Just how much money are the Domino developers making off of their project? No one knows, and CPCR, the lead developer of Domino has refused to say.
But the Greenpoint Star’s Dan Bush has found an answer. And if the numbers he has dug up are remotely based in reality, that answer is a lot. Almost half a billion a lot.
The problem is, the numbers may not be based in reality – they are three-and-a-half-years old and come with a host of caveats. Dan’s article is very well-reported, and sorts through the numbers pretty carefully, as well as the problems with them and what they might or might not mean. I strongly suggest you read what he has to say before reading on here.
The numbers Dan found came from the City’s Department of Housing Preservation and Development, which appears to have prepared the document in order to determine the impact of the landmark designation of the refinery on the overall project. HPD and CPCR both claim that the developer had nothing to do with the production of the numbers, but the basic structure of the development scenarios analyzed mirror CPCR’s actual development proposal quite closely, so clearly HPD some idea of what it was doing and what CPCR was planning at Domino (the document was prepared about 9 months before Domino released its plans publicly). For instance, the total number of units in all four scenarios is between 2,100 and 2,400 (Domino is proposing 2,200 but the zoning would allow up to 2,400). The total number of affordable units is between 630 and 714 (Domino is proposing 660). (One key difference is that the target number for affordable units is 35% – Domino only proposed 30%.)
HPD analyzed four development scenarios, with net profits in the $380 million to $450 million range (between 42% and 50% return on cost). Those are huge numbers, and remarkably, they only cover a portion of the project. They exclude all of the development on the upland site, and they assume no income from retail or parking on the waterfront parcels. They are also based on a full residential build out of the waterfront parcel, and we now know that about 20% of the site will be commercial office space, not residential (the office space was added to the scope of the project after 2008).
Of course the big caveat is that HPD’s numbers were done in late 2006, a very different market from today. HPD’s analysis assumes that market-rate units on the waterfront will get $900 per square foot. Both HPD and CPCR say that those numbers are out of date – late 2006 was near the top of the market, the world has changed since then, we don’t know when we’ll see those kind of numbers again, etc., etc. But according to StreetEasy, the average asking price at the Edge is $926 a foot, and the average sale price is $918 per foot. There may be some gross/net apples/oranges in this comparison, but $900 a foot for prime waterfront may not be too far off the mark, even in today’s market.
So what does it all mean? Well first off, CPCR has never said that it isn’t going to profit from the development. While the Daily News continues to operate under the misapprehension that CPCR is a non-profit, for its part, CPCR has always said that this a for-profit venture. And certainly Domino’s investors – led by developer Isaac Katan, who acquired the property in the first place – expect to make a profit.
And there is nothing wrong with that. We live in a market-based economy and without profit, we would have a lot less housing – affordable and otherwise – built. It also shouldn’t be a surprise that there huge potential profit here – considering the low price that CPCR and friends paid for the property ($55 million in 2004 – between $23 and $27 per buildable residential square foot by HPD’s calculation), the project should be profitable. CPCR has spent tens of millions of dollars just developing the plans for the project and getting them approved – those are not non-profit numbers.
The thing is that CPCR decided early on that what every other waterfront developer got in 2005 was not good enough for them. They need more – specifically, more market-rate density. A lot more market-rate density. And in order to justify that more, CPCR is saying that their project is different. They have to pay to rebuild the wharf for the waterfront esplanade. They have to pay to preserve the refinery. They have to cross-subsidize the additional affordable units with additional market-rate units. (None of these expenses are necessarily extraordinary or unexpected – every waterfront developer has costs associated with constructing bulkheads, piers and esplanades; CPCR is not the only developer on the waterfront with historic preservation costs; HPD assumes that there will be up to $70 million in housing subsidies available for the waterfront portion of the project. But I digress.)
In order to account for all of these unique factors, CPCR says that it has to have more market-rate units and a series of special permits to allow greater height, reallocation of floor area throughout the site and a huge number of parking spots. All of these permits and extra density come at a cost to the community and the city. Increased market-rate density means accelerated secondary displacement on Williamsburg – Southside and Northside. It means that the amount of available open space per capita drops throughout Williamsburg. It means thousand more people on Williamsburg’s buses and subways. It means thousands more cars on Williamsburg’s streets.
Given that CPCR needs so much more, and bases its case for all the “more” that it needs on “unique” factors and economic viability (the project “just doesn’t work” at lower density), the Community Board and local politicians are right to ask for some transparency in the process. None of these people are looking to kill Domino, but they do want to make sure that the community and the City get a fair deal. CPCR and its partners say they are giving the community a fantastic deal, but without transparency, we all have to just take their word for it.
So where does that leave things? Well, until CPCR does share, the only numbers the public has to work with are the numbers in the HPD report. And they are big. Very big.