Photo via BridgeStreet
Finally, a short-term rental scandal that has nothing to do with Airbnb.
The state has busted a 36-story Midtown tower that was the wrong kind of condo-hotel.
Located at 49 East 34th Street, between Madison and Park avenues, the building was supposed to be a condominium. However, the 110 apartments were actually being rented out for $239 a night for a studio to $359 for a two-bedroom, the New York Times reported. The owners of the property also raked in millions of dollars in tax breaks intended to encourage development of affordable housing.
The building is currently owned by an affiliate of Los Angeles-based CIM Group, the high-profile developer behind skyscrapers such as 432 Park Avenue. CIM has reached an agreement with the state attorney general’s office to pay $4.4 million, the value of the tax breaks, to a city fund for creating affordable housing. The tower will stop running as a hotel by March 11, and the units will become rent-regulated apartments. The owner will also fork over $275,000 to the state to pay for the cost of the investigation.
The Times lays out the building’s troubled history: 49 East 34th Street was built around 2007 as a condo by Jay Eisenstadt and David Scharf of Esplanade Capital. The developers received a 10-year 421a abatement, and they planned to sell the finished tower to Ireland-based Sorrento Asset Management for $96.8 million. However, financial woes abounded, and Esplanade ended up renting out the structure to BridgeStreet Corporate Housing, which offers extended-stay housing. Esplanade’s lender, iStar Financial, took over the building, then sold its loan to CIM Group, which allowed BridgeStreet to continue renting out the units on a short-term basis.
BridgeStreet’s listing for the illegal hotel, which is still up, describes the property as a “landmark building located in exciting Midtown East between Madison and Park Avenue. Each apartment features high ceilings, wood floors, modern state of the art kitchens with stone and porcelain interior finishes.” The two-bedrooms include in-unit washer and dryer; amenities at the location include 24-hour doorman, 24-hour reception, dry cleaning pick up and gourmet kitchens. The listing does note a 30-day minimum stay for New York City properties.
The bust is part of the attorney general’s attempt to stamp out violations of the 421a state tax abatement program, which is up for renewal this year. Created in the 1970s, the program was initially established to foster residential construction during a weak economy. Now, developers in Manhattan, Brooklyn and Queens promise to reserve 20 percent of their units for affordable housing in return for the tax break.