The Real Deal New York

De Blasio’s Domino Sugar deal not as sweet as it seems for mayor?

Sources say affordable concessions at the Williamsburg project were actually a positive for the industry

April 01, 2014
By Katherine Clarke

From left:

From left: Jed Walentas of Two Trees, the Domino Sugar site rendering and Mayor Bill de Blasio

Last month, Mayor Bill de Blasio seemed to notch an early victory when he convinced Brooklyn developer Jed Walentas, of Two Trees Development, to increase the number of affordable housing units at the mammoth Domino Sugar Factory mixed-use project in Williamsburg.

Walentas did so in return for a zoning change at the site.

But sources said the 40 affordable units Two Trees agreed to add was not that big a concession. They said it was actually a positive for the industry, proving that the new mayor will not derail development plans or eat too far into the industry’s bottom line to achieve his affordable housing goals.

In fact, if Domino — which while largely approved, was the first major development de Blasio had an opportunity to weigh in on since taking office — sets the tone for the administration, sources say the mayor may be on more of a collision course with preservationists and community boards than with real estate developers. That’s because the former groups may oppose his willingness to build tall and dense to make way for affordable units, sources said.

“Domino played out exactly the way I guessed it would,” said David Kramer, CEO of developer Hudson Companies. “The new team wants to show that they can do one better than the old team, but not to the point of things coming apart. The administration wanted to be quick to point out that it’s progressive, but it’s also highly pragmatic and transactional.”

De Blasio’s office did not respond to requests for comment.

The Domino plan originally called for Two Trees to include 660 units of affordable housing at the 2,300-unit site. Under the new agreement, there will be 700 affordable units.

While the mayor’s office touted the increase, some sources said the additional affordable units will not change the profitability equation in any significant way for Two Trees, especially since the new terms call for 50,000 square feet of that affordable space to be available to households with “moderate” incomes, rather than lower ones.

“If that’s a win [for the mayor], I’d hate to see what a loss looks like,” said Jason Haber, a residential broker at Warburg Realty, who campaigned for city Comptroller Scott Stringer. “The [developers] threw him a bone. There is such a huge affordable housing crisis in this city, they’re still nibbling at the edges and attacking it on the periphery.”

“It’s tough to say that Two Trees lost out because you don’t know exactly what the deal was,” said Jordan Barowitz, director of external affairs for the Durst Organization, who served as a spokesperson for Mayor Michael Bloomberg. “It’s possible that this deal could have been done with a very small impact on their bottom line.”

A representative for Two Trees declined to comment on the deal, which still requires City Council approval.

“I haven’t heard Two Trees crying about anything, so I assume the deal works,” said David Von Spreckelsen, president of Toll Brothers City Living. “How much of [the company’s early protest was] negotiation and how much of that is real? I’m sure there was a breaking point; I don’t know if they came close to it.”

Some industry execs argued that by pushing Two Trees to add more affordable housing, de Blasio wanted to send a strong message to the real estate industry early on. The exact number of additional units, they said, was not nearly as significant as the fact that he’d pushed for more than what Two Trees was comfortable with — and, more importantly, further than Bloomberg had.

“It sends an unambiguous message that the new administration views the world differently than the previous administration, and that smart developers will be accepting of that and modify their plans accordingly,” said Mark Weiss, vice chairman at commercial brokerage Newmark Grubb Knight Frank. “It’s not just the amount of units. It’s the fact that everyone needs to address this administration’s concerns about expanding the stock of affordable housing.”

Sources also noted that de Blasio is likely looking to squeeze more affordable units out of other projects that already won all, or most, of their approvals under Bloomberg. But they said the mayor’s real sway will be in developments his administration will be green-lighting entirely.

While the real estate industry did not take great exception to de Blasio’s treatment of Two Trees, some sources speculated that the mayor may be poised to butt heads with community boards and preservationists — who on the surface would seem to be his allies — given recent rhetoric backing tall, dense projects filled with affordable units.

During a February meeting hosted by the Real Estate Board of New York, he reportedly told developers, including Related Companies Chairman Stephen Ross and SL Green Realty Chairman Stephen Green, that he does not oppose building taller, “to the maximum feasible extent.”

De Blasio’s rhetoric on density has been “music to the development community’s ears,” Barowitz said, adding that the mayor “may be setting himself up for a fight with preservationists, community boards, NIMBYs and Council members.”

“If you can identify one community board or one local elected official who is interested in adding denser, larger buildings to their neighborhood, I’ll buy you lunch,” Barowitz added.

Haber said preservationists are likely to come out in force as soon as one “50-story building is proposed on 72nd and Columbus Avenue with 50 percent affordable units.”

“Forget it,” he said. “That won’t stand.”

In addition, preservationists and community activists can tie up de Blasio’s affordable housing agenda in lengthy litigation, if they think the mayor is overstepping in order to reach his goals, sources said.

“There are some entrenched interests in the city that he will have trouble overcoming,” Newmark’s Weiss said. “While he has a principled position on low-cost housing, the preservationists have a principled position on keeping this a very beautiful and architecturally diverse city.”

Andrew Berman, executive director of the Greenwich Village Society for Historic Preservation, told The Real Deal that he was reserving judgment on the administration’s density stance, until it’s applied to a neighborhood that does not have the same industrial traits as the Domino site.

He also disputed the assumption that extensive landmark protections and an affordable housing agenda were not aligned interests.

“I actually think they have more in common than in conflict,” he said. “The construct that preservation and maintaining a human scale of neighborhoods is somehow in conflict with affordability is 100 percent a construct of REBNY. Landmark protections can, when appropriately applied, be extremely helpful in terms of preserving housing stock, including affordable housing stock. When an area is landmarked, demolition becomes rare, if not impossible.”

  • BS politician

    One term is too much for this incompetent person. He just got himself into another big hole just because he is too head strong to prove he is different than Bloomberg.

MENU