attorney General Eric Schneiderman announced today.
“I am pleased that this company has agreed to do the right thing by paying the city back taxes and offering more than 100 rent-stabilized leases to New Yorkers,” Mr. Schneiderman said in a press release. “My office will continue to crack down on illegal development that exacerbates the city’s severe affordable housing shortage.”
Mr. Schneiderman began investigating impropriety at the property, filing a June 25, 2014 subpoena for documents, as Commercial Observer previously reported.
As part of the settlement, CIM will make required filings with the city’s Department of Housing Preservation and Development and the state’s Division of Housing & Community Renewal, and will convert the use of the building to a rent-stabilized apartment building. In addition, CIM will pay $4.4 million, to a special fund to help finance affordable housing for low-income New Yorkers. They will also pay the State of New York $275,000 to cover the costs of the AG’s investigation.
CIM purchased the 110-unit building in October 2011 for $54 million, property records indicate. On March 1, 2012, the company negotiated a $4.9 million-per-year, two-year lease with BridgeStreet for the building between Park and Madison Avenues.
BridgeStreet, a temporary housing provider, leased the building from March 2012 to March 2015 and was supposed to keep the building “genuinely residential in nature,” the suit indicates, meaning the 100 units “in the building could not be rented for periods of less than six months.”
BridgeStreet agreed to do this to maintain the building’s status in the 421a program, providing real estate tax breaks in exchange for providing affordable housing, the suit claims. The building started receiving the 10-year section 421a tax exemption commencing July 1, 2011 under the ownership of its developer Esplanade Capital and CIM wanted to maintain the exemption.
CO reported last November that CIM filed a $5 million lawsuit against BridgeStreet for running the building as an “extended-stay hotel,” according to a New York State Supreme Court complaint.
CIM didn’t respond to an inquiry via a spokesman.