In 1050 Pacific rezoning, empty promises (all 2-BRs, much commercial space) from applicant, who flipped property for likely large profit.

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

If the example of the 1010 Pacific St. project is a cautionary tale, well, that of the nearby 1050 Pacific St. even more so dramatic, given that the building was once promised to contain only two-bedroom apartments--a justification for offering less-affordable below-market housing.

Once the rezoning was passed in 2019, those plans fell by the wayside, as the property was sold--at a likely large profit--and the new owner combined the parcel with adjacent ones, producing a far larger building. 

Map by Kaja Kühl; rezonings in light blue are pending; apartment counts are from Environmental Assessment Statements; the 1050 Pacific project would now have 234 units, 1010 Pacific 175 units

Looking at 1050 Pacific Street

From 1050 Pacific EAS

The 1050 Pacific Street site was a 23,183 square foot lot, somewhat to the east of Classon Avenue, extending to Dean Street and occupied as storage for Ryder Moving Trucks. 

The parcel sold in foreclosure in 2002 for unnamed sum to 1050 Pacific LLC. In 2005, the LLC got a mortgage for $499,990, signed by member Martin Daskal. In 2009, the LLC got a mortgage for $700,000, signed by member Joshua Einhorn. 

The implication: the costs weren't too high.

The proposed rezoning area extended past the rectangular block-through project site west to Classon, allowing other landowners to potentially take advantage of the upzoning--or, as it turned out, to be acquired by property's new buyer.

The project would include two connected 8-story buildings containing 104 apartments, according to the Environmental Assessment Statement. Of the 105,670 zoning square feet, 89,880 square feet would be designated for residential use and 15,790 square feet for commercial use.

From EAS

At City Planning

Speaking at a 2/13/19 hearing of the City Planning Commission, attorney Richard Lobel said that the applicant had "owned the property for upwards of 17 to 18 years and so they felt, and after discussions with local retail owners, that smaller commercial would benefit from these types of smaller spaces," all part of the commercial square footage, including in the building's interior corridor from Pacific Street to Dean Street.

Lobel also said that, while both Option 1 and Option 2 of Mandatory Inclusionary Housing would be mapped, after consultation with Council Member Cumbo, they'd chosen Option 2, with higher incomes--an issue that irked Community Board 8 leaders, who hoped for deeper affordability.

"Is your client a long-term owner here?" asked Commissioner Anna Hayes Levin.

Lobel said yes.

"Do they intend to develop and operate this building?" she continued.

"They do," said Lobel, gaining assent from architect Paul Jensen, part of the applicant team. He noted that the first meeting on the project was June 2014, adding, in a bit of a word salad, "So they're not only long-term holders but also will you know intend to be long-term holders and again we just we think it's a really neat development."

From HPD, using 2016 income levels

He added that the building would have all two-bedroom units.

Commissioner Michelle de la Uz, an affordable housing proponent as the head of the Fifth Avenue Committee, asked about the failure to choose Option 1 for low-income units.

"We've basically been very clear with the Council Member from early on," Lobel said, "that Option Two was what was utilized in projecting the requirements to make this building work." He cited "this wonderful amenity of a central courtyard available to the community at large" and the two-bedroom units.

Given that the owner had the property since 2002, de la Uz observed, "I think the numbers can are often more likely to work in the fit in favor of Option 1 if you've owned the property for that long."

That was an understatement. There was surely some slack in their projections that if the landowners could soon sell the property at what seems to be a huge profit.

CB 8 frustrations

Testifying on behalf of Community Board 8, Gib Veconi, the leader of the M-CROWN effort, said the Community Board did vote to support the rezoning, with conditions that included allocating part of the ground floor to light industrial uses, consistent with M-CROWN and choosing Option 1. 

"It appears that the applicant is no longer willing to elect MIH Option 1," he said, "although obviously there's some further discussion to be had there." 

At an earlier CB 8 meeting, Veconi earlier had said the applicant had agreed to the conditions. But that was never pinned down--a lesson for future rezonings and a sign of lack of communication and coordination between the Council member and the Community Board. (Now CB 8 is asking for restrictive declarations on the property, as well as a document it calls a Community Benefits Agreement, a contested term, to enforce commitments.)

At the City Planning Commission, Veconi argued, unsuccessfully, for the rezoning boundary to not be extended to Classon Avenue. "The Community Board’s opposition to that is not based on general principles of rational rezoning," he said, referencing the practice of extending rezoned areas to the next street. But "having private applications take other lots down in their path and take them out of contention for that [M-CROWN] rezoning is is potentially detrimental to the community's goal."

At City Council: "two-bedroom units"

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." She said that 1050 Pacific and 1010 Pacific "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, they were only partly consistent, for example, lowering the density of 1010 Pacific to that of 1050 Pacific. And the larger precedent was instead to cast in doubt any developer's statement not memorialized in a document.

In his testimony, Lobel again talked up the ground floor, "this luscious interior court yard," allowing for smaller commercial spaces. 

He defended the choice of less affordable Option 2, given the provision of two-bedroom units.

Cumbo savored the prospect. "Can you describe for me again the bedroom mix?" she asked.

Lobel at hearing

"Sure, it’s straightforward," Lobel said, "which is that there are 103 proposed units in the building. All of them are two-bedroom units."

"And for all 103 units, they will all be two bedrooms?" Cumbo asked.

"That’s correct," Lobel said.

"That is not contingent upon anything?" Cumbo said.

"No," said Lobel.

"If the financing doesn’t work out, what will you be building?" she continued.

Lobel responded, "103 units of two-bedroom apartments." (I recently asked Lobel whether that pledge still stood and, if not, why he sounded so certain. He didn't respond.)

Other details

Cumbo asked about the architectural plans, with two different facades.

"I think we feel that after discussions with your office this façade was actually somewhat more stylized and... seemed to offer more to the community," Lobel said, "so my understanding is that the applicant was... able to incorporate this façade onto both frontages." 

(The building has since been expanded and redesigned, and the design has not been publicized.)

CB 8's Veconi again said that the Community Board voted conditional support for this project on the basis of the developers adopting MIH Option 1, so the affordability would be "as close to the level of median income" in the district as possible. (Today, with rising local incomes, CB 8 is asking for Option 3, the deep affordability option.)

Cumbo thanked both Veconi and Land Use Chair Ethel Tyus "for your incredible and tireless work and"--referring to the discussion on affordability--"I feel that I’ve done an amazing job because everyone is walking away somewhat disappointed." She added that it was "the first project that will be entirely two bedrooms that I’ve ever approved."

What didn't get discussed is why CB 8 thought, as Veconi said, that the developer agreed to use some of 15,790 square feet of ground-floor commercial space for light manufacturing, and whether Cumbo's vote was contingent on that.

The parcels gets flipped--and expanded

Any project delivering affordable housing loses some affordability due to delays. Though the rezoning was passed in May 2019, nothing got built.

More than two-and-a-half years later, the 1050 Pacific parcel was sold 12/22/21 for $26 million to an affiliate of David Bistricer's Clipper Equity, which already had purchased 1010 Pacific down the block.

Project initially aimed at blue parcel, but
has since expanded to some of the green parcels

Part of the delay apparently involved tension within the parcel's ownership group of 1050 Pacific LLC.

The sale was consummated only after a 12/9/21 declaration by Hershel Herbst releasing any claims to the property.  That reversed a 9/21/12 declaration (not prepared until 1/17/14) by Martin and Harry Daskal that Herbst had become the LLC's sole manager, and that no disposition could be effected without his written consent

The property sale also came after the resolution of a lawsuit that had been filed filed by Paul Jensen and Mark Rigerman on 7/31/19, shortly after the rezoning had passed. They alleged that the Daskals had pledged 5% of 1050 Pacific to each of them, in consideration for work on a different property, as well as to undertake the rezoning. But the plaintiffs never got deeds, and said they were unaware of the arrangement with Herbst.

"Upon information and belief, defendant is undertaking efforts to sell the Property, which has a current estimated value of $40 million, the plantiffs argued in 2019. The case was discontinued 12/23/21, after the Herbst declaration and, presumably after a settlement with the plaintiffs.

Adding to the site: enter 953 Dean

Bistricer's Clipper Realty last December bought two adjacent lots, Lots 2 (643 Classon Ave.) and 96 (953 Dean St.), for $4.73 million, allowing for a broader, albeit less rectangular footprint. (See two of the four parcels in green, above right.) That represented a rapid rise in the value of those lots.

The lots had been sold in 2000 for an undisclosed sum by Celeste King--who'd owned the property since 1985--to Baber Choudhary. In November 2014, just as the M-CROWN rezoning was percolating, Choudhary sold the parcels for $2.3 million to 643 Classon LLC, with the transaction signed by Harry Einhorn (perhaps related to Joshua Einhorn).  So in seven years, this new owner doubled its money.

Now Clipper Realty is planning what it calls 953 Dean Street, with about 50% more floor area than the announced 1050 Pacific, but more than double the number of apartments--which indicates smaller units. The permit is for a 234-unit, 164,763-square-foot mixed-use building.

In a 3/15/22 earnings call, Bistricer told investment analysts that the overall land cost would be about $48 million. "We expect to build a 9-story, fully amenitized residential building, a 160,000 residential rentable square feet with 240 units, 70% with free market and 30% affordable, which will provide us with a 30-year 421 tax abatement, 8,500 square feet of commercial rental square feet." 

That means smaller units, an average of 667 square feet, so unlikely to be all two-bedrooms. (Affordable two-bedrooms, according to NYC HDC, can be between 650 and 725 square feet, but it's very unlikely market-rate units would be that small.) Similarly, 1010 Pacific was redesigned for more, and smaller, units.

The building also would have less commercial space than earlier promised, though the building would have more street frontage.

With 164,763 square feet, that $48 million price tag--presumably including financing costs--suggests a cost of $291 per buildable square foot, more expensive than 1010 Pacific. Still, as with 1010 Pacific, Bistricer said he was expecting a 6.5% stabilized cap rate, which is a solid investment return.

He said construction should start in the third quarter of this year and take 24 months. "It will be a 421(a) tax abatement qualified, 70% free market, 30% affordable and a 35-year tax abatement. So we think that that’s very good result, very, very close to 1010 Pacific both, and it’s what we think will be the economic benefit to us and also with a geographic proximity."

The new owner has not communicated with CB 8, Veconi told me.

Voices for industrial jobs

M-CROWN stands for “Manufacturing, Commercial, Residential Opportunity for a Working Neighborhood,” and CB 8's goal was to incentivize job-creating space as part of an upzoning for increased residential density.

At the City Planning Commission in 2019, 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."

From 11/4/21 CB 8 presentation, regarding two pending projects

"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 the M-CROWN. A patchwork approach to outdated industrial zoning is not the solution."

He was backed up by Paula Crespo, a planner at the Pratt Center for Community Development, who said the projects were "not responsive to community priorities" and "premature."

"The owners of 1050 Pacific are applying for the misleadingly named mixed-use designation known as MX," she noted. "However, while MX allows for light industrial it does not actually require or even incentivize any light industrial."

"So, thanks to the dynamics of real-estate economics, these types of zones have a strong tendency to result in commercial and residential development that is devoid of any industrial uses," she said.

It looks like she was right.

"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," Crespo said. "This contradicts the community’s vision for promoting development 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."