Mr. Right Now: Mayor de Blasio Continues Wooing Real Estate Developers
Mayor Bill de Blasio has been coasting toward a second term for most of the year after a handful of Democratic rivals refused to challenge him.
Deep-pocketed developers who typically flood city campaign accounts with pools of cash largely sat out this election cycle, save for a brief flirtation with Paul Massey, a real estate sales executive, who raised $3 million but spent $4 million for his race before bowing out in June.
What it largely comes down to is this: Industry titans may not embrace this mayor, but they know what to expect from him.
Gone are the grand visions of urban redevelopment that rose Athena-like from the City Hall bullpen under Mayor Michael Bloomberg. De Blasio has retained lofty language to describe his ideas—adding adjectives like “transcendent” and “historic” when presenting proposals. But his attempts to remake swaths of the city in a Bloombergian manner have sputtered.
Sunnyside Yards in Queens, where the mayor hopes to build an 11,000-unit affordable housing complex on top of a platform, is a years-long dream that may never be realized. His transit plans, including a $2.5 billion streetcar project along the Brooklyn-Queens waterfront and a new subway line through Utica Avenue, haven’t gotten past preliminary stages. And his administration has equivocated over the future of Willets Point, where the courts blocked plans to build a mall and 2,500 units of housing on the blighted site next to Citi Field.
Instead, de Blasio made affordable housing the centerpiece of his agenda and touted pro-tenant measures, including rent freezes for rent-stabilized units.
“The real estate community, like any other business sector, prefers certainty,” explained Ken Fisher, a Cozen O’Conner attorney and former councilman. “After four years of working with Bill de Blasio and his team, people have a pretty good idea of expectations. He has a strong preference for affordable housing, but the mayor has taken a very clear position that he’s for many different kinds of housing development, not just low-income housing.”
De Blasio made that clear in his 2015 State of the City address when he proclaimed that the other successes of his administration would be at risk if the city and developers didn’t build enough housing for residents of all income levels.
“If we fail to be a city for everyone, we risk losing what makes New York New York,” the mayor pronounced. “And nothing more clearly expresses the inequality gap, the opportunity gap, than the soaring cost of housing.”
But the mayor’s relationship with real estate is complicated.
He has continually lambasted luxury developers on the campaign trail and in mayoral forums, while acknowledging the industry is ultimately an equal partner in creating affordable places to live.
“If you stop market-rate housing construction in this city, you’ll have a lot less employment,” he said at one forum this fall. “We need some market-rate construction, too, to help bring down the cost of housing in this city. It’s not all going to be done through affordable housing.”
And a lot of real estate owners generally shrug off the mayor’s slights against their profession, insiders said.
“The mayor’s constant disparagement of everything that came before him and everyone who [was] part of it is one of his quirks. They’re not looking for friendship,” said one City Hall veteran who works closely with developers and requested anonymity. “The mayor gets to argue how he’s different from everyone before him and still build similar deals and similar projects. It’s a question of degree not approach.”
One reason developers give de Blasio a pass on his “tale of two cities” rhetoric is they know he understands the fundamentals of the housing market.
“I think the mayor was conscious early in his first campaign to demonstrate he was pro-development, and he articulated very clearly that the city must build its way out of the housing crisis,” said Two Trees Management external affairs director David Lombino. “He acknowledges fears of gentrification and displacement, but his administration pursues pro-density, pro-growth policies to solve for rising rents and the lack of housing supply.”
Two Trees wasn’t always so sanguine regarding de Blasio.
During negotiations with the city over the Domino Sugar Factory, Founder David Walentas openly disparaged the mayor to New York magazine, saying, “I think he’s a disaster for the city. His whole administration are amateurs and left wing. He’s never run anything and has no ideas. All he wants to do is get his name in the paper.”
Their relationship with City Hall is “much better” and “less frosty” now, Lombino assured.
Another reason de Blasio gets away with the stinging remarks is that developers regard the mayor’s economic development team, led by deputy mayor Alicia Glen, as the most competent wing of his administration.
The former housing assistant commissioner and Urban Investment Group head at Goldman Sachs (GS) has forged ties with affordable housing firms that enjoy a most-favored-nation status among the industry, according to city developers.
That includes L+M Development Partners Chief Executive Officer Ron Moelis, whose close relationship with Glen—the two worked with each other on 12 projects in the past, and Glen and her husband once owned a unit in an L+M building—has rankled nonprofit housing leaders and left-wing activist groups, according to Crain’s New York Business. She has also overseen L+M projects as deputy mayor, causing one developer to grouse, “L+M is basically a city agency at this point.”
Glen brushed off criticisms saying real estate lobbyists don’t affect the city’s decisions.
“The notion that we are somehow involved with lobbyists to improve or stack the deck in favor of developers is just simply not true when you look at the facts,” Glen told WNYC’s Brian Lehrer in an interview two weeks ago. She did not return Commercial Observer’s request for an interview.
But developers’ gripes with the de Blasio administration are not with Glen, whom many industry leaders want to remain through a second term.
Instead, it is the mayor’s communication skills and misguided politics that frustrate owners.
“He doesn’t use his bully pulpit to advocate for his vision of how to manage the affordability crisis,” said one developer with extensive business before the city. “He only makes his case when he’s backed up against the wall at a community meeting, and it takes more than that to get people on board with a vision that is not innately popular. When he goes in and says, ‘This is what I want to do,’ they revolt.”
De Blasio touted rezonings in a dozen neighborhoods, a first step toward the creation of tens of thousands of affordable units, but only two have passed the City Council since his inauguration. A third, in East Harlem, may pass by the end of the year despite significant community opposition. Others have been scrapped or sent back to the drawing board.
“There’s irritation in the slow pace of the rezonings,” a second developer said. “There was anticipation that with the mayor’s background they would be good with the politics of different communities, but in fact the opposite has been true. It’s taken forever, and it’s been messy.”
De Blasio acknowledged that not every rezoning plan will occur and blamed obstinate council members.
“There may be a few [where’s] there’s not sufficient interest in the community or the council member’s not game,” he told the New York Daily News editorial board on Oct. 17 without specifying which neighborhoods. “We take those resources, and we move on and find other places that want it.”
Other problems, including the mayor’s management abilities and relationships with donors, haven’t been as easy to brush aside.
City Hall has done a poor job playing traffic cop among multiple city agencies when problems arise on projects large and small, developers said.
“They’re not good at convening the agencies and a third party around the table to figure out what the disagreement is,” the first developer told CO. “The third party ends up playing referee between the agencies, which is very difficult. You can spend years running back between the agencies in a he-said, she-said situation, and that’s frustrating and immensely counterproductive.”
Those disputes typically stay out of the public eye, but one episode, involving the sale of a Lower East Side nursing home, dominated news headlines and drew attention from prosecutors.
Top City Hall leaders repeatedly ignored warnings from community leaders and agency officials that removing a deed restriction on Rivington House would enable it to be resold as luxury housing—which it was at a $72 million profit by February 2016. Only after the details of the sale became public two months later did the mayor say he was “angry” and “livid” at the result and threatened to “hold people responsible.”
Another scandal involved the lease of a Queens restaurant owned by a prominent mayoral donor. The mayor and City Hall aides made several inquiries with city agency bureaucrats beginning in June 2014 over the renegotiation of Water’s Edge owner Harendra Singh’s lease. Singh was indicted on separate bribery and fraud charges in 2015, and his restaurant has since closed.
Federal and city investigators examined both deals, which were part of a broader corruption inquiry into the mayor’s relationship with top campaign donors, before clearing the mayor and his aides of any wrongdoing.
“There’s no adult supervision in City Hall,” the first developer said as an explanation. “They weren’t intervening when they should have been at Rivington House, and at Water’s Edge they were intervening in something they shouldn’t have been.”
The mayor likely won’t have to worry about campaign donors and federal investigators after the election, but other challenges abound.
Developers have been bracing for a slowdown in the housing and retail markets. Commercial property transactions have lagged, rental prices have fallen in Manhattan and Brooklyn and brick-and-mortar retail rents have declined slightly as New Yorkers are shopping more online.
A continued downturn resulting in a decline in tax revenue could limit the mayor’s ability to build new housing and fund other projects.
“People are pretty bearish about the real estate market generally,” Lombino said. “At some point, he’ll face a strong headwind, and there are a whole different set of policies that come up in that environment. We’ll see how they will handle it.”
Developers are already calling for tax relief from City Hall.
“In his second term, I hope to see the mayor bring that same focus to some of the challenges facing retail in the city right now,” said SL Green Realty Corp. CEO Marc Holliday. “Retailers would benefit from commercial rent tax relief in order to stabilize the vacancies we’re seeing in some areas, which would be good for business and for communities.”
Several neighborhood rezonings remain on the mayor’s plate, and it’s unclear whether the mayor has learned how to sell his development plans without further consternation.
“Rezonings are difficult. The administration faces lots of resistance to density from community boards and preservationists and local activists,” said Jordan Barowitz, a spokesman for the Durst Organization. “Density is the cornerstone of their affordable housing program, and it’s constantly under attack.”
(Durst has its own complicated relationships with the mayor. Company head Douglas Durst had been a significant donor, but de Blasio recently alluded to him in an op-ed implying that his company had received little largesse from the administration in a show of transparency. Irritated by the shout-out, Barowitz responded to Politico with a statement lifted from Game of Thrones, “Winter is coming.”)
The mayor is also pushing to mandate that 14,500 buildings make upgrades to reduce greenhouse gas emissions, require additional construction safety training thanks to a new law and nudge Albany to adopt a tax on the city’s wealthiest earners to fund repairs to the subway.
Looming under all of this is a class-action lawsuit that could upend the mayor’s housing agenda.
A coalition of plaintiffs, including developers Durst, Silverstein Properties and Related Companies, are claiming that single-family homeowners receive preferential treatment over the likes of them in property tax assessments and want the court to force the city and state to overhaul the system. The city has made a motion to dismiss the suit, and the next hearing on the matter is on Nov. 15.
“There was a thought this could be worked out between state, city and property owners, but without litigation it’s unlikely discussions will lead anywhere,” said Heidi Learner, a Savills Studley economist. “If you have two sides that are at a standoff, sometimes the court system is best equipped to effect judgment.”
With the election behind him, the mayor is looking ahead at the city’s challenges. But some industry pros worry he won’t keep his eye on his current job.
“Please focus on the difficult job of being mayor of New York: keeping the streets clean, the streets safe, the snow plowed and the potholes filled,” Nicholas Bienstock, a co-managing partner at Savanna, told CO in a survey for Owners Magazine. “Be a practical problem solver, not the national spokesman for progressive causes or a future presidential candidate.”