Mark Stagg feels good about the future of the Bronx, not because he thinks it will become the next Williamsburg but because he thinks it won’t.
“With the cost of construction only on the rise, our rents only can demand so much, which I prefer,” he said. “The working class—the workforce housing—Needs A Place to live.”
Stagg has been one of the most active developers in the Bronx for years, starting his ventures into real estate with the purchase of a lot in Wakefield in 1998 and steadily progressing to larger undertakings like the Equestrian, a 129-unit project on Pelham Parkway. Although he has encountered his fair share of critics throughout his career — most recently over plans to build a homeless shelter instead of a luxury building in Kingsbridge — Stagg defended his work in the Bronx as an attempt to provide housing for all New Yorkers, “some more fortunate than others.”
“You call it a homeless shelter,” he said. “We call it a family residence that is going to be filled with mothers and children.”
Stagg’s career has not taken him too far from his roots. He grew up in White Plains and was working in the mortgage business in the Bronx when a realtor approached him in 1998 to see if he was interested in buying a 25- by 100-foot lot in Wakefield. Stagg saw the offer as an opportunity to get more directly involved with the housing industry and pulled the trigger, purchasing the lot for $16,000 and building a two-family house.
“The Wakefield section was a West Indian community that thrived on home ownership,” he said, “and that’s what brought me here.”
Stagg’s portfolio gradually increased over the years as he transitioned from building two- and three-family houses to four-story walkups to elevator buildings. He said his company now has about 2,000 units of housing spread across more than 100 properties.
The Equestrian at 1680 Pelham Parkway South, which opened in June, is the Stagg Group’s largest project yet, featuring 129 market rate apartments with rents between about $1,600 and $2,500. Pachyderm Realty is handling the leasing. Stagg purchased land adjacent to the building for $3.35 million in March 2014 and then bought 1680 Pelham Parkway itself in August 2014 for about $440,000.
The property, the site of an old horse stable, was fairly well-known before Stagg purchased it. Developer Louis Zazzarino bought it at auction in 2014 for about $450,000, and although he said he would have loved to develop the property himself, he could not make the economics work, largely because he would have had to relocate the sewer.
“It was worth more to him,” Zazzarino said. “It had more value to him because he had the larger piece next door.”
Stagg said he was encouraged to build a larger project because the neighborhood’s housing stock could use improving, and there are lots of jobs nearby.
“We call this hospital central,” he said. “This section of the neighborhood here, there are so many employers that employ thousands of people that need housing.”
The developer was able to finance the Equestrian with a $14.6 million mortgage from Valley National Bank, one of the Stagg Group’s frequent lenders. Chris Coiley, senior vice president of the bank’s commercial real estate division in New York, said their relationship began in 2012, when Valley gave Stagg a $4.5 million mortgage for his property at 715 E. 214th Street. The Equestrian was Stagg’s most ambitious project to date, but the bank quickly stepped up with the financing, Coiley said.
“We felt comfortable with the location,” he said, “and knowing who the developer was and having experience with him made it a transaction that we wanted to include ourselves in.”
The Stagg Group’s Bronx portfolio also includes 668-674 E. 226th Street and 3961 Carpenter Avenue in Wakefield, 1650 Undercliff Avenue in Morris Heights, and 3210-3214 Olinville Avenue in Williamsbridge. The company has filed plans for buildings this year at 3469 Cannon Place, and 186 St. Georges Crescent. A 2015 analysis by The Real Deal found that the Stagg Group was the fifth most active developer in the Bronx with 552,556 square feet of real estate and 764 units spread across 14 buildings, and Stagg estimated he employs about 150 people.
Ariel Property Advisors‘ Victor Sozio represented the sellers for two other Stagg Group purchases in the Bronx: 3084 Webster Avenue and 5959 Broadway. Stagg purchased 3084 Webster Avenue in 2014 for $4.1 million from L+M Development Partners and filed plans the next year for an 11-story building with 118 residential units on the property. The company also purchased 5959 Broadway in 2013 for $3.6 million and is planning a 72-unit rental project on the property.
Sozio said Ariel approached Stagg for both deals, given the company’s reputation as a prolific developer in the Bronx. He said the firm was both clever and lucky to have started investing in the borough before the boom hit.
“They were smart and fortunate enough to enter that market at a time where it was growing and has since grown substantially,” he said, “so I think they’ve benefitted tremendously from that market growth.”
A Bronx cheer from politicians, community leaders
Stagg’s decades developing in the Bronx have not been without controversy. He has attracted his fair share of critics over the years who accuse him of not being straightforward about his projects, an issue that came to the forefront this summer when the company said the luxury building it was planning at 5731 Broadway would instead be a homeless shelter.
The project is located in Bronx Community District 8, and Charles Moerdler, who chairs the land use committee on the local community board, was highly critical of Stagg’s plans for the site, saying that his company “flat out lied to us.” The board has asked the Department of Investigation to look into the company and its consultant, former Bronx Borough President Adolfo Carrión, for misrepresentation, but the DOI declined to comment on whether they were taking up the matter.
Councilmember Andrew Cohen, whose district includes 5731 Broadway, offered a similar take on the project, saying in a statement that “Mark Stagg completely misrepresented 5731 Broadway to Community Board 8 as market-rate housing and then pulled a bait and switch. He hasn’t been transparent in his dealings with the community—and it’s a problem.”
Landlords can get up to $3,000 per month per unit worth of city subsidies to provide shelter for New York’s homeless population, significantly more than what other tenants would pay in rent. However, Stagg maintained he would get approximately $1,825 per month per unit for The Broadway project and framed the switch as a matter of bad timing, not deception.
“It happened so quickly that I could not get out ahead of it,” he said. “It’s the way the process works.
“This wasn’t something that was planned. It wasn’t something that was known about,” he continued. “It wasn’t something that was held back from the community at all.”
Stagg has no plans to do the same thing at any of his other pending Bronx projects, he said.
The Stagg Group has also run into trouble in Bronx Community District 12, where Councilmember Andy King, who represents the district, has come out against their building at 3677 White Plains Road, similarly arguing that the company duplicitously turned what was supposed to be market-rate housing into homeless housing.
King said he has an “in between” relationship with the Stagg Group, having been familiar with the company for a couple of years. However, he still had extremely harsh words for them about their trustworthiness.
“I’m at the point right now, I’m like, you don’t get to build in the Bronx no more,” he said, “because we can’t trust you.”
A gamble on the future
Stagg describes the Equestrian as an “affordable luxury building” with amenities that include a fitness center, a roof deck and underground parking. And while he maintains that the building is quickly filling up, with about 115 units occupied so far, he does not think the borough is on the verge of having luxury buildings on every block.
Though Stagg has no plans to stop building in the Bronx, he is not nearly as convinced as other developers that it will become the next Brooklyn, agreeing with a recent TRD analysis that many of the major investment sales deals are rather speculative. He estimated that his company’s ratio of affordable to market rate projects was about seven to three, and he sees this as the future of the borough much more so than a constant stream of high-end condos and expensive rentals.
“I’m surprised at what I’ve heard that some of the land deals trade at. From an economic standpoint, they just don’t make sense. I just think they’re going for too much,” he said. “I think when they’re comparing Brooklyn and Queens, they’re still seeing value. However, the value isn’t today’s value. It’s a gamble on the future.”
He is particularly skeptical of Somerset Partners’ and the Chetrit Group’s massive waterfront project coming to Mott Haven. The companies paid $58 million for the two sites at 2401 Third Avenue and 101 Lincoln Avenue, where they plan to construct a 1,300-unit seven-building complex with rents running between $3,000 and $3,500.
Stagg said it was a stretch to think that people would be willing to pay that much money to live in the South Bronx.
“They think one day they’re going to wake up, and rents for two-bedrooms are going to be $3,500” just because that is happening elsewhere, he said. “I think it’s totally speculative, and I don’t believe it is. This is the borough of value.”
Somerset founder Keith Rubenstein, who recently moved his company’s headquarters to the South Bronx, said he had never met Stagg before and was confident that the megaproject would do well.
“We’re comfortable in the economics,” he said. ”The market will always determine success and failure.”
Stagg stressed that he still viewed the Bronx as a great place that had come a long way from serving as the poster child for urban decay in the 1970s and 80s. He said money would likely continue to pour into the borough regardless of his skepticism.
“I don’t think we’re there yet. I don’t think we topped out,” he said. “I still think people are going to try to predict the future, and with that, the deep pockets will continue to buy.“