In 1010 Pacific rezoning, empty promises (affordability, cultural space, historic facade, unit count) from applicant, who flipped property for huge profit.

See collected coverage of M-CROWN rezonings: click here.

The first two private rezonings in the M-CROWN area are cautionary tales, given that the proponents made big promises that came to naught--and then sold at a huge profit.

From June 2020 Clipper Realty presentation

With 1010 Pacific Street,  a site in the eastern half of the block between Grand and Classon Avenues, promises of historic architecture, a community center, and deeper affordability fell by the wayside, because the overambitious plans were downsized and promises weren't locked down.

The developer flipped the project soon after the project was approved in 2019, selling parcels that cost an already substantial $8.5 million for $20.25 million. 

Now the building under construction is hardly what was discussed, even after it was revised. But its developer, publicly traded Clipper Realty, is bullish about profits, even after paying a hefty sum. 

Depending on how the land cost is calculated, the developer paid between $170.2-$260.5 per buildable square foot. These are benchmarks for the neighborhood. 

Map by Kaja Kühl; rezonings in light blue are pending; apartment counts, from Environmental Assessment Statement filings, include full areas rezoned, not just promised projects

(The M-CROWN acronym refers to "Manufacturing, Commercial, Residential Opportunity for a Working Neighborhood," but it is rarely explained in CB 8 presentations.)

Photos from EAS

Looking at 1010 Pacific Street

In 2018, the 1010 Pacific site was proposed (as per the Environmental Assessment Statement) to create an 11-story mixed use development with 154 dwelling units, 39 of them (25%) at Mandatory Inclusionary Housing Option 1, meaning low-income units averaging 60% of Area Median Income, or AMI.

It would have 7,056 square feet of commercial floor area and 4,378 square feet of community facility space. The building would have 144,842 zoning square feet.

The plan had been long in the making.

In October 2015, the parcels--a warehouse and parking lot--had been sold for $8.5 million to 1010 Pacific LLC, affiliated with AVO Construction, which would pursue the rezoning. 

The seller, Lisa Martenson, has owned the parcels for less than three years; the cost of that transaction was not stated, but the assessed value was $402,750.

The initial design, as shown below left, was striking. At the City Planning Commission 2/13/19, architect Jay Valgora said that "the idea of creating an outstanding community facility is a very important part of our proposal," noting they'd worked closely for four years--since 2015!--with Council Member Laurie Cumbo and her staff on a community center.

Original 1010 Pacific proposal.
Studio V Architecture via NY YIMBY

While the facade was not landmarked, "we elected to keep that and include that as part of the history and memory of the neighborhood and to incorporate the Art Center within that," Valgora said. They were "already speaking to different arts groups."

Asking for too much

But they were asking for 11 stories, part of R7D zoning and a Floor Area Ratio (FAR) of 5.59, which the City Planning Commission said would be too tall and dense "on a 70-foot-wide street and 800-foot-long block, and would also set an undesirable precedent for density on other similar mid-block locations."

So the City Planning Commission (CPC) modified the zoning to R7A/C2-4 district, with an FAR of up to 4.6--consonant with Community Board 8's guidelines for the mixed district below Atlantic Avenue and with the density sought by the other private applicant down the block, 1050 Pacific Street. (I'll write about that project separately.)

"The Commission is pleased that the applicant has proposed to set aside non-residential space to activate the ground floor and support job growth with new commercial space and community facility space envisioned to be occupied by a non-profit arts center," said the CPC overoptimistically, noting that, unlike with the originally proposed zoning, non-residential ground floor uses would not be required but rather permitted.

But a proposal does not mean a guarantee. The plan to incorporate the historic facade of the existing warehouse was scrapped when the building was downsized from 11 to 9 stories. 

Downsizing effects

At City Council hearing 4/16/19, land use attorney Richard Lobel, who's represented several projects in the M-CROWN area, explained that, with the reduction to 9 stories, "the total square footage of the building has now been reduced from roughly 148,000 square feet to 118,000 square feet of residential, which will consist of approximately 129 dwelling units."

At the hearing, attorney Lobel said the City Planning Commission's cut in bulk "has been a challenge for us," which meant cuts in total space and the loss of the facade.

Cumbo said, in her introductory remarks, "Since a city led rezoning takes numerous years, it is not unreasonable that these two private applicants want to move faster.... However, these proposals will help set the precedent for the wide area so we must ensure that they are consistent with the vision of the community plan." 

The problem was, the main example of consistency was modifying the proposed density at 1010 Pacific to conform with the proposed density at 1050 Pacific, not any requirement for job-creating space or lower-income housing.

Questions of affordability

From HPD, using 2016 income levels

"The project does indeed contemplate Option 1" under Mandatory Inclusionary Housing, Lobel said. 

But "contemplate" is a weasel word, and the Council's approval also left open Option 2, or 30% of the units averaging 80% of AMI, which as of 2016 meant $62,000 for a family of three, but today is $85,920.

Cumbo expressed regret at losing the "architecturally very exciting" design and asked if any could be restored. 

"I understand you had to do this quickly for today’s presentation and I understand because I’m also an artist and I consider you an artist as an architect in how seriously you take your design," she told the architect.

Valgora said he welcomed the opportunity to meet with her and explore possibilities. Of course, he was off the project once the project was sold.

CB 8's Gib Veconi, the leader of the Community Board's rezoning effort, expressed regret that, not only did the CPC allow the rezoning boundaries to extend all the way to Classon Avenue, beyond the applicant's parcel, the rezoning didn't require "light industrial, arts and community facilities uses that are part of the M-CROWN plan."

Closing the hearing, Cumbo noted that the decrease in volume meant "we lost a lot of the elements that would have complemented many of the goals of the M-Crown district." "So, there was a lot of give and take and as I stated earlier, everyone walks away somewhat disappointed," she said.

At the May 2019 CB 8 meeting, Veconi said that Cumbo had negotiated light industrial space on the ground floor. That, apparently, was not pinned down. 

A lesson was learned. For the next rezoning, known as Grand Pacific (or 979 Pacific Street), Veconi told CB 8 that, given that the 1010 Pacific lot had been sold without any agreement to follow the announced commitments, the board would explore new ways to address the enforceability. That led to a restrictive declaration for M-CROWN uses on the parcel, in exchange for a zoning bonus beyond the M-CROWN guidelines.

Voices for industrial jobs

At the City Planning Commission, a representative of both the Association for Neighborhood Housing Development (ANHD) and the Industrial Jobs Coalition had expressed opposition to "the proposed spot rezonings of 1010 and 1050 Pacific Street," noting CB 8's efforts "to enact a broader neighborhood-wide rezoning."

"Rather than advance spot rezonings in the district," testified Armando Moritz-Chapelliquen, "the City Planning Commission should bring the proposed developments at 1010 and 1050 Pacific into compliance" with M-CROWN

"The landowners are asking for the right to develop much more than they are currently allowed and not only are they not being required to set aside space for industrial uses but the new zoning they're seeking doesn't even incentivize the creation of industrial space," added Paula Crespo, a planner at the Pratt Center for Community Development.

"This contradicts the community’s vision for promoting development," she said, "that allows landowners to reap the financial benefits of building new housing while also creating space for industrial businesses and the jobs they provide to city residents."

Reaping the benefits

Indeed, the landowners have reaped the benefits. Six months after the rezoning was passed in May 2019, the owner sold the parcels for $20.25 million to 1010 Pacific Owner LLC, an affiliate of the publicly traded Clipper Realty, owned by David Bistricer. Even counting the costs of the rezoning, that's a huge profit.

Today, confirming the slide above, the building permit indicates 118,978 sf, but with 175 apartments, not 129. That implies far smaller units, with a more transient population. There's no commercial/arts space, only amenity space for residents.

From June 2020 Clipper Realty presentation, post-rezoning

According to the June 2020 Clipper Realty presentation to investors, excerpted above, the full cost of the land was $31 million, not $20.25 million. (Perhaps that includes financing costs.) At $31 million, the 119,000 buildable square feet would cost $260.5/bsf. At $20.25 million, the parcel would cost $170.2/bsf.

In a 3/15/22 earnings call, Bistricer told investment analysts that Clipper is "targeting substantial completion in the fourth quarter." They're expecting a 6.5% stabilized cap rate, which is a solid investment return.