Skip to main content

Developer Ross on the undertaxed rich, 421-a subsidies, and "workforce housing"

Stephen M. Ross, one of the city’s leading developers, is bullish on New York real estate, pointing to continued demand for high-end condos and office space. At the same time, as the chairman, CEO, and founder of Related told an audience at New York Law School (NYLS) three months ago, the market is pressed by escalating land and construction costs, and the city can’t keep pace in building middle-income “workforce” housing.

And Ross (right), who became chairman of the powerful Real Estate Board of New York (REBNY) in January, identified a new bogeyman in the quest to build affordable housing. He criticized the phase-out of 421-a subsidies—long seen by critics as fueling market-rate construction in city neighborhoods that need no incentives—as jacking up the cost of new buildings.

“The burden of the real estate tax system is placed on new construction,” he said in his March 13 speech, suggesting that residents on tony blocks like Park Avenue, Fifth Avenue, and Central Park West get are taxed too little. “REBNY is working with the state and city for a fair solutions,” said the billionaire Ross in a bit of auto-class warfare, “so we are not subsidizing the wealthiest people in New York any longer.”

Indeed, as the New York Observer recently reported, “Property-tax assessments for condos and co-ops would be as much as 5.2 times higher in fiscal year 2007 if the city used sales price rather than nearby rental comparisons as the measure, according to the [city’s Independent] budget office.

Affordable housing

Ross Sandler, director of the NYLS’s Center for New York City Law, pointed out that, a century ago, affordable housing was created by extending the subway. Now, he asked, where could new lines and land be developed?

Ross suggested that the extension of the 7 subway line, as well as the belated constructoin of the Second Avenue subway would add new capacity and support new housing. But he didn’t suggest transportation enhancements to increase density in the outer boroughs. (See, for example, Alex Garvin's suggestion about boosting development in the Bronx via light rail or bus rapid transit.)

Asked if he’d like to see the real estate industry step up to create more affordable housing, Ross suggested that that the city needs both “low income housing and workforce housing,” but dubbed the latter most critical. In 60 days, he promised, “You’ll see some announcements,” predicting that the plan “will be a national model.”

So Ross was predicting news in mid-May, apparently involving Queens West, which did surface in the face of some criticism, but has not been officially announced.

Happy days

“It’s a great time to be a seller of real estate,” Ross said at the outset. “I don’t know if I want to be a buyer.” His company, with a $15 billion portfolio, developed the TimeWarner Center and the Bronx Terminal Market, among others. He cited low interest rates and high liquidity as contributing to “the greatest moment for real estate in U.S. history,” though he suggested housing had peaked, with more defaults coming nationally.

What makes New York the global capital of real estate? He cited unprecedented construction, infrastructure improvements, a reduction in crime, and an improvement in schools.

He described a Manhattan-centric reality that diverged from Brooklyn. For example, developers can rent offices space for $60 per square foot in older buildings, and $100 per square foot in “trophy buildings.” (Meanwhile, in Brooklyn, as the Real Deal reported, office space goes for under $34 per square foot.)

Financial firms, Ross said, lack big blocks of space with large floor plates. (Actually, such space has recently been vacated at MetroTech in Brooklyn.) Picking up the slack, he suggested, would be massive developments around Penn Station and the Hudson Yards.

Ross said he didn't think the World Trade Center development wouldn’t depress the commercial market. Out of ten million square feet, he said, government would use two million, leaving eight million square feet, of which some would be be residential. “New York City needs the additional office space,” he said.

Residential market

He called the residential market “exceptionally strong, though we’re finding a lot of slowness in demand when prices exceed $1500 a square foot.” (Condos at Atlantic Yards would be $850 a square foot, according to a KPMG report prepared last December for the Empire State Development Corporation and released as part of the Public Authority Control Board's defense of the lawsuit challenging the AY environmental review.)

Steady profits on Wall Street, and the attendant bonuses, fuel all this high-end market. Still, Ross lamented, “a lot of inexperienced developers are not delivering the right kind of packages,” which he said include services, fixtures, and great architectures. “Buyers want classic design, not glass, unless the latter have great views.”

New rental buildings are projected to rent at $60 to $80 per square foot—again dwarfing projects for Atlantic Yards, where market-rate apartments are estimated by KPMG at $45 per square foot.

The storm clouds

After mentioning the strong market for retail and hotels—“I wish I could freeze it,” Ross said of the current milieu—he cited “some great storm clouds on the horizon.” Land prices have soared over 300% in the last three years. Construction costs have more than doubled in the last five years.

Condos in the “worst locations” in Manhattan must earn over $1100 per square foot just to break even, he said. (If the Atlantic Yards condos would sell for $850 a square foot, either Brooklyn’s a bargain, or the KPMG report was low-balling it.)

He cited the lack of “affordable housing for middle class,” citing the Empire State Development Corporation’s new plan for 5000 units at Queens West. “It is incumbent on us as an industry to help them built it efficiently,” he said, in apparently a bid of foreshadowing.

The city’s reform of 421-a has also stymied development, except for buildings that include 20% affordable units, he asserted, but neither the city and state have nearly enough bonding capacity to support such buildings. (Indeed, the deficit threatens Atlantic Yards.)

Then he launched into his criticism of the tax burden on new development and the light ride others get.

Other issues

Ross was asked if buildings should be “green.” He responded that it should become “a standard in all buildings” and that costs would go down if it were uniformly required.

Sal Galletta, chair of the American Engineering Alliance, noted that his group has promoted the concept of a Deputy Mayor for Infrastructure and asked if REBNY had a position on it. “Everyone recognizes the need to rebuild our infrastructure,” Ross responded, and suggested that the city’s new Office of Sustainability will be extended. But he didn’t endorse the Deputy Mayor concept.

CBA questions

Commentator Ross Moskowitz of the law firm (and breakfast sponsor), Stroock, Stroock & Lavan, mentioned the ongoing reassessment of Robert Moses, and cited the emergence of Commmunity Benefit Agreements (CBAs), which raise questions about the role of government in developments such as Atlantic Yards, Yankee Stadium, and the Bronx Terminal Market

Although CBAs “may be a necessary component,” he said, “many questions remain, primarily: Who is the community? Who defines what those needs are?” (Indeed, such questions have been raised regularly in Brooklyn.)

The success of a CBA may depend on the sophistication/expertise of the groups negotiating it, Moskowitz said, adding that it’s unclear how they fit into the city’s Uniform Land Use Review Procedure, or ULURP. (Note: Atlantic Yards bypassed ULURP because it’s a state project.)

Since then, others have criticized CBAs, notably at a panel in May on reforming city environmental review.

Comments

Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

Barclays Center event June 11 to protest plans to expand Israeli draft; questions about logistics

At right is a photo of a poster spotted in Hasidic Williamsburg right. Clearly there's an event scheduled at the Barclays Center aimed at the Haredi Jewish community (strict Orthodox Jews who reject secular culture), but the lack of English text makes it cryptic.

The website Matzav.com explains, Protest Against Israeli Draft of Bnei Yeshiva Rescheduled for Barclays Center:
A large asifa to protest the drafting of bnei yeshiva in Eretz Yisroel into the Israeli army that had been set to take place this month will instead be held on Sunday, 17 Sivan/June 11, at the Barclays Center in Downtown Brooklyn, NY. So attendees at a big gathering will protest an apparent change of policy that will make it much more difficult for traditional Orthodox Jewish students--both Hasidic (who follow a rebbe) and non-Hasidic (who don't)--to get deferments from the draft. Comments on the Yeshiva World website explain some of the debate.

The logistical questions

What's unclear is how large the ev…

Atlanta's Atlantic Yards moves ahead

First mentioned in April, the Atlantic Yards project in Atlanta is moving ahead--and has the potential to nudge Atlantic Yards in Brooklyn further down in Google searches.

According to a 5/30/17 press release, Hines and Invesco Real Estate Announce T3 West Midtown and Atlantic Yards:
Hines, the international real estate firm, and Invesco Real Estate, a global real estate investment manager, today announced a joint venture on behalf of one of Invesco Real Estate’s institutional clients to develop two progressive office projects in Atlanta totalling 700,000 square feet. T3 West Midtown will be a 200,000-square-foot heavy timber office development and Atlantic Yards will consist of 500,000 square feet of progressive office space in two buildings. Both projects are located on sites within Atlantic Station in the flourishing Midtown submarket.
Hines will work with Hartshorne Plunkard Architecture (HPA) as the design architect for both T3 West Midtown and Atlantic Yards. DLR Group will be t…

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official…

So, Forest City has some property subject to the future Gowanus rezoning

Writing yesterday, MAP: Who Owns All the Property Along the Gowanus Canal, DNAinfo's Leslie Albrecht lays out the positioning of various real estate players along the Gowanus Canal, a Superfund site:
As the city considers whether to rezone Gowanus and, perhaps, morph the gritty low-rise industrial area into a hot new neighborhood of residential towers (albeit at a fraction of the height of Manhattan's supertall buildings), DNAinfo reviewed property records along the canal to find out who stands to benefit most from the changes.
Investors have poured at least $440 million into buying land on the polluted waterway and more than a third of the properties have changed hands in the past decade, according to an examination of records for the nearly 130 properties along the 1.8-mile canal. While the single largest landowner is developer Property Markets Group, other landowners include Kushner Companies, Alloy Development, Two Trees, and Forest City New York.

Forest City's plans unc…