Developer Cited For Big Hazards

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Developer Cited For Big Hazards
Barry Shy

Earlier this year, city inspectors ordered major downtown developer Barry Shy to evacuate part of one of his apartment towers after uncovering life-threatening safety hazards.

Violations were found on every floor of his Sixth Street SB Manhattan building from the sub-basement to the upper penthouse.

Shy, who had converted the office building into 198 lofts, did large-scale construction without approval, inspectors concluded. This included demolishing four elevators, adding apartments on new floor space that hadn’t been inspected and constructing hallways that might not hold up in a fire.

“I haven’t seen an order this major for a building that was occupied by residents. It lists some serious life safety issues,” said Bill Pham, a residential real estate attorney at McKenna Long & Aldridge LLP who reviewed a February “order to comply” from the Department of Building and Safety for the Business Journal that listed 24 code violations.

The move by the city to order a partial evacuation is an extraordinary action only taken when there’s an imminent safety threat. But the evacuation never happened, after Shy took the unusual step of meeting with top building and safety officials instead of filing a formal appeal.

As a result, Shy will be required to pull permits, submit new plans and pass new inspections to remedy the violations for which he was flagged. But department officials decided the evacuation isn’t necessary.

“We reviewed each item,” said spokesman David Lara. “Our inspection people decided there was no imminent hazard which would have required a vacation or partial vacation of the building.”

In the meeting last month, Building and Safety General Manager Robert “Bud” Ovrom and other officials met with Shy, who told the Business Journal he produced inspection reports showing that the department’s inspectors had signed off on the building’s construction work as it had been happening.

Shy, who owns more than 1,500 apartment and condo units downtown, said his building has no safety issues. He claimed he will not have to make any physical changes to the building, and will only have to file some “minor paperwork.”

He also said the number of units he would have had to evacuate was only 10 or so, though someone familiar with the issue said the number was at least 25.

“You’ve usually got 30 days to comply, but now it’s been four months and the department didn’t do anything,” Shy said. “They’re just sitting on it because they know this order to comply should never have been written.”

The scrutiny comes amidst a widening FBI probe into possible corruption in the department among both the rank-and-file and supervisors. Two inspectors have pleaded guilty to taking bribes in return for building approvals.

Lara said department officials didn’t believe anything of that sort occurred in relation to the building’s initial approvals.

“We don’t think that there was anything nefarious with this,” he said.

Controversial history

It’s not the first time that construction at 215 W. Sixth St. has gotten Shy into trouble.

Shy bought it for $13.5 million from former business partner Andrew Meieran in May 2005. It was called the Los Angeles Trust building before Shy converted it into the SB Manhattan.

Meieran, who owns a popular bar, the Edison, in the basement of another one of Shy’s buildings, originally intended to open a bar in the ground-floor space and basement of SB Manhattan. But a construction crew severely damaged the basement during the building’s conversion to residential use, preventing the plans for a bar. Meieran sued Shy and won $18 million.

In 2008, the city hit the developer with a more limited order to comply for building a mezzanine floor without permits. He said he resolved that by pulling the proper permits.

Earlier this year, Shy settled a lawsuit filed by a SB Manhattan tenant who claimed she was injured due to shoddy construction work in the bathroom.

Shy has also been sued by homeowners’ associations in two of his other downtown buildings, the Bartlett Building at 215 W. Seventh St. and the Higgins Building at 108 W. Second St., for construction defects.

Finally, this year, city inspectors found that Shy made extensive unpermitted changes to the SB Manhattan building. Four of the seven elevators and several stairways were demolished and replaced with floor area for additional apartment units. A new structural deck was installed on one floor to add apartment units. Corridors that need to resist a fire for one hour either had defects or weren’t wide enough. New walls were put in on another floor to create exterior balconies.

But Shy says he was approved to make many of the changes by the time the building opened in 2007. He described discrepancies with his original plans as minor. He’s currently working on submitting supplemental permits.

“The building’s been fully occupied,” he said. “Four years later they wake up and say there are all these wrong things here, and we let you occupy the building for three or four years?”

Real estate attorney Pham said it can be difficult for building inspectors to spot all discrepancies during construction. But he was surprised that some of the allegedly unpermitted work at SB Manhattan wasn’t recognized.

“If four elevator bays are all of a sudden gone, usually you figure somebody would notice that,” he said. “He also supposedly built a mezzanine and a balcony.”

New allegations

The most recent tussle between the city and Shy over SB Manhattan also generated a wild allegation from the notoriously combative developer. Shy alleged in a meeting with building and safety officials that someone high up in the department had taken bribes to produce the negative report on his building. Since SB Manhattan has been the subject of multiple lawsuits, he believes Meieran and people working with his former partner are behind it all.

Meieran told the Business Journal the allegations were “preposterous and absurd.”

Spokesman Lara said an internal investigation into the bribery allegation was “on hold” until Shy can provide more evidence to back up his claims.

The allegations are one more twist in an unusual four months between Shy and the city.

Normally, a building owner who wants to contest an order to comply must file a formal appeal with the department. However, officials and those familiar with the process said it’s not unheard of for changes to be made based on informal discussions.

“We have an out of the ordinary situation becoming I think a little more out of the ordinary,” said Dale Goldsmith, an attorney at Armbruster Goldsmith & Delvac LLP who specializes in real estate and land use approvals. “Evacuation orders are in and of themselves very unusual. It strikes me as odd that they would then say, ‘Just kidding.’”

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