Chelsea Citzen developer asks court to intervene in tax abatement dispute

Developer says city’s 421-A decision will cost firm $3.1 million.

TRD New York /
Jul.July 05, 2012 10:00 AM

Anbau Enterprises, the development firm behind the Chelsea Citizen, a new 16-story condominium project, has petitioned the New York State Supreme Court to intervene in its ongoing dispute with the Department of Housing, Preservation & Development. The developer, which is constructing the 29-unit project at 124 West 23rd Street, has asked the court to step in to ensure that it will receive the 421-A tax abatement it applied for in December but has since been denied by HPD. In court records, Anbau claims it has met all the requirements to qualify for the abatement.

HPD’s refusal to grant the Citizen’s tax abatement is based on its assertion that the developer’s foundation permit for the project was not based on DOB-approved architectural plans. Anbau commenced its foundation work and installed a concrete piling at the site in June 2009. Projects begun after June 2009 were subject to a recently installed cap on tax abatements. HPD alleges that the developer did not technically commence construction on the project until early this year.

“[Anbau] faces the potential loss of approximately $3.1 million of 421-A tax benefits that the petitioner would otherwise be entitled to, provided it is deemed to have commenced construction of its building by June 30, 2009,” the petition states.

It continues, “HPD’s arbitrary and capricious determination that the project commenced construction on July 6, 2012 improperly subjects the property to the 421-A cap.”

The 421-A tax abatement was put in place to encourage development in certain areas by drastically reducing property taxes for a set amount of time, thereby reducing the taxes on condo buyers for a number of years after they purchase the property.

Sales were suspended last month in order to complete construction of the Citizen over the summer, the company previously told The Real Deal. Since the project went on the market in early April, 11 of its 29 units — or 38 percent of building units — have gone into contract.

Stephen Glascock, a principal of Anbau, said the lawsuit will not affect the taxes of those who have already purchased in the building and that it had not played a role in the company’s decision to temporarily take the remaining units off the market.

“We suspended sales purely because we wanted to finish up the lobby and the elevators to present the building in a much more finished fashion,” he said.

He added: “We think what the city is doing is just not right. It’s completely inconsistent with the intent of the program.”

Glascock emphasized that while the building will not necessarily be granted full 421-A tax benefits, it will receive other benefits granted to almost all developers under the 421-A program. The former would “certainly be better,” he said.

A spokesperson for HPD said the agency does not comment on matters of pending litigation.

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