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Struggling GMHC Plans to Break Lease and Leave Expensive Offices

By Mathew Katz | October 30, 2013 6:56am
 GMHC's pricey office on West 33rd Street.
GMHC's pricey office on West 33rd Street.
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DNAinfo/Mathew Katz

CHELSEA — The city's largest AIDS services organization is quietly planning to move out of its expensive new offices — just two years after moving in — after it made layoffs and pay cuts to be able to pay its astronomical $389,000 monthly rent, DNAinfo New York has learned.

GMHC, which sources said spent millions to move into new offices on West 33rd Street in 2011, has begun to work with Studley, a real estate firm that represents tenants, in the hopes of finding a cheaper space, according to multiple sources familiar with the situation.

“The board of directors believes that we can find a space that better suits the needs of the ever-progressing GMHC and its client services than where we're currently housed," said board chair Mickey Rolfe in a statement. "We don't have more info to share today.”

Insiders said the organization's board is considering a move within the next two years, meaning the agency would break its eight-year lease with Broadway Partners, the owner of the 446 W. 33rd St. building, which is set to end in 2018.

"This office was never a good idea," said one GMHC insider who asked to remain anonymous. "We can't provide basic services — we've had to cut services to pay for this thing."

GMHC's 165,000-square-foot office on West 33rd Street, which is still partly empty, will cost the ailing AIDS organization $4,341,195 in 2013 — nearly a fifth of its budget, according to a financial audit by Grant Thornton obtained by DNAinfo.

On top of that, GMHC is not allowed to provide medical services, like HIV testing, in its main office, so the nonprofit was forced to rent out additional space for an HIV prevention center on West 29th Street, which costs $322,875 in rent per year.

Studley and Broadway Partners did not respond to requests for comment.

GMHC posted a six-figure loss for the fiscal year ending in 2012, according to financial records. Over the past year, the organization had laid off employees and cut the departments of Health Informatics and Institutional Giving. Those who remained saw their salaries slashed and were forced to take a weeklong furlough.

Before the 2011 move, GMHC members warned that the high cost of the space was risky, and co-founder Larry Kramer blasted the organization's plans.

However, former CEO Marjorie Hill and then-chief operating officer Janet Weinberg pushed for the move to the West 33rd Street site, insiders said. Weinberg has since taken over as the organization's interim CEO after Hill was fired by GMHC's board in September.

The organization moved after its lease at 119 W. 24th St. expired at the end of 2010. Back then, landlord F.M. Ring Associates wanted to increase the agency's rent, but senior management did not attempt to negotiate it down in order to stay in the space, multiple sources said. 

According to sources, GMHC left the West 24th Street building in such a state of disrepair that F.M. Ring held on to all of GMHC's $1.2 million deposit, a cost the organization has written off as a loss over the past two years. 

F.M. Ring did not immediately return a call for comment.

With the combination of rent for its two current buildings and writing off the security deposit, the organization spent a total of $5,338,516 on rent and related expenses in the fiscal year ending in 2012, records show — nearly half of the organization's non-personnel expenses.

Much of the new office is now empty, according to sources within the organization, a fact that was pointed out in a letter written by current and former GMHC employees, which contributed to Hill's firing in September. 

"If we were to cut this space by half, we could save millions annually," the letter said. "We believe that Hill/Weinberg [have] squandered millions on wasteful and unnecessary space and must be held accountable."

GMHC was also criticized earlier this year for giving a "sweetheart deal" to MZA Events, a private company that organizes AIDS walks around the country. MZA gets free rent at the office, consisting of "10 rooms" according to its agreement with GMHC. 

In the fiscal year ending in 2012, the agency earned a paltry $53,897 in rental income, the audit shows.

A group of clients also slammed the new office for having a separate entrance for clients built into a former loading dock, which they say stigmatizes people who are HIV-positive by not allowing them to use the building's main entrance.