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Here’s how much price “shrinkage” it took to sell a certain Hamptons mansion

A Hamptons home famous for its appearance in “Seinfeld” has sold for a deep discount. The Amagansett house at 45 Whalers Lane spent about a year on the market before selling for $5.725 million, roughly $3 million less than its initial asking price, according to Curbed. The Corcoran Group listed the home in February for $8.75 million and gave it a price cut in April to $7.9 million before its eventual $5.725 million sale. It […]


Source: realdeal

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NYC makes shortlist for Amazon HQ2

A surprise package arrived Thursday morning. Amazon has announced its shortlist of 20 proposals for its $5 billion second headquarters on Thursday with New York, Miami, and Los Angeles all making the cut. There were 238 proposals from around the U.S., Canada, and Mexico for HQ2, although all 20 finalists are American, except from Toronto, Ontario. In New York, Amazon is expanding even if it doesn’t win HQ2. In November, the company signed a lease […]


Source: realdeal

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Here’s what Catsimatidis’ mixed-use Coney Island project might look like

UPDATED, 12:35 p.m., Jan. 18: John Catsimatidis’ large mixed-use project on Coney Island has a new rendering. The project, dubbed “Ocean Dreams,” will feature a glass façade with a white trim between floors, and Hill West Architects is designing it, according to New York YIMBY. It will consist of three structures, two of which will be 21 stories and 221 feet tall. They will span 432,000 square feet in total with 23,000 square feet for ground […]


Source: realdeal

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Freddie Mac’s David Brickman on GSEs’ Special Role and the Outlook for Multifamily

A financier with a public-service outlook. It almost sounds like a contradiction in terms. Nevertheless, that’s the tightrope that David Brickman, the executive vice president who leads Freddie Mac’s multifamily business, must walk every day. The University of Pennsylvania and Harvard University graduate, a year shy of his 20th anniversary with the agency lender, answers to an intricate pair of overlapping mandates: earn a sensible economic return from loan activities while assertively promoting liquidity and affordable housing even during economic crises.

If those responsibilities wear on Brickman, it doesn’t show. At the Commercial Finance Real Estate Council’s annual conference in Miami last week, the energetic mortgage executive walked Commercial Observer through his thoughts on the business with enthusiasm borne from a flourishing multifamily sector in the United States.

Commercial Observer: How does Freddie Mac understand its mission?
David Brickman: We have liquidity, stability and affordability tattooed on our forehead. Those are our three mandates. But our business model resembles that of a direct lender. We make all economic decisions relating to loans and all credit decisions. We think that that model makes us that much more “real estate people.”

How is your group organized?
We have a regional model, different than people’s typical view of government-sponsored entities. In New York, our staff is very much made up of New Yorkers, real estate people. When it comes to providing liquidity, we compete like a lender. The other lenders perhaps wish we would compete a little less. But we take very seriously the view that we’re supposed to act like a private lender.

To what extent does the affordability mandate limit what kinds of deals you’ll get involved in?
We will do deals that aren’t, per se, affordable. But we will proportionately lean in and be more aggressive and do more, if it’s got higher affordability. It’s a more nuanced model than just yes or no, but it’s absolutely there in the sense that the more affordable a project is, the more important it is to get involved.

So is that the primary driver of your decision-making?
As a business matter, I want to earn a reasonable rate of return on what we do. We view ourselves as a fiduciary, and I think we’ve been a good fiduciary for our shareholders—mainly the U.S. taxpayer.

What level of risk can you tolerate on your balance sheet?
We want to distribute the significant majority of risk, given that we are owned by the taxpayer. We look to support affordability. For any business activity we do, I like to ring all three bells to some extent: If there’s no affordability, I should earn a little bit more money on it. If it’s affordable, maybe I can earn a little bit less return. When it comes to liquidity, the good news is that we were able to do that while achieving the other objectives [during the financial crisis]. We were able to earn a reasonable return during that period of time. Our market share grew during the crisis, and then it shrank again after.

How would the market be different if the government-sponsored entities disappeared?
We actually did an extensive analysis of this in 2012 or 2013. We concluded that if you were to get rid of Fannie Mae and Freddie Mac, mortgage rates would go up by about 50 to 100 basis points, cap rates would go up by a similar amount, construction activity would decrease significantly in the short term, and there would be a diminishing supply of multifamily for some time. As a result, multifamily rents would be higher, all else being equal.

So the data vindicates your job.
It’s certainly a reasonable thing to ask: Do we need Fannie or Freddie? Some have suggested that there’s no economic consequence to [our presence], and I think we’d probably say, no, that’s not accurate. If you get rid of us, that would hurt the multifamily market.

With such high student-debt levels and stagnant wages, are young Americans less interested in homeownership than their parents were?
Those factors certainly contribute, as does the shift to information-based employment, which lends itself to a little bit more urbanization. I think there is a trend toward delayed marriage and delayed childbirth, which aligns with renting longer. I’m not sure that any fewer Americans will own a home today than in the past, but maybe they will own a home for a lower percentage of their lives. The idea of millennials renting more, I think that’s true, but what’s really happening is that people are just a little older when they transition into owned housing.

What’s Freddie Mac’s role in the commercial mortgage-backed securities realm?
We have our own type of securitization called K-deals. Those are exclusively multifamily. Other than that, we don’t participate in regular conventional CMBS. Over 90 percent of what we’re doing these days will turn up in some type of securitization. And we will never commingle our collateral with anyone else’s.

Why the 90 percent level?
We aspire for it to be 100 percent. I’d like to distribute risk on everything we do. In the past, we used our balance sheet, our retained portfolio, to buy and hold loans. Our retained portfolio has been shrinking because it’s been mandated to shrink by the Treasury Department and the Federal Housing Finance Agency. We haven’t had the ability to hold much on the balance sheet. What we don’t securitize tends to be loans that are difficult to securitize.

Source: commercial

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De Blasio wants the newest tenant on Billionaires’ Row to be a homeless shelter

A homeless shelter could be heading to Billionaires’ Row. The de Blasio administration is planning to open a shelter for 150 residents at 158 West 58th Street — the Park Savoy Hotel — in March, according to the New York Post. The Park Savoy stands back-to-back with One57, one of the glitziest apartment buildings in the city. The shelter is part of the city’s plan to create 90 new shelters across the five boroughs, and […]


Source: realdeal

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On the Home Front: The Mayor and REBNY’s Unlikely Alliance on Affordable Housing

Anyone running for higher office in New York must invoke the three pillars of city governance to earn the job: One, plan to keep crime down; two, improve public school performance; and three, create more affordable housing. And a sitting mayor must administer concrete plans addressing them.

Moreover, he or she must do all three while avoiding any self-inflicted stumbles—or corruption inquiries—and your legacy is secure as a civic leader. 

A month into his second term, Mayor Bill de Blasio has overseen a steady 27-year dip in crime returning the city to levels comparable to the 1950s.

His most widely touted achievement has been a universal pre-K program that will improve the lives of New York’s youngsters for generations. More students are attending college than ever before. And academic achievement in public schools has slightly improved.

Housing has been more complicated.

Creating new housing is a goal that progressive politicians and the city’s profit-minded developers share.

“Housing is all about supply and demand,” said Real Estate Board of New York President John Banks. “We don’t have enough housing in New York, and we need to build more housing for all segments of the market—affordable, moderate and market rate.” 

New construction and property acquisitions are dependent on New York’s trillion-dollar real estate market, state and federal tax breaks and individual property owners. 

But mayors have many tools to spur development generally, and on parcels of city-owned land.

The late-Mayor Ed Koch is still celebrated for generating 100,000 units of affordable housing—a promise he made in his 1985 State of the City address and kept.

Former Mayor Michael Bloomberg used Koch’s plan as a model. By the end of his administration, the city created or saved 165,000 units of below-market housing.  

De Blasio has upped the game: When he took office in 2014, he set a goal to build and protect 200,000 affordable units by 2024, and the city invested $41 billion to make it happen. 

Thanks to a booming economy, tax revenues rose from 2012 to 2016, although they dipped slightly over the last year. 

Construction also surged early in the mayor’s first term with the city approving permits for 20,329 units in 2014, more than three times as many as in 2009. And permits continued to be issued at a frantic pace—an average of 19,826 each year from 2010 to 2017, according to records analyzed by REBNY. That’s a 14 percent decline from the previous decade’s annual average of 23,123 but 182 percent higher than the 1990s when the yearly average was 7,020 permits, the records show.

The renewal of a crucial tax break last April also likely spurred developers to build luxury projects with a portion of units reserved for lower- and middle-income residents.

The housing tax abatement, known as 421a, expired in January 2016 after state lawmakers failed to reach a deal with REBNY and the Building and Construction Trades Council of Greater New York over prevailing wages for construction workers. Negotiations over the measure took a year and a half before it was tucked into the state budget as “Affordable New York.”  

Developers have been waiting for the abatement’s renewal, causing a slight lag in development projects, Banks said.

“We have every expectation the new Affordable New York program will return us to the time frame of the past decade of 20,000 units per year in production,” Banks said.

160801 aerial view1 On the Home Front: The Mayor and REBNYs Unlikely Alliance on Affordable Housing
Rendering of the Bedford Union Armory redevelopment in Crown Heights. Photo: BFC Partners

The de Blasio administration was able to finance 87,557 affordable homes over the last four years, including 24,536 units in 2017 alone, according to an announcement from the mayor this week. As of July 2017, the Bronx had seen the most affordable preservation and development, with 24,014 units between 2014 and 2017. Manhattan had the second-highest amount over that period with 23,862 units, followed by Brooklyn (21,494), Queens (6,226) and Staten Island (2,055), records show.

Affordable housing developers have embraced the mayor’s housing efforts.

“The mayor doubled down and they put a lot of resources, human and financial into the plan. They seem to be doing very well and on track,” said L+M Development Partners CEO Ron Moelis. “The mayor has done a good job reigning in costs to make programs more efficient.”

But de Blasio has had difficulty selling his plan to the very constituents he hopes will live in these units.

City Hall wanted to rezone 15 neighborhoods in his first term. Only three—East New York, Brooklyn, Far Rockaway, Queens and East Harlem—passed the City Council and one was withdrawn entirely. 

The East Harlem hearings were incredibly contentious; activists chanted, “East Harlem is not for sale!” and disrupted a council meeting, arguing the rezoning would allow luxury development that would price out longtime residents. 

Other large redevelopment projects on the mayor’s agenda, such as the Bedford Armory site in Crown Heights, Brooklyn or Sunnyside Yards in western Queens, have been significantly altered or delayed in the wake of community opposition. 

And public housing residents blasted his proposal to build private housing on open space in their complexes, concerned the plan would create “two cities”—a backhanded reference to de Blasio’s campaign promises to reduce income inequality. 

Such criticism is steeped in “NIMBYism”—“Not In My Backyard”—where residents want more affordable housing, just not in their own neighborhoods, Banks said.

“It is understandable that people would try to protect their communities, but you can’t ask for more housing and prevent the production of housing because of concerns about density and fear of gentrification,” he said. “They don’t like tall buildings, but the de Blasio administration recognizes, in order to meet prices demand, he has to upzone and have more density.”

Developers must continue to provide housing units at a range of incomes, Banks asserted, even if some of the units at the moderate end stay on the market longer because they are the units paying for most of the project.

“In order for building to be economically viable, you have to get a certain amount of rent and you need that upper income level to make the building financially viable,” he said. “Otherwise, it throws the financing off.”

Housing advocates say their primary concern has less to do with density than with affordability. 

“The plan should focus more on targeting the limited resources the city has on housing that’s affordable to the very low-income households in the city— that’s 50 percent of area median income and below,” said Oksana Mironova, a housing policy analyst at Community Service Society of New York, which is a nonprofit that fights poverty. “That’s where the greatest rent burdens are, and that’s the demographic of people suffering the most amount of displacement as a result of everything happening in the city.”

Jonathan Westin, the executive director of New York Communities for Change, a housing and workforce advocacy group, attributed a surge in homeless New Yorkers—up 39 percent over the past year—to a lack of housing options for the city’s poorest residents. About 60,000 New Yorkers, including 40,000 families with children, are currently living in city shelters.

“In order to make a dent in the homeless numbers, they need to build and preserve housing for people on the verge of homelessness—working families with, in some cases, minimum-wage jobs,” he said. “The mayor’s housing program isn’t meeting their needs.”

Instead that plan largely follows the Bloomberg blueprint of rezoning swaths of neighborhoods and working with private sector developers to build new housing, Westin said.

“The rezonings serve to accelerate gentrification in some ways worse than what Bloomberg [did],” he said. “They’re going into neighborhoods and gentrifying them, and that leads to more displacement. It’s disrupting the community and pushing out families.”

8311752360 1b55d0bf90 o On the Home Front: The Mayor and REBNYs Unlikely Alliance on Affordable Housing
Construction work at Sunnyside Yards in western Queens. Photo: Patrick Cashin/Metropolitan Transportation Authority

The city’s booming economy has allowed the mayor to revise his housing projections upward. In October, the de Blasio administration pledged to construct and preserve 300,000 units by 2026.

“We’ve kept our promises to New Yorkers, and now it’s time to go farther and faster,” de Blasio said at an Oct. 24, 2017, press conference. “Like Mayor Koch before us, we are building an engine that will keep families in safe, decent and affordable homes for decades to come. We will keep this a city for seniors, veterans, working families and the middle class.”

But that engine may stall thanks to factors beyond the mayor’s control.

The city’s economy may be slowing down as both private sector job growth and tax revenues over the past year have not kept pace with previous years since 2012. Meanwhile, construction costs and property values continue to rise, making it more expensive for the city to finance new housing projects. 

Real estate industry leaders have been clamoring for the revision of the scaffold law, which makes property owners and contractors liable for injuries on the job. But any reform faces an uphill battle in the legislature.

“New York is the only state in the nation whose law continues to dramatically increase the cost of general liability insurance,” said Banks. “Unless we do something about the Scaffold Law, we’ll remain at a competitive disadvantage to other states.” 

The federal tax overhaul will likely benefit real estate investors, and the plan kept subsidies for private activity bonds that pay for large development projects, but the long-term effect of the tax plan on the market remains unclear.

And the Trump administration itself is a wild card that could cut federal spending on affordable housing and development programs, eliminate a visa program that enabled investment in development projects, or simply shut the government down repeatedly. 

City Hall officials acknowledge the uncertainty of the tax plan and budget cuts on their housing plans. 

“We have been actively working to form coalitions with national affordable housing advocacy groups and other cities and states to fight threats and elevate the importance of housing, which isn’t just a crisis in New York City,” said de Blasio spokeswoman Melissa Grace.

Whether the mayor ultimately succeeds at keeping the city affordable may hinge more on the city’s ability to preserve large tracts of housing than create new units.

“The real threat to affordability is the naturally occurring moderately priced rent-stabilized multifamily buildings in weaker parts of strong markets and strong parts of weaker markets,” said Community Preservation Corporation Vice President Robert Riggs, a housing lender who works with nonprofit developers. “There’s a lot of new construction in these neighborhoods, but it does not compare to the amount of units that are just there.”

Preservation takes up about 60 percent of the mayor’s 300,000-unit plan, a City Hall spokeswoman said. And two-thirds of the 77,000 affordable units were existing homes the city financed and kept under rent regulation.

City housing officials have been scouring properties in emerging residential markets, such as Crown Heights and Bushwick, both in Brooklyn, and Washington Heights, to keep residents in their homes. 

The prices of units in those markets across the city will continue to rise as property values increase if the city doesn’t get there first, housing lenders say.

“They’re small buildings, no inclusionary component, not happening with tax credits,” Riggs said. “It’s going to be building by building with owners getting comfortable with the city’s housing program.”

Update: This story has been edited from the print version to reflect more current data on the de Blasio administration’s financing of affordable housing.

Source: commercial

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Size isn’t everything: Durst courting smaller companies at 1 World Trade Center

Condé Nast may be the most famous tenant at 1 World Trade Center, but plenty of smaller companies are signing leases at the building as well. As the Durst Organization searches for another major tenant to take as much as 400,000 square feet in the building, leasing smaller portions of the space has gradually raised its occupancy rate, according to Crain’s. Durst reserved 360,000 square feet of prebuilt office space on nine floors of the […]


Source: realdeal

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Labor vs Lobbyists: A Look at the ‘Campaign to Stop REBNY Bullies’

The emails first began circulating last summer and intensified during the fall as the November elections approached. They were scathing in their criticism of the top industry body in New York real estate, labeling the organization as a “plague” on New York City and calling its leaders “a bunch of billionaire bullies and racketeers.”

One featured more than 30 political candidates running for various city offices—including mayor, public advocate, comptroller, borough president and City Council—holding up signs saying to “beware” of the “real estate bullies” in question. Others spread the word of public protests at City Hall and echoed calls for the state to investigate Mayor Bill de Blasio and his administration for operating pay-to-play schemes benefitting developers.

They were, and continue to be, the work of the Campaign to Stop REBNY Bullies, a protest initiative laying a wide variety of issues—from the city’s affordable housing shortage and homeless crisis to the displacement of small businesses and the influx of construction worker fatalities in recent years—squarely at the feet of the Real Estate Board of New York.

The campaign is led by Ray Rogers, a 73-year-old labor activist and organizer renowned in labor circles for his anti-corporate initiatives against the likes of Coca-Cola and textile manufacturer J.P. Stevens & Co. (the latter was dramatized in the Academy Award-winning 1979 film Norma Rae). Having made a career challenging the perceived greed of corporate entities and political institutions—often working on behalf of and alongside labor unions—Rogers and his organization Corporate Campaign have now set their sights on REBNY.

“My objective is to greatly diminish the political power of REBNY and to make REBNY something that you would not recognize today,” Rogers told Commercial Observer. “What REBNY should be in the business of is working with the vast majority of their membership, which is real estate agents and brokers, to help them buy and rent and sell properties. They should not have their dirty hands and their dirty money in politics, trying to undermine labor protections for construction workers and undermine every kind of rent control and rent stabilization.”

Upon launching last May, the Campaign to Stop REBNY Bullies produced and released a five-minute animated film entitled “Bullies,” which screened at the annual Workers Unite Film Festival. The animated short blames REBNY-backed policies for exacerbating high commercial rents that price out small businesses and for fostering unsafe working conditions on construction sites (in addition to drawing a curious, if unclear, connection between REBNY and real estate industry investment in the tobacco industry).

In the months since, the campaign has staged and participated in a handful of protests around the city designed to criticize the real estate industry’s influence over New York politics and public policy, and sought to get its message out by lobbying the support of dozens of political candidates vying for city positions—many of whom appeared in the aforementioned photos on email blasts and the campaign’s site, holding up signs labeling REBNY as “bullies.”

And this week, the campaign will stage its highest-profile protest to date outside of REBNY’s 122nd Annual Banquet at the New York Hilton Midtown—an occasion that will see U.S. Senate Minority Leader Chuck Schumer receive an award honoring his public service. Rogers announced the protest with an open letter to Schumer voicing “displeasure” at the senator’s acceptance of the award—citing REBNY’s support of the Independent Democratic Conference (IDC), a group of eight Democratic New York state senators who align themselves with senate Republicans, enabling the GOP “to maintain control of the New York State Senate particularly as it relates to the interests of the heavyweights in the real estate industry,” the letter says.

photo by stoprebnybullies org 3 Labor vs Lobbyists: A Look at the Campaign to Stop REBNY Bullies
Labor activist Ray Rogers hands out literature at a Campaign to Stop REBNY Bullies protest last year. Photo: Campaign to Stop REBNY Bullies

REBNY discounts Rogers’ efforts as a union-backed initiative that’s part and parcel of the building trades unions’ ongoing battle for relevance in a construction sector that’s increasingly veering in the favor of nonunion contractors. In particular, the trade association pointed to Metallic Lathers and Reinforcing Ironworkers Local 46 as the driving force behind the Campaign to Stop REBNY Bullies and as Rogers’ primary financial backers.

“We respect Local 46’s right to free expression,” a REBNY spokesman said in a statement. “We wish them well as they seek to more effectively market their services to address the needs of a 21st century construction site.”

Rogers acknowledged that Local 46 supports the Campaign to Stop REBNY Bullies but disputed the notion that any union had hired him with the express goal of lodging an anti-REBNY smear campaign. Rather, he said his interest in the real estate industry group dated back several years and was initially motivated by the issue of construction safety and hazardous working conditions on construction sites. He added that he had had conversations with numerous union leaders about the prospect of taking a stand against REBNY, only for those parties to eventually back out.

“I tried to get [other] labor unions involved but couldn’t get anyone to really do it with me,” Rogers said. “There are a lot of labor leaders out there that have shown great fear, but the labor union was not built because people were scared to fight. Labor leaders have got to start realizing that [unions were] built on activism and courage. I’m so sick of hearing about how ‘REBNY is destroying us’—well, you have an opportunity to turn the tables.” (Local 46 did not return multiple requests for comment.)

While the matter of organized labor plays an undoubtedly significant role in the Campaign to Stop REBNY Bullies’ platform (among the campaign’s goals is for at least 90 percent of New York City construction workers to be working under union contracts), the initiative has gained support from political candidates and social justice advocates passionate about issues ranging from the future viability of the city’s small businesses to the influence that corporate-backed industry groups like REBNY have over the political system.

“I’m not anti-real estate; real estate is important to New York City. But, I do believe REBNY wields tremendous clout over our political system, and I don’t think any one entity should have that,” Sal Albanese, the former city councilman who challenged Mayor de Blasio in last year’s Democratic mayoral primary (and ran in the general election as the Reform Party candidate), told CO.

Albanese described REBNY has having “disproportionately outsized influence over our politics” at the city and state level, citing the role that real estate interests had in the corruption trials of former state politicians Sheldon Silver and Dean Skelos.

“These guys have deep pockets, and they know how to manipulate the political process to their benefit—our campaign finance laws make that possible,” he said. “Chuck Schumer isn’t alone; Bill de Blasio, a so-called progressive, is in the pocket of big real estate. There’s no single entity in the city or state of New York that wields more influence.”

sal albanese d mayor Labor vs Lobbyists: A Look at the Campaign to Stop REBNY Bullies
Sal Albanese is among the New York City political candidates to have supported the Campaign to Stop REBNY Bullies. Photo: Campaign to Stop REBNY Bullies

Albanese also criticized the industry group for its role in stunting the progress of the controversial Small Business Jobs Survival Act (SBJSA), which would make it easier for commercial tenants to renew their leases while hindering landlords’ abilities to raise rents at their own discretion. REBNY President John Banks has labeled the proposed law “unconstitutional.”

That issue, in particular, has drawn support for the Campaign to Stop REBNY Bullies from activists like Marni Halasa, who unsuccessfully challenged new City Council Speaker Corey Johnson for his seat representing the Third District on Manhattan’s West Side. Halasa said Rogers’ campaign “highlights an important issue that the average layperson is unaware of: how big real estate actively works against the public.”

“I think Ray has really galvanized small business activists from all over the city to come together, and that’s often difficult,” she noted, pointing to the issue of “hyper-gentrification” that negatively impacts neighborhoods and small businesses as the primary reason she supports the campaign. “A bill that would provide small business owners with leasehold rights and the right to renew their leases—if that can get not just a public hearing but support and passage—would be huge. But does REBNY want that? I’m sure they don’t.”

Albanese agreed that passage of the SBJSA would be “one of the barometers” of the campaign’s success—“If they could pass significant legislation that REBNY opposes, that would be a major win for [Rogers] and the movement,” he said—as would campaign finance reform “that would limit [REBNY’s] influence.”

Albanese—who along with Halasa is among the candidates who had their picture taken holding Stop REBNY Bullies slogans—also contested the notion that Rogers is merely doing the unions’ bidding under the guise of a collectivist, anti-corporate campaign. “Ray Rogers is not somebody you can put up to anything,” he said. “He’s got a history of being an activist and an organizer around the country, and he takes on causes because he believes in them.”

Of course, Rogers’ campaign still has a long way to go in terms of getting anywhere near the traction it would need to attain its lofty goals; the “Bullies” animated short has only just over 1,000 views on YouTube, and sources with knowledge of REBNY’s thinking told CO that the organization has been far from intimidated by the relatively tepid turnout at some of the campaign’s protests to date.

Rogers himself is under no illusions about the task that he has set for himself and the work that lies ahead should he wish to realize his campaign’s goals.

“I say to people all the time that, when you confront powerful institutions, you cannot expect to gain any meaningful concessions or justice unless you’re backed by a significant force or power yourself—it’s not just one demonstration after another,” he noted. “I need to raise money, just like political leaders. We’re taking on the most powerful industry—the most powerful lobby and institution—in the state.”

Source: commercial

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Friend of the Court: REBNY Is Not Afraid to Dip Its Toes in Legal Matters

While it may not be a litigious body, the Real Estate Board of New York is willing to get down and dirty in the legal system when needed.

The 122-year-old trade association doesn’t jump into the ring on every real estate-related legal case; it picks ones that have potentially serious impact on REBNY’s 17,000-plus members.

“In terms of examining the cases, [they] range from tenant behavior to smoking to construction,” explained Carl Hum, the general counsel for REBNY. “We have to be vigilant about all of these different areas of law. They touch upon the industry. They touch upon our membership and they touch upon how buildings are managed and constructed.”

In 2017, REBNY was involved in six legal cases—one as a plaintiff and the rest as a nonlitigant. In those five cases, REBNY filed amicus curiae, or “friend of the court” briefs (from someone who is not a party to the case), to convey its members’ strong opinions on the matter. In two of the cases, REBNY came out victorious, and the other four are ongoing. Commercial Observer takes a brief look at the six.

Keeping New Construction Decisions With City Agencies

A group of Upper West Siders had a beef with the New Jewish Home (previously called Jewish Home Life Care) and its plans to erect a 20-story nursing home and rehabilitation center at 125 West 97th Street between Amsterdam and Columbus Avenues.

Called the Living Center of Manhattan, the new building is slated to be the first nursing facility in New York City based on the Green House elder care model and will replace the nonprofit’s current outdated nursing home at 120 West 106th Street.

Parents from the adjacent Public School 163 and residents of three neighboring buildings were upset about the environmental impact the construction would have on them and filed a lawsuit in 2015. They wanted the New Jewish Home to redo its environmental review of the project to reduce dust and noise, according to a DNAinfo story at the time.

The plaintiffs “challenged the issuance of a certificate of need” by the state health department, “which constituted authorization to construct a proposed nursing facility,” according to REBNY’s Sept. 20, 2017, friend-of-the-court brief on behalf of the nursing home. Before giving permission to New Jewish Home, the New York State Department of Health conducted a Final Environmental Impact Statement, or FEIS. The lower court annulled the agency’s authorization, claiming it “failed to take the requisite ‘hard look’…for potentially significant adverse construction impacts,” REBNY’s filing states. The Supreme Court Appellate Division’s First Department (which covers Manhattan and the Bronx) reversed the decision, emphasizing “that it is not the province of the courts to second-guess the thoughtful deliberations of agencies and that those decisions must stand unless arbitrary, capricious or unsupported by the evidence,” the brief notes.

REBNY took a stand out of fear the case “would undermine the integrity of the [New York State Environmental Quality Review Act] environmental review process,” the brief says.

Hum said that REBNY “felt that this was important to weigh in on the city’s land use procedures and [to reaffirm that the] EIS was done properly. We wanted to uphold the EIS.”

The Court of Appeals made its determination on Dec. 13, 2017, according to Richard Leland, a partner at Akerman and REBNY’s attorney in the case. The court upheld the validity and appropriateness of the EIS, a coup for REBNY.

Following the decision, REBNY President John Banks said in a statement, “This ruling reaffirms the consistent approach to environmental review in New York City’s land use procedures. The board filed a friend-of-the-court brief in this case because we thought it was important to uphold this approach.”

As for REBNY’s involvement, Bruce Nathanson, the senior vice president of the New Jewish Home, said in a statement provided to CO, “REBNY was extremely helpful in conveying to New York’s highest court the need for established and predictable environmental review procedures to ensure that both developers and nonprofit institutions like ours know what is expected in an EIS. REBNY made the point, from a practical development perspective, of how important it is to know that compliance with the detailed procedures set out in New York City’s CEQR [or City Environmental Quality Review] Technical Manual should be sufficient to establish that an EIS complied with law.”

A spokesman for New Jewish Home said that while the EIS matter was settled, the nonprofit organization is awaiting a decision on an unrelated case.

“Once that’s been adjudicated a construction schedule will be determined,” he said.

Responsibility for Compensation When Construction Workers Injure Themselves Off-Site

Another case where REBNY flexed its muscles involved an accident in connection with the construction of a Tribeca high-rise condominium.

In 2012, ironworker Robert Gerrish tripped and fell at a work site in the Bronx.

“He was bending and cutting steel rebar to be used for the construction of a new building located at 56 Leonard [Street in Manhattan],” court documents read. Since Alexico Group owns 56 Leonard Street and Lendlease was the construction manager, Gerrish sought to hold the landlord and Lendlease liable under New York’s Scaffold Law, a labor law.

Lendlease subcontracted with Collavino Structures (one of the defendants), which subcontracted with Gerrish’s company, Navillus Tile (nonparty), for the Bronx work. Collavino leased space in the Bronx Yard from Harlem River Yard Ventures (nonparty) for the construction work. Alexico and Lendlease were being charged with not “providing reasonable and adequate protection and safety” at the yard.

Gerrish sued Alexico and Lendlease for labor law violations. In April 2015, the New York County Supreme Court dismissed the plaintiff’s labor law claim. Last February, the Supreme Court Appellate division, first department, reversed that decision.

In October, REBNY filed a brief with the New York State Court of Appeals, contending that “the Appellate Division erred in concluding that the trade contract between Lendlease and Collavino provided a nexus to impose liability on appellants for an alleged violation of labor law that occurred on property that 56 Leonard did not own and where Lendlease did not supervise or control the work side.”

The organization further said the ruling would have a “detrimental effect on the real estate, construction and insurance industries by expanding their liability to an uncontrollable, limitless degree and driving up the cost of construction and insurance in New York to the state’s detriment.”

This case awaits an outcome.

A spokesman for Lendlease said the company does not comment on pending litigation. A spokeswoman for Alexico Group didn’t respond with a comment.

screen shot 2018 01 16 at 12 56 02 pm Friend of the Court: REBNY Is Not Afraid to Dip Its Toes in Legal Matters
LEGAL EAGLES: REBNY has flexed its muscles in legal cases involving construction of an Upper West Side nursing home at 125 West 97th Street, top left, a construction injury at a site affiliated with the building of 56 Leonard Street, right, and a rent-regulation issue stemming from a tenant at 285 West Fourth Street, bottom left.

Let the Conversions Recommence!

Last June, REBNY appealed a 2016 ruling that upheld the city’s moratorium on hotel conversions into condominiums.

The issue relates to a bill that Mayor Bill de Blasio signed into law in June 2015 banning the conversion of more than 20 percent of the space in Manhattan hotels with at least 150 keys into other uses. Its intention? To try to cap the number of hotel owners turning their properties into residential condos.

Having 29 hotel owners as members, REBNY filed papers with the Appellate Division in June 2017.

“For those 29 REBNY members, Local Law 50 limits their right to use their property to realize its full-market value,” the appeal indicates.

The board also claimed that the law shouldn’t have been passed as it was a land-use matter It should have been under the purview of the City Planning Commission rather than the City Council, REBNY said.

“We believe the trial court’s findings were in error,” Banks said in a statement provided to CO. “We are confident the appeals court will find this restriction on hotels unconstitutional, circumvents city land use procedures, constitutes an unlawful taking and is without legitimate public purpose.”

The case is ongoing, according to Hum.

Whether a Minority Partner Can Dissolve a Partnership

REBNY gave voice to a case that it fears could alter the nature of partnership agreements, which are commonplace for holding and operating real estate (particularly because of the tax advantages they offer).

In a case against Marc A. Malfitano, the majority partners of Poughkeepsie Galleria Partnership in Upstate New York said that Malfitano didn’t have the right to terminate their partnership agreement.

While a lower court sided with the majority owners, the Court of Appeals decided to take up the case.

This past June, REBNY, and other real estate organizations, filed a brief with the Court of Appeals, saying, “Allowing a minority partner to deviate from the express terms of the partnership agreement in his dealings with the partnerships poses a significant threat to the stability and viability of real estate partnerships across the entire real estate industry throughout New York State—and the country.”

The case is scheduled for oral arguments on Feb. 13, according to a REBNY spokesman.

Rent-Regulation Redux

This March, the Court of Appeals will determine if over 100,000 homes may return to rent-regulated status.

That is something that REBNY is fighting, landing squarely in the corner of landlord Alan Wasserman, the owner of 285 West Fourth Street, who faces a lawsuit from tenant Richard Altman over alleged rent overcharges. Altman claimed his unit was subject to rent stabilization and the landlord said otherwise.

In April 2015, the Appellate Division of the Supreme Court’s First Judicial Department decided in favor of the landlord and dismissed the case, but on appeal, the tenant won with the court “eliminat[ing] post-vacancy deregulation (deregulating an apartment after it became vacant by lawfully raising the rent above the deregulation threshold),” according to New York Law Journal. In the first part of last year, REBNY filed a brief to support Wasserman.

On March 22, the Court of Appeals will issue a decision, REBNY’s spokesman said.

primaryphoto6 Friend of the Court: REBNY Is Not Afraid to Dip Its Toes in Legal Matters
UP IN SMOKE: REBNY supported the co-op board at 300 East 54th Street in a secondhand smoke case filed against the board by a tenant. Photo: CoStar Group

Can a Co-op Board Be Responsible for Secondhand Smoke From Another Unit?

In January 2017, REBNY got involved in a secondhand smoke case in Sutton Place.

A shareholder at Connaught Tower at 300 East 54th Street, Susan Reinhard, claimed in a 2013 lawsuit that she was entitled to a 100 percent, eight-year maintenance abatement to exceed $120,000, plus reimbursement of legal fees, because secondhand smoke from another apartment was seeping into her pad, and the co-op board didn’t remediate the situation.

A Manhattan Supreme Court judge ruled in her favor in 2016. The court held that “building owners are capable, and tenants are incapable, of providing smoke-free apartments by imposing strict no-smoking policies or by constructing or rehabilitating buildings so that smoke cannot travel between apartments,” as per REBNY’s amicus curiae.

REBNY took issue with this premise, saying that the decision did not reflect the fact that “cooperative boards are not legally empowered to ‘impos[e] strict no-smoking policies,’ ” according to its amicus curiae. It also disagreed with awarding the maintenance abatement to Reinhard as habitability damages as she “had no intention of using the apartment as a primary residence but rather only as a pied-a-terre.” The warranty of habitability policy, REBNY said, “guarantee[s] adequate shelter in one’s home, i.e., the place where one resides.”

Regarding wider implications, REBNY argued that if the lower court’s decision was upheld, it would “require all residential buildings—including cooperatives and condominiums which…can only act by a supermajority vote of apartment owners—to guarantee that its residents will not smell smoke (or any unpleasant odor which is allegedly attributable to smoke) in their apartments.”

Finding that Reinhard did not produce sufficient evidence that the odor made her apartment uninhabitable, REBNY scored a victory when the Appellate Division reversed the lower court’s decision last May.

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Rent Asunder: City Council Tears Up Tax Bills on Thousands of Small Business Leases

Vacant storefronts have become a persistent Manhattan eyesore in recent years, as ever more window dressings and restaurant menus have given way to “for rent” signs. Blame sky-high rents, a shift away from brick-and-mortar shopping habits or decades-long leases with locked-in rents that leave landlords desperate to secure top-dollar deals today: All contribute to a veritable minefield for mom-and-pop businesses.

However, small-business owners have a shot in the arm coming their way this July when a years-long legislative effort to lower their costs is set to reach the finish line: A revenue-code reform will ease the commercial rent tax, a consistent fly in the soup of a broad cohort of prime Manhattan tenants.

The niche revenue measure, which applies only in Manhattan, to businesses south of 96th Street that earn at least $5 million per year, currently falls on all firms that accrue rents of at least $250,000 annually. (That’s just over $20,000 per month.) The effective tax rate is 3.9 percent, or about $20,000 on a firm that pays $500,000 in rent annually.

Now, City Council Intro 799-B, legislation inked by Mayor Bill de Blasio in December 2017, promises relief, at least to firms at the lower end of the current bracket. The bill raises the minimum rent threshold to $500,000 for fiscal year 2019, a change the mayor’s office said will entirely eliminate the tax for 1,800 small businesses in the city and significantly reduce the outlay for 900 more.

The measure, championed by a city councilmember who has since left office, Dan Garodnick, has won broad political and business-community support. The Manhattan Chamber of Commerce and the Real Estate Board of New York each issued a ringing endorsement of the move, as did a grab bag of lawmakers ranging from incoming City Council Speaker Corey Johnson to his predecessor, Melissa Mark-Viverito, as well as Jerrold Nadler, who represents much of Manhattan and Brooklyn in the House of Representatives.

“With these reforms to the commercial rent tax, the New York City Council is helping breathe new life into local businesses and increase jobs,” Johnson said in an email to Commercial Observer. Johnson’s constituent territory, District 3, encompasses west Soho and Greenwich Village, neighborhoods that have prominently suffered from the blight of higher vacancies.

garodnick Rent Asunder: City Council Tears Up Tax Bills on Thousands of Small Business Leases
Daniel Garodnick. Illustration: Kaitlyn Flannagan

None were more eager to celebrate the legislation’s passage than Garodnick, however, whose victory in shepherding the legislation to de Blasio’s desk at the 11th hour before his term-limit mandated departure last month represented something of a victory lap for the longtime councilmember from Manhattan’s East Side.

“We have a tax here that has the effect of throwing cold water on local economic activity,” said Garodnick, who has lain low since leaving office to spend more time with his family. “We needed to find ways for the city to stop stepping on the necks of small businesses, and this was one.”

Praise for the measure has rained down from industry players as well.

“I think that this is a definite benefit for a sweet spot of people that have smaller and midsize businesses,” said Tom Corrie, the director of accounting firm Friedman LLP’s state and local tax group. “[Those businesses] provide a lot of employment.”

A persistent problem with the tax, several insiders said, had been that a fair number of commercial renters did not even realize they were responsible for it when they signed their leases—although that problem may not alleviate with the new reform.

“Many tenants are not aware when they calculate their costs that there is a requirement to pay commercial rent tax,” Robin Abrams, the vice chairman of Eastern Consolidated’s retail brokerage, said via email. “They often are not represented by brokers who might educate them about this expense and are likely not knowledgeable about these kinds of additional expenses. [Then], they are hit with these costs once committed to the space.”

Corrie provided an illustrative story.

“I just completed an audit where I had a longtime family business that would have fallen within the context of this new change,” Corrie said. “Unfortunately, their previous accounting firm did not advise them correctly. Now, they got caught for an eight-year audit, which cost them a lot of money.”

By removing the tax burden on the smallest businesses it had applied to, Corrie said, the new measure will decrease the likelihood of mistakes by unsophisticated companies.

The accountant also lamented that the rent tax’s incidence falls on a group he sees as an economic engine in the city.

“These folks are not getting wealthy. They’re providing employment for 20 or 30 individuals each,” Corrie said of small business owners.

That logic mirrors the de Blasio administration’s thinking on the subject. Small businesses employ millions of New Yorkers, and nearly half of the companies are owned by immigrants, a spokeswoman for the city’s Small Business Services department said in an email to explain the administration’s emphasis on supporting the sector. Responding to questions about the overall business climate, the spokeswoman pointed out that in addition to the new tax break, the city has tried to lessen the regulatory burden on firms.

Total fines assessed against small businesses have declined 40 percent since 2014, she said, adding that the de Blasio administration has held thousands of free consultations with enterprises to help them avoid incurring costly violations.

Indeed, the reduced tax burden could help promote a more transparent relationship between businesses and the city because businesses sometimes cheated to avoid the rent tax. Some conniving tenants who were aware of the tax had dreamed up inventive schemes to avoid paying up, brokers said.

“We had one guy who asked if we could write him a separate lease, [each] for his store and his basement,” said Rafe Evans of brokerage Walker Malloy & Company, explaining that splitting the space into two separate contracts would have been a dubiously legal end run around paying a commercial rent tax bill. “That was a few years back, and we declined to get involved in shenanigans like that.”

“Tenants don’t want to know [about a tax violation],” the broker added. “There’s some willful blindness.”

Of course, the most seething ire against the tax comes from tenants themselves.

“I think it’s insane,” said Brian Kelly, a client of Evans who leases space for the Japanese restaurant, Kobeyaki, he owns on the Upper East Side. (Kelly declined to name his restaurant for this article.) “Taxing people on paying high rents. It seems kind of crazy to me.”

When Kelly signed a lease on East 86th Street in 2014, Evans said, the rent was in the mid-$20,000s, putting the restaurant squarely in the category of businesses that see their rent tax entirely disappear under 799-B.

The new tax policy would bring immense relief, the restaurant owner said.

“It’s a very big deal,” Kelly said. “I’m very happy they decided to do away with [the tax]. It’s one tiny step by the city of New York to become a friendlier place to do business.”

“We had been looking to get outside the city,” Kelly added.

Between relentless rising rents and mounting transit headaches, looking outside the Big Apple for growth has become an increasingly tempting proposition for businesses and developers of late. With decidedly positive harbingers for the city’s business climate harder to come by, many stakeholders seemed downright bemused by how broadly palatable the tax cut has been.

Indeed, conversations with landlords, politicians, special interest groups and business owners failed to uncover a single constituency that looked askance at the development.

At worst, at least one broker was merely indifferent.

markviverito Rent Asunder: City Council Tears Up Tax Bills on Thousands of Small Business Leases
Melissa Mark-Viverito

“I don’t think [the commercial rent tax] has an impact on anybody anymore,” said Stephen Siegel, the chairman of global brokerage at CBRE. “It’s all part of the expense package. When we do a financial analysis, everything is considered, and as far as the tenant is concerned, if anything is a problem, it’s rising rents.”

“I don’t even think people think about [the commercial rent tax],” he added. (Siegel has personally invested in a number of New York City restaurants, including Sarabeth’s, the Knickerbocker Bar & Grill and P.J. Clarke’s.)

Even if that’s the case, with the city’s climate for small businesses under increased scrutiny from politicians and other commenters, it’s perhaps unsurprising that a deep coalition of politicians was moved to act.

Sal Albanese, who challenged de Blasio in the Democratic mayoral primary last year, emphasized his support of the Small Business Jobs Survival Act during his campaign, a measure that would force landlords to sign more tenant-friendly leases. Although that bill would lead to deeper structural reforms for business owners than the rent-tax change, the current cut represents a broad group of politicians’ acknowledgement of small firms’ struggles to stay in Manhattan.

And Jeremiah Moss, a writer who for years has chronicled small-business closures in Manhattan on a popular but melancholy blog, has argued prominently that city policies are stacked against the beloved restaurants and stores whose shutterings he bemoans. His 2017 book on the subject, Vanishing New York, was widely reviewed in local and national outlets.

But Siegel, for his part, argued that any concerns about small-business viability in New York are decidedly overblown.

“I think there’s a good climate for anything in Manhattan,” Siegel said. “There’s not better labor anywhere in the country, and more and more people want to live in urban areas.

“Is it more expensive than Podunk, Iowa? True,” he added. “But [for people who are] looking to grow their businesses—the access in New York City to people and banking—there’s no better place in the world.”

Source: commercial

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