Liu and city say Seaport operator owes $1.3 million

Downtown Express photo by Terese Loeb Kreuzer City Comptroller John Liu.
Downtown Express photo by Terese Loeb Kreuzer
City Comptroller John Liu.

BY TERESE LOEB KREUZER | City Comptroller John Liu issued an audit report April 30 criticizing the New York City Economic Development Corporation for its handling of some of the leases under its jurisdiction in the South Street Seaport.

The report states that the city (as successor-in-interest to the South Street Seaport Corporation) and South Street Seaport Associates (Seaport Associates), a limited partnership, are parties to two leases for spaces within the South Street Seaport.

It also states that Seaport Associates improperly calculated rent payments and did not report all subtenant rental income or other income and therefore owes the city at least $1.3 million for unpaid rent and accrued interest.

It goes on to say that, “These issues occurred, in part, because E.D.C. did not adequately monitor Seaport Associates to ensure its compliance with lease terms. As the agency responsible for administering the leases, E.D.C. should have ensured that Seaport Associates complied with significant lease terms. E.D.C. also improperly adjusted Seaport Associates’ interest and rent charges totaling $27,032.”

In addition, the comptroller’s audit notes that an unnamed E.D.C. board member who is a former Seaport Associates principal and lease signatory, utilized Seaport Associates’ office space rent free in violation of E.D.C.’s conflict of interest code. This board member chairs E.D.C.’s Real Estate and Finance Committee.

Seaport Associates responded to the audit by saying that it rejected the report’s findings and recommendations, calling them “politically motivated and the result of political infighting between the Comptroller’s Office and E.D.C.”

E.D.C., part of the Bloomberg administration, denied that characterization, even though mayoral candidate Liu is one of the harshest critics of Mayor Bloomberg

In its response, E.D.C. officials substantially agreed with all of the report’s findings and recommendations and detailed steps it had taken or will take to implement the comptroller’s recommendations.

E.D.C. issued a statement to say that it “is currently in litigation with Seaport Associates, seeking to secure unpaid rent and interest. We appreciate the comptroller’s verification of the findings and the steps that we have taken.”

The comptroller’s office discussed the findings in its audit with E.D.C. and Seaport Associates officials. Both received a draft report on March 22, 2013 with a request for comments.

According to the E.D.C., when it was apprised of the comptroller’s audit and concerns, it immediately took steps to recover the money due the city.

E.D.C. also asserts that the board member who leased a suite in a Seaport Associates building for several years paying nearly $3,000 a month subsequently only used it as a mailing address and is no longer doing so.