Troubled nonprofit gets payout in flip of Bed-Stuy landmark to upscale developer

October 25, 2019 Alyssa Katz and Claudia Irizarry Aponte, THE CITY
Share this:

This story was originally published on Oct. 25 by THE CITY.

Luxury development wasn’t what state officials envisioned when they sold an ornate, century-old office building in Bedford-Stuyvesant to an arm of a local anti-poverty nonprofit, seeking to create jobs with “neighborhood-oriented focus.”

But upscale residences or work spaces are coming to the corner of Throop Avenue and Decatur Street — their way paved by a deputy mayor’s removal of a deed restriction that had required the property to remain home to organizations aiding young people.

Subscribe to our newsletters

The nonprofit group — formed to improve Bedford-Stuyvesant when the neighborhood struggled with decay and abandonment — told the state in 2012 that the property would become its new headquarters.

But at a federal bankruptcy judge’s behest, sprawling 601-619 Throop Ave. is instead now primed to become a magnet for wealthier newcomers changing the face of the Brooklyn neighborhood.

Voras Enterprise, a nonprofit affiliated with the Northeast Brooklyn Housing Development Corp. (NEBHDCo), sold the formerly state-owned building for $12 million in June to a firm registered to an outfit called Rivington Company LLC, property, court, business and tax records indicate.

At a March hearing, a representative for the buyer announced a “major construction rehabilitation of this property.”

In the final bankruptcy plan, approved this month, Voras secured about $250,000 in charitable donations after settling millions in mortgage, tax and other debts.

NEBHDCo itself is due to get back $940,000 it poured into running the money-losing, largely empty office building.

Meanwhile, as THE CITY has reported, tenants in some of NEBHDCo’s nearly 100 apartment buildings in the area and city housing officials have hauled the group into court to force repairs.

Tenants Debra King, Latoya Wiggins, Makuna Mtambuzi and Dino Perera (left to right) show the unsanitary conditions in their Brooklyn apartment buildings operated by NEBHDCo. Photo by Ben Fractenberg/THE CITY

Voras is solely controlled by its president, Jeffrey Dunston, according to IRS records. Dunston, also the longtime CEO of NEBHDCo, reaped nearly $400,000 in compensation in 2017.

One tenant involved in efforts to sell some NEBHDCo apartment buildings to new owners expressed outrage — but not surprise — that the nonprofit moved funds to the Throop Avenue property.

“Someone’s got to ask, ‘Where were y’all getting this money from without maintaining the buildings y’all already have?’” said Dino Perrera, who lives in a NEBHDCo building on Kosciuszko Street.

Moving out

Court records point to a key role played by a Brooklyn U.S. Bankruptcy Court judge, Nancy Hershey Lord, in expediting the sale over Dunston’s objections after Voras filed for bankruptcy in 2017.

She rejected Dunston’s request to allow his group to hold onto the property after a lender foreclosed, court transcripts show, keen on preserving NEBHDCo’s financial health.

Lord then pushed to make sure the state attorney general’s office issued a legally required approval and okayed the sale on terms that would usher a major nonprofit tenant out the door — even though the AG had signed off based on documents that said its lease would remain in place.

The Italian Renaissance Revival-style building, part of the Stuyvesant Heights Historic District, sits in an area that today is limited to residential development. The new owner will have the power to convert office space into apartments if they choose.

Jeffrey Dunston, CEO of NEBHDCo, in 2013. Photo: Paul DeBenedetto/DNAInfo

A tenant on a floor slated for redevelopment, Brooklyn Legal Services Corporation A, agreed to take $400,000 from the new owner to move out of the building, clearing the way for its upscale overhaul, according to a pact submitted as part of the bankruptcy settlement.

Corp A, which represents low-income clients in civil matters as well as local nonprofits, also has served as counsel to NEBHDCo’s community development programs.

Legal Services Corporation A Executive Director Jessica Rose declined to comment.

Jeffrey Dunston did not respond to repeated requests for comment. Nor did Rivington Company CEO Travis Stabler, who has worked on residential projects in SoHo and Brooklyn.

Ghost of Rivington House

The name of the buyer of 600-619 Throop Ave. also evokes the saga of Rivington House on Manhattan’s Lower East Side. There, the purchaser of the onetime AIDS residence nudged city bureaucrats in 2015 to lift a deed restriction that had required the building to operate as a nonprofit health facility — and then sold the property for $116 million.

Rivington House sold again last month for $160 million, Bowery Boogie reported.

THE CITY is unaware of any business relationship between Rivington Company LLC and the sellers of the Lower East Side property.

In the case of 601-619 Throop Ave. — built in 1910 as the New York and New Jersey Telephone Exchange Company — officials working for the Bloomberg administration in November 2012 lifted a decade-old deed restriction that said the building could only be used for “not-for-profit youth development, counseling and educational services.”

The city Economic Development Corporation had set those terms in 2001 with a nonprofit associated with then-state Assemblymember Al Vann, once a power broker in the neighborhood, property records indicate.

Deputy Mayor Robert K. Steel and EDC executive Patrick J. O’Sullivan Jr. removed that restriction without putting any new guidelines in place. They did so at the behest of Gov. Andrew Cuomo’s Empire State Development Corporation, a state agency, which in 2011 launched a search for a new owner after foreclosing on Vann’s group.

The winning project should “maximize job creation,” the state noted in its request for proposals: “The foremost theme in the Proposal must be how the proposed plan would benefit the community and bring new jobs onto the Premises.”

Empire State Development officials chose NEBHDCo over two other competing groups after allowing one month for initial proposals to be submitted.

The CEO of Empire State Development at the time, Kenneth Adams, recommended NEBHDCo, materials submitted to ESD’s board of directors show. NEBHDCo planned to consolidate its operations there, creating 60 jobs, renovating vacant floors and leasing the second floor to an early childhood education center.

“What gives NEBHDC the edge,” Adams’ memo to the board said, “is that NEBHDC is from the area, understands the neighborhood and is the best fit for the Property.”

A $3 million state mortgage

Dunston formed Voras in July 2012. The entity bought the property that December for $3.4 million, with the help of a $3 million state mortgage.

Three years later, foreclosure and other records show, he signed papers refinancing the mortgage — borrowing $6 million from a lender called Woodbridge Investments.

Woodbridge has since been alleged to be a “Ponzi scheme” by the U.S. Securities and Exchange Commission, which has charged company principals with defrauding investors and demanded back $1 billion.

Voras soon ceased making payments. After a buyer of the debt foreclosed in Brooklyn Supreme Court, Dunston’s group filed for bankruptcy, precipitating the sale of its dreamed-of NEBHDCo HQ.

An Empire State Development spokesperson said in an emailed statement that the state had fulfilled its obligations.

“ESD took control of this property after a non-profit repeatedly defaulted on a nearly quarter-century old loan,” said the spokesperson, Jack Sterne. “We immediately issued a competitive request for proposals to recoup the money the state — and taxpayers — were owed, with a focus on selecting a community-based owner with a plan that would benefit the neighborhood.

“At the time, the Voras/NEBHDCo team had strong community support, and we were successful in ensuring more than $3 million in taxpayer money was repaid to the state. We have not had any connection to the property in over four years.”

The state continues to hold a vacant building at 1024 Fulton Street that Dunston had hoped to reboot as a co-living residence for senior citizens.

Decaying apartments

As THE CITY reported last month, NEBHDCo recently reached a settlement with tenant lawyers and city housing officials to sell 11 Bed-Stuy apartment buildings to new buyers, after the properties fell into foreclosure and deep disrepair. The dire condition of NEBHDCo buildings gained Dunston a prominent spot on then-Public Advocate Letitia James’ “NYC Landlord Watchlist” last year.

Tenants, many low-income and some formerly homeless, reported extreme difficulties getting maintenance workers to their apartments. City and court records show the Department of Housing Preservation and Development repeatedly sent in crews to do emergency repairs.

The front of a NEBHDCO-run building at 146 Marcus Garvey Blvd. in Bedford-Stuyvesant was littered with trash. Photo by Claudia Irizarry Aponte/THE CITY

Residents described mold, absent heat or hot water, persistent leaks, and rat infestations as issues as far back as 2004.

In February, NEBHDCo filed for bankruptcy on 17 of its properties, which had racked up $4.2 million in debt and more than 4,000 housing violations. Tenants at those buildings are now trying to kick NEBHDCo out.

Publicly available records show large sums leaving NEBHDCo and entering Voras without customary documentation.

‘Isn’t that problematic?’

Bankruptcy records indicate NEBHDCo advanced substantial sums to Voras, the entity controlling the Throop Ave. building. In late 2017, NEBHDCo filed a claim with the court seeking $922,000, without documenting or itemizing the funds owed.

Filings with the Internal Revenue Service dating back to the Throop Avenue property’s purchase don’t show any sums lent to Voras as an affiliate — transactions nonprofits are asked to report.

Court records indicate NEBHDCo paid nearly $52,000 in October 2017 to the lawyer representing Voras to file the bankruptcy case, a payment not reflected on NEBHDCo’s IRS filings that year.

Audits filed with the attorney general’s Charities Bureau show loans recorded from NEBHDCo to unspecified affiliates, growing in size over time beginning in 2013. The most recent filing, for 2017, indicates $907,000 on loan.

“Isn’t that problematic for that to advance — one not-for-profit to advance to the other?” Judge Lord asked at the first hearing after Voras filed for bankruptcy in November 2017.

“I sure hope not,” replied Voras attorney Allen Kadish.

This story was originally published by THE CITY, an independent, nonprofit news organization dedicated to hard-hitting reporting that serves the people of New York.

Leave a Comment

Leave a Comment