(Un)Civil War at Seward Park: Part 1

It sounded like such a good idea, on paper, to the co-op board at Seward Park, a sprawling 1,728-unit development on the Lower East Side of Manhattan.

On January 28 of this year, shareholders received a note informing them that the 11-member board had voted unanimously to convert the co-op’s 388-space parking garage and deck into a valet operation, effective March 1. The below-market-value prices for parking would not be affected, and the valet system would create 40 percent more parking spaces, reducing the waiting time for a coveted parking spot – which is more than 30 years for those who sign up today. Valet parking would also generate annual revenues of at least $200,000.

You’d think such an announcement would have been greeted with cheers. Instead, it ignited a full-blown civil war, with a vocal group of shareholders claiming that the board had spent months working out a deal without soliciting any shareholder input.

Darcey Gerstein, the board treasurer, explains that the board withheld announcements about the impending change in order to prevent the spread of rumors and misinformation. She cites a history of “continual ugly propagandizing in an otherwise harmonious and near-utopian cooperative,” as well as past episodes of corruption and mismanagement, which, she says, have left a bitter after-taste even though they’ve been rectified since Charles H. Greenthal & Co. took over management duties in 2008.

As a result of this checkered history, Gerstein says, the Seward Park board is between “a rock-and-a-hard-place in terms of disseminating information during the exploratory or research phase of a co-op project. That level of trust is lacking.” Arthur Weinstein, the general counsel for the building for a decade, agrees, noting that most major projects in Seward Park lead to acrimonious battles.

This one was no exception. The opposition called meetings, circulated petitions, and collected signatures, arguing that the shift to valet parking was an opaque, high-handed decision. The opposition also learned that the Certificate of Occupancy was not changed to allow for the 40 percent increase in cars, or for the addition of hourly, daily, and weekly parking for non-co-op residents. A C of O is required for every commercial or residential area, stating the space’s legal use and occupancy. If that use changes, the property owner needs to get an amended C of O.

In a formal letter, the opposition asked the board to refrain from signing “any contracts related to the garage for at least 90 days since there were now legal reasons to reverse the board’s decision.”

On February 10, the board circulated a six-page notification, emphasizing how valet parking would improve everybody’s parking experience. On February 22 , the board issued its first-ever State of the Co-op Memorandum, citing its fiduciary duty to keep maintenance low in the face of sharp rises in real estate taxes and other costs. The memo stated that the co-op’s annual operating budget was $25 million but its income was just $20 million. “To avoid the 35.44 percent maintenance increase that would be required to overcome such a deficit,” the board wrote, “we resolved to find new ways to generate revenue.”

The board called a shareholder meeting for February 24, and the turnout was nearly unprecedented – hundreds of shareholders showed up, many of them visibly angry. “The change to valet parking will not go into effect on March 1,” board president David Pass announced. “This will take a long time, maybe even several more months.”

During a question-and-answer session, several shareholders asked about the validity of the Certificate of Occupancy for the parking area. Shareholders were promised that every eventuality would be negotiated and included in the lease agreement. After the meeting, many shareholders seemed mollified. Some doubters even came around to applauding the board’s decision.

But this uncivil war was far from over.

(To be continued on Tuesday, June 28.)