(Paydirt is a new weekly column that riffs on the biggest NYC real estate news of the moment, providing analysis and historical context on the deals and players that make this town tick.)
Hindu mythology tells of a demon giant, Kumbhakarna, who’d sleep for six months at a stretch. When he’d awaken, he’d devour everything in sight. Since 421a expired in January, Gov. Andrew Cuomo, save for the occasional statement on unions, has been asleep. But the Prince of Darkness is now up, and roaring.
To resurrect the program — which developers insist is the only way to get any housing built in the outer boroughs — Cuomo proposed a new wage subsidy for large projects in Brooklyn and Queens. A direct wage subsidy of this sort is extremely rare if not unprecedented in the U.S., and it’s not quite clear how the state will pay for it or manage the program.
Outsourcing the 421a burden in the first place to private groups was considered foolish. Its death helped put the city’s investment sales market into a stupor and led to major developers shelving projects. The governor has managed to bring the Building Trades and REBNY back to the table, but as sources from both sides put it to TRD‘s Kathryn Brenzel, “the devil’s in the details.” Of which we have very few. One major Brooklyn developer told TRD the wage requirement for 300-plus unit projects could discourage builders from constructing larger developments.
Move over, LeFrak: In the year’s biggest multifamily deal to date, Blackstone is buying an 894-unit rental complex on Manhattan’s East Side for $620 million, as TRD first reported. When completed, the deal will see Blackstone leapfrog past LeFrak to become the second-largest rental landlord in New York, behind only Related Companies. It’s a swift rise, made possible by megadeals such as the one for Stuyvesant Town, the Caiola portfolio (after Joe Sitt dropped out) and this one. Even as Blackstone amasses a long-term portfolio, it’s always looking for quick gains — a piece of the Caiola is already on the market.
Resi dramedy: With a dad who was buddies with Cus d’Amato, Wendy Maitland grew up around boxing. No wonder she didn’t pull her punches in her lawsuit against her former firm Town Residential. After buying co-owner Joe Sitt out of his stake earlier this month, it was Andrew Heiberger’s turn to take Maitland on, and he too went hard, claiming his former president of sales abused her position by borrowing from her underlings, created bad press for the firm, and wooed top talent over to her new firm, Brown Harris Stevens. His affidavit even included a bizarre screenshot of Maitland’s savings account, showing a balance of $1.54 million.
It’s hard to know how this will end for Town, but it’s definitely becoming a lot lonelier there: Recent departures include Ginger Brokaw, Jason Karadus, Itzy Garay, Judi Lederer and Terry Naini.
Extell’s $163M haircut: For the fourth time, Gary Barnett was forced to delay closing on a loan for One Manhattan Square from RXR Realty, as Extell Development is yet to secure the construction financing that RXR’s loan was contingent upon. This time, the delay hurt: RXR said it would be reducing its commitment by $163 million, to $300 million.
“RXR’s decision is creating a bigger hole for Extell, but it also reduces Extell’s total exposure,” Ori Eisenberg of real estate financial advisory firm One Ha’am told TRD.
Barnett told his Israeli bond investors that he expects to close on the construction loan for One Manhattan Square by the end of this month, at which time he can get his money from RXR. He’s juggling that burden with another hefty one, at Central Park Tower, where he needs to close on a construction loan by May.
The pious ones: This morning, TRD published an in-depth look at how Hasidic real estate investors operate, balancing piety with profits. “It’s not easy for them to be true to their deep religious outlook and be real estate developers in modern America at the same time,” lender Gary Katz told TRD. How they do it is fascinating, especially this principle: If one buys a building from fellow Hasidim, he should keep it as is. If he buys a building from a non-Jew, however, he may market it to hipsters.
(Read more from Paydirt here)