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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

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

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.

Source: commercial

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

What Issues Should REBNY Be Fighting For?

For decades, the Real Estate Board of New York has represented the old guard of New York City: the most powerful developers, landlords, brokerages, construction companies and the folks they do business with, from financial institutions to architecture firms. And they’ve had great success at it.

But, for better or worse, the new guard—and its concerns—is going to require the organization’s attention.

Despite its financial and political clout, REBNY’s critics have charged that the trade organization has advocated planning and development policies that favor Manhattan and the short-term interests of its members, rather than pro-growth initiatives that would benefit the entire city in the long term. With a population that’s growing and a shockingly low residential vacancy rate of 1.9 percent in Manhattan, as per Douglas Elliman’s December 2017 market report, housing will have to be on REBNY’s mind, and it will have to be outside of Manhattan.

Mitchell Moss, an urban planning professor at New York University and the director of NYU’s Rudin Center for Transportation, said that the real estate board could play a valuable role in shaping development in areas where the city needs it most.

“We’ve been very fortunate that the Bloomberg administration was able to rezone so much of the city, but we have to be able to find ways to encourage more development on the waterfront in Staten Island and on the waterfront in the South Bronx, in Red Hook [Brooklyn] and along the East River waterfront,” Moss explained. “We can’t allow communities to simply reject new development because they don’t like it.”

The real estate lobby scored a significant victory last August with the passing of the Midtown East rezoning, which was first proposed, unsuccessfully, by the Bloomberg administration in 2012. Activists and urban planners often wonder what the organization could accomplish if it lobbied for denser residential zoning in Brooklyn, Queens and the Bronx, particularly in neighborhoods that are well served by the subway but populated mostly by one- and two-family homes.

“There are a lot of neighborhoods throughout the boroughs that have transit—subway or LIRR or Staten Island Railroad—and they’re zoned like they’re in northern Connecticut as opposed to New York City,” said Moses Gates, the director of community planning at the Regional Plan Association. “Looking at those neighborhoods as a whole, ones that are very low density in character, wealthier than average and yet have transit opportunities and job opportunities and infrastructure that you don’t find in the suburbs, that’s where I think we should be looking at ‘How do we add housing and affordable housing?’ That’s what REBNY should be thinking about also.”

Although the trade organization has created committees focusing on Brooklyn, Queens and Upper Manhattan in the past few years, it hasn’t yet made it to the Bronx, where a wave of development is beginning to reshape the borough’s southern waterfront. REBNY has made inroads with residential brokers in the outer boroughs, as Commercial Observer reported last year, but its track record of attracting and representing outer-borough developers and landlords, particularly smaller firms, has been mixed. The number of outer-borough members wasn’t available by press time.

One incremental reform that REBNY could also help push that would add tremendously to housing would be the legalization of basement apartments in one- and two-family homes. With the help of zoning and building code changes, the city could legalize as many as 100,000 illegal apartments, largely in immigrant-heavy swaths of Queens and the Bronx, according to a 2011 report from neighborhood group Chhaya Community Development Corporation and the Citizens Housing and Planning Council.

Landlords can rack up tens of thousands of dollars in fines if building inspectors catch them illegally renting out a basement or cellar. But the extra income earned from renting them out can help keep a homeowner from sliding into foreclosure. And many of the neighborhoods that saw the highest foreclosure rates last year, like Jamaica, Queens and the Brooklyn neighborhoods of East New York and Canarsie, attract much higher numbers of illegal conversion complaints than the rest of the city, according to city data and a recently released PropertyShark foreclosure report.

Under city rules, basements can be rented in single-family family homes as long as the owners take specific (and sometimes expensive) steps to bring the spaces up to code. Two-family homeowners, on the other hand, aren’t allowed to rent out their basements. Tenants are also prohibited from renting in cellars. (Basements are “at least a story below curb level but have at least half their height above curb-level,” according to a brochure from the city’s Department of Housing Preservation & Development. Meanwhile, a cellar is an enclosed space that has at least half its height below curb level.)

But why would REBNY push for a policy that affects small homeowners rather than big landlords? Gates argued that an accessory dwelling unit, or ADU, program would bring in more business for small contractors and construction firms.

“If you have an ADU law and you’re doing ADU conversions, I think it’s a way of maintaining the [construction] industry through those downtimes,” the planner explained. “And I think it’s in the best interests of the industry to keep a trained workforce that knows how to do this throughout the boom and bust real estate cycle.”

Gates and other housing advocates have urged the real estate board to do more outreach with small, neighborhood developers and contractors, particularly minority- and women-owned businesses, as well as nonprofit developers—a point that REBNY’s new chairman, Bill Rudin, has said he plans to focus on. It’s “about creating opportunities and awareness, training programs and mentoring programs. It’s a responsibility of our members to be proactive in promoting those things.” (See interview on page 42.)

Rudin also said, “We just added two women to the Executive Committee: Amy Rose and Lisa Silverstein.”

A REBNY spokesman also pointed out that the organization partnered with small and minority-owned contractors to pressure the City Council into rewriting a proposed construction safety bill last year. The original version of the bill, Intro. 1447, favored construction unions by requiring apprenticeship programs for all workers on buildings of 10 stories or more. Then the Real Estate Board banded together with open-shop groups to argue that small, minority-owned contractors and their workers would be hardest hit by the new rules, because small firms wouldn’t be able to afford to build new training programs. The open-shop coalition won part of the battle by getting the apprenticeship language eliminated from the bill. But the final version of the proposal, passed in September, will require at least 40 hours of training for workers on building sites that are four stories or taller by September 2020.

Over the past couple years, REBNY has become more vocal about sustainable development while remaining wary of some of the city’s policies. Last year, the group encouraged its building owner members to save energy and reduce their carbon footprints by up to 30 percent with the NYC Carbon Challenge for Commercial Owners and Tenants. At the same time, it has expressed concern that the city’s plan to limit fossil fuel usage—set to go into effect by 2035—by fining landlords will unnecessarily punish the owners of older residential properties, which rely on natural gas or heating oil.

Architects, meanwhile, argue that the trade group could be doing more for green building. Rick Cook, an architect and partner at COOKFOX, said that he wanted the city to offer zoning bonuses as an incentive to include more green space in buildings, either in the form of planted terraces or green roofs.

“Under the concept of biophilic design, people do better if they’re connected to nature,” he explained. “We could incentivize people planting [in] more of the buildings. It would also do some stormwater absorption.”

More plantings would help New York City cut its greenhouse gas emissions and diminish the “heat island effect,” which causes dense urban areas to trap more heat than rural ones, Cook added.

But it’s not just about development. Transit advocacy is also at the top of many wish lists when it comes to REBNY’s citywide work. That includes expanding subways and buses in the outer boroughs, finding ways to raise money for subway maintenance, and pushing for a new Port Authority Bus Terminal and the Gateway Tunnel project, among other issues. 

“Certainly the crisis with our transportation infrastructure is something that is critical to the health of the real estate industry,” said Seth Pinsky, an executive vice president at RXR Realty and the former director of Mayor Michael Bloomberg’s Special Initiative for Rebuilding and Resiliency. “Nobody’s office or apartment building is going to be worth as much if our transportation network continues to deteriorate at the rate it’s deteriorating at. Supporting efforts to better fund our network is something REBNY should be advocating for.”

In fairness, the group has voiced public support for a congestion pricing plan, which would help collect taxes from drivers in New York City to fund the Metropolitan Transportation Authority. It pushed back against a recent proposal for a “transit-maintenance” district that would increase commercial rent by $1.50 a square foot below 60th Street in order to generate cash for the subways. REBNY President John Banks penned  a Real Estate Weekly column arguing that the plan would increase the already-heavy tax burden for commercial businesses while doing nothing to encourage more public transportation use. “This proposal does nothing to discourage driving,” Banks wrote in the November 2017 column. “Simply imposing a fee will do nothing to relieve congestion, and worse, it will do nothing to reduce the harmful impact of greenhouse gas emissions.”

In recent years, REBNY has also advocated for extending the 7 line to Secaucus, N.J., and supported calls for the Gateway rail tunnel between New York and New Jersey.

Moss argued that the board could play a more aggressive role in advocating for federal and state cash for infrastructure and transportation.

“I think this is a very important moment for REBNY because the city has to mobilize to get support in Albany and Washington,” he explained. “They have a very important role to play because we need funding for the mass transit system. We need to recognize the importance of getting the Port Authority bus terminal rebuilt and getting a new train tunnel across the Hudson [River]. There are some really big high-profile projects that are going to be really important for the vitality of the city, to the Manhattan office market, and for anyone who comes through the city on mass transit and commuter rail.”

Ultimately, Pinsky noted, it would benefit the organization to focus on quality-of-life issues, subway construction costs and broader transit problems.

“REBNY is the sort of organization that has to play the short game and the long game,” he said. “The short game is often defensive and involves the ways in which regulation and laws tax the industry on a very granular level…REBNY should be seen advocating for things that aren’t directly beneficial to their members. Showing that kind of civic spirit conveys a kind of goodwill that makes the short game that much easier to play.”

Source: commercial

Rob Speyer’s Greatest Hits as REBNY Chairman

Five years makes a big difference. If one were to hop in a time machine and zoom back a half decade, it would almost feel like a Futurama episode of a parallel universe.

Having been hit by Superstorm Sandy, a lot of the coastal parts of New York City were in shambles, and thousands were still reeling from the devastation. President Barack Obama was gearing up to begin his second term, while Donald Trump was penning an op-ed on CNN’s website championing, “We will have to leave borders behind and go for global unity when it comes to financial stability.”

During that time, Rob Speyer, the real estate scion of Tishman Speyer, became the chairman of the Real Estate Board of New York. With his term having ended at the close of 2017, Commercial Observer took a look at his tenure over the last five years at the helm of the 122-year-old body.

2013

January—Speyer, the president and co-chief executive officer of Tishman Speyer, starts a three-year term as REBNY chairman (it is later extended for two more years). He becomes the youngest person to steer the organization. His father, Jerry, was chairman from 1986 to 1988 and oversaw the appointment of Steven Spinola as president in 1986. The younger Speyer works with Spinola until his retirement.

November—Mayor Michael Bloomberg’s administration withdraws a proposal to rezone Midtown East for taller new commercial buildings, after failing to gain support from the City Council.

2014 

cdcmyk Rob Speyers Greatest Hits as REBNY Chairman
The Rob Speyer CD. Illustration: Kaitlyn Flannagan/For Commercial Observer.

January—New York City Public Advocate Bill de Blasio succeeds Bloomberg as mayor.

December—Speyer leads the search to replace Spinola as president of REBNY after his nearly 30-year run. The organization announces Consolidated Edison Vice President of Government Relations John Banks will be the next president.

2015 

January—Obama signs an extension through 2020 for the Terrorism Risk Insurance Act days after Congress approves it. REBNY supports the extension of the program, which was created in 2002 following the World Trade Center terrorist attacks. It provides compensation for “certain insured losses resulting from a certified act of terrorism.”

March—Banks becomes president-elect during a transition period to replace Spinola, who will step down at the end of the year.

June—The 421a tax abatement program expires. About a week later Gov. Andrew Cuomo announces the renewal of the program for six months with the caveat that for a longer renewal REBNY and the construction unions will have to come to an agreement about prevailing wages.

September—Speyer becomes the lone CEO of Tishman Speyer after sharing the title with his father since 2008. The younger Speyer also retains the president role, while his dad, a co-founder of Tishman Speyer in 1978, keeps the title of chairman.

2016 

January—Talks between REBNY and the Building and Construction Trades Council of Greater New York break down and 421a officially expires without an extension.

January—REBNY’s membership exceeds 17,000 real estate professionals, an all-time high for the then 120-year-old organization.

August—After breaking tradition and giving Speyer a fourth year as chairman in 2015, the board of governors approves Speyer for a fifth year.

October—New York State enacts legislation (supported by REBNY) that makes it illegal to advertise short-term rentals in multifamily buildings, targeting Airbnb and similar actors.

November—The construction unions and REBNY agree on a benchmark labor wage for construction workers, fulfilling the prerequisite to revive 421a.

2017 

April—421a is reborn as Affordable New York after it passes in the state budget. The legislation allows a tax break for 35 years if developers of market-rate rental buildings with 300 or more units in certain neighborhoods set aside 25 to 30 percent as affordable units and pay construction workers an average hourly rate of $60 in Manhattan and $45 in Brooklyn and Queens.

June—William Rudin, the CEO and co-chairman of Rudin Management Company, is selected to succeed Speyer as the next REBNY chairman.

August—REBNY launches its newly syndicated Residential Listing Service. The long-planned RLS allows salespersons and brokers to send listings to a network of real estate listing websites through one centralized feed.

August—The City Council passes the Midtown East rezoning, which will amplify developers’ ability to construct taller commercial buildings along 78 blocks from East 39th to East 57th Streets and Third to Madison Avenues.

September—Despite heavy pushback from REBNY over a new bill that increases safety training for construction workers, the City Council votes unanimously in favor of it. In a statement, REBNY says it supports more safety training but criticizes the legislation for failing to address the trade organization’s concerns about its implementation and costs.

December—Speyer ends his five-year tenure, the second-longest consecutive term behind Bernard Mendick (1992 to 2001).

Source: commercial

REBNY 2018: Thrills and Frills

changing of the guard is a good moment for reflection. Last June, it was announced that Rob Speyer would be stepping down as chairman of the Real Estate Board of New York and be replaced by Bill Rudin.

Speyer got the job in 2013, five years and a bizarro world ago; and that crack isn’t strictly about the national political scene.

New York City is a different place than it was under the beginning of the Speyer regime. Michael Bloomberg was mayor. Steven Spinola was the long-serving president of REBNY. Sheldon Silver was the Speaker of the New York State Assembly. Nobody had heard of WeWork.

Different, right?

We spoke with Rudin and asked what his plans were for the organization.

Liam La Guerre looks at the various milestones in the Speyer presidency, from tapping John Banks to become Spinola’s replacement, to helping steer the city into the next incarnation of its 421a program, Affordable New York.

Speaking of Affordable New York, it has been one of the things that the 122-year-old trade organization has lobbied most fiercely for, and now that a year has passed since the new legislation has been signed into law, Aaron Short explores how the program has been panning out.

Of course, REBNY is not an organization that is strictly defined by the laws it advocates. It is also a presence in the courtroom. Lauren Elkies Schram examines the six legal cases that the trade organization has lent its legal expertise to over the last year.

One of REBNY’s big victories of last year was the fact that the City Council tore up the commercial rent tax for businesses whose rents are less than $500,000 per year, which Matt Grossman reports on.

An organization like REBNY will no doubt  be facing unforeseen questions and problems including a booming population and a razor thin vacancy rate; so if they’ll pardon a little persnickety advice on our part, Rebecca Baird-Remba examines at the issues that will be on the horizon.

Baird-Remba also got a look at the board’s annual report, the highlights of which we reported here.

Of course, not everybody is in love with the board. Rey Mashayekhi looked at its most persistent critic, labor advocate Ray Rogers.

REBNY, and the industry it champions is all about data. Mashayekhi found out where, physically, the old archived data is being housed (LaGuardia Community College, as it turns out).

Finally, our yearly REBNY issue also delves into who is being honored this year and why. The honorees at this year’s banquet include Rudin Management’s Gene Boniberger; Richard LeFrak; Cushman & Wakefield’s Ron Lo Russo; C&W’s Joanne Podell; U.S. Senator Charles Schumer; outgoing president Speyer; and Stribling & Associates’ Elizabeth Stribling.

—Max Gross

Source: commercial

A First Look at REBNY’s Historical Archives, Now at LaGuardia Community College

They’re not the Dead Sea Scrolls,” admitted Michael Slattery, the senior vice president of research for the Real Estate Board of New York, “but for us, they’re the equivalent.”

Slattery is talking about the 35 boxes worth of materials that REBNY delivered from its Midtown headquarters, at 570 Lexington Avenue, to the LaGuardia and Wagner Archives at the City University of New York’s LaGuardia Community College in Long Island City, Queens, this past September. The shipment contained a treasure trove of historical documents, tracing the course of REBNY’s 122-year history—and with it, the history of New York City real estate.

“We had them in our offices. I had some in my office. We had diaries in the storage room. We had property cards in metal file cabinets in the conference room,” William Auerbach, REBNY’s chief financial officer, said of the documents REBNY donated to the LaGuardia and Wagner Archives.

He said the industry group decided that providing LaGuardia with the materials would be the best way to ensure their future preservation, while also making them available for academic and research use to the wider public.

In addition to thousands of institutional artifacts—membership directories, annual diaries, meeting minutes ledgers and photographs from REBNY galas and dinners past—the boxes shipped to LaGuardia Community College contained an estimated 300,000 “property cards” that, for decades, REBNY used to document property information “for every block and lot in Manhattan,” Auerbach said.

Those property cards—12-by-6-inch index cards featuring information on everything from property transfers to mortgage details to zoning alterations—comprise the most expansive, and arguably most valuable, facet of the historical trove. The organization maintained and updated the cards, which date back to the 1920s, up until the turn of the 20th century as “repositories of information” for members interested in a given property’s history, according to Slattery.

“It was a member service to provide information and save you from going down to the city register’s office [near City Hall],” Slattery said.

Since the handover, archivists at the LaGuardia and Wagner Archives have been busy at work, going through the boxes and undertaking the painstaking task of gaining “informational control,” according to LaGuardia Community College archivist Douglas Di Carlo—a process that includes counting, ordering, processing and eventually digitizing the documents.

“There are some volumes, particularly the early volumes from the late 19th and early 20th century, that will need conservation work—repaired bindings and pages,” Di Carlo said.

City historian Kevin Draper of New York Historical Tours said the documents will provide researchers with firsthand source materials on the history of New York City real estate. And beyond real estate, Draper added, the REBNY archives’ value extends to the general history of the city.

“One thing about New York is that from the very beginning—when the Dutch settled here 400 years ago—it was always about real estate,” he said. “Everything in this town always starts with the real estate, and having access to archives like this is a great way to find out that information.”

Source: commercial

How Steven Levy Reinvented Kamber Management’s Decades-Old Real Estate Legacy

Kamber Management is a 77-year-old company that, with a Manhattan collection of four properties, sought a larger play.

So Steven Levy, the president and CEO of the Manhattan-based, third-generation family firm, acquired Tower 45, a 40-story, 458,000-square-foot office building at 120 West 45th Street, for $365 million from SL Green Realty Trust in September 2015. The building is currently in the midst of a years-long redesign that will make it the jewel in the Kamber crown.

At the time, Kamber held a 95-year leasehold on the 1.1-million-square-foot 1407 Broadway that the firm’s founder, Abraham Kamber (Levy’s grandfather) had originally acquired from developer William Zeckendorf. As the leasehold passed its 65-year mark, Levy felt the time frame had become too short to maintain its value and sought to sell the asset, hoping to instead find a property that would allow the company to hold a fee position.

“At some point [in the leasehold], the owner has less incentive to invest capital, and tenants find the lease term too short for their sense of stability,” Levy said. “Once you’re below 25 years, you can’t borrow money on it. If there’s a big capital investment to be made, you’re kind of scratching your head, thinking, do I really want to do this.”

Kamber sold the leasehold to Shorenstein Realty Services for $330 million in 2015 and used the proceeds to help finance the acquisition of Tower 45. (Also helping: the company’s September 2015 sale of 18 and 20 West 33rd Street to a partnership of the Carlyle Group and 60 Guilders for $111 million.)

Once the purchase was done, Kamber had its work cut out for it, as the building needed significant renovations, which Levy put in the $10 million range. The building’s atrium and lobby are being completely redesigned by the architectural firm Pei Cobb Freed & Partners, and all of the building’s mechanicals are being updated with several innovative systems being installed. These include destination dispatch, a system that routes passengers into the building’s elevators more efficiently, and an atmosphere air filtration system that gives the building some of the cleanest indoor air in New York.

“Destination dispatch is the new computer algorithm you find in new buildings,” he said. “It makes elevator usage much more efficient and quicker for the passenger. The elevators won’t be completed until the end of 2018, but we’ll be turning that on at the beginning of the year.”

As for the air filtration system, Kamber was the first developer in New York to install it, giving Tower 45 arguably the cleanest air in New York. This designation only lasted several weeks, though, as over 10 other buildings have installed the system since.

“It scrubs the air in the building according to three measurements—small particulate, large particulate and one for anything you can smell,” Levy said. “Small particulate tends to be bacteria or viruses—organic matter. Large particles tend to be dust and dirt. The filtration system cuts down the presence of those three by about 50 percent.”

Every floor of the building has sensors to measure air quality, which Levy can monitor in real time on a smartphone app. He said the system has been found to save $2,300 a year per employee in terms of sick days avoided and increased productivity.

With floor plates between 10,000 and 13,000 square feet, Levy sees Tower 45 as filling an essential niche in the New York office market.

“We are a small boutique building,” he said. “If tenants like the neighborhood and aren’t large enough to command the presence of a full floor in [larger buildings on Avenue of the Americas], they can be in a state-of-the-art, beautiful building with tenant amenities and a location that can’t be beat. We think we distinguish ourselves on that level.”

Richard Baxter, a vice chairman of New York capital markets and investment sales for Colliers, represented SL Green in the Tower 45 sale while still at JLL and has known Levy for 20 years.

“Steve’s decisive. When he wants to acquire something, he goes for it very aggressively,” Baxter said. “The Tower 45 deal was a very competitive transaction. There was competitive bidding to buy the building, and he was able to pre-empt the bid process. He’s a gentleman and a man of his word, and when he says he’s going to do something, he does it. You could do business with him on a handshake.”

The publicity around Tower 45 since the purchase has brought increased and much-desired attention to Kamber and Levy, who said he’s being brought more deals to consider as a result. While Levy is a broker, he’s spent most of his time in real estate as more of a steward of the family office, handling Kamber’s investments.

Levy, 62, grew up on the Upper East Side. His grandfather, Abraham Kamber, founded the company that bears his name in 1940, but Levy said that he and his grandfather never discussed business. Rather, his father Stanley, an attorney who didn’t work in the business, told him all about it instead.

Levy attended Connecticut College in New London, Conn., where he was allowed to design his own major, and graduated in 1977 with a bachelor’s in the American founding and the enlightenment. He scored his first job in real estate as a leasing broker at Julien J. Studley (now Savills Studley). 

“It was highly unusual then to be able to design your own interdisciplinary major. I’m still an amateur historian,” he said.

“A couple of years into working at Julian Studley, I went out to lunch with my boss, Mike Soloman. He said, ‘Steve, do you know why we hired you?’ I said, ‘Actually, Mike, I have no idea.’ He said, ‘Because you had that crazy major on your résumé. I figured if you could be that creative, you might be able to do something.’”

Levy, who said that seeking a job in real estate after graduation was more of a natural inclination, given his grandfather’s position, than a marked decision about his future, didn’t find success as a leasing broker, finding a more natural fit in sales.

He later worked at Wm. A. White & Sons, managing the firm’s Manhattan properties, and realized that his future would include a broader range of duties than simply sales. As he was looking over some of his company’s proposed sales, he inadvertently caught the development bug.

“We had these incredible deals for sale,” he said. “I went to my boss, and I said, ‘You know, let’s not sell this one, [referring to a building at 40 Worth Street]. Let’s raise some money and buy it.’ He looked at me and said, ‘Steve, we don’t do that here. We’re brokers.’ So I realized I was not long for that office. I realized the point was to own.”

Kamber, meanwhile, had been somewhat dormant at the time. While the middle of the 20th century found the firm owning a slew of prestigious properties throughout Manhattan, including One and Two Park Avenue, the Astor and Manhattan Hotels, and the Hearst Building, many of these were sold in the upmarket of the mid-1960s. By the time the elder Kamber died in 1977, the company, while still a fee-collecting entity with assets of its own, had basically stopped any new deal activity.

After the stint at White & Sons, Levy joined Kamber in 1986. (His brother, Peter, joined the firm three years later and remains today as a principal in charge of the daily operations of Kamber’s properties.)

His father had much of the paperwork related to the family business, and Levy poured through the documents, learning all he could. 

“I studied everything and thought, ‘This can’t be that difficult. How do you improve the building’s operations? How do you make it more attractive to tenants?’ ” he said.

Levy said Kamber’s status as a family firm made his duties a bit different than the head of your average real estate firm. While still a broker and actively seeking deals, Levy described his top priority as managing the “family office,” by which he means serving as the steward of the family’s many long-standing investments.

“We have an investment imperative,” he said. “We have everything organized into different types of investments. So I’m not just in real estate. I run a ‘family office’ now. That’s a term that refers to the disparate interests of families that have holdings of various kinds. Real estate is most of what we do but not all. We also have alternative investments. We do quite a bit with energy, rail cars, all kinds of things.”

At first, Levy built the company back to the point where it could manage family properties that had been run by outside firms. This included writing all the operational software for the company, which would remain in use for almost the next two decades. He also sold off shopping centers the company owned around the country, because, he said, “I wasn’t crazy about the asset class.”

For much of his time since then as Kamber’s president, his priority has been increasing the desirability of his family-owned properties and determining the best ways to maximize asset value. Selling off an expiring leasehold, as he did at 1407 Broadway, is one example of this. Another was his handling of a Section 8 housing project the family owned in Groton, Conn., the 446-unit Branford Manor Apartments. While the property had become “tremendously valuable,” Levy said, its effective management over the long run was beyond the company’s expertise, and Levy sold it.

He perceived a better opportunity in the purchase last month of three parking garage condominiums at 80, 100-120 and 220-240 Riverside Boulevard in Manhattan. Kamber purchased the properties, which total 916 parking spots over 248,000 square feet that Levy believes will be “a great long-term asset,” from the U.S. arm of a foreign-based for $50 million. He’s also continuing to manage a 16-story, 143,000-square-foot office building Kamber owns at 15 West 37th Street, a job that includes installing new dual burning boilers and the destination dispatch elevator system.

For later in 2018, Levy aims to see Kamber add another building—as yet undecided—to its portfolio.

“We prefer office, but we’ll look at anything,” he said. “One idea is more of an industrial logistics kind of use somewhere in the metropolitan area, and we’ll be looking to place about $55 million at that time.”

In addition to working on maintaining the business, Kamber, who lives in Greenwich, Conn., with his wife of 33 years, Leora, Levy is a third-generation contributor to the United Jewish Appeal/Federation of Jewish Philanthropies. The couple has three sons, twins David and Michael, 28, and Benjamin, 24.

“The UJA was started around 1938 to rescue Jews in Europe,” Levy said. “The federation is just finishing its 100th anniversary year, and they merged in 1986. Grandpa had always been very involved with that and other institutions, and we continue to contribute a major gift there. Now my boys will be fourth generation, as they’re getting involved in UJA.”

For all the different aspects of his responsibilities at Kamber, Levy said he still sees himself as a broker first and foremost and believes this grounding has played a large part in driving his success—and now, Kamber’s— and will continue to do so in the years ahead.

“I would argue the basis of my success in my business has been my brokerage training, the focus on closing a deal,” he said. “That training has focused me on mastering everything that needs to be done, not relying on others to get a deal closed, following up, and dealing with people in a way that keeps them engaged.”


Source: commercial

NKF’s Regional Mall Guru Thomas Dobrowski Is Taking Retail Doom and Gloom in Stride

Thomas Dobrowski might be one of the reasons why malls are not actually dying. And it’s not just because he sells regional malls, but because he arguably has been to more malls than anyone else (60 in 2017 alone), and whenever he visits one, he shops (that’s 60 purchases last year).

No, he’s not buying anything big—“just a couple small items I can throw in the bag,” the executive managing director at Newmark Knight Frank, said—but he’s still shopping at malls. And just that fact alone, he said, “inherently speaks to—when you get people in the mall they’re going to spend money.”

Dobrowski, who handles regional mall investment sales nationally, sold 13 regional malls last year. (Whenever he gets an assignment, not only does he tour the property he’s selling; he check out the mall’s competition.)

While there’s no doubting that malls, and retail in general, face headwinds—only five malls have either opened or are under development since 2007, while about 200 have closed in that time Dobrowski said—the broker remains optimistic about the future of the industry. “The news does not help pricing. However, it does help bring attention and interest to mall properties for sale,” Dobrowski said, “because savvy investors recognize that this could be a once-in-a-lifetime opportunity to pick up malls at good prices.”

Dobrowski didn’t start his career in the mall business. After graduating with a bachelor’s degree in finance from Villanova University he worked in Morgan Stanley’s real estate investment banking group. He got into the mall business at the now-defunct Rockwood Real Estate Advisors, where he worked from 2002 through 2014, before NKF came calling. The brokerage was looking to “grow a capital markets platform and grow a national brokerage business,” Dobrowski said.

Since then, Dobrowski has been NKF’s lone regional mall investment sales broker. With the help of a support staff of three who handle underwriting, analytics, materials preparation and research, he sold 13 out of the 30 brokered mall deals last year, making the sellers’ representative’s market share nearly 50 percent.

Being in a business that is not territory based, Dobrowski can be based anywhere in the country, but prefers New York City, his home for the last 18 years or so. (He, his wife and their 3-and-a-half year old son live in the East Village.)

As people continue to speculate about the future of malls, CO sat down with the 39-year-old broker at NKF’s digs at 125 Park Avenue last week to make sense of it all.

Commercial Observer: What’s your take on the doom-and-gloom mall headlines?

Dobrowski: My opinion is, it’s very overblown—the “death of the mall” headline.

Do you only deal with noncore assets?

Look, all the REITs want to hold onto their good assets obviously, or assets that they feel they can add value to so our business today is really split 50-50—50 percent of our sales come from the REITs that are shedding their non-core assets and then the other 50, plus or minus, come from [commercial mortgage-backed securities] special servicers and lenders that have taken back a lot of these malls over the last decade that were overleveraged and now are in many cases distressed. I grew this business out of the distressed mall market [back] in 2011, 2012 when malls started to sell again. A lot of the mall REITS, when these loans came due, and even today, when they come due, if they can’t refinance out of them, they’ll just give the keys back to the lender and that obviously is the beauty of CMBS financing. One of the best sources of lending for regional malls is CMBS debt.

Why is that?

I think because that’s where there is the biggest appetite for that type of loan. A lot of the insurance companies and a lot of the balance-sheet lenders typically have shied away from regional malls, just given the complexities behind them. They’re relatively illiquid in markets. And CMBS historically was the go-to source of financing [for regional malls]. That’s started to change now because obviously the headlines about malls are pretty tough. So that’s really why you see, [with] a lot of the sales today, the valuations are much lower than people ever really anticipated, even though we’re obviously in a really great economic cycle and there’s growth and retailers are doing well in many cases. But buyers are just underwriting out all of the risk associated with most malls. The proof is in the pudding. The reality is a lot of these malls are suffering around the country.

Have the mall owners found financing materially more difficult?

Yes. In the last 24 months, in particular, I would say financing has become one of the major hot points or constraints with respect to really selling bigger malls that require real financing. Because the equity check gets bigger, the number of players gets smaller who can stroke a big check to take down a $50-plus-million-dollar mall, which is a big deal today. Ten, 15 years ago, we were selling malls at $100 [million] and $200 million valuations. If you look at 2017, most malls were, call it between $20 million and $60 million, plus or minus, that sold.

How would you characterize lenders’ level of caution?

Well, much like buyers—but even more. They’re much more cautious where they are really concentrated on two or three main aspects. One is who the sponsor is: Do they have a track record? Do they have an expertise in the space? Because there are a lot of new owners and new buyers starting to enter the mall field today. Next, it’s starting to get into the property: Who are the anchors? What’s my anchor risk? Do I have a Sears, Bon-Ton, JCPenney, a Macy’s, kind of a lot of the anchors that are worrisome today for a lot of folks, and what does that risk look like in relation to really the rest of the mall and what are the options of re-tenanting those spaces? The third one is really then, Who’s the competition for that mall in that given market?

What are the most essential differentiating factors between malls with a positive outlook and those with more cause for concern?

I always give the comparison: It’s like a custom suit. From 50 feet away, your navy blue suit that you buy off the rack at Macy’s could look the same as the one you buy at Brioni, right? So when you look at a mall from an aerial, it could have Macy’s, Dillard’s and JCPenney and Sears and have very similar tenants on the inside, and that mall could be 10 miles outside Manhattan, and it’s killing it. But then you could take that same mall and put it in the middle of Ohio with the same tenant makeup: Once you get closer into it, [it’s floundering]. So what do we look at? I would say the big driver…is what are the options for that consumer in that market and what’s going to continue to drive them to continue to go to that mall into the future. If that mall is in a market that has two or three other malls but the market really only needs one…it’s going to be hard to make a case that [all three] need to exist. They may keep going for a while. Malls don’t die of heart attacks. They don’t die overnight. It takes a very long time for a mall to go away. It could take five years, it could take 10, it could take 15. Once you’re comfortable knowing that that mall can survive in that market, it’s then, What can I do to improve upon the tenant mix that is there today?

There’s enough there you don’t need to sell open-air shopping centers?

Correct. I can comfortably say we’re the only team probably in the country that can say we focuws 100 percent of our time and efforts on covering the regional mall market, which is why we have, arguably, the biggest market share, because we’re just ingrained in this sector. 

What would you say is impacting malls besides e-commerce?

It’s changes in shoppers’ habits I would say and changes in the shopper demographic. I can give the example of, when I was growing up [in Holmdel, N.J.], it was always the mall where you bought everything, from soup to nuts. Right? Malls were woven into the social fabric. You hung out there. It was always where you sort of went shopping for back to school and holidays and everything in between. You first date at the movie theater was at the mall [and] you maybe ate at the food court.

screen shot 2018 01 09 at 12 10 56 pm NKF’s Regional Mall Guru Thomas Dobrowski Is Taking Retail Doom and Gloom in Stride
MALL FOR ONE: Dobrowski has had his hand in selling dozens of malls in his career, including Foothills Mall, at top, Mesa Mall, in the middle and College Square Mall, at the bottom.

What’s the biggest deal you’ve ever done?

The largest mall sale I ever worked on was a mall out in California called Stonestown Galleria, right outside San Francisco. We sold it for $312 million at the peak of the market [in August 2004]. It’s still a great asset. It’s still owned by [General Growth Properties].

What’s the last mall you sold?

Moreno Valley Mall in Moreno Valley, Calif. The all-in purchase price was $63 million. It was one of the bigger sales of 2017. It’s one of the best malls I’ve sold in the last five years.

Why?

It’s a complete contrarian story. This mall was foreclosed and taken over by CWCapital, a special servicer, in 2011. It’s one of the few malls, since they took ownership, it has only steadily improved year over year. And, it’s just a great case study in execution in terms of they brought in Round1 [entertainment company], they brought in Crunch Fitness, they brought in cool retailers that weren’t in that market before, and a lot of it has to do with Inland Empire California, which got hit really hard in the recession but has since emerged and exceeded expectations you can say in terms of population growth. And the mall stood to benefit from that. And we sold it to a private owner outside of Beverly Hills, [International Growth Properties]. This closed on Nov. 28, [2017].

How long does a mall typically take to sell?

Three to six months I would say is average. The time to sell them is not necessarily the part of selling malls that is most challenging.

What is?

It’s just the sheer complexity of the properties and the amount of time and effort that has to go into preparing offering materials and underwriting the asset that I think a lot of brokers would shy away from that, plus it’s a national product type and most brokers focus on regions, and that’s how most brokerage offices are set up. So we don’t sell anything in the immediate New York metro because there’s not really a mall market there.

Are you worried, with the death of mall stuff, about your future with this slice of the market?

I get that question a lot. A lot of people are like, Why do you put all of your chips in this basket, focus on this one product type? The answer is no. If you look at the peak of the market, there were 1,300 malls in the U.S., a well-established fact in 2007. Today, there are around 1,100. We’ve only lost 200 malls in 10 years’ time. If it took 10 years to get rid of 200 malls, is it another 10 or 20 of sales, trades, transactions to get these malls into the right hands of people that will really redevelop them, close them down and have them developed into something else? So, I think there’s a lot of runway left in terms of the number of sales that will happen over the next, call five to 10 years, and candidly, I think it’s only going to ramp up and increase. I think there’s going to be more transactions in 2018 than there were in 2017.


Source: commercial