It seems like only yesterday that big-time luxury developers were the darlings of City Hall. Under Mayor Michael Bloomberg, firms like the Related Company, Vornado Realty Trust, Tishman Speyer and Extell Development Company flowered, negotiating some of the biggest development deals New York City has seen in half a century.
Those firms are not going anywhere, especially given the megaprojects they currently have underway, including Related’s Hudson Yards site. But now, with a new (non-billionaire) mayor in office, the discussion at City Hall has shifted away from gleaming luxury condos to affordable housing for the city’s working class. And as a result, there’s a new crop of developers that, while already active, are likely to be in the spotlight even more.
That’s because Mayor Bill de Blasio has pledged to develop or maintain some 200,000 units of affordable housing — creating 80,000 new units and preserving 120,000 existing units. That commitment to affordable housing could mean big money for a few established developers with the city earmarking $8.2 billion in public funds over 10 years. And the sheer amount of building being proposed means that in addition to the large established players, that smaller developers could also be tapped for big projects built over the next decade.
While many developers have expressed concern about increased affordable housing requirements that the administration is planning to implement, saying they will stymie construction, affordable housing advocates argue otherwise.
And for some developers, increasing affordable housing requirements means more bread-and-butter work.
This month, The Real Deal looked at which of those big affordable housing developers, sources say, are expected to move more squarely into the limelight under the new City Hall team.
L+M Development Partners
L+M Development Partners, an employee-owned private developer, has long played a major role in the development of affordable housing in New York City.
It’s taken on some of the biggest subsidized projects in the city, and was selected at the end of Bloomberg’s administration as one of the developers — along with BFC Partners, Taconic Investment Partners and Grand Street Settlement — on the long-anticipated mixed-income redevelopment of the so-called Seward Park Urban Renewal Area in the Lower East Side. The project, known as Essex Crossing, will house 1.9 million square feet of commercial, community and residential space, including 1,000 units of housing, half of which will be affordable.
And the firm knows the ins-and-outs of how the government’s affordable housing development system works. During the Bloomberg era, L+M CEO Ron Moelis hired Rafael Cestero, the former commissioner of the city’s Department of Housing Preservation and Development, as well as Lisa Gomez, a former staffer at the city’s Housing Development Corporation, to help navigate city bureaucracy.
But the firm could see its influence grow in the coming years.
Moelis has a long working relationship with Alicia Glen, de Blasio’s deputy mayor for housing and economic development (see “City Hall’s golden girl: Alicia Glen”). Glen formerly sat on the board of the Moelis Institute for Affordable Housing Policy, an organization founded by Moelis within New York University’s Furman Center for Real Estate and Urban Policy.
As head of the Goldman Sachs Urban Investment Group, Glen partnered with Moelis on several projects, including the restoration of Newark’s 400,000 square-foot Hahne & Company building and Brooklyn’s 11 Broadway, a 160-unit mixed-income project.
Moreover, de Blasio’s new HPD commissioner, Vicki Been, also has ties to L+M. She ran NYU’s Furman Center from 2004 until her recent City Hall appointment. During that time, the Moelis Institute donated some $2 million to the Furman Center.
“L+M has been able to very effectively associate themselves with the city and with the growth of affordable housing generally,” said Ismene Speliotis, executive director of the Mutual Housing Association of New York, a nonprofit affordable housing group.
Moelis did not return calls for comment. But de Blasio spokesperson Wiley Norvell disputed any suggestion that connected developers would get favored, noting that developers of city-owned property are selected through a “highly-competitive process, including RFPs.”
“Decisions are made on the merits of the proposals and qualifications of the developer,” he said.
Jonathan Rose Companies
Since its inception in 1989 as a sustainable developer, Jonathan Rose Companies has completed more than $1.5 billion in projects, making it one of the largest affordable developers in New York.
Those opportunities are only expected to grow and become more high profile now.
“We think that opportunities for all affordable housing developers are going to increase under de Blasio,” company head Jonathan Rose said. “At the same time, our firm has been growing its focus on mixed-income housing, and we think that is an area that will grow under this administration [too].”
Currently the firm is developing Harlem RBI, on 104th Street and Second Avenue, a $78.5 million project that includes 89 affordable housing units along with office space and a charter school.
And like L+M, the company is well connected to City Hall. The firm’s managing director, Paul Freitag, has taught alongside Glen at Columbia University’s Paul Milstein Center for Real Estate, as has Moelis, according to the university’s website.
Moreover, Freitag has sat on the board of the Citizens Housing Planning Council, a nonpartisan policy research organization focusing on housing and economic development, with Glen and other major real estate players.
But Rose also said connections alone mean very little compared to a developer’s ability to get the job done and do it well.
“For the last 12 years, under the Bloomberg administration, there was a real sense that the development process was fair … and that the administration was always trying to pick the best, while also making an effort to spread the affordable housing around to make sure that everybody got a fair shot,” Rose said. “I hope that will continue under this administration.”
As the cost of developing affordable housing has ballooned in recent years, some developers have been pushed to the side, lacking the cash to score major development projects from the city without pooling resources. But Phipps Houses is an exception to that rule: Sources say the firm is one of the only nonprofit developers in the city with the resources needed to build on its own.
The firm — a 110-year-old organization that develops, owns and manages affordable housing — generates tens of millions in revenue annually, according to public records, and has deployed that money to develop 8,000 units of affordable housing. It’s retained ownership of about 6,000 of those units and currently has 1,100 units under construction.
In partnership with Related and Monadnock Construction, the firm was selected by the Bloomberg administration to develop the first phase of Hunter’s Point South, with two mixed-use buildings consisting of more than 900 units of affordable housing in Long Island City.
“What has happened over the years is that the bar, financially speaking, for developing affordable housing has been raised,” said president and CEO Adam Weinstein.
He pointed out that because the government uses fewer taxpayer dollars per unit to generate resources for affordable housing, the initial capital a firm needs to take on a project is much higher than it once was. As a result, the pool of developers able to compete for projects has been limited to the largest and most well-financed firms, he said.
But, he added, the huge amount of affordable housing being developed and preserved under de Blasio will allow smaller firms to get in on the action again. Smaller nonprofits, which lack the liquid resources to compete with large private firms, will become major players in specific submarkets and neighborhoods, since they have long-established relationships with communities, he said.
Nonetheless, Weinstein said: “The RFP process is going to be more competitive than it has ever been, because the city is really looking to maximize its resources for affordable housing.”
Over its 30-year history, BFC has developed more than 4,500 units of affordable housing, including Toren, a 240-unit mixed-use, mixed-income project in Downtown Brooklyn and the Rail, a 99,000-square-foot, 92-unit building on Staten Island.
Currently, the firm is handling the ground-up, mixed-income development of 250 units of housing at the first tower of Downtown Brooklyn’s City Point, a mammoth 1.8 million-square-foot residential and commercial development at 70 Fleet Street. It is also working on deals to preserve a total of 250 units of affordable housing in the Bronx and another 550 units on Staten Island.
And that’s not to mention the firm’s plan to redevelop the St. George waterfront on Staten Island, with the world’s tallest Ferris Wheel, a 340,000-square-foot retail complex and a 200-key, 130,000-square-foot hotel.
Under the new city leadership the company is expected to gain even more name recognition.
BFC’s managing principal, Don Capoccia, predicted that winning affordable housing projects under de Blasio would come down to land.
“You have to have land in your portfolio, which we do, and you have to be on the hunt for acquisition opportunities where you see potential for rezoning and affordable housing,” he told TRD. “That is what best positions yourself with any administration.”
Capoccia stressed that because the HPD and the city’s Economic Development Corp. have very specific requirements for each project, developers will have to qualify to compete — regardless of who they know in the administration.
“I think the de Blasio administration is going to cast a really wide net across the whole spectrum of builders in New York City because they have to basically double production of ground-up affordable housing,” he said. “They will need to include as many players as possible.”
Martin Dunn, the head of Dunn Development, met de Blasio for the first time at the April ground breaking of Livonia Commons, a 278-unit affordable housing development in East New York, Brooklyn.
“Martin Dunn’s been a great partner in this effort, and his focus on community hiring is something I particularly commend,” de Blasio told the crowd, which also included Glen.
But he and his firm are likely to be in more regular contact with the administration from here on out.
Dunn Development was founded in 1998, and since that time it has developed thousands of units of affordable housing throughout the five boroughs. It currently has nearly 1,000 units under construction.
When asked how he is positioning his firm to get a piece of the coming wave of new-construction affordable housing, Dunn said, “we’re doing what we have always done: We’re buying land and assembling sites.”
“When I founded the firm, part of our mission was to create new models of affordable and supportive housing,” he said. “A lot of what this new administration has been talking about is stuff we pioneered, so we think that we are in a good position.”
Specifically, Dunn has developed projects for formerly homeless individuals, those with special needs and workforce housing, as well as mixed-income housing. Most recently, the firm completed King Garden Seniors, a 59-unit low-income senior housing project in Brownsville, Brooklyn, for both residents with severe medical conditions and healthier elderly residents.
Dunn noted that de Blasio has proposed so much new construction — 8,000 new units a year — that there will be plenty of room at the table for affordable developers of all sizes.
“We’re not looking to grow,” Dunn said. “So, how have I been preparing? I’m not. We are already doing what this mayor has been articulating as his vision.”