Tuesday, January 15, 2008

From $6 million to $120+ million: Newswalk and the evidence against stagnation

How much has Brooklyn changed? On January 4, I pointed out a dramatic shift since the production of the documentary A Walk Around Brooklyn in 2000. The Empire State Development Corporation seems to think that the zone bordering the Metropolitan Transportation's Vanderbilt Yard would be stagnant absent the Atlantic Yards project, and state Supreme Court Justice Joan Madden didn't disagree.

The story of the luxury Newswalk building in Prospect Heights offers some useful context; in an interview taped 03/28/06 for Michael Stoler's CUNY-TV show BuildingNY, Shaya Boymelgreen, then partner in Leviev Boymelgreen, discussed how he paid $6 million for the former Daily News printing plant less than a decade earlier.

The dialogue begins at approximately 17:13.

Getting a deal

MS: And now, 1997, the market is changing, the world is changing, and Shaya Boymelgreen leaves the Avenue B and the Williamsburg, and decides to buy the Daily News building on Pacific Street in Brooklyn. How did you decide to buy a 500,000 square foot building and convert it to residential condominiums?

SB: I think, at that time, we have a niche to buy not in the center of the city, not in the center of the prime places, because [of] lack of money, and I saw an opportunity in this building--this building went for six million dollars, half a million square foot, for six million dollars.

MS: It went for basically eleven dollars a foot.

SB: Something like that. And I said, there's no way, we can make, from this piece of glass, we can make a gem, we can make a diamond out of it.

The location

MS: You were right near Flatbush Avenue, you were right in the heart of Downtown Brooklyn, in an area that today is Atlantic Yards, that Bruce Ratner is planning to build this stadium and everything else. And you--it took chutzpah and a combination of confidence--

The area is neither Downtown Brooklyn nor Atlantic Yards, but the footprint is carved around the Newswalk building, which occupies a good chunk of the block between Pacific and Dean streets and Sixth and Carlton avenues.The foresight of a deal

SB: Y'know, the people that bought from the Daily News bought it for three million dollars. When I met them, they didn't know if to sell it or not to sell it. And I saw what I can do from this building. It was just a fortune, no windows, just one big manufacturing building, with all this big machinery... And I came to them and I said... they said that they're not sure if they want to sell it or not... I said, y'know what, I'll give you six million dollars.

MS: So they paid three million?

SB: They paid three. I knew they have somebody talking to them about five million dollars. And if I'll offer five and half, they'll go to six... it's going to go into an auction... I say, I'll give you six million dollars and I'll buy the property. I saw the face--very surprised. They said they need a minute with themself. They walked out, they came back, they said: are you ready to give us half a million dollars tomorrow morning? I said yes. In the morning I was there with half a million dollars, and we wrote a contract.

Long process

MS: How long did it take you to redevelop the News building?

SB: A year and a half just to demo and to take out all the printing machines. It was huge, huge, thirty machines--each machine was a building by itself... At the same time I was changing the zoning. The zoning change took two and a half years...

Note that the ESDC had said that, "While the City, if it desired, could rezone the project site, it has not."

MS: So when did the first tenant move in?

SB: I believe in 1999 a tenant was moving in.

Some history

I wrote in March 2006 about the history of the Atlantic Terminal Urban Renewal Area (ATURA). The Daily News built a printing plant on Dean Street in 1927. In 1983, as the Times reported in an 11/27/83 article headlined “The Intricacies of Initiating Development Projects,” city officials helped the newspaper add parking space and a new 15,000-square-foot warehouse, despite complaints from neighbors.

The plant closed, however, at the end of 1996, as the newspaper moved its printing operations to a more modern facility in New Jersey. The building was a haven for squatters for several years. Boymelgreen bought the building and converted it into the luxury Newswalk condominium complex, which opened in 2002 (as opposed to 1999, according to clips I saw).

And why wasn't it included in the Atlantic Yards site plan? As the Village Voice noted in a 4/5/04 article, “But if Ratner could design around Newswalk, he could have spared other properties as well.” (The building has about 170 units, according to the Voice article.)

Likely the cost of buying out all the owners was deemed too high, and the rest of the block had more structures in good condition than the rest of the footprint, so it would be hard to argue blight. Then again, the new construction on the same block also challenges the notion that Atlantic Yards is needed to arrest neighborhood decline.

The cost today

Here's a Newswalk unit that was on sale for $635,000 in September.

Some units, I'm sure, are much more expensive, but, to be conservative, let's estimate $700,000 as the average value of the 170 units. That adds up to a valuation of...nearly $120 million. Nice work, given that, as Judge Madden ruled that "blight conditions documented in the Blight Study... provided a rational basis for the ESDC's conclusion that continued new development on the project site was unlikely."

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