Posted on February 16, 2022 at 7:30 am by West Side Rag

The former Royal Park Hotel at 258 W. 97th will become affordable housing.

By Joy Bergman

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. 97ththe 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 recordsFreid sold the Marrakech Hotel in 2019 for $44 million. YIMBY reports 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 estimated 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 Gardenswe 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.”