REAP does not stand for Real Estate Acceleration of Profit. But it could.
This month, the Citizens Budget Commission urged Gov. Kathy Hochul to veto a bill extending the $506-million-a-year tax break known as ICAP. But that’s not the only such program. I asked the watchdog group about REAP — the city’s Relocation and Employment Assistance Program.
The commission opposes that one, too, and for the same reason: No one knows if REAP, like ICAP and the city’s other business tax breaks, does any good.
“It should not be renewed without a thorough evaluation of its effectiveness,” said CBC’s Ana Champeny. Both programs, she said, should be “potentially narrowed or eliminated to ensure benefits are only spent to induce investment or job creation that would not otherwise occur.”
REAP aims to get companies to locate jobs in outer boroughs (or Lower or Upper Manhattan) and improve properties there. I once asked a high-ranking city official why that cause merits public funding. One reason, he said, is so there’s less of a commuting bottleneck into Manhattan.
But the tax break is poorly designed and easily exploited. If I buy a company, terminate its outer-borough workers and immediately rehire them, I can reap millions of dollars from REAP.
Furthermore, the goal of diverting subway commuters to Brooklyn and Queens makes even less sense now that remote work is a thing. Trains are not overstuffed like they once were.
Is an Amazon tech worker in Queens really better for the city than an Amazon tech worker in Manhattan? (Amazon would have received $900 million from REAP had it built a second headquarters in Long Island City and put 25,000 employees there.)
Tax breaks that benefit particular areas, such as federal Opportunity Zones, make those areas more valuable. Some of the subsidy is simply a transfer of wealth from taxpayers to the landowner.
The big problem, of course, is that in many cases, REAP is giving companies cash for decisions they would have made anyway.
What we’re thinking about: In concept, SROs should be part of New York City’s housing mix because they provide affordability to people who don’t mind sharing bathrooms and kitchens. But the few SROs that survived the city’s ban are “in terrible condition with no way to improve,” a reader told me on X, because “the limitations on owners are impossible.” What’s your opinion on single-room occupancy? Email me at eengquist@therealdeal.com.
A thing we’ve learned: According to the Sane Energy Project and several other advocacy groups, there’s an “ongoing crisis of unpaid utility bills” — 511,000 National Grid customers are in arrears, with an average debt of $1,140. The company has 2.3 million customers upstate and 1.9 million in Brooklyn, Queens, Staten Island and Long Island. That means about 1 in 8 customers is behind on payments.
Elsewhere…
— Donald Trump last week named Newmark executive chairman Howard Lutnick, along with former wrestling executive Linda McMahon, to head a transition team that will recruit and vet political appointees and prepare executive orders in preparation for a potential second presidential term. Both are major donors to Trump. Lutnick, who was a featured interviewee at The Real Deal’s New York Forum in May, co-hosted a fundraiser for the former president this month in the Hamptons. Lutnick also hosted a $5 million Trump fundraiser at his Manhattan apartment in 2019.
— The market for value-add, multifamily investing (aka buying and improving apartment buildings) is finally emerging from its stupor. At least, that’s what Cortland said in announcing it had raised a $1.5 billion fund, 80 percent of which came from institutional investors. It exceeded its goal by $500 million.
The Atlanta-based firm patted itself on the back for being “patient and disciplined” as it sat on ample dry powder from mid 2022 to late 2023 during a “challenging acquisition environment that corresponded with the unprecedented rise in U.S. interest rates.”
Now, Cortland says it is finding discounted asset prices, higher yields and an improving operating and capital markets environment. With capital ready to deploy and interest rates poised to fall, we should see a lot of dealmaking over the next year.
Closing time
Residential: The priciest residential sale Thursday was $8.9 million for a 5,771-square-foot townhouse at 123 East 80th Street on the Upper East Side.
Commercial: The largest commercial sale of the day was $69.2 million for a 45,082-square-foot, 56-unit dormitory at 35 Cooper Square in the East Village. New York University purchased the property from Bhatia Development.
New to the Market: The highest price for a residential property hitting the market was $10 million for a 3,693-square-foot condominium at 201 East 74th Street in Lenox Hill. Douglas Elliman has the listing. — Matthew Elo