Despite insistence that it came as a surprise to the mayor’s office, high-level aides at City Hall were “aware of and involved” in the discussion about whether to lift a deed restriction on a nonprofit AIDS hospice called Rivington House, the Department of Investigation said today in a deeply damning report. That deed removal sparked intense scrutiny after it paved the way for the nursing home to be sold to a luxury condo developer for a massive profit.
And the finding that the city had been repeatedly notified about the deliberations was compounded by an allegation from DOI that their investigation was “hindered” by Mayor Bill de Blasio’s Law Department, which refused to turn over documents and city computers to the city’s in-house investigatory agency.
At issue is the decision to lift two deed restrictions on the Lower East Side property—one that required it be run as a nonprofit, and one that required it to be operated as a nursing home. The city eventually did agree to lift both deed restrictions, in exchange for a $16 million from Allure Group, a nursing home company that had purchased Rivington House from its first owner, Village Care. In turn, Allure Group flipped the property to luxury condo developers for a profit of more than $70 million, infuriating the community and running afoul of de Blasio’s crusades to save healthcare facilities and to stop high-cost housing from taking over the city.
For months, de Blasio has insisted that he and others in his orbit at City Hall did not know about the deed restriction process, handled by the obscure Department of City Administrative Services, and that were not involved in it. He had also said the city had been promised by Allure Group that the property would remain a nursing home—despite the fact that Allure Group had asked the city to remove the deed restriction requiring it to be a healthcare facility, and the fact that the city agreed to remove it.
The DOI investigation contradicted those claims from de Blasio.
“DOI found that City Hall knew or should have known that both parts of the deed restriction were being lifted prior to the sale. DOI also found that while representations had been made to the City suggesting that Rivington would continue to be used as a nursing home, several City employees knew the property owner considered selling the property for conversion to luxury housing,” the report reads. “In addition, senior City officials knew or should have known that the lifting of the deed restriction would allow the buyers of the property to legally use the building
for any purpose, including luxury housing.”
The report continues: “DOI’s investigation further revealed a complete lack of accountability within City government regarding deed restriction removals and significant communication failures between and within City Hall and DCAS.”
The mayor’s office has not yet responded to the audit.
Further complicating the matter for the de Blasio administration is the involvement of James Capalino, a lobbyist who is close to the mayor and has fundraised for him. Capalino was the lobbyist for the original owner, VillageCare (which sold the property to Allure), and first asked the city to lift the deed restriction, at no cost to the company. That request was denied.
But when the city did eventually lift the deeds, it used the exact language that Capalino had used in his request in the formal document justifying the decision.
“Rather than the City performing any analysis justifying the removal, however, the language in this memo was cut and pasted verbatim from an earlier memorandum from Capalino on VillageCare’s behalf,” the city wrote. “The justification provided was therefore taken from the perspective of the property owner, who was not responsible for taking into consideration the City’s best interest.”
The report is peppered with evidence that high-ranking city officials knew about the deed restriction conversation, in contrast to de Blasio’s insistence otherwise—including the fact that de Blasio himself received an e-mail about it from his top deputy mayor, Tony Shorris, on August 3, 2014. (De Blasio told DOI he didn’t remember the e-mail.)
Shorris, meanwhile was notified at least three times and in some cases months in advance by DCAS Commissioner Stacey Cumberbatch that the city would lift the deed restriction: on May 6, 2015; on July 8, 2015; and on November 18, 2015.
And in September of 2014, Shorris was e-mail on two policy memos outlining possibilities for redevloping the site—including selling it to a housing developer.
“Both City Hall memos clearly consider the option of VillageCare selling Rivington to a private housing developer. Both memos also cite the cost to remove one or both parts of the deed restriction,” the report found.
While it seems people within City Hall knew about the deed lifting, the report contains ample evidence the city and the developers didn’t want people outside City Hall to know.
On March 19, DCAS Assistant Commissioner Randal Fong was informed the property may be converted into luxury condos if Allure was forced to pay $16 million to lift the deed, DOI said. In his report on the issue to the administration, Fong removed the reference to luxury condos.
On May 11, notice of the removal was published for one day in the City Record, but listed the property only by block and lot—not by name or address.
On May 14, prospective buyer Slate told its staff via email: “do not discuss this deal…the seller [Allure] is very concerned that the city and union will find out that [the seller] is in contract to sell at the price that we are buying it which will directly impact his ability to have the deed restriction removed. Once he has it removed we can do whatever we want.”
On June 18, 2015, DCAS wrote up a notice for a public hearing, at first including the property was “a/k/a 45 Rivington Street,” but the address was “specifically removed” by Fong from the final version. No members of the public attended the hearing.
And at the end of the process that set the owners up to make a huge profit, the city up to lose a healthcare facility and has dogged the mayor for months, the city congratulated itself.
“Congratulations!” DCAS Commissioner Cumberbatch wrote to her staff, according to DOI. “Thank you and staff for great work and bringing this to closure in the best interest of the City. Much appreciated.”