In 1938, after flying around the world in a record three days, legendary tycoon Howard Hughes Jr. was greeted with a ticker tape parade in Lower Manhattan to mark the triumph.
Three-quarters of a century later, David Weinreb — CEO of the eponymous Howard Hughes Corp. — is not getting the same adoring reception. The company has already won approval to revamp the famed South Street Seaport, but its development plans for some of the surrounding sites have generated intense community controversy.
A Dallas-based development firm, Howard Hughes inherited a dozen projects after spinning off from then-bankrupt mall operator General Growth Properties in 2010.
The Seaport is the first New York City project for the firm, a publicly traded builder of master-planned communities nationwide. And some wonder if the company, which has $5.3 billion in assets and was spawned from the empire of Hughes himself, is biting off more than it can chew.
Weinreb, 50, rejected that characterization, and said the company is committed to getting the community on board with its plans.
“We’re trying to create something that both respects its past but helps look into the future, so it can stand the test of time,” Weinreb told The Real Deal during an interview at the Woolworth Building offices of SHoP Architects, the firm spearheading the redevelopment design. “We’re spending a lot of money to do that.”
Howard Hughes Corporation —which controls the South Street Seaport proper through a lease with the city, as well as all of the other buildings in the district bounded by John Street, Peck Slip, Water Street and the East River —said it’s investing $1.5 billion for the project in full.
Part of that funding would go toward the already-approved centerpiece of the plan: the redevelopment of Pier 17 into a two-story retail hub with a 10,000-square-foot rooftop venue that’s slated to break ground this year.
But the company is also looking to revamp several of its other sites and to build a 42-story condo tower with which some of the community is less than thrilled.
Bridget Schuy, an agent at Bond New York and member of the steering committee for opposition group Save Our Seaport, argued that the neighborhood is “in danger of being Disney-fied.”
The most controversial aspect of the plan is the proposed mixed-use tower, located just east of Pier 17 on the edge of the river. The building, which calls for 150 market-rate condo units and a middle school at the base, would rise on the site of the currently uninhabitable New Market Building (part of the former Fulton Fish Market) next to the actual Seaport.
Local residents have criticized the tower’s height, location and design, arguing that it’s out of step with the low-rise historic neighborhood. (Howard Hughes has already agreed to chop the height to 42 stories from 52.)
The firm will also construct a new five-story building with 60 or 70 affordable rental units on Schermerhorn Row, a historic block that formerly housed 19th-century hotels. Weinreb said the number of affordable units, which comes to 30 percent of all the residential units the firm is proposing, is not only more than required to win approval, but is “the highest percentage that any developer has ever offered in affordable housing.”
The master plan also calls for the Tin Building, the other now-uninhabitable former outpost of the Fulton Fish Market directly north of the pier building, to be moved 30 feet to the east and turned into a state-of-the-art food market. In addition, the Link Building, a transitional structure that sits just west of the pier building, would be demolished to make way for a new façade for the Pier 17 building. The plan also calls for widening the esplanade at the pier, constructing a new marina and upgrading the Seaport Museum.
The company needs to secure approval from the Landmarks Preservation Commission for key parts of the project before it can file for the Uniform Land Use Review Procedure — the final public approval process. The tower, which is currently envisioned at just under 500 feet, requires approval under ULURP to exceed 350 feet.
But it could be an uphill battle: Landmarks rejected GGP’s plan for a 42-story condo-hotel tower on the same site.
Weinreb said his firm is open to transferring the development rights to a site within a few blocks away, but he has yet to find one.
But Manhattan Borough President Gale Brewer — who with City Council Member Margaret Chin has led the opposition to the firm’s plans for the area surrounding the Seaport site — claims Howard Hughes and the other stakeholders “haven’t looked hard enough.”
When asked whether the tower would win city approval, Chin replied simply: “Not right now.”
Yet some are skeptical about that idea, because it would mean starting from scratch.
Seth Pinsky, who was EDC president when the city approved the Pier 17 plan, said the redevelopment would vastly improve the South Street Seaport area.
“If you want a developer to preserve the Tin Building and make improvements to the public space, the developer needs to be able to pay for it,” said Pinsky, now executive vice president at RXR Realty. “It’s hard to imagine that a project without this level of density or some other significant new revenue source would allow a developer to cover those costs. I don’t see another way.”
For his part, Weinreb told TRD: “We’ve basically provided all the benefits we’re able to provide with this project.”
New York state of mind
Howard Hughes has no doubt had success in other parts of the country.
In the third quarter of 2014, the firm, which has 12 offices and about 1,000 employees nationwide, brought in $119.2 million in revenue, up nearly 20 percent from $99.6 million a year earlier, according to U.S. Securities and Exchange Commission filings.
Peter Martin, managing director and senior analyst at San Francisco-based JMP Securities, said there are key signs that Howard Hughes is in a “very healthy position,” including its ease with securing project financing and the more than $800 million in cash on its balance sheet.
He added that the Seaport is more the firm’s most public project than its most contentious.
“Development rules, regulations and public scrutiny in Texas is much less than in New York,” Martin said.
The firm is helming other large-scale projects, including the 60-acre Ward Village master-planned community in Honolulu that includes 22 towers slated to rise over the next 10 to 15 years.
Honolulu residents have criticized the heights of the three towers proposed for the first phase, the New York Times reported. And Weinreb said he has been “dealing with the [local] council and a host of very complicated steps.”
“We’ve had a lot of history as a company in taking on challenging opportunities that we believed in,” he said.
But the Seaport plan is undoubtedly among the most controversial projects the company has ever tackled.
Weinreb, however, said that while the firm “recognized there were challenges” around redeveloping the site, they viewed it as “unique opportunity.”
“We felt this was an asset that, with our skill set, was ultimately what the company’s mission was all about: creating a community, not only building buildings,” he said. “We could come in and reimagine what the Seaport could be, while studying the storied past that it had.”
Some real estate players contend that Howard Hughes is at a disadvantage when it comes to locking up approvals, because it is not based in New York or steeped in the political scene here. The firm is, however, represented by veteran political consultant and lobbyist Suri Kasirer.
And Weinreb disputed that the company is at any disadvantage, saying “I think of myself as a New Yorker and our whole team is New York-centric.”
Last year, the firm signed a 10-year lease for its first New York City office — nearly 37,000 square feet at 199 Water Street. The office, which has more than 50 employees, doubles as the East Coast headquarters.
For his part, Weinreb grew up in Westchester and attended New York University for a semester before leaving to work for, and eventually partner with, real estate investor Jerry Reinsdorf, who also owns the Chicago Bulls and Chicago White Sox.
And Weinreb noted his first real estate deal was the purchase of a condo across from the Flatiron Building, at age 16. (As a teen, he had success in opening as a singer for stand-up comedians in the Catskills, and also did voiceovers and acting in TV commercials — affording him various luxuries.)
“He sounded like a Jewish Frank Sinatra,” said Simon Ziff of Ackman-Ziff, which was hired to arrange financing for Howard Hughes after the Seaport retail leasing is complete.
Ziff, who said he has been friends with Weinreb for more than 15 years, described him as “hard-driving, team-oriented and charismatic.”
Weinreb — who currently spends at least 10 days a month in New York and is looking to buy a condo in Lower Manhattan — served as head of TPMC Realty Corp. in Dallas from 1993 to 2010, rising up the ranks from broker to CEO.
And he made some powerful friends along the way.
Despite the community opposition, Mayor Bill de Blasio has not opposed the tower. And Howard Hughes has plenty of supporters, including several Manhattan business groups and high-powered players. Company board members include hedge-fund tycoon Bill Ackman, who went to high school with Weinreb and serves as chair, CBRE’s Mary Ann Tighe, and the Georgetown Company’s Adam Flatto.
Industry players agree that the redevelopment of the Seaport and surrounding area will have a positive impact on the real estate market.
RKF, which is handling retail leasing for Howard Hughes, has been targeting restaurants and fashion tenants.
The retail mix is intended to be family-friendly and less high-end than, for example, Brookfield Place, said RKF’s Robert Futterman. But the only lease announced so far is a luxury iPic movie theater set to anchor 11 Fulton Street at Fulton Market, one of the other buildings Howard Hughes plans to revamp.
Bradley Gerla, executive vice president at CBRE, said the changing Seaport neighborhood could attract tech tenants, who are already moving into Lower Manhattan. And, he said, nearby office towers with a glut of vacancies, such as 180 Maiden Lane, would benefit from a surge of activity in the area.
Weinreb said he knows his plans are ambitious and risky, but he’s optimistic they will be realized. And, he noted, they are in keeping with the philosophy of the company’s late, reclusive founder.
“I think that I’ve worked hard over a long career in real estate to do transformational things,” Weinreb said. “In that sense, Howard Hughes [Jr.] and I share a vision that [only] some people are able to see.”