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City Agency Knew of Possible Condo Conversion Before Rivington Sale: Report

 Community members and elected officials have expressed outrage over the sale of the Rivington House, formerly a nursing home for HIV/AIDS patients.
Community members and elected officials have expressed outrage over the sale of the Rivington House, formerly a nursing home for HIV/AIDS patients.
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DNAinfo/Allegra Hobbs

LOWER EAST SIDE — Officials within the Department of Citywide Administrative Services were told in March 2015 that the Allure Property Group was considering a luxury condo conversion for the Rivington House, then agreed to lift a two-fold deed restriction that kept the building a nonprofit nursing home, according to the city's Department of Investigation, which on Thursday released the findings of its months-long investigation into the transactions that led to the deed flip.

Allure reps informed DCAS in a March 11, 2015, meeting that they might convert the property — which for decades served as a nursing home for HIV/AIDS patients — into condos if forced to cough up $16.5 million for a lift on both parts of the deed restriction. The agency's assistant commissioner, Randal Fong, omitted this fact in a report subsequently filed on the meeting, according to the DOI.

Roughly two months later, Allure requested the lift and agreed to pay the $16.5 million. 

DCAS signed off on the deed lift in July, and the change was made official that November when the money changed hands, according to the report. 

Allure then sold the Rivington House in February to the "Rivington Street Investors" — comprised of residential developers China Vanke and Slate Property Group — for $116 million. The property is now slated for a luxury condo development.

The omission is just one of many administrative failures highlighted in the report, which states that high-ranking city officials "knew or should have known" that the two-fold deed restriction was being lifted and that the lift could pave the way for a luxury residential development, despite officials' insistence they were oblivious to the deal.

In fact, First Deputy Mayor Anthony E. Shorris and other officials at City Hall were informed "on numerous occasions, and months in advance" that both parts of the deed restriction were slated for removal, the investigation found, citing a memo passed on from DCAS to Shorris, which Shorris claims he never read. 

And despite officials' insistence that they believed the property would be maintained as a for-profit nursing home following the deed restriction removal, only one part of the two-part deed restriction had to be lifted in order to allow it to be used for this purpose, according to DOI. Yet officials unquestioningly signed off on the lifting of both parts of the restriction, the report states. 

While city officials did not break any laws throughout the deed-lifting process — and DOI in the report does recognize that Allure attempted to deceive the city to usher through the deed modification — the agency says officials failed to act in the city's interest, and that the investigation's findings reveal a "complete lack of accountability" when it comes to deed restrictions, as well as "significant communication failures" in both City Hall and DCAS.

"In the end, the deed restriction was lifted to the benefit of private entities permitted to use or sell the property for any purpose, while the community for which Rivington provided much-needed services was left without a medical care facility and without any ability to ensure that the property would be used to help the community," the report states.

The report further states that the "justification memo" prepared by DCAS during the process of lifting the deed restriction was lifted from a memo written by lobbyist James Capalino on behalf of VillageCare, which had tried to get the restriction lifted before selling to Allure. Capalino also raised $50,000 for the de Blasio administration after lobbying for the lift, the New York Daily News has reported, and has represented Slate Property Group in the past on unrelated matters, according to a spokesman for Capalino. 

Meanwhile, Mayor Bill de Blasio last week unveiled a handful of changes to the deed restriction modification process, which are set to be put into motion in the coming months.

The changes aim to ensure better communication among city agencies and greater transparency throughout the public review process, requiring DCAS to run prospective modifications by a committee of city officials, and roping in local community boards for the review process.

In the case of Rivington, the notification of the deed lift was posted in the City Record for one day, and a subsequent meeting was attended only by city officials and Allure reps, according to the DOI's report. 

Community members, including the local community board, have maintained the changes are "not enough," and continue to demand the return of Rivington House to the community, though the city has refrained from commenting on that.

In the wake of the report, City Hall representatives have chalked up the failures to a painful learning experience, acknowledging the report's finding that the process for deed restriction removal is haphazard and outdated. Representatives said the mayor's announcement of changes to the process will help prevent such failures in the future.

"This report confirms what Mayor de Blasio has already said: the City's decades-old deed modification process was deeply flawed," said press secretary Eric Phillips.

The entire DOI report can be read here.