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Category ArchiveReal Estate Board of New York

Real Estate Board, Brokers Outraged About Vacancy Tax Talks

As Mayor Bill de Blasio jumps on the “vacancy tax” bandwagon, the Real Estate Board of New York and brokers are crying out in opposition.

Details on a potential vacancy tax—which would levy landlords that let their retail spaces sit vacant for long periods of time—have been scant, but Blasio said he would support one in an interview on the Brian Lehrer Show on WNYC last Friday.

“I am very interested in fighting…for a vacancy fee or a vacancy tax that would penalize landlords who leave their storefronts vacant for long periods of time in neighborhoods because they are looking for some top-dollar rent but they blight neighborhoods by doing it,” de Blasio said.

REBNY said the new tax, which originated with Manhattan Borough President Gale Brewer last year, is hogwash. The organization claimed that that’s not the solution when vacancies are coming as a result of economic issues that tenants face, rather than landlords, such as minimum wage increases, the paid sick leave requirement and the battle against e-commerce.

“The city’s retail environment is going through a transition primarily due to macro-market forces, like Amazon, and increasingly unfriendly local regulations,” John Banks, the president of REBNY, said in a prepared statement provided to Commercial Observer in response to the mayor’s comments. “Property owners take a substantial financial hit when they are unable to secure a tenant. A vacancy tax, premised on a flawed set of assumptions, will punish owners further and do nothing to address vacancy.”

Brewer’s office did a survey last May that identified 188 empty storefronts from the Battery to Inwood. While she didn’t didn’t provide the total number of storefronts, she said at the time that the “data will be the starting point in finding policy solutions to this problem.” In response, Cushman & Wakefield studied a slightly smaller area the following month. On Broadway between Bowling Green and 146th Street, the brokerage recorded 133 vacant stores out of 1,580 storefronts, representing a vacancy rate of 8.4 percent.

Brokers with whom CO spoke called allegations that landlords are leaving their spaces purposefully empty is erroneous, because it would result in landlords losing revenue.

“I have never met a single one of them that thinks like ‘let’s keep it vacant and I am confident that rents will go up in the next few years,’ ” said Steven Soutendijk, an executive managing director at C&W. “There is almost no justification for keeping your space vacant.”

He added later: “It’s not good for [landlord’s] buildings. It doesn’t help if you have 30 apartments that you are trying to rent and a vacant space on your ground floor.”

Other brokers said that ultimately tenants will be the ones that end up paying for any new tax, because landlords would have to raise rents higher to offset the cost.

But because of all of the vacancies—if there is no new tax—brokers expect rents will come down and subsequently deals will get done to fill those empty spaces.

In fact, asking rents for the top commercial strips in Manhattan were flat or down in the final quarter of 2017 when compared with the same period in 2016, according to C&W. (The 2018 first-quarter statistics were not available yet.)

The largest declines could be found in Soho, which experienced an 16.7 drop to $440 per square foot from $528 a year earlier. Also, there was an 11.7 percent slump in Herald Square to $691 a foot from $783 a foot.

Not only will rents continue to fall to meet the market demands, but also more tenants are taking shorter-term leases to test the market, such as one- or two-year deals, according to Chris DeCrosta, a co-founder of retail brokerage GoodSpace. Afterward, if sales are up, they’ll sign longer leases.

“[Tenants] are just trying to justify that the rents justify the sales. They are tired of landlords saying that this is market rent,” DeCrosta said. “They’ll pay market rent but they want to make sure that they can make money there.”

There are some legitimate reasons for keeping a space vacant, according to TerraCRG’s Peter Schubert. Landlords could be planning to redevelop or renovate their building or are currently in negotiations with tenants, which could last around six months but sometimes as long as two years.

He also explained that sometimes when a deal gets done, stores don’t open immediately because they are waiting on permits, like a liquor license.

“People complain about [vacancies], but they don’t know what is happening behind the scenes,” Schubert said.

To find out more about what is going on behind the scenes, Brewer has called on the City Council to establish a database of vacant properties, in which landlords would be required to report the space as empty and when a new lease is signed and when tenants begins to use it, according to her testimony at the City Council in December 2017.  

There would be a small fee for registration and a larger fine for owners who don’t adhere to the rules after a certain period, a spokesman for Brewer told CO via email.

“If we’re going to tackle vacant storefronts, we need to know what we are dealing with,” Brewer said via prepared remarks. “If we can get a handle on how many vacant storefronts there are, where they are, and how long they’re vacant, we’ll have a much better idea of what the problem is and how to solve it.”

Regarding the vacancy tax, Brewer’s spokesman noted that there is no specific proposal on the table yet and a vacancy tax would likely require authorization from the legislature in Albany.

Source: commercial

REBNY to Extend Reach With Global PropTech Contest

The Real Estate Board of New York is planning a property technology contest open to global innovators, marking the first worldwide initiative by the 122-year-old organization, Commercial Observer has learned.

It will be the organization’s second real estate technology contest, following its “hackathon” event last year (which ended with the winners competing in a “gauntlet challenge” last month).

REBNY’s PropTech Challenge will offer a payout of $200,000 (from REBNY members and sponsors), split between 24 contestants who rank in the top three within eight categories.

“We are going to really break down geographical boundaries and hopefully get some good solutions to problems in real estate,” Sandy Jacolow, the chief information officer of Silverstein Properties and a member of REBNY’s tech committee, told CO during the Marché International des Professionnels d’Immobilier (MIPIM) conference in Cannes, France last week. “I think what we are all realizing right now is there are so many challenges and problems that we have that technology can solve and focusing on these hackathons and these proptech challenges seem to be a way to develop some really creative solutions.”

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A scene from REBNY’s hackathon last year. Photo: REBNY

The PropTech Challenge came out of the growth of the property technology sector, evidenced by REBNY’s tech committee membership. Upon launching in March 2017, the REBNY tech committee had 14 people from 12 companies and one meeting each quarter. Today, there are 102 people from 47 companies and there are nine subcommittees, which meet several times a month collectively.

“We’ve locked down New York City real estate for over a century, now reflecting our members’ interest in real estate [technology] around the world, we too are expanding,” said Ryan Baxter, a vice president at REBNY.

The upcoming contest follows REBNY’s previous New York City-focused proptech competition. The October 13-15, 2017 hackathon competition saw 150 participants compete in six categories. And the winners from the hackathon competed in the gauntlet challenge.

In the PropTech Challenge, there will be two separate series of four categories. The first will encompass the themes of blockchain, operations and maintenance, brokerage and AEC (architect, engineering and construction) and development. And the second will be comprised of the internet of things (IoT), machine learning technology (artificial intelligence), social media, and geospatial and location technology.

Starting April 1, individuals or companies can enter the contest with a PowerPoint presentation and a video showing their technology. Three finalists will be selected from each of the four categories from the first series for a “demo day” live presentation of their technologies, which will be held in June. And then three finalists from each of the four groups in the second series will be selected for the second demo day in October.

Judges at the demo days will select the first, second and third of each of the four categories with the first-place contestants taking home $15,000, and second and third places will receive $7,500 and $2,500, respectively.

REBNY plans to fly participants into New York City for the presentations if they aren’t based in New York City. The exact location is yet to be determined.

Source: commercial

It’s MIPIM Time: Why You Should Be Excited for the Cannes Conference

Once again, it’s that time of the year for real estate professionals across the globe to head to Cannes, France.

Just two months ahead of the invitation-only Cannes Film Festival, where movie stars will take to the sandy city on the French Riviera and no doubt trade Harvey Weinstein horror stories, tens of thousands of men and women in business suits carrying briefcases and card holders will storm the streets of Cannes hunting deals during the annual MIPIM (or Marché International des Professionnels d’Immobilier) conference on March 13 through March 16.

The bulk of the events, which is organized by Reed Exhibitions subsidiary Reed MIDEM, will be held at the Palais des Festivals et des Congrès, a massive conference center on the Cannes waterfront.

MIPIM’s theme for the 29th annual conference is “Mapping World Urbanity,” and the event’s programming will try to address issues like, How will we live in cities in 2030 and 2050? And, what are the best strategies for building future cities in a globalized world?

There are plenty of reasons to be excited for MIPIM, but to approach a conference as big as this (with more than 24,000 people), a roadmap might prove useful. We talked with a few MIPIM-goers from the U.S. to get an idea of what the sophisticated attendant should look out for this year.

Networking (duh)

With approximately 24,200 expected participants from over 100 countries, it’s more than possible to find the right person to talk to at MIPIM, whatever your needs may be.

Of the attendees, there will be 5,000 investors and financial institutions, 4,500 developers, and 3,800 CEOs and chairpeople scrambling around the waterfront and in the Palais des Festivals. And there will be more than 3,100 exhibiting companies.  

And in case the conference center isn’t your scene to swap business cards, networking parties will take over the swanky hotels, luxury yachts and the beach.

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With an array of events and booths, there’s ample opportunities for networking at MIPIM. Photo: MIPIM

“The most important thing for me is the networking,” said Susan Greenfield of Brown Harris Stevens, who has been to the event for 28 consecutive years and has already booked her flight for No. 29. “I go every year because it’s the one place in the entire year where I see almost everyone I know from around the global at the same time.”

She added, “The thing that is so important about this event is you get so many decision-makers. One day I was walking down the street [in Cannes] and who could be facing me walking the other direction? Harry Macklowe. I said, ‘What are you doing here?’ He said, ‘I’m here to look for money, what are you doing here?’ ”

City and country exhibitions

If you’re thinking global and want to know what investment opportunities there are in cities abroad, this is the event for you.

The European cities put on a show at MIPIM, bringing large-scale panoramas of entire cities and models of megaprojects to dedicated pavilions. Last year, London and Istanbul had massive jaw-dropping displays.

“Some of the models and booths are off the charts,” said Jay Olshonsky, the president of NAI Global, who has gone to MIPIM for seven consecutive years and is returning this year. “Some people told me some of the models there are million-dollar [displays]. I always leave two or three hours for myself to walk around because you always see something you’ve never seen before.”  

“Le Grand Paris,” the name for the pavilion dedicated to the City of Lights, will feature 19 exhibitions and events each day. Belgium’s pavilion will feature experts and models of Flanders, Brussels and Wallonia, while Holland’s space will be dedicated to Amsterdam, Rotterdam, Utrecht and The Hague.

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Model displays of cities and large developments are popular in MIPIM, such as this one of London last year. Photo: MIPIM

On top of these, there will be booths dedicated to countries from Asia, Africa and North America. Not that the models and displays of cities are there just to be pretty or promote specific projects and the companies that are developing them; more than 370 political leaders and 500 representatives from cities will be in attendance to talk about development in their cities, attract developers and get investments in their locales. (We’ve already heard from the Moscow delegation!)

“If you go to ICSC in Vegas, which is by far a bigger show [with 37,000 attendees], it’s more about the displays about the companies [not cities],” Olshonsky said. “New York City doesn’t come and display at ICSC like Paris does in MIPIM.”

Panel events and keynote speeches

It’s not all deal-making and networking—MIPIM is also a place to learn about development trends across the globe. The event will feature more than 360 keynote speeches and well over 120 panels, sessions, workshops and networking socials covering a wide variety of topics—from Asia and Europe to sustainability and logistics.

And those events will also serve to gather experts across the globe and offer opportunities to get someone’s ear.

“[After networking,] the second thing that I find very valuable is attending these program and panels because I learn so much,” Greenfield said. “You never stop learning and real estate is always changing. If you don’t stay ahead, if you don’t stay involved, if you don’t stay knowledgeable, then you are going to miss out.”

Some panels to look out for include “Self-Driving Cars: Bringing a New Face to our Cities,” “Smart Housing: What Millennials Expect,” “Belt and Road Initiative: Capturing Opportunities Through Hong Kong” and “Urban Logistics: the Next Challenge for Cities.”

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The comprehensive panels with world-class experts are plentiful at MIPIM. Photo: MIPIM

And even Commercial Observer is getting in on the action, co-organizing the U.S.-focused two-panel event entitled “Developing and Investing in the United States: Where, What & How?” on the morning of March 14 at The Ruby Room in Palais des Festivals.

Ric Clark, Brookfield Property Group’s senior managing director and chairman, will deliver the keynote address and Jonathan Mechanic, the chairman of Fried Frank Harris Shriver & Jacobson’s real estate department, will moderate the panels. Cushman & Wakefield’s Bruce Mosler, SL Green Realty Corp.’s Isaac Zion, Hines’ Christopher Hughes, Hap Investments’ Eran Polack and Allianz’ Christoph Donner are just some of the panelists. (You can find us there!)

Tech

Come for the drinks and deals, but stay for the tech!

For the past couple of years, the presence of property technology companies has grown at MIPIM. As the sector is becoming a force in the industry—making more investors curious about what’s next to come—MIPIM has stepped up to provide some answers.

There will be a PropTech Lab event at MIPIM for the first time on March 15, where  invite-only real estate executives and tech leaders will meet and talk about the increased impact of technology on real estate.  

“MIPIM events and conferences will be great opportunities for members of the REBNYTech team to meet with industry leaders of tomorrow,” Ryan Baxter, a Real Estate Board of New York vice president for management services and government affairs, who is heading to MIPIM this year again and is a member of the advisory board of MIPIM PropTech, said in a statement. “We’re looking forward to learning more about smart cities and human-centric innovation efforts from around the world.”  

MIPIM also serves as the final leg of the third-annual MIPIM Startup Competition, an international tech competition in partnership with MetaProp NYC, a real estate tech accelerator. Nine finalists at the nexus of tech and real estate were selected from three previous events, MIPIM U.K., MIPIM Asia and MIPIM PropTech (in Manhattan), and those companies will face off in Cannes to determine the best of the lot on March 14.

The competitors from New York City’s MIPIM PropTech that are heading to Cannes are Real Atom, the first online marketplace for commercial real estate debt financing; PlanRadar, a digital software that facilitates project management for construction companies; and Acasa, an app that helps individuals manage household bills.

The winner will receive three passes to both MIPIM U.K. and MIPIM Asia 2018, four passes to MIPIM 2019 (again in Cannes), an automatic selection as a finalist for MetaProp NYC’s 2018 accelerator program as well as brand exposure and coaching at this year’s MIPIM.

And take in Cannes, for goodness sake!

“If you think about it, if you have got to go somewhere 6,000 miles away—for you and I, it’s not too shabby to go to the south of France,” Olshonsky said.  

Cannes is packed with bars, restaurants, hotels and historic buildings all within walking distance of the beach. For those looking to notch Michelin stars on their belts, there are plenty of options. La Palme d’Or, Villa Archange, Paloma and L’Oasis all hold multiple stars.

There are luxury hotels all around the beach area of Cannes. Some leading contenders are Hotel Barrière Le Majestic Cannes, InterContinental Carlton Cannes Hotel and Grand Hyatt Cannes Hôtel Martinez thanks to their astounding architecture and rich history.

And speaking of history, while you’re in town for a real estate expo, why not do a little sightseeing? Cannes is home to Eglise Notre Dame d’Espérance, a 17th century gothic church set atop a hill that overlooks the port area and it provides some amazing views. And there is also the Musée de la Castre, a museum that is set in a castle built by 11th-century monks.

Also just like the Hollywood Walk of Fame, Cannes is known for Allée des Étoiles du Cinéma, where stars leave their handprints. Finally, don’t forget to talk a stroll along the Promenade de la Croisette if you didn’t already do so on your way to and from the convention center.

Source: commercial

Gilmartin, Lapidus and Levinson Explain How They Started Their New Company, L&L MAG

MaryAnne Gilmartin rocked the real estate world last week when she announced she was leaving her post as Forest City New York’s chief executive officer to found a new company, L&L MAG, with L&L Holding Company executives David Levinson and Robert Lapidus.

Since joining Forest City in 1994, Gilmartin and her team have built the New York Times Building on Eighth Avenue, the Frank Gehry-designed rental tower at 8 Spruce Street and the Tata Innovation Center at Cornell Tech’s Roosevelt Island campus. And most famously, she has spent the last decade shepherding through the byzantine city approvals and construction of the first phase of Pacific Park (formerly Atlantic Yards), the $5 billion, 22-acre complex rising around an active Long Island Railroad yard. (So far, five out of 15 buildings and 800 out of planned 6,400 apartments—2,250 of which are supposed to be affordable—have gone up with Forest City facing a looming deadline of 2025 to deliver the rest of the below-market units.)

L&L, for its part, has a well-established reputation for developing, acquiring, and operating commercial properties in New York City. The 18-year-old firm is in the midst of redeveloping 390 Madison Avenue near Grand Central Terminal, building the Norman Foster-designed 425 Park Avenue from the ground up and planning a 700-room hotel and retail project, TSX Broadway, in Times Square. Levinson and Lapidus also happen to be partners in the New York Yankees (and often describe their business ventures in baseball metaphors).

The partnership coalesced because Gilmartin, 53, has a reputation as a fierce dealmaker, Lapidus, 57, and Levinson, 69, told Commercial Observer. Much like the L&L founders, Gilmartin has taken on massive, difficult projects with complex financing and elaborate architecture and dragged them from the drawing board to reality, in the process making her one of the most powerful women in New York City real estate.

Levinson, whom Gilmartin had known for nearly 20 years, approached her in late 2016 about starting a new venture. She jumped at the chance.

Gilmartin is making the switch not a moment too soon: Forest City announced last week that the subsidiary of China’s Greenland Group would up its stake in Pacific Park to 95 percent from 70 percent, whittling down Forest City’s ownership to a sliver of the sprawling project. The company also axed 20 people from its Brooklyn office.

Last week, at the Real Estate Board of New York banquet, Gilmartin, the new CEO of L&L MAG, spoke to Commercial Observer about the new firm. The next day she sat down with us along with Lapidus and Levinson at L&L’s (and L&L MAG’s) offices on West 57th Street to talk about how they met doing a deal with Bear Stearns, Gilmartin’s encounter with a CEO who had a Matt Lauer button behind his desk and New York City’s cooling residential market.

Commercial Observer: Are you concerned about doing new residential construction in New York City given that we’re in the middle of a luxury residential glut?

MaryAnne Gilmartin: I don’t think this company is so keen on building a lot of $40 million condos. I think real long-term value creators are interested in multifamily, not in condos. Condos are really a great allocator of land cost, so if you pay too much for the land, you often have to build condos to make it pencil out. So the goal of the company is to build for value creation over the long-term, through market cycles and beyond. And the multifamily business, in the depths of the recession, the vacancy rate never pierced 3 percent. And [there’s] a housing emergency. So you’d have to work really hard to build too much multifamily in the city. The issue of course is price of the land, making the numbers work. And that’s our job: We have to figure out where to go and how to find the land.

David Levinson: I think that’s exactly right. And your point about the condo market being soft is actually to our advantage because the land prices now go down. So with that market stalled for the near term…land prices are going to come down, and the opportunity for multifamily would increase. Good locations, quality projects. That’s the best way to mitigate the risks.

What kind of projects do you guys really want to pursue, and in what New York City markets are you looking to build?

Robert Lapidus: Clearly, we’re not in the commodity real estate business. We try to create special products, and there’s a rationale for that. It’s not just that we like to build pretty things, but the better products are better financial investments. I think it’s a philosophy David, MaryAnne and I all share.

Levinson: The kind of buildings we’re going to build are environmentally sustainable, architecturally interesting, beautiful. They’ll have amenities that help people with their health, like fresh air, outside spaces, places for people to collaborate and meet. It’s really how people want to live and work in the 21st century.

If you’re thoughtful about these things, it’s really no additional cost or [it’s a] marginal cost. We’re not really talking about huge, significant costs to be thoughtful about how you’re going to design a building, how you’re going to underwrite the building.

Gilmartin: The underwriting is challenging. When we built the Gehry tower, we had six lenders. It was a $670 million loan. To sit and talk about what Frank Gehry was going to do for the skyline, every floor as you got higher up was in this beautifully proportioned tower—we had to underwrite it as if it were a forgettable luxury rental building [so lenders wouldn’t feel intimidated by the cost of the project]. And I said to the lenders, “Let’s just do that because I think it’s 10 cents a floor in rent as you go up to the top.” Nobody wanted to hear about it. To David’s point, if you can build it as a commoditized product and figure out how to do that and not pay more, it’s such a home run because the value is there and it’s going to stay. And it’s almost as elastic [against] fluctuations in the marketplace. There’s not only a flight to quality, but the quality holds up in a downturn or market correction.

Levinson: It’s really the best way to mitigate the risk, to not build a commodity building.

Lapidus: Think of something as simple as LEED, which is commonplace these days. But if you’re planning a billion-dollar project, and you want to hit a certain level of LEED certification, it might cost you an extra $500,000 or a million dollars on a billion-dollar project to get that. Everything we do is about upfront planning and coordination. By the time you actually start doing the work, you’ve thought about everything. There’s always going to be things you can’t foresee, particularly in what Dave and I have done in the past with taking existing hundred-year-old buildings.

Like 390 Madison?

Lapidus: Everything: 200 Fifth, 390 [Madison], 195 [Broadway], 425 [Park Avenue]. But when you have the luxury of building ground-up, you have other issues to deal with, but you don’t have that uncertainty…It’s like a treasure hunt. Some of our buildings, like 150 Fifth, you’d peel things away and Dave’s like, “You got to come down here and look at this. It was the bishop’s vault.”

Gilmartin implied in an interview with us at the REBNY banquet that commercial was more the priority. Is that the case?

Lapidus: We’re opportunistic. L&L’s history is office buildings with ancillary retail. Obviously, the project we’re doing, TSX Broadway in Times Square, has no office, which is a departure. What attracted us to that was an iconic, once-in-a-lifetime location and the ability to create a 21st century product and a very, very complicated construction. It had all of those elements even though it wasn’t office. With MaryAnn’s pedigree and background, we think the world has opened up to us even more. We’ve looked at residential things at L&L but haven’t really done them. It’s a very different view now because MaryAnne and her team have executed those successfully many times.

Gilmartin: I think I had said [at REBNY] my first love was office because, when I first came into the business, I built office buildings at Forest City. That was my bread and butter. But then what Pacific Park did and Spruce Street did was open up a whole new avenue. That was the great thing about being at a company where, if you dared to dream it and defend it and it penciled out, they were game. I had a great run—built two hotels [former Embassy Suites at Battery Park and Hilton Times Square]. That’s the spirit around here, too [at L&L]. You have to be sensible and know what risks you’re taking, but there’s a lot of ambition and a lot of enthusiasm around the city. And inside of that anything is possible.

Can you talk about how this partnership came together?

Levinson: So Rob and I had really been talking about, from day one, creating a platform for the most talented people we could attract. And as our business grew and as the projects got more complex, there was more of an urgency in our minds to bring in the most talented people we could find. As the founders take a company from point A to point B, very often the platform needs to have new blood, new management, people that have their own vision and drive.

It had come to my attention that [Forest City] changed the nature of their business, and it made me think that potentially, knowing MaryAnne as a “hopeless developer,” as she says, that she could end up in a place where she could be constrained. She might not be able to reach her own aspirations as a professional developer.

We knew each other. We did a deal a zillion years ago, which was interesting and successful.

What deal?

Levinson: It was Bear Stearns. I was advising and representing them [as a broker with Insignia/ESG], and they did a [300,000-square-foot] deal at MetroTech in 2003. So we go back a very long way. We reached out to MaryAnne, and it was sort of like a “let’s catch up” social kind of thing, knowing in my mind where I really wanted to go with that conversation. Over a period of about a year and a half, it was sort of a courtship. I watched what was happening at Forest City, and it was unfolding the way I had anticipated. And it was getting a little clearer to MaryAnne what we had in mind, and we had this very fun enjoyable lunch at the 21 Club [in November 2016]. I think MaryAnne proposed something that was a little different than what I had contemplated. And she proposed her team potentially.

And that idea of her and her team was something Rob and I hadn’t even contemplated. But it was an awesome idea. Then we started thinking, “O.K., so how would this work? And what would be the structure of our deal?” MaryAnne was at the point in her career where she wasn’t going to just take a job working for somebody. She really was in a place in the world where she should be an owner of the business. And we were totally O.K. with that.

Gilmartin: I was on a career quest for sure. If I was going to leave, it was going to be different than it had been up until that point. The notion of being an owner in something versus being a well-paid CEO, that I was clear on. And I learned along the way that the definition of partnership is a very interesting conversation.

I can tell you how you can dance around that discussion to the point of being utterly exhausting because what you get to fundamentally is, “You’re a partner but…” Doesn’t mean you’re going to actually own anything. You’re just going to shill and then you’ll get a piece of the upside.

I can say from the onset, David said all the right stuff.

What I find remarkable is not just that we figured it out on a deal front, but I was able to feel comfortable and they felt comfortable with me, and these guys have been partners for 17 years. For me it was a great validator that they’re not clones of each other and that they were able to be successful, enjoy each other, have fun and make money.

What was the most uncomfortable situation you’ve been in as a woman in real estate?

Gilmartin: [Years ago, Bruce Ratner] and I went to Midtown to meet with [the CEO of a now-defunct investment bank about a lease]. We were arguing over a buck a foot in rent [in MetroTech]. So we go in, and [the CEO] is like, “These people could be in Calcutta for all I care. What do I care about Brooklyn?” And I was like, “Oh, this is going to go really well.” He literally had like a button, and the door closed, and then he lit up a cigar, and it was like 9:30 in the morning. I thought, “Where are we? I just want to get the buck and get out.”

And he started with “Oh, I read the paper today. Turns out you’re in bed with The New York Times.”

And he looks at me, and he looks at Bruce. I’m like, “O.K. this is a little off topic, what are you saying?” And he’s like, “You’re stopping the Freedom Tower [from] getting built, according to [New York Post reporter] Steve Cuozzo, because you can’t fill your building in Midtown.”

[When he struggled to find tenants and financing for The New York Times building in 2003, Ratner applied for $400 million in tax-exempt federal bonds that were earmarked for rebuilding New York City after 9/11, the Times and The Village Voice reported at the time. However, the government ultimately rejected his application for the financing.]

I’m like, “That’s kind of deep. You’re giving us a lot of credit.” And he said to me, “I think I’m going to try and hire you.” And I’m sitting there with Bruce Ratner, and I’m like, “This is not about the buck. I just want to talk about the buck!”

[Afterward] Bruce says to me, “I’m so sorry, I should have just gotten up and left.” We got the 75 cents [a square foot].

Then we go downstairs and Bruce is beyond upset. I said, “Bruce, stuff like that, people get their comeuppance.” And as the future would have it, things didn’t end so well [for that CEO]. We go downstairs, and there are all these black cars lined up, and Bruce’s driver was off or something, and we had to go to another meeting. So there’s a car right outside the door of [the bank].

We get in the car, and the [driver asks if we’re the CEO we just left]. And Bruce is like, “Yeah, I’m him.” So we take the black car, and we’re driving up Madison Avenue, and the guy starts getting calls: “Where are you? Where are you?” And he’s like, “I got the guy in my car.” And they’re like, “No. you don’t. He’s looking for his car.” So Bruce takes out $500 and says to the guy, “Take us where we’re going. It’ll be worth your while. It’s worth it to me for you to not [kick us out]. And I could easily get another cab. Here’s 500 bucks.” So Bruce and I [won] in our little Brooklyn way…We got the 75 cents, and we left, and we took the car.

This is my story of like, “As a woman in real estate, have you ever had any crazy [moments?]”…and I’m like, “Well, there was this one time…”

Do you think the gender dynamics and balance of power in real estate will ever shift enough that we can just talk about you in terms of being a developer, instead of being a female developer?

Gilmartin: I don’t do panels with women talking about women in real estate. Because you know what? It’s not going to change anything. I’ll do a panel with some men, and if women come up, I’ll talk about it. But it’s not going to change if women get together and just keep talking about how it has to change. The change starts when fellas like this decide they picked the best person for the job, man or woman, and it happens to be a woman. And then we go change the world. And then I go inside of the C-suite, I do what I do, it opens pathways for women. Fifty percent of the people I brought [to L&L MAG] are women. Then I go into a boardroom at Jefferies [the investment bank], a bunch of guys, and I’m on the board there, and that’s when we start talking about a new board member, and you know we’re going to have a conversation about putting women in the mix.

The change really has to come two ways. Women have to get into the C-suite and the boardroom. And men have to sign onto the mission. And then we change the world. And then it’s not going to be such a big deal. I know I’m the beneficiary of this very shallow pool where women aren’t doing what I’m doing. I’m not proud of that. There’s a lot of fuss about it, and it’s all really exciting. But, it’s also quite pathetic. It shouldn’t be that big a deal.

Levinson: I’m not giving Rob and myself any special credit, but for us…we didn’t really see MaryAnne as we’re partnering with a woman. It’s really more of a coincidence. Our job is to create the best platform we can and either hire or partner with the best people we can. It wasn’t like, “Let’s go find a woman because the world needs a woman CEO.” They do, but that’s more of a coincidence. And at this moment in time, it’s a benefit because I think people really like this idea by itself. But that’s not what it was about. It was 100 percent about the best people. We know what it means to field a great team. This is our Giancarlo Stanton [who just got picked up by the Yankees] moment.

Gilmartin: Recently someone was quoted in all these stories that were written about real estate and women and the “MeToo” moment and all that. Somebody said, “You know the reason it’s a boys club is because people want to be among people who are like them.” [That’s] as opposed to saying you want your business to reflect the people you serve. You look around at our city, and if the city is our clientele, what the hell? There better be some diversity. So I look at it more on the outside as, Who are we serving?

Source: commercial

Clipper Equity Scores Victory in Rent-Stabilization Case at 50 Murray Street

Six months after a judge ruled in favor of 40-plus tenants that Clipper Equity unlawfully deregulated 421-g units at 50 Murray Street, a higher court has overturned the decision in a big win for residential property owners and developers.

Over 40 tenants alleged in a June 2016 lawsuit that David Bistricer’s company overcharged them on rent at 50 Murray Street between West Broadway and Church Street while receiving millions in tax breaks as part of the 421-g tax exemption program (which caps rent increases as per the Rent Guidelines Board). They alleged that their apartments were subject to luxury deregulation, which allows landlords to deregulate units once the rent exceeds a set sum, today $2,700.

New York’s State Supreme Court sided with the tenants in a July 2017 decision, as reported by The Real Deal.  The landlord took the case to the Appellate Court, which TRD said made it the first 421-g case to reach that level of the court system.

Yesterday, the Appellate Division reversed the Supreme Court’s ruling and declared that the apartments had been properly deregulated and were not subject to rent stabilization, as the tenants had argued. As explained in an internal memo from law firm Rosenberg Estis, which submitted an amicus curiae, or friend of the court, brief to the Appellate Division on behalf of the Real Estate Board of New York, apartments in buildings receiving Real Property Tax Law 421-g tax benefits “can use luxury deregulation in the same manner as other rent-stabilized apartments.”

“It is a significant decision for owners of buildings in Lower Manhattan for which they had received 421-g benefits,” Rosenberg & Estis attorney Luise Barrack told Commercial Observer. “The Appellate Division’s decision reversed the Supreme Court Judge who had ruled that the tenants’ apartments had been wrongfully deregulated and had sent the case to a special referee to determine the amount of the rent overcharges and the attorney’s fees and costs incurred in litigating the case. This decision will allow the owner of the building in question and all other buildings that received 421-g benefits to luxury deregulate apartments in those buildings.”

In 1995, then-Mayor Rudolph Giuliani proposed the Lower Manhattan Revitalization Plan (LMRP) in hopes of turning around the decline of Lower Manhattan. The 421-g program, which provided tax benefits to owners of underutilized office buildings that converted either all or part of their buildings to residential apartments, was part of the LMRP. The law provided that apartments in 421-g buildings would be subject to rent stabilization (like other tax incentives), including its luxury deregulation provisions.

Attorney Adam Leitman Bailey of his eponymous firm and who has nothing to do with the case spoke to the significance of the decision: “The decision…allows landlords the freedom to rent out their apartments and have received this tax benefit with the ability to seek luxury decontrol when appropriate. This is the opposite result of those receiving tax benefits from J-51 or 421-a programs. This has also been a rare victory for landlord groups putting in friend of the court briefs who have lost almost every tax benefit case in recent years.”

JJ Bistricer, an executive vice president at Clipper Equity, didn’t immediately respond to a request for comment, and nor did a spokesman for REBNY. The tenants’ attorney, Serge Joseph of Himmelstein, McConnell, Gribben, Donoghue & Joseph, wasn’t immediately available to comment.

Source: commercial

Optimism Abounded at REBNY’s 2018 Prom

Despite a tumultuous year for real estate—with investment sales falling off a cliff, retail suffering due to technology and banks tightening their lending—it was a night full of spendor, high spirits and big names at the Real Estate Board of New York’s gala yesterday.  

The 122nd annual REBNY banquet at the New York Hilton Midtown at 1335 Avenue of the Americas featured a power-packed list of politicians, developers, brokers, bankers and other professionals. Many in the room expressed optimism for 2018 to Commercial Observer.

“It’s a great time to celebrate the industry,” REBNY President John Banks told CO, without giving further explanation.

However, Bruce Mosler, the chairman of global brokerage of Cushman & Wakefield, later expounded that economic factors are positive and things seem to be looking up for 2018.

“I’m not worried about macroeconomic risk, I’m more concerned about geopolitical risk,” Mosler said.

While nearly 2,000 partygoers hobnobbed at the cocktail hour before the award presentation, members from the Campaign to Stop REBNY Bullies rallied in front the hotel against the trade organization.

Top pols that graced the event included Mayor Bill De Blasio, recently minted for his second term, Attorney General Eric Schneiderman, New York City Comptroller Scott Stringer, Bronx Borough President Rubén Díaz Jr. and Brooklyn Borough President Eric Adams. Meanwhile, some of the real estate community’s brightest stars in attendance included RXR Realty’s Scott Rechler, Extell Development Company’s Gary Barnett, Durst Organization’s Douglas Durst, C&W’s John Santora, CBRE’s Mary Ann Tighe (a former REBNY chairman), L&L MAG’s MaryAnne Gilmartin and Robert Lapidus (also of L&L Holding Company), Avison Young’s A. Mitti Liebersohn, Newmark Knight Frank’s Barry Gosin, former REBNY President Steven Spinola; and new REBNY Chairman William Rudin, the CEO and co-chairman of Rudin Management Company.

United States Senator of New York Senator Chuck Schumer, the only politician being honored with the award last night, was busy in Washington, D.C., with Congress trying to pass a spending bill to avoid a government shutdown. (He earned the John E. Zuccotti Public Service Award.)

Tishman Speyer President and Chief Executive Officer Rob Speyer, REBNY chairman until December 2017, was the recipient of the Harry B. Helmsley Distinguished New York Award. LeFrak Organization CEO and Chairman Richard LeFrak was presented the Kenneth R. Gerrety Humanitarian Award.

Joanne Podell, an executive vice chairman at C&W, earned the Louis Smadbeck Memorial Broker Recognition Award. Rudin Management Company Senior Vice President Gene Boniberger was honored with the George M. Brooker Management Executive of the Year Award. Ron Lo Russo, the president of C&W’s agency consulting group, won the Young Real Estate Professional of the Year Award.  

And Elizabeth Stribling, chairman of Stribling & Associates, received The Bernad H. Mendik Lifetime Leadership in Real Estate Award. In her speech, Stribling recalled having known Mendik and what it was like attending the REBNY banquet for the first time.

“It was exactly 50 years ago tonight that I first attended my first REBNY gala as a 21-year-old rookie broker,” she said. “I was starstruck. And I still am.”

Source: commercial

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

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