Anatomy of a building in distress.

When owner Robert Rodriguez bought the five-story walk-up building at 76 Pearl Street, there was a restaurant in place in the first floor retail space. He converted that without proper alteration permits to become his locksmith office. But the prior elderly owner had also illegally created the restaurant.

Both renovations resulted in Environmental Control Board fines, and the last renovation was inhibiting the legalization of the premises and interfering with obtaining a residential certificate of occupancy for the upstairs apartments, and the collection of rents.

Rodriguez is the owner of the Downtown building where two tenants remain missing at press time. They are Joseph Gregory real estate agent Camden Sylvia - a recent second prize winner of the prestigious Real Estate Board of New York Residential Deal of the Year contest - and her boyfriend, actor Michael Sullivan.

To date, police say Rodriguez is not a suspect in the couple's disappearance, and while he has made contact with the police through intermediaries, his attorney says he won't speak with them without an arrest warrant.

The district attorney's office states it does not have enough evidence to obtain a search warrant of Rodriguez' Orange County home grounds, although samples of what appeared to be blood were taken from the loft building's corridors over the weekend. The samples turned out not to be blood, according to published reports.

An examination of city records, however, portrays a building owner desperately trying to legalize a money-losing loft building so that rents could be obtained to support the building.

Rodriguez had purchased the property from an elderly widow, believing he would no longer have to pay rent to house his growing locksmith business.

What he found instead was a morass of city rules supposedly designed to provide incentives to legalize residential apartments that had been illegally created - usually by the occupants - in manufacturing buildings.

He also found a city tax structure that supposedly is based on the income and expenses of a building, but does not count building mortgage payments as an expense and often maintains an assessment higher than what the owner can afford.

The tax structure is supposed to protect small buildings from fast increases in assessments, but also creates a yearly system by which the assessment goes up, the owner pays property taxes based on the full amount, and then if successful in obtaining an assessment reduction, could wait years for a refund.

Rodriguez could not keep up with the system.

He purchased the five-story walk-up loft building in July of 1993, paying $205,000 for the property, which had been the subject of contentious court actions by the handful of loft dwellers seeking running water, heat and other amenities.

By 1996, Rodriguez was two years behind in his property tax payments and the 76 Pearl Street building had been included in the city's tax lien sale process, with liens amounting to about $50,000, according to a Finance Dept. spokesperson.

Under the terms of the contracts with the corporate lien owners, the property owner must keep up-to-date with current property tax payments or be subject to a foreclosure action.

The building once again appeared on this year's lien sale list, but the liens were paid off on the last possible day, said Richard Loconte, the Finance spokesperson, thus avoiding default and probable foreclosure problems.

Still, the last July 1, 1997 tax payment was not made, and the city sent out past due notices in October. During the first week of November, a property tax bill for January 1 would have also been received by owner Rodriguez, both amounting to a bit over $27,250.

Along with those payments, Rodriguez would have been making payments on the $50,000+ in property tax liens, and on mortgages amounting to over $230,000.

But the income from the building was less than $24,000, according to Finance Records, creating yet another hopelessly spiraling situation for a property owner.

Architect Arthur Atlas says Rodriguez' locksmith shop, still operated by his son, also named Robert, was supporting the building, and not the residential tenants. Certainly, the stated income from the building as filed with the Tax Commission could not support the property taxes, let alone municipal water and sewer charges, back tax liens and mortgage payments, which are not considered by the city when computing expenses.

Owner Rodriguez was buoyed, however, by what he believed were the possibilities offered by the Downtown residential conversion plan, and Chelsea architect Atlas was helping him legalize the building for residential use.

According to Atlas, the second floor office has already been converted for use by a residential tenant paying "market" rent, and a fourth floor residential loft tenant was bought out and replaced with a market rent tenant.

That left two tenants occupying full floors of the 1840's building paying low loft rents - the top floor occupied by Sylvia and Sullivan, with a rent of about $300, and the third floor occupied by Chuck DeLaney, a member of the city's Loft Board and a long-time resident of the building.

Atlas said that in order to comply with loft law requirements to legalize the interim multiple dwelling, alteration permits had to be pulled by October 1st or Rodriguez would have been unable to collect rents.

Under the loft laws, the Loft Board is able to extend the time to comply with various provisions for 12 months, no more than twice, so long as the owner makes a good faith effort to satisfy the requirements.

Those laws also provide that three occupants of separate units can ask the court to order specific performance - basically require the owner to do the work. But those tenants then may be required to vacate their units while the work is being completed.

When Atlas tried to pull permits from the Buildings Dept., he was told the 1995 Environmental Control Board (ECB) fine for work without a permit amounting to $350, and the illegal occupancy violation of $800, also paid at that time, resulted in an eight-times Buildings Dept. penalty fine.

Since an illegal alteration is considered a hazardous violation, Buildings wanted - and still insists on - a fine of about $8,000.

"Now that he's caught and violated he pays a penalty fee," explained Ted Birkhahn, a spokesperson for Buildings, who noted the filing fee penalty does not appear in the computer but would have been noted in another file and brought up when the architect went to the counter at the Buildings Dept. to pay the remaining $791 for the permit.

"It's a substantial amount - this is standard - and goes on all the time. You will never be able to pull a permit unless you pay that fee," insisted Birkhahn.

If the owner does not legalize the building, Birkhahn added, they could keep getting ECB violations, which he says end up being more expensive.

"He was willing to pay something, but not $8,000," said Atlas of Rodriguez. Atlas had been in contact with his client in October and had recently been trying to get an appointment with a Manhattan Buildings Dept. deputy commissioner or someone else to try to lessen the penalty so the permits could be pulled.

"We were legalizing the entire building under these permits, and that would have taken care of the first floor alterations as well," Atlas explained, adding that some minor plumbing work and a few other things still need to be completed in order to obtain a certificate of occupancy.

DeLaney, the Loft Board rep, has lived at 76 Pearl Street since about 1982, Atlas said. "He was obviously very aware of the regulations," he added.

DeLaney did not respond to a fax requesting an interview.

Rodriguez was also aware that regulated tenants, including Sullivan, might not have had to pay any rent after October 1, since the permits were not pulled by that time, Atlas noted. So if Sullivan was threatening not to pay rent because of a lack of heat, it probably wouldn't have meant that much to Rodriguez, who knew he could not legally collect the rent anyway.

The heat dispute was ongoing because the building was virtually uninsulated and the heat just dissipated out of the building. It dates from the 1840's, Atlas believes, and not the 1920's as the Finance Dept. records show. The former sailmaker's shop also has evidence of holes where sails or masts could be passed through the floors.

To get the heat to the top floor, Atlas says the boiler needs to be "pumped up" extensively. But that means the lower floors would be overheated.

Rodriguez was willing to insulate the ceiling, and Atlas says that information was relayed to Sullivan. Because Rodriguez felt he wasn't required to add the insulation, he also wanted Sullivan to pay half of the cost.

The 76 Pearl Street building was not known to DHCR, as it was technically viewed as being under the Loft Board and the Loft Law, instead.

If the Buildings Dept. penalty fee was paid, according to the Loft Board rules, when the permits were pulled, Rodriguez would have been allowed an increase in rents of about six percent. He would have been allowed other increases throughout the legalization process for the interim multiple dwelling.

Once the certificate of occupancy was obtained, the Loft Board would permit an increase in rents of about 8 percent.

But those familiar with the process say even if the building were to be completely legalized, under the Loft Board rules, the tenants would have had a voice in setting a first rent for DHCR purposes, and the rents would probably have never gone anywhere near to market.

"He was trying real hard to legalize the building," insisted Atlas. "There were no major fights with the tenants and the papers have blown up the disputes out of proportion."

The conversion to residential use was a relatively easy conversion compared to many others that Atlas has been involved with, he said. For instance, while Atlas was "uncomfortable" with the ability of the front fire escape to support weight, they did not have to construct a second egress because the building is fully sprinklered.

The architect helped work on the original !oft laws and conversion issues, and since that time has legalized dozens of buildings for residential use.

It is not yet clear what will happen to this property if the residential legalization does not move forward, or if Rodriguez does not pay the taxes owed, possibly leading to a foreclosure by city tax lien holders.

At deadline, the two tenants remain missing, along with a former employee of Rodriguez, who disappeared several years ago.