Affordable Lender CPC Gets $250M Boost

Good for them (and good on Citigroup for putting up the money). CPC let itself get distracted by being thinking they should be a developer, which they never were. Their core role of providing funding for affordable housing is too important:

Experts, such as president of the city Housing Development Corporation Marc Jahr, see CPC’s focus on small, four-story walk-ups and six-story elevator buildings as essential to revitalizing the city. “The fate of a neighborhood resides in the fate of those buildings,” Jahr told the Journal.

Atlantic’s Credibility Crisis

Wow – Atlantic Cities let someone with no clue about development in Brooklyn write about development in Brooklyn. The basic premise of the article is that zoning (both use and FAR limits) is making housing more expensive by restricting the amount of new housing that can be constructed. In other words, the classic libertarian argument about land-use restrictions.

Let’s review:

According to data from the U.S. Census Bureau, the number of housing units in the five boroughs inched up an average of 0.5 percent annually between 2000 and 2010. That’s not even enough to keep pace with average U.S. population growth, which is about 1 percent per year.

The 2010 Census is so flawed, particularly with regard to Williamsburg and Greenpoint, that no credible argument can be based on its data. Remember, according to the census, much of North Brooklyn did not see a population increase between 2000 and 2010. Despite the very gentrification that Smith writes about, despite a building boom that has added thousands of new housing units since 2002 and despite a massive rezoning halfway through the decade that allowed for the creation of thousands more new housing units in formerly industrially-zoned areas. In all, something on the order of 4,000 new dwelling units (very conservatively estimated) have been added to the western parts of Greenpoint and Williamsburg since 2005 (the areas within and immediately adjacent to the 2005 rezoning). Hundreds if not thousands more have been added elsewhere in Greenpoint, Bushwick and the Southside.

Functionally, the industrial zoning along the waterfront and throughout Bushwick is hopelessly out of date. Urban manufacturing here is a shell of its former self. Car repair shops, wholesalers, warehouses and storage facilities are now the main tenants of Brooklyn’s “manfacturing core.”

What industrial zoning along the waterfront? 80% of the Williamsburg/Greenpoint waterfront was rezoned for residential use 7 years ago, and another 10% (Domino) in 2010. Hundreds of new housing units have been created on the Williamsburg waterfront, and hundreds more are coming to Greenpoint. There are three blocks of the Williamsburg waterfront that are still zoned manufacturing (between Grand and North 3rd) one of those blocks contains a power plant), and the other two.

Meanwhile, the remaining industrially-zoned areas of north Brooklyn are creating a lot of jobs. Good jobs, too. Look at the Brooklyn Navy Yard, a center of high-tech manufacturing and film production. Look at GMDC, which has a waiting list of small manufacturers. Look at the booming film production industry in Greenpoint. Historically, many people in north Brooklyn worked in north Brooklyn – not in Manhattan.

East Williamsburg actually has an abundance of underused land around Bushwick Creek, but Mayor Bloomberg and Brooklyn borough president Marty Markowitz don’t want to allow any residential development in the neighborhood, in order “to preserve the city’s manufacturing base.”

Bushwick Creek is not in East Williamsburg. It is not even a creek anymore. It is an inlet on the East River that divides Williamsburg and Greenpoint. Yes, the city created a small industrial carve out around Bushwick Inlet in 2005, and no, that carve out probably doesn’t make any sense.

…northern Brooklyn is underdeveloped. The hip neighborhoods around the L train, the main vehicle of gentrification in Williamsburg and Bushwick, are less than half as dense as Brooklyn neighborhoods like Crown Heights and Bed-Stuy.

Perhaps true – hard to tell from a jpeg of a map with no data sources listed (perhaps its from the census?). Regardless, much of Williamsburg and Greenpoint is actually under built compared to the allowable zoning. The potential density for north Brooklyn at current FAR limits is well above the actual density (in fact, it is probably comparable to the density shown in the fuzzy jpeg map, which seems to show much of brownstone Brooklyn at higher density than north Brooklyn – though all these areas have roughly the same zoned density).

Aesthetically, the vinyl-covered two- to four-story houses that dominate are some of the ugliest in the city. They lack the ornate cornices of their peers in south Brooklyn, and the brick patterns hidden behind the vinyl and stucco are plain compared to other pre-war styles.

So tear them down and we can build to a higher density. Zoning isn’t stopping that, and in fact that’s what is happening already (and has been happening very actively for a decade now). (And by the way, the brick is plain because a lot of those houses are pre-a-different-war – the Civil War; Williamsburg in particular has some of the oldest housing stock in the city.)

Problem is, from an infrastructure point of view, north Brooklyn is hurting. Unlike other areas of Brooklyn with higher population densities, north Brooklyn is not as richly served by public transit (if you pay attention to the map, the areas of highest density are along the public transit corridors), and it does not have as much park and open space as a lot of other areas. L trains run at capacity (in part because more newer residents are more likely to work in Manhattan, not locally), JMZ trains are rapidly gaining capacity (and neither line can be readily expanded), new bus lines, bike lanes and ferries are being added (but that only helps at the margins), parks and open space are overcrowded and over-utilized, and on and on. Sure, we could double the zoning density of North Brooklyn, but our infrastructure can’t even handle the thousands of people who have been added to the area to date, let alone the thousands more that will be added if currently as of right development continues apace.

New Affordable Development in Greenpoint

210 units of new housing will rise on the site of the former Brooklyn Heights Railroad Co. trolley barn at Manhattan between Box and Clay. The building (Crain’s says it’s a “tower”, but the R6A puts a 7-story cap on the whole thing) will have half the units set aside middle- and low-income residents, with the other half being market rate. I’m not sure if the income splits are exactly the same, but this mixed affordable/market-rate development scenario is a very similar set up to 11 Broadway.

Domino Sells

DUMBO-based Two Trees has closed their deal for the Domino sugar refinery site, for what appears to be $185 million ($20 million more than the price that Two Trees supposedly went into the negotiations at). According to the Times, the price increase came after co-owner Isaac Katan made an offer with developers Chetrit Group and David Bistricer for $185 million. The price is a handsome return for co-owners CPC Resources and Katan, who bought the property in 2004 for $55 million and spent 6 years securing a rezoning for the residential use of the site (though Katan apparently doesn’t think it’s such a great return).

What does the new owner have in mind for the project? Two Trees principal Jed Walentas is quoted in the Times as saying that there are “probably some opportunities to make improvements on the plans”. The Rafael Viñoly plans shown during the public review for the site’s rezoning are non-binding, so a redesign of the building skin is certainly possible (and I’d bet likely). So too is a redesign of the Landmarks-approved addition to the Refinery building (the current model was designed by Beyer Blinder Belle).

But what of all the promises that CPCR made to the local community during the rezoning process? The open space is largely codified into the zoning for the site (and by general waterfront access plan requirements), as are the building heights and general uses (retail, office, residential).

But the big promise – the one that brought a lot of community into CPCR’s fold – was affordable housing. 660 units of it. Rob Solano, a supporter of the CPCR rezoning told the Times: “It’s extremely important that the Domino project is built with all the affordable housing that was promised”.

The Daily News asked the question that is on the minds of CPCR’s community supporters, and the response should not be reassuring:

The new developer of the iconic Domino Sugar Factory hedged Thursday on whether the new deal would include affordable housing.

“There were promises made by another developer. We literally just brought the property today so I don’t know,” said Stefan Friedman, a spokesman for Two Trees Management Co.

Two Trees is an experienced developer (unlike CPCR), but they are an experienced developer of luxury and market-rate housing. As I’ve said before, they are a good fit for this project in that they have experience with old buildings, experience with big (and complicated) developments, a commitment to good design and a very long-term investment philosophy (and they are certainly better than Katan-Chetrit-Bistricer partnership would have been). But affordable housing is not their thing, and if, after two or three weeks of due diligence on a $185 million deal, they are being coy on the affordable question, that should make people in the community pretty nervous. Maybe Two Trees is thinking about who to partner with to do the affordable housing (a smart move), but it’s a pretty good bet that they are also looking at the number or percentage of units.

Two Trees is right – the promises were made by another developer. That other developer was able to secure a zoning density that far exceeded what any other developer on the waterfront was able to get, and in exchange for that, they promised to build a lot of affordable housing. But those promises were not binding on CPCR and they are not binding on Two Trees.

Related, Silverstein Also Looked at Domino

The Commercial Observer has more information on the Two Trees acquisition of the Domino site, including the fact that two other major developers – The Related Companies and Silverstein Properties – were interested in the site.

The Observer seems to agree with everyone else (myself included) that Two Trees is a good fit for the site. But the paper also seems to misunderstand some of the issues that make the property so hard to develop:

Landmark protections at the sugar factory require that its main buildings, a square structure with the Domino logo on its facade and a behemoth brick property with a towering smokestack, be preserved. Those familiar with the site say that it would likely cost many millions of dollars to renovate and make them habitable. CPC also struck a deal with the city to build 30 percent of the project as affordable housing, a larger than normal percentage that people familiar with the development said cuts into the project’s profitability.

The refinery (the “behemoth brick property with a towering smokestack”) is a landmark, but the bin structure (the “square structure with the Domino logo on its facade”) is not a landmark. As part of its landmark approval for the refinery, CPCR did agree to move the (not very historic) Domino Sugar sign to the refinery. But the building that the sign is attached to is toast.

As for the affordable housing, there was no “deal” to develop 30% of the project as affordable housing. CPCR promised to do so, but significantly, neither the city nor CPCR’s community supporters thought it necessary to make that commitment binding. As I noted yesterday, there is a strong incentive for 20% affordable housing on the site, but technically, there is no requirement for any affordable housing as part of the project.

[via Brownstoner]

Community Anxious Over Possible Domino Sale

Crain’s has some follow up community reaction to the news that Two Trees might be buying the Domino site. Apparently the community, or at least Isaac Abraham, is “anxious” about the sale:

Any developer or investor who wants to purchase Domino without committing itself to the 660 affordable units, should really think twice,” said Isaac Abraham, a Williamsburg community leader and housing advocate

Not to worry, says CPC, the parent company of bankrupt developer CPC Resources:

CPC Chief Executive Rafael Cestero, told Crain’s New York Business on Sunday that the new owner would be required to follow the zoning guidelines, which among other things would mean providing the affordable housing.

All of the affordable housing? Or just “the affordable housing” required under the inclusionary program (which amounts to 440 units – 20%)? CPCR was never bound to provide 30% affordable housing. Even the 20% is optional – though, as at other waterfront sites, the incentives are deep enough to make that 20% a very attractive deal. The other 10%? The community supporters of CPCR – and the city – gave that away. Hopefully someone steps up to keep CPCR’s word, but nothing is guaranteed.

Remember – 20% is the baseline. Neither CPCR nor Two Trees (nor any other developer) is obliged to build a single unit more. No one in the community should be surprised if a third party developer does’t live up to CPCR’s unsecured promises. If it wasn’t binding on CPCR, why should it be binding on anyone else?

Two Trees to Buy Domino?

The Daily News and Crain’s are reporting that CPCR has reached a deal with Two Trees to sell the Domino project for $160 million. CPCR and its partner Isaac Katan bought the Domino site in 2006 for $55 million. Since then, they have rezoned the property for residential use and gotten stuck in a morass of bankruptcy and lawsuits. The sale would allow CPC (the not-for-profit parent of CPCR) to pay off its subsidiary’s mortgages on the property (rumored to be $125 million) and go back to focusing on what they do best, which is providing financing for affordable housing.

If true, this latest development in the Domino saga bodes well for the fate of the overall project – not that that was ever really in question (prime waterfront real estate in a hot gentrifying neighborhood is a rare commodity, and someone was going to build there). Two Trees is an experienced developer that brings a wealth of expertise in developing mixed-use projects, and a long-term commitment to the neighborhoods they go into. It is particularly encouraging news with respect to the landmark refinery building – CPCR never had a viable plan for this wonderful structure and clearly saw its preservation as an impediment rather than an opportunity. Two Trees’ track record with historic buildings – including the stunning renovation of the Wythe Hotel – hopefully means that the refinery will no longer be an afterthought.

But when all is said and done, the New Domino project will be judged on the promises made to the community by CPCR. There was never any question that someone would develop this property. The question, still unanswered, is whether anyone will live up to CPCR’s unsecured promises for massive amounts of affordable housing and other community benefits that too many in the community bought into.

Two Trees is not a developer of affordable housing1 – what does that mean in terms of the promises made to the community? Certainly Two Tree can partner with an experienced affordable housing developer – but how much housing will they build, and how affordable will it be?

1. But then again, neither is CPC – and its for-profit subsidiary, CPCR, never had the depth of experience needed for a project of this scope.

LPC Warehouse RFP Issued

Brownstoner has published the full text of the press release for the Landmarks Warehouse RFP. This is the site at 337 Berry between South 4th and South 5th Streets that was promised as affordable housing in the 2005 rezoning. CB1 pushed hard to get the City to agree to some additional community benefits, most notably a local presence on the development team. And lo, HPD delivered:

As part of the RFP’s threshold criteria, at least one Principal of the development team must also be a locally-based development company

That probably does not mean that a local partner is required, but it comes darn close. Los Sures should have the inside track here, assuming that they can put together a viable proposal and convince the city that they can pull the project off.

Katan Loses Domino Suit

The Observer reports that Isaac Katan failed to secure an injunction against his partner in the $1.5 billion Domino development from selling a majority stake in the project.

The decision appeared to clear the way for the Community Preservation Corporation, a joint owner of the site, to proceed with a deal to hand the majority stake to the project’s senior lender, Pacific Coast Capital Partners, LLC… Mr. Katan secured the Domino Sugar Factory in 2006 in a whirlwind deal largely negotiated over a single weekend to buy the site with CPC for about $50 million from the sugar company, which decades ago [actually, less than a decade ago] used the factory as one of its largest sugar refineries in the world.

Which means that Katan’s (and CPCR’s) stake in the project drops from 50% to 8%. The difference between 50% of $1.5 billion and 8% of $1.5 billion explains why Katan, through his attorney, is promising to continue his legal fight.

[again, via Brownstoner]