A Rivercross ground lease increase? What’s that? Perhaps I can help.
Forty years ago, as a specialist in the workings of municipal government, I came to New York City to assist the New York Public Library. Here was Roosevelt Island – recently developed to attract lower middle-income families, folks who were fleeing the New York City turmoil. Governor Nelson Rockefeller made certain the physical community was well planned. The people put in charge originally were committed to creating a community.
And here was a cooperative house called Rivercross. Fantastic place, really affordable, willing to accept me as one of the joint owners. How could it fail?
Maybe it was intended to fail. The controlling legislation, called Mitchell-Lama (M-L), had a provision that, after 20 years, any building under M-L could escape the program and the program’s affordability requirements. It inspired its tenants to hunt for the “pot of gold at the end of the rainbow” – the market rate.
Early Rivercross owners included people who could read the big offering plan. They decided to take advantage, to make it their mission to end M-L control as soon after the 20 years as possible.
It took time, money, and effort to get to the end of the rainbow, but they did. As an extra assist, they pushed to remove Steve Shane as head of RIOC. And then Rivercross became a real estate operation. Apartment owners accepted the 576-page offering plan by a substantial margin four years ago. The reward is that the original owners can sell their apartments for many dozens of what they originally paid. (Never mind the pesky 45% flip tax, or the fact that the new ground lease will raise our maintenance fees).
Now owners can exercise their right of ownership in just one way. Every spring, apartment owners can vote for one-third of the members of the corporation’s board.
That is it. You ask about the ground lease increase? The lack of affordability plan invalidated a previously negotiated (and less expensive) ground lease with RIOC, that’s true. But in my view, the bigger question is how the building will cover the outstanding portion of the bond issue due to be refinanced in three years. The Rivercross board took out a $50 million ten-year mortgage, replacing their 30-year-fixed $25 million mortgage in 2011. The principal is due in 2021. That could be an interesting matter, particularly in view of financial market rumblings suggesting interest rates will be going up.
Until then, tenants will sit on the sidelines until they are invited to a meeting to hear what the board has decided is in apartment owners’ best interests.