City Hall Should Have Known Nursing Home Would Be Flipped: Investigation

In a scathing report, the city's Department of Investigation found that City Hall knew or should've known that deed restrictions on a Lower East Side nursing home would be lifted and that the building could be converted into luxury condos. 

Rivington House was a nursing home for AIDS patients until it was sold to a for-profit nursing home operator known as Allure group which then sold it to private developers for what's believed to be a $72 million profit. In order for the real estate deal to happen the city needed to remove two deed restrictions that required it to stay a non-profit healthcare facility.

The city's Department of Citywide Administrative Services eventually lifted the restrictions for $16 million, the largest amount the agency had ever received for a removal, according to the report. Investigators found that an assistant commissioner knew the building could be converted into luxury condos but then specifically omitted the information from a report.

Notice that the deed restriction would be lifted was published in an obscure newspaper that lists hearings, auctions and proposed rules by city agencies but investigators said the property was identified by block and lot instead of by name or address. And when a public hearing was announced, the name was also removed.  

In a statement, City Hall press secretary Eric Phillips said that the report confirms what the Mayor has already acknowledged — that the process was deeply flawed but there was no evidence of illegal or unethical behavior. 

The Department of Investigation said it issued subpoenas, reviewed thousands of documents and interviewed 50 people, including current and former commissioners, Deputy Mayors and the Mayor himself who said that had he known the restrictions were being lifted, he would have stopped it from happening.

While the transaction may not have reached de Blasio's desk, the report found that Deputy Mayor Anthony Shorris was told three times in writing that the deed restrictions would be lifted. Shorris said he never read those notes. 

Before the deed restrictions were lifted community groups spent months fighting to keep Rivington House a nursing home. K Webster runs a community garden across the street and said Allure group, the nursing home operator that flipped the building, made the community believe it would remain a healthcare facility.   

"They promised 200 medicaid beds," she said. "Were we naive? Now I guess yes." 

Investigators said that Allure group also tried to deceive the city about its plans to sell the property. A note from the company that was buying the property warns that the deal should not be discussed because if the city or union found out, the Allure group may not get the restrictions removed. "Once he has it removed, we can do whatever we want," the note says.

Community members are pushing for the real estate deal to be reversed. Webster said she was frustrated that no one had been reprimanded. 

"It's astonishing to me," she said.