Lloyd Goldman’s BLDG claims it will lose $10.6M in 421a error

By Adam Pincus

Lloyd Goldman’s BLDG Management claims it will lose $10.6 million after the city became aware of a minor discrepancy in the execution of a 421a tax break, according to a law suit the developer filed in New York State Supreme Court on Friday.

Goldman sought to take advantage of the 421a state tax incentives to develop affordable housing in exchange for benefits such as being allowed to build a larger building. Goldman built the 429-unit Summit, at 222 East 44th Street in Turtle Bay, which was given its initial certificate of occupancy in February 2019.

The potential losses were disclosed in a law suit BLDG filed Friday accusing the law firm Holland & Knight of committing the error and providing incorrect advice. Goldman is seeking $10.6 million from the firm including $10 million in lost rental value and $640,000 in additional costs related to a delay in refinancing the property. The property was refinanced with $289.3 million in September 2020.

This and any filing in state court is composed of allegations from one party and may or may not be accurate. Holland & Knight has not filed response papers yet. The city is not named as a defendant.

The discrepancy is relatively minor, but the city’s proposal to remedy the harm was to keep the eight units under rent regulation as long as the tenants remain in possession of a lease, and to convert nine free-market units to rent-regulated units.

In 2015, Goldman filed to convert a six-story building to a 42-story tower with 429 units. The building received its initial temporary certificate of occupancy in February 2019.

The alleged advice given was that for a portion of the units, the renters should not have an income above 130 percent of the area median income, or AMI, when in fact the law they were applying for said the tenants should not have more than 120 percent of the AMI.

BLDG marketed 22 units as available to renters with up to 130 AMI, but they should have marketed it to renters only up to 120 AMI. In all, eight renters with their income above 120 AMI but below 130 AMI, signed leases, a relatively minor infraction of the law.

Before the error was discovered, the city’s Housing Preservation and Development approved the tax benefits in April 2018. But after learning of the error, the law firm notified HPD, in an effort to find a resolution.

According to the complaint, BLDG negotiated a plan to remain in the 421a program, but it required the eight units remain rent-regulated as long as the tenant or those with succession rights occupy the units. In addition, HPD required BLDG, “to convert nine, high-end units that had been designated as fair market rental value units to affordable housing units for a period of 35 years. As a result BLDG will suffer lost rental income and lost opportunity profits of more than $10 million, including lost rent for units BLDG was unable to rent from November 2019 through January 2021 due to its negotiations with HPD.”