Douglaston’s Jeff Levine On His Big Hudson Yards Tower, 421a and Kathy Hochul

Post-vaccines, “finally, people came back to the market with reckless abandon,” Levine told Commercial Observer. “I think, basically, what you had was a pent-up demand. Not only those people who left New York wanting to come back, but you essentially had two graduating classes of college, which had been stuck at home during COVID, and were getting jobs, whether it be corporations in New York or whatever the case may be, and wanted to take advantage of the discount rental available. So our occupancy in New York is as high as it’s ever been, and our rents are back to all-time highs with no concession.”

Douglaston is also working on a slew of affordable projects throughout the city, including a two-building, 450-unit affordable and senior living project by the New York Botanical Garden in the Bronx and one on West 49th Street in Hell’s Kitchen. In addition, the company is redeveloping two defunct hospital campuses — the Seaview Hospital on Staten Island and part of the Kingsboro Psychiatric campus in East Flatbush, Brooklyn — into affordable and supportive housing.

A little farther east in Brooklyn, Douglaston is working on a federal Rental Assistance Demonstration project to renovate the New York City Housing Authority’s  Linden Houses with L+M Development.

“In the affordable market, many of the workers were … in the hospitality industries, whether it’s driving or hotels or food service,” which suffered terribly during the pandemic. But even that is beginning to change. “The fact of the matter is that restaurants are opening, hotels are opening, and traffic is getting back to where it was. So these people are now starting to go back to work and will be able to pay their rents going forward. So I’m looking forward to a better period ahead on the affordable side as well.”

Commercial Observer got on the phone with Levine last month to discuss his current projects, the imminent expiration of the 421a development tax break (a.k.a. Affordable New York), and how he’s feeling about Gov. Kathy Hochul and Mayor Eric Adams so far.

The interview has been edited for length and clarity.

Commercial Observer: Tell me a little about what you guys have under construction in New York. I’m aware of a building by Hudson Yards, another in Hell’s Kitchen, maybe one or two in the Bronx.

Jeff Levine: In New York City right now we’re wrapping up the single largest project we’ve ever done, which is the 60-story, Affordable New York tax-abated, multifamily rental at 29th Street and 11th Avenue, diagonally across from Hudson Yards. We are in the final stages of construction, and we hope to deliver that project in the beginning of the third quarter of 2022 to what we think is one of the hottest real estate rental markets New York City’s ever seen.

In answer to your question: We’re very excited about the job at West 29th Street. We are [also] building a senior affordable job as we speak up in the Bronx in partnership with the New York Botanical Garden, across the street from the garden. That job is well underway. There is also a second phase to that job which we are currently in the planning phase on, which will be a low-income residential project of a similar size — that job’s about 150 units. And the affordable senior rental job will be about 150 units. The job you referenced in Hell’s Kitchen is in the planning stage, we have just been certified to go to [the city’s land-use review process, or ULURP]. So, we hope that in seven months we’ll be able to start pursuing permits to build a job in partnership with the Actor’s Fund over on 49th Street, which will again be an affordable job for that community.

In addition to that, you might also know that we submitted for an RFP [or request for proposals] with the state at the Kingsborough psychiatric facility over in East Flatbush in Brooklyn, not far from where I grew up. And there we will be building over a million square feet of senior housing and shelter housing as well as low-income housing, in association with the state. Our partner there is breaking ground and is a very well-known and respected, not-for-profit, social service and housing provider. We also have partnered with the Velez Organization, who’s done quite a bit of work here in New York City. And we’re very excited about that because our architect there is David Adjaye, the British architect who has quite a bit of acclaim now, and working very closely with the state there.

We also purchased a property up on 138th Street on the East River on the Bronx side, where we’ll be building in partnership with Phipps Housing a mixed-use project with both affordable and senior housing  again. So we have in New York City going forward a very substantial backlog of affordable work on our plate.

We also have the next phase of a SARA [Senior Affordable Rental Apartments]-subsidized seniors project in Staten Island at what was formerly the Seaview Medical Complex, in association with the city’s Economic Development Corporation. First, we built an assisted-living project. We then went on to develop a senior [low-income affordable] job through the SARA program in New York state. We’re looking to close and begin another SARA project with seniors, which is greatly needed in Staten Island. So we’re very excited about those as well.

And, then, the most exciting thing — and then I’ll take a breath and let you ask another question — is we were designated in partnership with L+M, Juan Barahona, a MWBE contractor, and Dantes [Partners], another MWBE developer, to hold a 99-year lease to renovate the Linden Houses along with Penn-Wortman Houses, which have approximately 2,000 units under the federal RAD/PACT program, which through Section 8 vouchers enables developers in the private sector to borrow money from bank lenders to do all of the capital improvements that have been deferred. So I’m really very excited about that project. The most exciting thing for me personally, is, as a child, I actually lived at the Linden Houses in East New York, Brooklyn, so it’s really coming full circle to me.

So you grew up in East New York?

I grew up in Brooklyn, first Herzl Street in the Brownsville-East Flatbush area. And then we moved when my father came back from his military service to the Linden Houses over in East New York.

There is discussion of the possibility that 421a might not be renewed. Do you think that’s a possibility?

There’s no question that the current 421a program is expiring. If you aren’t in the ground by June of ’22, which is two months away now, you need to be in order to be grandfathered in. And you need to complete it within four years subsequent to that. So, the reality is nobody can plan an Affordable New York state tax-abatement job as we speak. So, all multifamily residential development is being held in wait, until a new program [is passed]. Gov. Hochul has proposed the 485w, which has both its merits as well as its drawbacks. And it may or may not be approved before this current abatement goes away completely. [Note: On April 7, state lawmakers announced that 485w would not be included in New York’s next budget but a replacement might be debated in the coming months.] But nobody can plan anything right now because the future of taxes and tax abatement is not clear.

How do you feel about Gov. Hochul’s 421a replacement?

Well, I think Hochul is moving the ball in the right direction. I think she still has people pushing against her, without mentioning any names. There are many people in both the city government as well as state government who are opposed to any form of 421a or a New York state affordable tax abatement, including her new proposal, 485w. So, it’s about, obviously, we’re in an election year. We have the primaries coming up in June. So I’m very concerned that not only will nothing be done, I’m quite sure that nothing will be accomplished prior to the primaries.

And then we remain somewhat hopeful that something will be happening before the election. I’m afraid that you’ll see this current tax abatement expire by law. And I don’t think you’ll see a new tax abatement until sometime after the election, which will put the governor — the new governor, hopefully it’s Kathy Hochul — in place. And the rest of the electeds make the decision that’s based upon facts, not election designs.

Sure, and what do you think will happen if 421a is not replaced? 

Well, I think that you may see an abundance of projects go into the ground right now. Because people are rushing to beat that tax abatement if they own the property at expiration. If developers own the property and are pursuing the plan approval, you’re trying to get into the ground because there is no question that the tax abatement that currently exists is going to be better than the tax abatement that is going to be approved going forward, just by virtue of the rhetoric we’re hearing from the electeds. So, what I think that means is, other than those projects that are ready to go into the ground, shovel-ready right now, you will not see new projects being planned until such time as the economics of an abatement or correction of the underlying taxation system is in place.

Since you’re in the planning stages for a couple of projects here in the city, I was just curious: What has it been like to secure financing for construction during the pandemic? And where are you getting financing these days?

We’ve been in business over 40 years. Obviously, we work with any number of institutions in connection with an affordable package. Wells Fargo has been one of our primary lenders. JPMorgan has been great on the affordable side, as has Citibank, which have very well-informed and, you know, creative and aggressive affordable lending divisions. On the private bank side, those are all very good, but I must tell you that in recent years, OK, government regulation has, in essence, homogenized major commercial lending here in the United States. I personally have chosen to try to work with banks that are regulated in the United States because of the surety of execution.

There are certain institutions — the names of which I won’t mention, who are international and therefore may not be as familiar with the banking systems and requirements here in the United States — and their people may take longer to get up to speed. I know when I’m closing the deal, on the private side with a Citi, a Wells, JPMorgan and Bank of America, a Capital One, that they know the drill and they will perform. So I’m also doing deals with the likes of HSBC and Helaba, which have a large presence here in America and are acquainted with the process. But also working out west with M&T, which was an exceptional bank to work with, so we work with the lenders who are most interested in the markets in which we’re building, whether it’s affordable or New York or Arizona or overseas.

What’s your take on Gov. Hochul so far, given that she wants to remove some barriers to converting commercial buildings and hotels to residential? She proposed what seems like a fairly similar 421a replacement.

I think that Gov. Hochul thus far has been a breath of fresh air. She has in essence brought a sense of moderation to governing. She understands that there are great needs out there in the way of affordable housing, senior housing, as well as market-rate housing. And she has put forward this 485w that will hopefully be a frame around which the electeds can work. The concept of taking underutilized commercial space like office buildings and hotels is a good one.

But, obviously, it’s not an easy job. Some hotels may, in fact, work very well because of the fenestration and layouts. The egress in the hallways of many commercial buildings are inefficient to convert — because of their footprint, many buildings are more square than rectangular, lots of interior space. The elevators may, in fact, not be in the right location. So, there are lots of issues that have to be dealt with. But I think, certainly, investigate it. And, hopefully, ultimately execution of it will be very positive for the housing market.

What are your thoughts on how Mayor Eric Adams is doing so far in terms of housing and real estate? I feel like he hasn’t done much yet.

So, I’ve had the good fortune of having known Eric Adams for many years, back not only to his days in the state Senate, but as the borough president of Brooklyn. And I have been very active in Brooklyn over the past 10 years, both in the creation of the Williamsburg waterfront as well as a number of other projects.

I remember once an old-school developer telling me that development is about the three S’s — schools, subways and security. You know, we need schools, we need subways for transportation and we need the security of having a safe city to live in. There’s no question that Eric Adams supports these three issues, and they have been front and center. So, what I like to say about the mayor is I think he’s singing the right song. Now he needs the choir of legislators to back him up.

Rebecca Baird-Remba can be reached at rbairdremba@commercialobserver.com.