SCTA Meeting on Potential Sale of Spring Creek Towers

The Starrett City Tenants Association ( SCTA) Executive Board invited Andrew MacArthur of Brooksville Company and Curt Deane, representing Starret City Associates to their meeting to discuss the potential sale of Spring Creek Towers.

The Starrett City Tenants Association (SCTA) Executive Board invited
Andrew MacArthur of Brooksville Company and Curt Deane, representing Starret City Associates to their meeting to discuss the potential sale of Spring Creek Towers.

The Starrett City Tenants Association (SCTA) invited the current owner of Spring Creek Towers and the potential purchaser, Andrew MacArthur of Brooksville Company to a community meeting on Wednesday, September 13th to discuss the sale and what this will mean for the community. More than 350 residents attended this meeting along with elected officials, and/or their representatives, and management representatives.

Below are excerpts from the transcript of the meeting with edits to clarify certain points.

We will publish additional comments and questions in subsequent editions of the Spring Creek Sun.

Why is ownership considering a sale of Starrett City?

Answer:
Curt Deane of Starrett City Associates (current ownership representative):

Our current ownership has been with Starrett since its inception, that’s 45 years. We are a limited for profit housing company, regulated by the government. That means we are only allowed a certain amount of dividend that we can receive each year.

Unfortunately, because of how the tax laws in this country work, we have reached a point where the limited partners are paying $1.70 for every $1.00 in dividend we get each year. And, for us, the math just doesn’t work.

We’ve looked long and hard for a good responsible buyer who will carry on my uncle’s legacy *and continue to maintain and improve the quality of life and the operations here. We believe we have found that with Mr. MacArthur and his company.

What is Donald Trump’s relationship to Starrett City?

Answer:
Curt Deane:
President Trump received his interest in the ownership as a result of inheritance from his father who died in 1999. His father’s interest was disseminated to Mr. Trump and his siblings. His personal interest is small. More importantly, by law, he may have no involvement on any level with the operation, management or affairs of this community.

(* referring to Disque D. Deane, Managing General Partner of Starrett City Associates until his death in 2010.)
What about the long term affordability of the site: Section 8 expires in 2029 and Section 236 expires in 2039? Will there be extensions to these programs?

Answer:
Andrew MacArthur, President of Brooksville Company, the potential purchaser:
As most of you know, the overall community is protected under the 236 regulations through 2039. In addition, there is Section 8 that applies to two thirds of the community. The current Section 8 contract expires in 2029.

When we looked at investing in Starrett City and becoming a part of the community we knew that one of the most critical aspects of the community, one of the things that makes the community what it is, is the nature of the affordability protections.

So, when we looked at investing in Starrett City we knew the most important thing for us to figure out was how we could maintain the affordability since it is the very foundation of this community. Frankly, I envisioned the moment where I was going to have to stand in front of the community and answer this question.

Let me be very clear: We are here to extend the affordability. We want the affordability, and we want to be part of this community. We don’t want any of that to change.

One concrete example of this commitment is that we want to extend the section 8 protections for an additional 20 years. As I said at the beginning, Section 8 expires in 2029; that is 12 years away. 12 years can go quickly. Through this transaction we have an opportunity to extend it. If you went down to HUD today to request a Section 8 extension, with current ownership, they would probably make you wait. I am not saying they definitely would, but it’s my understanding that they would make you wait. They would make you wait until closer to the expiration date and then you could negotiate an extension.

However, through this transaction, we think we can trigger an extension of the Section 8 protections for another 20 years so that would take the Section 8 from 2029 to 2049.  On top of that, you have the 236 protections that exist until 2039.  Of course this is not necessarily easy. We will need everybody’s support. We think this is good for the community and we are hoping that people who benefit from Section 8 will support this request.  We are also hoping that the various stakeholders and community representatives will help support us in this. We have taken the time to meet with as many people as we can. We met with Mr. Barron and Ms. Barron. I was down yesterday in Washington DC meeting with your Congressman. Then we met with State Senator Roxanne Persaud, So, we’ve been out trying to meet with as many people as possible in order to make sure that they both understand our intention and that we also are asking everybody for their support in terms of trying to work to extend that affordability here in the community.

Hi, Good evening, I would like to get something cleared up in my mind. Are you the new owners and do you have the option, as the new owner coming in, do you have to take the subsidies? You talk about the approval process that you had to go through or, that you will go through but if you are not accepted or if your partners don’t want to have anything to do with it….what happens to the tenants?

More than 350 residents of Spring Creek Towers attended the Starrett City Tenants Association (SCTA) meeting on September 13th.

More than 350 residents of Spring Creek Towers attended the Starrett
City Tenants Association (SCTA) meeting on September 13th.

Answer:
Andrew MacArthur:
Thank you. At the time of the last transaction, the Section 236 program and Mitchell Lama were extended to ensure affordability through 2039. HUD, as part of that deal, also signed a contract to provide Section 8 subsidy through 2029. So, that is what exists today and it won’t change.

Now, we do not have to extend the HUD contract; there are reasons financially we want to do it and there are reasons why we think it is good for the community. So we will seek to extend it. We could have said we don’t want to do it, we want to play for the expiration of these programs and then figure out something different. That isn’t our business plan and we don’t want to do that. The Section 8 subsidy is important for the community, it is important for the property, it is important for the financials of the property and it’s something for us that provided us with security as well. It’s one of those things that I think works well for everybody.

So that’s the answer, we didn’t have to do it. It is possible that somebody else would look at this and say we have a different plan, we want to play for the expiration and do something different. But that’s not our plan.

That is the part that I am interested in. Your investors, if your investors differ from what your dream is, then what happens to the tenants again?

Answer:
Andrew MacArthur:
First and foremost, my investors do share my vision for the property. When we considered purchasing the property, it was very important to me that we find investors that understood our plan and that thought the same way we do about preserving the community as is. In addition, as part of the process, we will be submitting applications to the regulatory agencies. As we submit these applications we are anticipating your electeds are going to be watching like a hawk, and I think somebody said that in the paper. I have every expectation and frankly every hope that they are going to be very engaged in all of this. So they are a part of your protection in all of this. They are going to be watching all of this and if I am doing something that is different than what I am standing here saying today, I expect they will call me on it. I see representatives from the Congressman’s office, I see Mr. and Mrs. Barron here and I see representatives from the State Senator’s office. They are all watching me right now and if I am doing something different from what I am telling you I am doing then I think they are ultimately your protection in this process.

Will you be developing the parcels that have been carved out if so will you build more affordable housing or something else?

Answer:
Andrew MacArthur:
First of all, we plan to be here for a long time. When we looked at this, we said we want to be here 20 or 30 or 40 years. So, I don’t want to rule anything out indefinitely, but I can tell you that we have no plans, made no plans, did not look at, did not focus on the idea that we were coming in and somehow changing the community through development. That is not something that is part of our plan. If we were ever to revisit the question of open space, we would do it in dialogue with the community, with the stakeholders, with the electeds and make sure that it was something that fit within the fabric of the community. But that is not something we are currently looking at.

If this place is losing so much money why would you and your investors want to buy this place? And my second question after that, is, the way it seems, from my point of view, it seems that you guys are trying to buy low and sell high, basically flip Starrett City.

Answer:
Andrew MacArthur:
So, we have no desire to flip Starrett City. We are not looking to be in here for the short term. That is what I said earlier. We have every desire to be here for a long period of time. That is the answer to your second question. To your first question, part of the reason that they are in the position that they are losing money is because of the tax situation. So, those taxes get reset as part of this process and that issue won’t affect us. We are also expecting to save some money on the debt. When we put the new debt on it will cost us less than the old debt. So, that is going to help us and we are coming in, as part of the plan, with a lot of money to figure out how to fix the various things that need fixing here.

I fully anticipate that as part of the approval process there will be a list of things that are going to need to be fixed and there will be money put aside for those things to be fixed. I would expect that we will be held accountable for all of that.

And, why do you want to buy Starrett City especially since the rents are locked in for at least 20 years or maybe more?

Answer: 
Andrew MacArthur:
I think the answer to that is we are hoping to make a little bit of money over a long period of time which is exactly what the Mitchell Lama programs are intended to do. We are not here trying to make a quick buck. We are here to be a member of the community for a long period of time. We are here to continue and extend the existing structure and to reinvest in the community.

Answer:
Jean Lerman, Deputy General Manager of Spring Creek Towers , representing the Management (Grenadier Realty Corp., responded to a question about Section 236)

The State Division of Housing also regulates Fair Market rents. So no one can come in and arbitrarily raise rents. The way that the rents are set for Fair Market, and Section 236 tenants, is that every two years we are required to submit documentation to the State Division of Housing, as to what is needed. They set the rents, they decide what the Fair Market rent will be and what the Section 236 rent will be and there is a very small difference between the two, depending on where your income lies as to whether you are in one category or the other but, it’s not a big difference. I just want to make it clear that you are all under the Mitchell Lama program. Some of the units have additional subsidies, like Section 236 and Section 8 but you are all under the Mitchell Lama program that was extended to the year 2039.

Will the Power Plant be upgraded with additional equipment to meet the demand of new technology, phones, computers, screens and anything else that may come by?

Answer:
Andrew MacArthur:
We are acutely aware of the importance of the Power Plant and understand that it is of tremendous concern to the community. It was something that we were extremely focused on when we were looking and discussing with ownership the possibility of purchasing.

We studied it extensively and while there are many different scenarios for what could happen with the power plant, we were maybe most focused on things we could do day 1 to help improve and stabilize the situation.

Our immediate plan is to bring in 6 megawatts of backup power. You currently use approximately 12 megawatts of power, so that will give you a 50% increase. We will install the additional six megawatts of backup power on a permanent basis and the additional capacity will do a couple of things: if power goes down, if a generator fails, if something happens, you will have this as backup. The other thing that it does is it provides additional capacity to allow us to bring parts of the power plant off line in the future, while maintaining power to the community, to make repairs and upgrades as needed.

We felt it was extremely important to be able to say on day one, we are not going to take a shortcut on this and we are going to put in 6 megawatts of additional backup power.

That will give us a tremendous amount of flexibility to then figure out how best to take one generator at a time down to replace and fix it and do what needs to be done. That’s an answer and a promise that we can make today, – that we are going to step in and we are going to do that and we are going to get that situation under control as quickly as we possibly can.

Are you proceeding with the piping upgrades throughout the site?

Answer:
Andrew MacArthur:
So, the piping upgrades, that’s the other thing that we wanted to make sure that we were in a position to move on as quickly as possible. I know the current ownership is working hard to replace it and we are going to do everything that we can to accelerate that process. We watched what happened this summer and we were seeing what was going on and we were hearing what was happening and it’s obviously an incredibly difficult situation for everybody. I would say that because of the size of the complex, it can’t happen overnight but we are going to do everything that we can to make sure that it moves as quickly as possible.

We have been talking about a Con Edison connection since we are off the grid, what are your plans, will you pursue that conversation and action?

Answer:
Andrew MacArthur:
My guess is that we will have a conversation with Con Ed. What we focused on in terms of our plan was something that we know that we can control so we have a plan going in for the backup power. We also have a plan for upgrading the existing power plant because honestly, as much as I’d love to think that we could plug into Con Ed tomorrow, I know that the current ownership has been trying to get answers out of Con Ed for a long time. But as I said – what I want to be able to do is have a plan that I can get done that I can control and that I can move quickly on that doesn’t depend on somebody else.

Are you planning to add, maintain, upgrade additional recreation areas like parks, repair basketball courts, soccer and football fields?

Answer:
Andrew MacArthur:
I would say with respect to all of the community facilities, we intend to maintain them, we intend to upgrade them as necessary and desirable but, I would say that when it comes to adding things, I want to be careful about making too many commitments too quickly. I want to come out and listen to folks before making any decisions.

We would like to conduct community wide surveys. We would like to have additional follow up meetings with stakeholders and representatives and we’d like to understand the long list of things that people may be interested in seeing. Then we will need to figure out the priorities. I want to be very careful about promising this and promising that and promising a third thing and then ending up with a big list and coming back and saying well you know what – I can’t do that on second thought. So, we will maintain everything that is here and we will upgrade what needs to be upgraded. I know that there are a lot of programs that mean a lot to a lot of different people here, so we have every intention of maintaining all of these programs. When it comes to adding things, that’s a longer conversation that we are looking forward to having, but that will happen over a longer period of time.

What about management of the site, are you planning on keeping Grenadier as managing agent?

Answer:
Andrew MacArthur:
We are maintaining the existing management company and the existing staff. We want to have as many people stay on as we can and are looking forward to partnering with the existing staff and maintaining as much continuity as we possibly can.

Now, I do have a couple of folks who have been with me for a while and have a fair amount of experience.. We certainly will be out here – I will personally be out here a couple of days a week – and a couple of my guys will be out here a couple of days a week.

We will very much be on top of everything and there are no excuses. If there is stuff that is going wrong, if there are issues that people have – there are always issues that people have – you should know we will be here and we will be on top of it and we will be accountable for it. There are always things that can be done better no matter where you are, and we want to hear that feedback from you.

Are you going to expand the Department of Public Safety, increase the staffing levels and also will they maintain an armed status and also is the K9 unit going to be continued?

Answer:
Andrew MacArthur:
We will absolutely maintain public safety.
We will maintain it and make sure that adequate resources are allocated to it. After affordability and after making sure that electricity is on, Public Safety is right there in terms of importance. We do not currently have plans to expand anything. That is another topic on which we are very interested in hearing people’s perspectives. Sitting here today, I’d be lying if I said we have a plan for adding a whole bunch of people. We want to understand that better and certainly make sure that we maintain it. I can say that safety is one of the most critical priorities for us coming in.