|Marvin Rubin and Joel Landau|
The Allure Group, a Brooklyn nursing home chain, has been mired in a major real estate scandal during more than 20 months of city and state investigations. Now it’s finally poised to pursue its stalled growth plans after reaching a settlement with the state late last year.
Allure, run by operators Joel Landau and Marvin and Solomon Rubin, agreed to pay $2 million in penalties and charitable contributions to local nonprofits in a deal with state Attorney General Eric Schneiderman, announced Jan. 5.
In February 2015 Allure purchased Rivington House, an HIV/AIDS facility on the Lower East Side, for $28 million. It sold the building a year later to luxury housing developers for $116 million, provoking an outcry from the community, the media and the city.
Allure will pay $750,000 in fines and contribute $1.25 million to health care nonprofits on the Lower East Side. It also committed to spend $10 million in the next five years to establish health care facilities both in central Brooklyn and on the Lower East Side. Allure must run them for at least eight years each.
Schneiderman withdrew his objection to Allure’s purchase of Greater Harlem Nursing Home on West 138th Street, where Allure has served as the state-appointed receiver of the financially distressed facility since 2014. Under the settlement, Allure must keep the facility open for at least nine years.
Allure can now resume the expansion plans that Schneiderman blocked in 2016 during the investigation. “Now that the roadblocks holding up our full control have been lifted, we look forward to turning our Harlem center into a world-class facility similar to all other Allure facilities,” Landau said.
Landau and the Rubins entered the nursing home business in 2010 with the backing of Leibel Rubin, Marvin and Solomon’s father, who has run nursing homes for decades. The partners bought the vacant nursing home portion of the former Victory Memorial Hospital in Bay Ridge for $20 million and set up Hamilton Park Nursing and Rehabilitation Center.
Landau and the Rubins went on to acquire four more Brooklyn facilities. They successfully raised occupancy at these struggling locations. Its six homes generate about $200 million a year in revenue, according to Landau.
When they sought to buy Rivington House from nonprofit VillageCare, the property had a deed restriction that required it to be used as a nonprofit residential health care facility.
Because Allure is a for-profit company, the city informed Landau and Marvin Rubin that they would have to pay $16 million to lift that restriction. Landau told the city that the price, which was five times higher than anyone had ever paid to lift a deed restriction, undermined the financial viability of operating a Medicaid-funded nursing home.
By May, three months after buying the 219-bed Rivington House, Allure had an agreement to sell the building for $116 million to investors including Slate Property Group, Adam America and China Vanke. A partial stop-work order that limits construction and demolition remains in place.
In November 2015 Allure paid the city, and the deed restriction was lifted, facilitating the sale to developers, but they didn’t disclose the deal until several months later. The city Department of Investigation found that City Hall officials ranking as high as then-First Deputy Mayor Anthony Shorris either were aware or should have been that the deed restriction was being removed, causing the property to lose its public purpose designation.
“This was a mistake. It was ridiculous, and I’ve said it a thousand times,” Mayor Bill de Blasio said in June during a town hall meeting on the Lower East Side. “Not only did we entirely change the rules around anything like this; now it will require a personal signature from me to happen, which did not happen in this case.”
De Blasio said last week that NYC Health and Hospitals is adding 60 beds at its Gouverneur facility in Lower Manhattan to offset the Rivington closure. The beds are a welcome addition in a neighborhood that lost 335 beds when the Bialystoker and Cabrini nursing homes closed in 2011 and 2012, respectively. Still, a larger facility is needed, said Webster. “We don’t want any more stopgap measures,” she said. “We really have a crisis on our hands, and it’s going to get worse.”
The Rivington sale ultimately passed legal muster, as Schneiderman’s office concluded that the developers’ title to the property “is not subject to effective legal challenge.” But Schneiderman enforced penalties on Allure because his office found that designated members of the company’s board of directors failed to fulfill oversight duties. When Allure purchased Rivington from VillageCare, it appointed four board members: the brother-in-law of Allure CEO Solomon Rubin, two Allure employees and a truck driver for a food-delivery business who had no prior nursing home experience. But it was ultimately Landau and Marvin Rubin’s decision to sell.
Besides failing to question the move, the board did not notify the state Supreme Court or the attorney general before the nonprofit sold its assets. Allure did not admit to or deny any of the attorney general’s findings.
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Nursing home chain looks to future after scandal