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City Touts Victory Over ‘Illegal Hotel Operator’ with $2M in Fines, 82 Affordable Units Planned; But Owner Has Sold the Buildings for Over $70M

February 16, 2022 | 7:30 AM - Updated on June 5, 2022 | 11:38 PM
in NEWS, POLITICS, REAL ESTATE
24
The former Royal Park Hotel at 258 W. 97th will become affordable housing.

By Joy Bergmann

What qualifies as a win for housing justice? 

On Monday, Mayor Eric Adams and the Mayor’s Office of Special Enforcement (OSE) issued a press release announcing the City had “shut down illegal hotel operator” Hank Freid, concluding a protracted legal battle. 

As part of the settlement, the Upper West Side will be gaining 82 new affordable housing units for low-income and formerly homeless adults. The City will also collect nearly $2 million in total penalties for hundreds of illegal occupancy and safety violations incurred at three Freid properties:  the Marrakech Hotel at 2686-90 Broadway [103rd], the Broadway Hotel at 230 W. 101st and the Royal Park Hotel at 258 W. 97th, the statement said.

The City’s 2017 lawsuit against Freid claimed the three hotels were operating illegally by providing transient accommodations to tourists rather than permanent housing to New Yorkers as required by the buildings’ Class “A” SRO [Single Room Occupancy] Certificates of Occupancy under the 2010 Municipal Dwelling Law.

“The city will use every tool it has to hold accountable illegal operators who turn housing into hotels,” said OSE Executive Director Christian Klossner. “After over a decade of enforcement and litigation, this owner’s illegal hotel empire is closed for business, proving that defying the law and depleting the city’s housing stock is a costly proposition.”

But it’s not clear how “costly” this was for the owner. Neither Hank Freid nor his attorneys responded to WSR’s request for comment. Freid may have actually come away in much better shape than the city claims. If Freid had operated the buildings as rent-regulated SROs under city code, he likely wouldn’t have made the same returns he now appears to have made by selling the buildings.

File photo of the former Marrakech Hotel at Broadway and 103rd Street.
File photo of the Broadway Hotel at Broadway & W. 101st.

According to public records, Freid sold the Marrakech Hotel in 2019 for $44 million. YIMBY reported that a new, 13-story, mixed-use building will be constructed by Toll Brothers at the site. 

In November 2021, Freid sold the Broadway Hotel for $15.5 million, public records show. Steven Kashanian’s Klosed Properties was the purchaser, according to Real Estate Weekly. 

And in early February, a corporation controlled by the Fortune Society purchased the 97th Street Royal Park property from Freid for $11 million, a Fortune Society spokesperson confirmed to WSR.  

So, after being accused of skirting City regulations for years, Freid has collected a total of $70.5 million on his appreciated UWS properties. Minus legal fees and the $1.9 million in fines, his likely net gain would be considered a win by many a bare-knuckled businessperson.

The City is getting something in the bargain as well: Permanent, affordable housing.

According to an emailed statement, the Fortune Society will be transforming 258 W. 97th into the “Castle IV Residence” with 82 rent-restricted apartments, including 58 homes for formerly homeless New Yorkers, offering on-site support services and 24/7 security. Future residents will include formerly incarcerated people in keeping with the nonprofit’s mission: “to support successful reentry from incarceration and promote alternatives to incarceration, thus strengthening the fabric of our communities.” 

“Fortune is committed to complete transparency and will engage in open dialogue with all members of the Upper West Side community as planning for this residence moves forward,” said JoAnne Page, Fortune’s President and CEO. “Using our previous successful experiences establishing Fortune’s Castle Residence and Castle Gardens, we will do all that is necessary to ensure the Castle IV Residence, our staff and our tenants are assets to the community.”

The organization anticipates construction to require at least a year, with new units becoming available in early 2024 to tenants who meet its rigorous screening requirements, the statement said. 

Local housing advocates and elected officials welcomed the news. 

“We applaud the conversion of this illegal hotel into what it was always meant to be—permanent, affordable housing for New Yorkers,” said Kseniya Schemo, Project Director of the Goddard Riverside Law Project, in an email to WSR. “This settlement sends a strong message to landlords that illegal hotels are not welcome in New York City. Furthermore, affordable housing with built-in services is urgently needed in every neighborhood to enable people experiencing homelessness to move off the streets and live in dignity and safety.”

“I congratulate the team at the Office of Special Enforcement on the actions taken against the illegal, short-term rental scam at 258 West 97th Street perpetrated by Hank Freid,” said UWS Councilmember Gale Brewer via the City’s release. “A nonprofit will take over the property and transform it into 100 percent rent-stabilized housing for low-income and formerly homeless New Yorkers in one of the most expensive neighborhoods in the city. What’s more, the existing rent-stabilized tenants will remain. In the middle of an affordable housing crisis, this is a phenomenal outcome.”

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Paul
Paul
3 years ago

Not sure I get the “…but the owner has sold…”
That’s the idea. Get this slime out of the business. And the sale to the Fortune Society is exactly what the City wanted, a responsible steward to handle supportive housing in a building that will be used for that purpose.

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Lizzie
Lizzie
3 years ago

Please, WSR, look into what happened to the Marrakesh building site. I thought the rather lovely historic building was supposed to be preserved. Instead, it seems that, through incremental declarations of “instability,” Toll Brothers was able to dismantle it completely.

(On the plus side, maybe Toll’s building won’t be as hideous as the crap Extell has built on the UWS)

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Joy Bergmann
Joy Bergmann
3 years ago
Reply to  Lizzie

Thanks for reading. The YIMBY link in the story gives some details on the future development.
Also, in 2019 WSR wrote about the Marrakech’s demolition plans here:
https://www.westsiderag.com/2019/08/02/pyrrhic-victory-for-city-in-hotel-lawsuit-no-more-illegal-occupancy-but-sro-housing-to-be-demolished

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Otis
Otis
3 years ago

NYC’s housing market is corrupt and dysfunctional due to rent regulation. This inevitably allows shady landlords like Freid to exploit these laws and walk away with millions.

Meanwhile the city wastes precious time and resources going after characters like Freid.

Furthermore, the term “affordable housing” is a misnomer. The Fortune Society is getting massive tax breaks and subsidies to provide a handful of below market housing. This is revenue the city desperately needs.

So this housing is not “affordable” but rather subsidized by everyone else.

But now Gale Brewer can boast she created “affordable housing” for the neighborhood.

The whole system is corrupt and unique to NYC (OK, maybe SF also). I wish there were a politician who had the courage to end these shenanigans.

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Longtime UWSer
Longtime UWSer
3 years ago

I find it interesting that they are all above 96th.

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B.B.
B.B.
3 years ago
Reply to  Longtime UWSer

West side of Manhattan from basically Chelsea to Harlem and northward once was full of “residential hotels”. These were places were people moved in for long stays (one or more months), and or in some cases permanently.

As tourist tastes changed favoring full service hotels we now see today, complete with ensuite bathrooms, but no kitchen facilities those old residential hotels fell out of favor. Some upgraded to modern accommodations, others became apartment buildings and or were torn down for redevelopment. Those that remained all over city became SRO hotels.

From 96th street north once was no man’s land for host of reasons. SRO hotels that remained became protected by new laws during and after Koch administration.

By NYS law no new SRO hotels can be built, and city long as relied upon existing stock as part of solution for homeless, so that is that. UWS/Harlem has large supply of remaining SRO hotels, so…..

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Zed
Zed
3 years ago

I preferred the hotel guests, personally.

I’m still baffled by this idea that someone can take a bus from Cleveland to NYC, declare themselves homeless, and get the city to pay for their housing on some of the most valuable real estate in the country. It’s quite a racket.

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Mike
Mike
3 years ago
Reply to  Zed

I lived in this building from 1996 to 2020 and I have to agree I preferred the hotel.

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Sarah
Sarah
3 years ago
Reply to  Zed

You try it and see how fun it is, Zed.

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Zed
Zed
3 years ago
Reply to  Sarah

Never said it was fun, Sarah. But the city doesn’t have to house the homeless here–they can house them anywhere in NY State (so says the court order). But it’s big business, with lots of rich landlords banking big money with the city. Why do you defend that?

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Concerned Small Business Owner
Concerned Small Business Owner
3 years ago

Why didn’t Gale mention that they also are people with criminal histories? It’s wonderful to help with rehabilitation but how many supportive housing is already in the 90’s? Once again, no notice to anyone before something coming in that can affect the neighborhood residents, school around the corner and local businesses. We had no information first and just as the homeless hotels from last year had supportive services, it did not go well. This is permanent. What if it does NOT go well here? The stores on Broadway in the 90’s are overwhelmed with problems. I ask people, PLEASE talk to the local businesses on Broadway and ask how things are going. Then if there are more vacancies because we can’t stand the problems anymore, you will know why. It is not the rent or the landlords.

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good humor
good humor
3 years ago

Will this be good for the neighborhood?

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gina
gina
3 years ago

The city gets away with not building affordable housing and the landlord makes a fortune but ALAS- what about the local residents? I would so prefer tourists lto recently released convicts. Clearly: NOT GOOD FOR NEIGHBORHOOD.

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Joe
Joe
3 years ago

These are all turning into homeless shelters which is a lot worse than hotels for the neighborhood. The city is buying them up and making homeless shelters.

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TJ
TJ
3 years ago

It seems the west 90s is becoming an area disproportionately populated by subsidized housing and new luxury condos while the rest of us are hanging in the balance. Could this not have been converted into market rate rentals?? That’s what this neighborhood actually needs.

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Pedestrian
Pedestrian
3 years ago

I’ll believe the claim about the affordable housing when I see the units and the documents that guarantee affordability. There have been too many announcements like this that have melted away.

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Just the observer
Just the observer
3 years ago

I was afraid to voice my opinion and face the usual woke it UWS readership, but looks like other people agree with me: it is ludicrous that UWS is getting more and more shelters for former homeless and incarcerated individuals, and we are expected to celebrate it as a neighborhood. Why do they have to be integrated into the community that they were never a part of before? I am a hard working middle class college educated person. I enjoyed living on the IWS tremendously. I do not see how dense population of former criminals will enhance the fabric of our community. I would rather tourists were housed there illegally. The city does not have to house criminals in one of the most expensive neighborhoods. It feels like they are rewarding these individuals for crimes they have committed in the past.

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rw
rw
3 years ago

It would be useful for WSR to look into the impact of some other Fortune Society projects on their neighborhoods.

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Maxx
Maxx
3 years ago

Living here now, this is probably good. But having visited and stayed at the Broadway hotel probably a dozen times, I’m pretty sad to see it go. Lots of good memories there and those times in the city in general. But almost 100 housing units is good news, kinda wish we could do more of this to additional hotels I’m less attached to 😉

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Jonas
Jonas
3 years ago

Does anyone actually have stats on how many homeless / supportive housing beds we have on the Upper West Side? How many of them are between 90th and 110th? I bet most of them are. How many are in the 80s or 70s? Why are the 90s being discriminated? Our businesses are overwhelmed with thefts, violent crime, our pharmacies have off-duty police inside, police cars outside, most products under a lock – and still a ton of crime. I’m not saying that the city doesn’t need more supportive housing, it does — but why here? Are we the most supportive neighborhood in the city? It’s probably because we don’t object — nay, we APPLAUD more supportive housing. It’s our socialist zeal. But all of this idealism takes a toll on the businesses, on the families, on our police. I hardly see tourists anymore in our neighbohood — maybe Lincoln Center, Absolute Bagels, but otherwise… watch out… nothing to see here.

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Zed
Zed
3 years ago
Reply to  Jonas

Yeah, I remember in the 2003-2008 timeframe I would get stopped a lot in the street by European tourists looking for various things. That hasn’t happened in at least a decade. De Blasio, Brewer and the homeless oligarchs have killed tourism. Bravo guys.

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Will
Will
3 years ago
Reply to  Jonas

I don’t recall 101st street and Broadway being a particularly interesting hotspot for tourism

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Joe
Joe
3 years ago

These hotels are all going to be turned into homeless shelters by the city. Better to be turned into real hotels or market rate apartments,

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Susan
Susan
3 years ago

Will any short stretch of street have as many SRO’s and housing of this sort as West 97th between Riverside and Broadway? This makes 3 such buildings. Glad everyone thinks this is a victory but its too much concentration in barely more than one block. I don’t think the East side has any, do they?

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