Roosevelt Island is owned by the City of New York but leased to New York State’s Roosevelt Island Operating Corporation (“RIOC”) for a period of 99 years that commenced in 1969. RESGroup and CBRE were engaged by RIOC through an on call contract to analyze a ground lessee’s (“Island House”) request to extend the ground lease, leave the Mitchell Llama affordable housing program, and commit to a new Affordability Plan (the “Plan”). The new Plan created a leasehold condominium interest and converted the residential portion of the building to cooperative ownership. This new structured allowed (i) existing tenants to purchase their apartments at below market purchase prices, (ii) non-purchasing tenants to remain in their apartments at below market rents with increases promulgated by the New York City Rent Guideline Board (the “RGB”), with adjustments to reflect tenant income, and (iii) second generation affordability by limiting the resale prices of cooperative apartments and establishing maximum income levels for second generation purchasers and beyond.
The team reviewed and summarized:
- the proposed terms of the Affordability Plan,
- the lease modification plan,
- an appraisal of the fair market value of the asset,
- a fairness opinion relating to the reasonableness of the appraisal and that the terms of the proposed lease modification in accordance with the Affordability Plan,
- and the “Deal Narrative” provided by RIOC, comparing the present value of the lease payments under the proposed lease modification to the market value of the asset.
The team also provided an opinion as to whether there was any reasonable alternative to the proposed transaction that would achieve the same purpose of providing continued affordable housing for existing resident buyers and tenants of limited financial means.
