If the 962 Pacific developer didn't win a rezoning, Totem--and maybe Ailanthus--show a connection and a track record.

Last week I published Making Sense of the 962 Pacific Street Rezoning Story, a couple of weeks after the New York Times published two online articles about the failed rezoning effort for that Crown Heights lot, but just before the Times published the package in print.

So this post repurposes some of that long article.

One lesson from some past spot rezonings, as I reported, is that the applicant, often spouting promises of community commitments, is not looking to (or even able to) build, and plans to sell the property once a lucrative rezoning as been achieved.

“What we're trying to do… is work with all of you so that we can maintain control over our property, and that we could then bring in somebody, a developer, that echoes the same values we have and that the community has,” property owner Nadine Oelsner told Brooklyn Community Board 8.

Would the Oelsners maintain a majority ownership in a joint venture? “We pray to God," she responded, "we can keep this property and we can have a controlling interest."

That’s, of course, was hardly definitive. Why would a new investor leave the Oelsners in control? 

That's why it's important in such cases to lock in promises in a side contract, often (misleadingly) termed a Community Benefits Agreement.

Who might it have have been?

The pattern with some but not all previous rezonings nearby has been for the property owner to cash out, such as with 1050 Pacific Street.

 
I wrote that I wouldn’t have discounted the involvement of Totem, co-founded by former Downtown Brooklyn Partnership head Tucker Reed. Totem has been successful in achieving at least two rezonings, with its main investor's money (mostly), and saw one of those rezonings already cash out.

Totem--or perhaps its new incarnation/associate firm, Ailanthus--bears watching, because it has been notably successful with some high-risk, high-reward rezonings, able to get nonprofits as partners and to inoculate against pushback, delivering not insignificant public benefit--but more significant profit.

It's the kind of nimble politics, often behind the scenes, that Atlantic Yards developer Forest City Ratner was once good at--until it overreached.

At the City Planning Commission, one person testifying in favor of the project was Totem VP Elizabeth Canela, who some might remember as a staffer at Forest City.

Also testifying was Daniel Lebor, a partner at the real-estate firm TerraCRG, who with firm head Ofer Cohen brokered the 2023 sale of 1057 Atlantic Avenue from a team led by Totem and BEB Capital to Douglaston Development.

BEB Capital supplies most funding for recent rezoning projects credited to Totem. It’s based in Port Washington.

Cashing out

News reports claimed Douglaston paid $66 million for the rezoned (for residential use) parcel, though the sale document says $65 million. BEB paid about $24.9 million: parcels $13.5 million, nearly $4.8 million, and $6.6 million. Terra CRG also brokered those sales.

So that land purchase, plus the cost of the ULURP process, was alchemized by rezoning into a significant return, even as the building will deliver 30% affordable housing (137 units), of which two-thirds will be affordable to low-income households at 60% of Area Median Income, under Mandatory Inclusionary Housing Option 2.

The beneficiaries included two BEB entities, with the signatory Lee Brodsky, owning about 87.2% of the shares, and two holding companies, one with Reed as signatory and the other with TerraCRG’s Cohen as signatory, each owning 6.4%.

Other projects

Separately, a partnership involving BEB Capital, Totem, Cohen, and SK Development gained $121 million in financing for a 187-unit development at 737 Fourth Avenue in Sunset Park.

The project includes a Community Benefits Agreement signed with the Fifth Avenue Committee and others. The Fifth Avenue Committee also works with Terra CRG on leasing retail parcels it controls.

A much bigger project in East New York, known as Herkimer-Williams, is pending for Totem.

Another connection

I also wrote about how a public affairs consultant connected to the Oelsners wrote a supportive comment on a fundraising website for Peter Anekwe, a Crown Heights man whose speech at a Community Board 8 meeting helped galvanize a vote in favor of the compromise to which the landowner had agreed.

That consultant, Ben Branham, contributed $100 to Anekwe’s fundraiser. William Oelsner, Nadine’s husband, contributed $250. So did Totem’s Reed.

Enter Ailanthus

If 962 Pacific resurfaces, the partner might not be Totem but rather a new “platform” called Ailanthus, which involves two Totem principals and Terra CRG’s Cohen.

From a May 13, 2024 press release headlined Brooklyn Real Estate Leaders Launch Housing Creation Platform to Tackle NYC's Affordability Crisis, produced by Berlin Rosen, the go-to public relations firm for real estate:

Ailanthus, a new housing creation platform that aims to create 10,000 new units in New York City over the next five years, was launched today by Ofer Cohen, Tucker Reed and Vivian Liao. The principals have collaborated on several Brooklyn projects over the last five years, with a pipeline of approximately 1,500 housing units through developments such as 1057 Atlantic Avenue and 737 Fourth Avenue.

…Ailanthus takes direct aim at the capital assumption that entitlement efforts are riskier, drawing on a track record of success of assembling sites, partnering with community stakeholders and successfully entitling large housing projects. By focusing on community-driven entitlement processes, Ailanthus will unlock a significant pipeline for housing creation that has often been overlooked by investors.

In other words, they claim a white hat, while recognizing they can, in Cohen’s words, “right size the risk profile of entitlement efforts from an investment perspective.” Translation: find properties that can be vaulted in value thanks to rezoning, while gaining “community” buy-in from nonprofit partners.

That, indeed, is possible when few watch closely or push back.

(Could it be that Totem didn't have a potential financial interest in the project but the support, from Canela and Reed, was more along the line of "game recognizes game"?)

Pursuing equity

Ailanthus also committed an unspecified fraction of profits “to local nonprofits” via the community foundation Brooklyn Org. 

The press release quotes foundation head Jocelynne Rainey: they’re “proud to work in partnership with Ailanthus to address one of the largest challenges we face in building a more equitable Brooklyn: the lack of truly affordable housing.”

Is this the best way to pursue equity? Would Brooklyn Org be interested in bolstering efforts, as articulated by the Pratt Center, to tax home-flipping or to capture value uplift that otherwise goes to “front-runners” and land speculators?

Those are the kinds of questions, I wrote, that a newspaper series on the housing crisis also might address.