Manhattan House Tenants Sue to Halt Condo Conversion

Tenants of Manhattan House have filed a lawsuit to cancel the owners’ proposed condominium conversion. Manhattan House is a 583-unit apartment building on Manhattan’s Upper East Side. The $1.1 billion offering is the largest proposed condominium conversion on record.

On Tuesday, July 3, tenants represented by David Rozenholc, filed an Article 78 petition claming that New York State Attorney General Andrew Cuomo arbitrarily and capriciously approved the sponsors’ condominium offering plan.

In the court papers, tenants claim that Cuomo abused his discretion on various grounds by, among other things, overlooking defective certifications by sponsors Jeremiah O’Connor and Richard Kalikow—and by their engineer—excess vacancy issues, and violations of the Martin Act.

This is the latest development in what has proven to be a highly contentious and problem-ridden conversion, with the two co-owners currently embroiled in litigation directed at ousting each other from the project.

To date, only a single insider has offered to purchase, the exclusive period for insiders to buy having been extended until July 20, when the petition will be heard.

Credit Suisse underwrote the Manhattan House conversion, together with other condominium projects, as part of a mortgage backed securities loan placed in 2005. The Manhattan House portion represents 54.5% of the entire loan.

Click here to read the Article 78 petition

Kalikow v O'Connor Manhattan House Lawsuit Documents

Here are three links to documents pertaining to the Kalikow v O'Connor Manhattan House lawsuits

Main complaint - this is a 129 page document and will take several minutes to download

Memo in support of preliminary injunctions - 54 pages

Memo in opposition to motions for a preliminary injunctions - 18 pages

Manhattan House In-Fighting Leads to Fitch Downgrade

June 19, 2007 03:55 PM Eastern Daylight Time
Fitch Downgrades 2 Classes of CSFB 2005-CND2

CHICAGO--(BUSINESS WIRE)--Fitch Ratings downgrades and removes from Rating Watch Negative the following classes of Credit Suisse First Boston's (CSFB) commercial mortgage pass-through certificates, series 2005-CND2:

--$23 million class M to 'BB' from 'BBB-';

--$18.8 million class N to 'BB-' from 'BBB-'.

In addition, Fitch affirms the following classes:

--$375.4 million class A-2 at 'AAA';

--Interest-only class A-X-1 at 'AAA';

--Interest-only class A-X-2 at 'AAA';

--Interest-only class A-X-3 at 'AAA';

--Interest-only class A-X-4 at 'AAA';

--Interest-only class A-X-5 at 'AAA';

--Interest-only class A-Y at 'AAA';

--$64 million class B at 'AAA';

--$63 million class C at 'AA';

--$39 million class D at 'AA';

--$36 million class E at 'AA-';

--$35 million class F at 'A+';

--$37 million class G at 'A';

--$33 million class H at 'A-';

--$36 million class J at BBB+';

--$32 million class K at 'BBB';

--$32 million class L at 'BBB-'.

Classes A-1, A-1S, and A-1J have been paid in full.

As of the June 2007 remittance date, the transaction's principal balance had decreased by 58.6% to $824.3 million from $2 billion at issuance due to the payment in full of twelve loans. Eight loans remain in the transaction. Five are secured by multifamily rental properties that are undergoing conversion to individual condominiums. Three loans are secured by multifamily properties with cancelled condominium conversions. All loans are current, and none are specially-serviced. There have been no losses to the trust.

The downgrades are due to several Fitch concerns about the transaction's remaining loans; upcoming 2007 maturity dates, geographic concentration (all of the remaining loans are secured by properties in either New York or Florida), concentration by size (the five largest loans comprise 90.1% of the transaction), oversupply in various Florida condominium markets, and delays at the largest loan in the transaction - Manhattan House (54.6%). All of the loans mature in 2007.

Four (17.8%) of the eight remaining loans are in Florida. Three of the loans in Florida are secured by multifamily properties that are no longer being converted to condos: Mizner Court (7%), Spring Harbor (4.6%) and Spring Landing (3.8%). All three are being re-leased as rental properties. Fitch is concerned that they do not generate sufficient cash flows as rentals to support their current debt levels, and as a result the loans no longer maintain investment-grade credit assessments.

The Manhattan House loan is secured by a 583-unit multifamily rental building located on the Upper East Side of Manhattan, New York. As of the June 2007 remittance, there had been no sales or contracts signed for any of the units. Fitch is monitoring the ongoing status of litigation between the partners and its impact on the loan's performance.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Battle for Manhattan House Heats Up

June 17, 2007
by Braden Keil
New York Post

It's not just the tenants who are allegedly getting booted from their market-rate apartments at Manhattan House. Now it's the new owners who are trying to evict each other.

Jeremiah O'Connor and Richard Kalikow, who are in the midst of the city's costliest condo conversion - at a reported $1.1 billion - have taken their skirmish to Manhattan Supreme Court, where a judge has determined that either man must buy the other one out in 30 days.

At stake is a five-building, 20-story complex, where Grace Kelly once resided, which encompasses an entire city block between Second and Third avenues and East 65th and 66th streets. The two moguls bought it in October 2005.

The two paid $623 million - more than $1 million per apartment - and received nearly $800 million in additional financing. The 20-story postwar buildings, with almost 600 units, are slated to become pricey remodeled condominiums at nearly $2,000 per square foot as tenants leases expire.

"Jerry O'Connor has the upper hand on this ruling," said a source familiar with the case. "He already has the money, while Kalikow is going to have go fish."

Kalikow was said to have had the backing of UBS, but the enthusiasm of the Swiss-based financial giant for the project was said to be waning.

According to sources, O'Connor was dissatisfied with Kalikow's duties, which included coming up with a viable marketing plan.

Kalikow could not be reached, while O'Connor had no comment when reached at his office.

The tenants, meanwhile, are not going out without a fight.

While just over 100 residents have moved out, many, mostly rent-regulated, have said they're staying put. "They're going to have to cart me out of here in a box," vowed one resident.

But one elderly resident, Martin Burwick, a 97-year-old man in failing health, died of pneumonia, allegedly because of dust and asbestos kicked up by the construction work.

Manhattan House Divided

June 17, 2007
By JOSH BARBANEL
New York Times

BREAKING up is hard to do, particularly for the developers of one of the most ambitious and expensive condominium conversions ever: the redevelopment of the Manhattan House, a complex with 582 apartments on a full square block on East 66th Street and Third Avenue.

The state attorney general approved sales at the $1.1 billion conversion this spring. But sales have been stalled while the project’s general manager, N. Richard Kalikow, a real estate investor and developer, has been feuding in court and out with his partner, Jeremiah W. O’Connor Jr., the managing partner of O’Connor Capital Partners, a private equity firm.

Last week, a State Supreme Court judge ordered that one partner buy the other out, under the terms of their agreement. But lawyers for Mr. Kalikow immediately filed a notice of appeal, and in the meantime are attempting to block the judge’s order.

Mr. O’Connor asked the court to order the buyout, while, according to associates, Mr. Kalikow was trying to put together investors to help him take over the huge project and refinance it.

The project has long faced legal challenges from angry tenants who have been living in the building during a year of messy renovations. But the court papers show that the project has also been troubled by cost overruns, along with disputes over the marketing campaign, access to the project records and even its Web site design.

The project is being marketed by Prudential Douglas Elliman, but with the sponsors in disarray, there have been no reports of contracts signed at Manhattan House. While most developers prefer to build with other people’s money, the papers show that for many months the construction has been paid for by regular “capital calls,” in which the partners provide cash to meet construction costs. The project’s lender refused to provide construction loans after the partners were unable to work out an agreement to provide a $30 million letter of credit to deal with the cost overruns, court papers say.

Yet with the huge demand for luxury apartments in Manhattan and with prices on the rise, it is not clear whether the dispute reflects financial distress or a struggle by one side or the other to capture a greater share of the rising potential profits.

In the court papers, Mr. O’Connor’s lawyer, Max R. Shulman, argued that Mr. Kalikow and his team had mismanaged the project, and with the partners unable to agree, Mr. O’Connor had the right to demand that Mr. Kalikow either buy him out or agree to be bought out. “It cannot be known how many sales and how much revenue have been and will continue to be lost as a result,” he said in court papers of the management.

But Mr. Kalikow’s lawyer, Mitchell A. Karlan, said the objections were a ruse, raised in bad faith to force Mr. Kalikow out of the deal and capture all the profits just as sales were beginning.

He said the issues raised in court were many months old and were brought up just before the final approved offering plan, known as the “black book,” was distributed to tenants in the building, triggering the beginning of sales. Once sales began, Mr. Kalikow’s share of the returns would eventually rise to as much as 40 percent from about 20 percent, he said.

The court decision would give Mr. Kalikow the first right to buy out his partner, and if he refused, Mr. O’Connor could buy him out. But because Mr. O’Connor and his investors put far more cash into the project than Mr. Kalikow did — $119 million versus $31 million, according to court papers — Mr. Kalikow would have to raise more money for the buyout.

Under the ruling last Tuesday by Justice Bernard J. Fried of State Supreme Court in Manhattan, Mr. O’Connor was required to post a $30 million bond to cover any potential damages that might eventually be owed to Mr. Kalikow under future court rulings. Once the payment is made, Mr. Kalikow will be given 30 days to decide whether to buy out Mr. O’Connor or give up his own interest in Manhattan House. At the hearing, Mr. O’Connor’s lawyers said they would post the $30 million in a few days, but that was before a notice of appeal was filed.

White Bricks and Pale Imitations

Best of a Bad Lot, Manhattan House Heard as Landmark
April 15, 2007
by JAKE MOONEY
New York Times

MANHATTAN HOUSE, the 19-story slab of an apartment building on a full Upper East Side block bounded by 65th and 66th Streets and Second and Third Avenues, was built to stand out, from its size to its stark silhouette to its most striking feature: its bold white-brick skin.

Time, changes in fashion and a host of pale imitations around the neighborhood have perhaps made the facade less surprising, but this month the building, which is actually light gray, may be on its way to getting the recognition that advocates say is long overdue. The city’s Landmarks Preservation Commission is considering protecting the building and heard testimony on the matter last week, while the local community board plans to consider it this week.

Meanwhile, Manhattan House tenants, who are involved in a long struggle with its owners over plans to convert the building to condominiums, hope that a landmark designation will preserve elements they love.

The building, completed in 1950 and designed by the firms Skidmore, Owings & Merrill and Mayer & Whittlesey, was part of a project by the New York Life Insurance Company, which bought adjacent land and kept buildings there low to ensure Manhattan House had abundant light, air and visibility. The pale brick exterior, one of the first of its kind, was meant to stand for cleanliness; the bricks were covered in a glaze to make them self-cleaning in the rain.

"It wasn’t the high-end part of the Upper East Side, and when it went up, the Third Avenue el was still there," Seri Worden, executive director of Friends of the Upper East Side Historic Districts, said last week. "So it would have been very impressive to see this 19-story white building rising among the brownstones and old tenement buildings."

John Jurayj, co-chairman of the Modern Architecture Working Group, a collective of preservationists pushing for landmark designation of Manhattan House and other modernist buildings including 40 Central Park South, a white-brick precursor, called Manhattan House a synthesis of high modernism and middle-class living, and one of the city’s first and best manifestations of the theories of Le Corbusier.

"It was a belief on some level that industrialization in general, and the byproducts of it — your kitchen stove, your refrigerator — could free you up to have a better life," Mr. Jurayj said. "It was a very hopeful idea of designing and living."

Developers of a half-century ago, though, took another lesson from the building where Benny Goodman and Grace Kelly once lived: white brick was in. The resulting homages were less than sparkling.

"It’s exciting — at first," Simeon Bankoff, executive director of the Historic Districts Council, said of the medium. "Then it becomes banal. Manhattan House is an incredibly important building, and it was really the very best of a bad lot."

The proliferation of copycats may have robbed the building of some of its distinctiveness, but Mr. Jurayj said the bricks, which eventually fell out of fashion, were not to blame. "Most of the other white-brick buildings in the city, it’s not the white brick that’s the problem," he said. "It’s not the material. It’s a paucity of skill and imagination in those architects."

What sets Manhattan House apart, he added, is the little touches, like the large picture windows, glass-fronted balconies and landscaped gardens. Details like those, along with the building’s height and outward appearance, are what tenants hope landmark designation would preserve.

The building’s current owners, N. Richard Kalikow and Jeremiah O’Connor, are in the midst of a billion-dollar conversion to condominiums, and the Manhattan House Tenants Group says hundreds of tenants have been forced out. The owners, who deny any impropriety, consider the building "an iconic property truly deserving of landmark status," said their spokeswoman, Barbara Wagner.Preservationists, meanwhile, hope the attention will benefit other modernist buildings, which have generally been harder to protect.

Modern designs, Ms. Worden said, "don’t always have the same heart-tugging appeal of older buildings, but they are an important part of New York’s cityscape."

Mr. Jurayj noted that even Manhattan House, which is relatively well known and well liked, was eligible for landmark status for more than 25 years before last week’s hearing. "You run the risk," he said, "of losing important things."

Questions surface about controversial Manhattan House financing

By Vanessa Londono and Gabby Warshawer - February 13, 2007
The Real Deal

While the Upper East Side's massive Manhattan House is slowly being converted from rental to condo, questions remain about the project's controversial financing structure, which involves securitization bonds.

Fitch Ratings released a statement yesterday flagging the property's loan, noting, "Fitch is concerned about delays at the Manhattan House...The Manhattan House loan is secured by a 583-unit multifamily rental building...As of the January 2007 remittance, there had been no sales or contracts signed for any of the units."

Contracts and sales for the conversion, however, cannot occur until the project is approved by the New York State Attorney General's Office, an approval that Manhattan House's owners expect to occur shortly.

Manhattan House's owners said the project was not experiencing delays.

"There has been no delay in the Manhattan House project. We are awaiting approval from the Attorney General and until Manhattan House receives that approval, there can be no sales or contracts signed," they said.

The first condo conversion bonds appeared in 2005, but relatively few investors have utilized the securities. Real estate experts have warned that the financing could be problematic if a conversion is unsuccessful.

Manhattan House's owners Richard Kalikow and Jeremiah O'Connor obtained $450 million in securitization bonds underwritten by Credit Suisse to finance the conversion of the building. The condo's mortgage loan was sold with other loans to investors backed by the condo building itself.

"The Manhattan House is among the first condo projects of its size to get financing," said Neil Shapiro, partner at the law firm of Herrick, Feinstein.

According to tenants of the Manhattan House, when Kalikow and O'Connor used securitization bonds to fund the condo conversion, details were released to the public by independent rating agents before the proposal was reviewed. Tenants argue that this violated the Martin Act, which governs condo conversions.

"The issue has been resolved," said Jin Lee, chief financial officer for Kalikow's company, Manchester Real Estate. "To have a loan financed in the public market, rating agents will do their own independent underwriting reports of the building. We can't stop them from doing their own decisions and judgments but that's not what our offer is."

Fitch remains negative on the Manhattan House loan

Fitch is concerned about delays at the Manhattan House (32.1%) and Toy Buildings (13.5%) loans. The Manhattan House loan is secured by a 583-unit multifamily rental building located on the Upper East Side of Manhattan, New York. As of the January 2007 remittance, there had been no sales or contracts signed for any of the units.

Read the full press release here

Manhattan House goes condo -- slowly

Owners begin renovations of only a handful of units
By Vanessa Londono, February 2007, The Real Deal

Manhattan House The developers of Manhattan House, who paid a record price for the Upper East Side building, are going to be making back their money only a few units at a time.

Owners Richard Kalikow and Jeremiah O'Connor have begun the first round of conversions on the 580-unit white-brick rental property located at 200 East 66th Street, which they purchased for $623 million in mid-2005. At the time, it was the most expensive price paid for a rental complex, setting a Manhattan record at $1.072 million per apartment.

The high price the developers paid at the peak of the market led the industry to speculate about whether they had overpaid and whether they could recoup their investment. At the time, Kalikow was quoted as saying that even if the broader market remained flat, he expected prices at Manhattan House to rise, due to a shortage of high-quality condos on the East Side.

"[Kalikow and O'Connor] certainly paid a very high per-unit price, making their margin for error that much smaller," said Neil Shapiro, a partner at the law firm of Herrick, Feinstein who deals with commercial financing.

"When they purchased, the market was stronger, but now the market for million-dollar or a million-and-a-half homes isn't so strong," Shapiro added.

Renovations of 30 units are under way as part of a project that will eventually be worth $1.1 billion, according to documents filed by the developers. Units won't hit the market until the building's offering plan is approved by the state attorney general's office; it was filed more than a year ago, said Jin Lee, chief financial officer for Kalikow's company, Manchester Real Estate.

The mix of units and prices has yet to be released, hinging on expected attorney general approval. Other apartments will be renovated and converted to condos as they become vacant, said Lee.

While the number of units hitting the market at first will be small, it's also part of a marketing strategy, Lee said.

The first phase will be completed in four months, but the time frame for converting the entire block-long Manhattan House has yet to be determined. It "may be never," according to Mikhail Khlyavich, director of construction for Manhattan House.

For one thing, developers face limits on how many units can hit the market. Units that are rent-stabilized cannot be converted automatically into condominium units. At Manhattan House, approximately 250 of the 580 units are rent-stabilized.

Scope of renovations

Plans for Manhattan House will include a full range of apartment sizes, from studios to four- and possibly five-bedroom condos. The top-floor units will remain full-floor penthouses.

Units will range from around 600-square-foot studios to 2,400-square-foot four-bedrooms. Developers are also considering combining apartments, because there is a demand for larger units, and they could make some as big as 3,600 square feet.

Aside from combining units, renovations will be superficial. Apartments will retain their working fireplaces, wide hallways and north- and south-facing windows, which provide cross-ventilation.

"It's not a gut renovation," Lee said. "It has the same layouts with expensive finishes."

The developers are adding new fixtures to the bathrooms and crown molding to the living rooms, as well as glass tiles in the kitchens.

Ceiling heights in the postwar building are eight-and-a-half feet, which is considered a drawback. However, with both north and south views, ceiling heights are not a problem, Khlyavich maintained. He said some apartments will have washer-dryers, and a gym is in the works.

Two months ago, Manhattan House implemented a full concierge service as part of an amenities package available to all rental tenants free of charge. The complex also has one of the largest private gardens in the city.

"We're giving people an option to buy ultra-luxury residences at a luxury location," Lee said. "We think there will be tremendous demand because of the highest quality of design and amenities."

The tenants speak

In the meantime, the tenants association that represents the renters still in the building, the Manhattan House Tenants Group, is trying to get greater price discounts.

"We're trying to get what we think pricing should be for the apartments in the area, given the facilities," said Rafael Urquia, president of the tenants group.

According to Urquia, tenants have been forced to leave because Manhattan House is not renewing leases. He also said tenants have been harassed for a good part of 2006. "We're not happy about what they've done," he said.

Some residents were not offered any renewals when their leases expired, while others were offered short-term leases at exorbitant rates, said Urquia. "Rent-stabilized renters were accused of having other homes, forcing them to incur legal fees" to prove that Manhattan House was their primary residence, he said.

"The owners are in full compliance with the law and are mindful of the rights of all the tenants," Lee responded, noting that "beautiful, spacious apartments with wonderful views and doorman service in the heart of the East Side of Manhattan are in high demand, and the owners are permitted by law to increase market apartments to market rates."

Urquia also said the Manhattan House Tenants Group has raised concerns about asbestos removal with the attorney general as a result of the construction.

"There is absolutely no asbestos problem at Manhattan House," said Lee.

Plastic coverings with zippers separate rental units from the renovated condo units on some floors of the Manhattan House.

Everyone will benefit from the renovations, said Lee, who added it was hard to predict when all of Manhattan House will be a condo.

Vote on Landmark Status Set for Manhattan House

Vote on Landmark Status Set for Manhattan House
BY GARY SHAPIRO - New York Sun
January 29, 2007

A sprawling white-brick Upper East Side apartment building, which was once inhabited by Grace Kelly and Benny Goodman and inspired other uptown modernist buildings, may become a landmark. The Landmarks Preservation Commission is set to vote tomorrow on whether to pursue landmark designation for Manhattan House, at 200 East 66 Street, whose ample light and ventilation influenced a generation of postwar apartment buildings.

Designed by Skidmore, Owings & Merrill, the gleaming building, which has approximately 583 apartments, received an award from the New York Chapter of the American Institute of Architects in 1952, a year after its completion. Its glass-walled lobbies are set below a spare frame with Bauhaus-style balconies. A sloping driveway traverses the front of the H- shaped apartment building, which stretches between Second and Third avenues and is bounded by 65th and 66th streets.

The president of Docomomo US, an advocacy group for documenting and conserving buildings of the modern movement nationally, Theodore Prudon, said Manhattan House began to set the standard for apartment house designs following World War II. The co-chair of the Modern Architecture Working Group, an ad hoc committee of preservationists, John Jurayj, said this building has always been known, virtually from the time it was built, as architecturally important.

Another Skidmore, Owings & Merrill Building under consideration for landmark status is the Guardian Life Insurance Company Annex at 105 East 17 St (1959-63).

"One of our top priorities is to preserve the city's modern architecture, which is why we are pursuing Manhattan House and Guardian Life with a great deal of determination," said Commission Chairman Robert B. Tierney. "Both of these buildings are important examples of architecture that is finally getting its due." The owners of Manhattan House, N. Richard Kalikow and Jeremiah O'Connor Jr., were unable to be reached by press time. The building has been undergoing conversion to condominiums.

The decision to hold a hearing on Manhattan House has the support of two local council members in the area. Council Member Daniel Garodnick said, "As the City's first white-brick apartment building and one of the finest examples of the International Modern Style, Manhattan House is a strong candidate for landmark designation." Council Member Jessica Lappin agreed the building was worthy of consideration.

The Landmarks Commission has designated other modernist buildings such as the Summit Hotel at 569 Lexington Ave. If the two Skidmore, Owings & Merrill buildings become landmarked, they will join other noteworthy buildings from that firm, such as the Pepsi-Cola Building at 500 Park Ave., the Manufacturer's Trust Company Building at 510 Fifth Ave., and Lever House at 390 Park Ave.

The director of Friends of the Upper East Side Historic Districts, Seri Worden, acknowledged that the landmark process can be a tough sell for some who, for example, might have grown up with the building and do not see why modern buildings were historically important. But she said this building was both important and especially well designed. Its large shiny white presence, she said, was quite a contrast to the dark brick tenements once seen along the elevated train line.

Attempts to Subvert Anti-Warehousing Law

The sponsors' actions were intended to circumvent New York State's "excess vacancy" or "anti-warehousing" law, according to this January 25, 2007 letter from David Rozenholc to the AG's office.

Read the letter here.

The Battle at Manhattan House

New York Magazine, December 4, 2006
By S. Jhoanna Robledo

Condo conversions are notoriously difficult, but the drama unfurling at Manhattan House, a 583-unit East 66th Street building that’s the epitome of the giant postwar white-brick, is reaching legendary proportions. Lawyers and legislators are hollering, and “animosity would not begin to describe what’s going on,” says Gail Amsterdam, who has lived in the building for sixteen years.

Tenants claim owners N. Richard Kalikow and Jeremiah O’Connor, who bought it last year for $620 million in the second-most-expensive sale of a rental building ever (topped only by the Stuyvesant Town deal), are muscling elderly rent-stabilized and market-rate tenants out the door. Those who’ve stayed gripe about renovations. One man well over 80 says his rent checks have gone uncashed; Amsterdam even blames the recent death of her uncle, Martin Burwick, on the resultant stress. (Publicist Steve Solomon, speaking for Kalikow and O’Connor, says “there’s absolutely no truth” to the harassment claims.)

It’s the stuff headlines are made of, and indeed the mess has made the papers repeatedly. But is it worth it for the developers? Their prices, around $1,500 per square foot, are pretty high, and questions linger over whether the cooling condo market will support them. A 1,482-square-foot two-bedroom on the seventh floor, for instance, is priced at $2.2 million; a 2,367-square-foot on a higher floor, $3.8 million. (Current tenants will get a slight discount.) In comparison, a 1,475-square-foot unit at the Philip Johnson–designed Metropolitan is listed in the offering plan at $1.68 million; a 2,200-square-foot three-bedroom on East End Avenue is $3.25 million. Even for a place that once housed Grace Kelly, those are ambitious numbers. “You’re going to be living with a lot of renters … My clientele would not be interested in that,” scoffs one uptown broker.

Furthermore, even with a planned makeover—roof deck, library, billiard room, fitness center—Manhattan House’s owners can’t do much about its modest ceiling heights and ungainly exterior. Appraiser Jonathan Miller, while noting the building’s appealingly large units, says the conversion “may fly, but there’s more competition out there.” Says Amsterdam, “If I was going to spend $2 million on a two-bedroom, I’d go to Park Avenue … You can teach an old dog new tricks, but an old dog’s an old dog.”

Solomon maintains “a lot of thought went into the pricing,” adding that he expects many residents to buy in. Some of those tenants wonder if they’re wanted, though. “We told them many times we were interested, and they [sent] us an eviction notice,” says software executive Ben Weintraub, who’s lived there for eleven years. Ditto Douglas Altchek, a doctor and 25-year Manhattan House resident who suspects that the developers would prefer the higher prices outside sales would bring. “I’m ready, willing, and able,” he says, sighing. “Why on earth they haven’t negotiated with me, I don’t know.”

Manhattan House Condo War - Martin Burwick Story

Excepted from BIG DEAL; A Classic Candela With a Storied Past, But Few Takers by Josh Barbanel, New York Times
November 19, 2006

MARTIN BURWICK, a 97-year-old retired owner of a wholesale plumbing supply business, died of pneumonia on Monday and was buried in Mount Carmel Cemetery in Queens. But because Mr. Burwick lived his last years at Manhattan House, a luxury apartment complex being converted to condominiums on East 66th Street, his death has become part of a bitter fight between tenants and the condo developers.

Mr. Burwick and his 90-year-old sister, Elizabeth Amsterdam, had lived in separate market-rate apartments at the Manhattan House, the site of the most expensive condo conversion -- at $1.1 billion -- on file at the state attorney general's office. They were fighting eviction by sponsors who hoped to remodel and sell their units.

But at the end of October -- after weeks of construction that tenants say spewed fumes, dust, debris and mice and rats throughout the building -- Mr. Burwick's family abandoned their legal claims to the two apartments. Mr. Burwick and his sister, who suffers from emphysema, moved out of the building and into a rental apartment on York Avenue. Before the move Mr. Burwick complained of shortness of breath. Five days after he moved out, his condition worsened and he was hospitalized two days later.

When someone of Mr. Burwick's advanced age dies of pneumonia, it is usually difficult to definitively link it to a single cause, doctors say. Yet Mr. Burwick's niece, Gail Amsterdam, a corporate recruiter who still lives in the building (in a rent-regulated apartment and, as such, is protected from eviction) said she believes the difficult conditions in the building, and the stress of the eviction contributed to his death.

Although he had difficulty hearing, and needed help walking, she said, ''he was never sick a day in his life.''

Ms. Amsterdam said that Mr. Burwick's final months in the Manhattan House were made particularly harsh because she had made a personal appeal on his behalf to N. Richard Kalikow, one of the partners developing the project. She had asked Mr. Kalikow to let him stay in his apartment because of his advanced age but was turned down. Mr. Kalikow's partner in the development is Jeremiah O'Connor Jr.

Mr. Kalikow referred questions about Mr. Burwick to Steve Solomon, an executive vice president at Howard Rubenstein Associates, a public relations company. ''We have no idea what caused Mr. Burwick's death,'' Mr. Solomon said. ''We do know that we have taken every precaution possible to create the safest and healthiest environment at Manhattan House during this reconstruction period.'' Mr. Solomon added, ''The plan remains on schedule.''

Tenants at many buildings undergoing conversion to condos have complained that city and state officials do not pay enough attention to the needs of people living in buildings that have been turned into construction projects. At Manhattan House, tenants complained about the handling of asbestos in the building and are pressing to have their own engineer examine the work there.

Dr. Harrison Bloom, a senior associate at the International Longevity Center and a specialist in geriatric medicine, said that construction dust and debris could spread disease and requires careful planning, especially around older people. But he noted that the stress of an eviction or another crisis could also be a contributing factor to pneumonia. ''There is good evidence that, at any age, stress can lower immunity and therefore predispose someone to infection,'' he said.

CONDO CRAZE

New York Post, Page Six(TM)

November 16, 2006 -- Tenants resisting the conversion of Manhattan House at 200 E. 66th St. (once home to Grace Kelly) into condos blame it for the death of a 97-year-old resident. Martin Burwick, whose unregulated lease would have been up in April 2007, died of pneumonia on Monday, causing some activists to blame the stress of eviction. "A man is dead, and it's from the conditions in the building," one tenant said. A spokeswoman for Manhattan House, owned by Richard Kalikow and Jeremiah O'Connor, denied the claim: "We are all very sorry to hear about the death of the 97-year old gentleman. We have taken every precaution to ensure the safest and healthiest environment for the tenants."

Tenants seize on state law to soften condo conversion

Market-rate tenants turn to innovative tactics to fight landlord practices that may be coming all over town.

By Sara Stefanini, City Limits WEEKLY, October 30, 2006, Number: 559

When Douglas Altcheck first heard rumors last fall that Manhattan House, the 583-unit building where he’s rented an apartment for 25 years, would be converted to condominiums, he thought he would finally have an opportunity to become a homeowner.
But he soon heard more rumors that the owners, to maximize their profit on the building that covers an entire city block, would be offering an “insider’s rate” less attractive than the norm to tenants who insisted on staying, instead trying to empty the building through a variety of unpleasant tactics to make way for wealthier outside investors.

“I thought this was my chance to purchase my apartment,” said Altcheck, a dermatologist whose rent was stabilized until four years ago, when it hit the $2,000 mark that allows rent to be decontrolled for those who earn $175,000 or more annually. “There are no laws protecting market-rate tenants.”

Though that’s a bit of an overstatement, tenants of the landmark building one year later are seeing their fears about the condo conversion coming true in a situation that could foretell the future for many other tenants, as there are currently more than 700 buildings pending condo conversions in Manhattan. That’s according to the office of the state attorney general, which approves the proposals to convert. The new owners appear to be pushing tenants out by disturbing them with construction work, raising rent drastically and refusing to renew contracts.

As the first condo conversion on such a large and expensive scale, the contentious relationship between Manhattan House’s tenants and landlord could be the shape of things to come citywide. “With Manhattan House, what’s new is the size of the project, and other ones that are slated to enter,” said Jonathan Miller, CEO of Miller Samuel, a real estate appraisal and consulting firm.

Like the Peter Cooper Village and Stuyvesant Town complexes, which sold this month for $5.4 billion, Manhattan House is one of a number of affordable-housing apartment buildings built as part of a postwar urban renewal project designed for middle-class New Yorkers. The 22-story edifice is the Upper East Side’s first white brick structure, covering an entire block on 66th Street between Second and Third Avenues, and includes a parking lot, retail stores and the largest private garden in the city. Close to 250 apartments remain rent-stabilized. Market-rate apartments go for $4,000 to $8,000, said Rafael Urquia, chairman of the tenants’ association.

Eventually, buildings like Peter Cooper Village, Stuyvesant Town and Manhattan House will become condos, said Larry Longua, a professor at the New York University Real Estate Institute. “This will ultimately convert,” Longua said. “There’s no rent that they can achieve to make up what they’ll pay in interest. Deals like this are going to empty out the middle class from Manhattan.”

But the Manhattan House Tenant’s Association is fighting aspects of the conversion using tactics that can at least stall the process and give them bargaining power, he added.

Tenants are drawing attention to what they claim is abuse of a state law called the Martin Act as a way to force the new owners to lower the inflated rental and purchasing prices they’ve imposed, said Altcheck, a member of the tenants’ association.

According to the Martin Act, Altcheck and his neighbors, who also fretted about their fate, shouldn’t even have heard about future plans for Manhattan House until its new owners, N. Richard Kalikow and Jeremiah O’Connor, Jr., filed a proposal for tenants to review and for the New York Attorney General to approve. On Feb. 1, 2006, several months after the rumors started spreading, Kalikow and O’Connor submitted a proposal of their plans for the property they had purchased in October 2005 for about $625 million, which real estate experts said set a national record for the sales price of a single residential building.

In response to the apparent violation, and what the tenants call “scare tactics” by the landlord to force them out before apartments go on the market, the tenants’ association this past summer filed a complaint with the attorney general. It claims that to bankroll their purchase, Kalikow, O’Connor and Credit Suisse Bank, which backed them, publicly sold bonds. In doing so, they released details about the conversion before it was reviewed.

David Rozenholc, an attorney for the tenants’ association, said he is focusing on how the sale was funded. “The way this deal was financed is a new sort of creation, it’s one of the newer inventions in financing and buying.”

New York Life Insurance Company sold the building at the peak of the housing boom for more than $1 million per apartment. Kalikow and O’Connor bought the property as a joint venture between their two firms, Manchester Real Estate and Construction, LLC, and O’Connor North American Properties Partnership, respectively.

A spokeswoman for the owners would only confirm that the building is being transformed to condominiums.

Keeping conversion plans under wraps, as the Martin Act requires, protects tenants from hearing false rumors or moving out prematurely, said Urquia, an international corporate lawyer.

Credit Suisse posted details about the building’s future on bond-rating Web sites such as Fitch Ratings, the tenants’ association says. It also claims that O’Connor’s son and business partner, William, discussed the plan at a Columbia Business School alumni seminar on Dec. 8, which some Manhattan House tenants attended.

Allan Starr, an attorney for the owners, did not return phone calls. In a letter he sent the attorney general’s office this August which the tenants’ association provided, Starr said his clients have not and will not “engage in any pre-sales or other activity that violates the Martin Act.” He also said that William O’Connor merely used Manhattan House as an example while lecturing on other real estate issues, and didn’t realize there were residents in the audience.

But tenants think releasing the information was part of a larger effort to intimidate renters into leaving before the construction to renovate, remove asbestos and install central air conditioning is complete. They have also accused the owners of beginning the asbestos work before receiving the go-ahead from the attorney general, significantly hiking rent prices and using other methods to push out rent-stabilized tenants.

A spokesman for Attorney General Eliot Spitzer said he could not comment on an ongoing case.

As they wait to see whether their legal challenge will bear fruit – optimally forcing the owners to lower the rent hikes and improve the insider’s rate on purchasing – tenants say they’re stuck with exposed pipes in the hallways, holes in walls and floors, fire hazards, cut phone lines and other problems, while rents are predicted to rise as high as $10,000 a month.

“My apartment has been 90 degrees, there’s obviously something wrong, and pipes are everywhere,” said Altcheck, who was told his rent would increase by 50 percent. “This was at one time an institution, now it’s ... like a war zone.”

Petition concerning conditions at Manhattan House

This Petition documents some of the deplorable and illegal acts being visited on the tenants of Manhattan House by Messrs. N. Richard Kalikow and Jeremiah W. O’Connor, MH Residential, and their Managing Agent, Prudential Douglas Elliman, in utter contempt and disregard for directives issued by the State Attorney General and the health, safety and well being of the tenants.

Click here to read the petition

Impact of documents uncovered by Freedom of Information Act

Based on documents uncovered by Manhattan House tenants' rights under FOIL (Freedom of Information Law), a letter is sent to the New York State Attorney General.

The letter describes problems caused by the Sponsor's actions. These problems include: asbestos exposure; vermin infestation; fire hazards; lack of an engineering inspection; and excessive vacancies.

Read the letter here.

Pioneering Condo Conversion Loan Challenged

Just learned that Commercial Mortgage Alert, a real estate industry publication, wrote about the Manhattan House condominium conversion controversy in its July 28, 2006 issue.

"Tenants of a big Manhattan apartment complex are taking action in an attempt to derail the property's conversion to condos, claiming their rights were violated by a pioneering securitization of the conversion loan."

Read the full article here.

Formal request to investigate Manhattan House lenders and sponsors

On August 17th, David Rozenholc requested a formal investigation by the New York State Department of Law into the conduct of Manhattan House's new owners and their lenders.

Read the entire letter here.

More on asbestos/windows installation problem

Posted below are two August 11, 2006 letters pertaining to the asbestos/windows installation problem.

David Rozenholc's letter informing the Attorney General's office that the sposor is ignoring their order regarding the asbestos in the building.
View the letter here.

Allan Starr's letter of reply.
View the letter here.