Property and Politics: NYC’s Unlicensed Real Estate Agents

This post is the final installment in a 3 part series, which the previous posts on this subject are: Whose Responsible for the Urban Blight at 1576 Fulton Street & Goldman Sachs Finds Opportunity in Bedford Stuyvesant

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September 15th 2008 became a day of reckoning for the U.S. economy.  Less than 60 days from an historic election and Wall Street finds the crisis that’s been at the front door of Lucylla Baynes, and others like her, now busting through the doors of some of the worlds wealthiest individuals, corporations, governments, pension funds and sovereign nations.

Predatory Lending in neighborhoods like Bedford Stuyvesant that resulted in the sale of Collateralized Debt Obligations (CDO’s) can also claim amongst its victims the country of Iceland.

Investment Banks like Goldman Sachs were engaged in the packaging and sale of Collateralized Debt Obligations, in addition to hedging their own CDO portfolio positions with another Wall Street player that currently exists as a shadow of it’s former self, American International Group, (a.k.a., AIG, your government funded, taxpayer owned insurance company).

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With the above in mind, consider the irony of Goldman Sachs investing in real estate in the 11213 zip code of Bedford Stuyvesant…a neighborhood which, according to RealtyTrac.com, has 960 households in default on their mortgages, 265 homes that have been foreclosed, 30 courthouse auctions tentatively scheduled and 91 bank owned properties as of August 11th 2009.

Given that Goldman Sachs brings resources to bear that New York City’s real estate titans of the gilded luxury condominium age can no longer summon, the stage is set for a paradigm shift in the City’s real estate landscape.

From its appearance, 1576 Fulton Street and adjacent properties continues to exist in a run down manner, undeveloped and underutilized for any of the highest possible uses that were available for the last 30 years.  Even Community Board #3’s neighborhood report on Housing goes on to highlight the needs faced by its residents:

So that it can’t be missed, we’ve pulled the statement below from the report that identifies this community’s burgeoning need;

In an effort to fight the displacement of our residents, we support rent stabilization and residential ownership initiatives…

We propose that affordable housing ownership opportunities be made available, including Coops and Condominiums.

For a community to be successful and thrive, the community must support mixed income housing.

The above excerpts come from the Housing section of the District Needs Statement that was created on September 7th 2006, which may summarize the 197-A plan, or at least serve as it’s motivation.

Wouldn’t the need mentioned in the District Needs Statement been prevalent prior to September 7th 2006?

A 197-A plan is a plan sponsored by a number of parties that guide a city, borough and communities growth and development.  According to the NYC Department of City Planning’s web site:

Neighborhood or Civic groups within the larger community may draft a 197-a plan, but they must be approved, sponsored, and submitted by a community board, borough board, or borough president.

Now, I’m not a cynical person.  In fact, I’ve often been accused of being too optimistic.  My clients rely on me having the confidence that they’re not able to muster at times to see the sale of their home to completion.

But if the above serves as a guide then your left to arrive at the following conclusion;

• Elected Officials and City Agencies do not develop plans for Urban Renewal and Development.
• They take under advisement plans developed and proposed by Neighborhood and Civic groups from among the larger community.
• If the plans fit a particular agenda for a given area, then either the Community Board, Borough Board or Borough President will approve, sponsor and submit it to NYC’s Department of City Planning.

Given that outline, the Bedford Stuyvesant Restoration Corporation, the nation’s first local community development corporation, in operation for 32 years, whose Board of Directors also includes Robert F. Kennedy jr., Esq., are best positioned to advocate a change in this location.

However, we find another institution engaged in the effort of urban renewal at this stretch of Fulton Street.  (I encourage you to read this post regarding the Bedford Stuyvesant Restoration Corporation: Just One More Thought on the Reason Why)

When we tried to review the 197-A plan proposed for this location, we started our search at Community Board #3’s web site, which had a link to this plan prominently displayed on its home page.  However, when I tried to retrieve it by clicking on the link, it directed me to the Pratt Center for Community Development’s web site (and there was no plan available to reveiw).

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To get an idea how a 197-A plan evolves, we’ve included a link to the presentation by the NYC Department of City Planning’s 197-A Plan Process.

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So who brokered the deal that utlimately bought Goldman Sachs Urban Investment Group into the picture?

Well, let’s examine the time line of events and allow it to guide our conclusion on the deal’s evolution:

May 7th 2007 is the date when this process unfolds officially in public view, where a 197-A plan submitted by a Neighborhood or Civic group may have served as the impetus.

October 29th 2007 is the date when the City Council approves the rezoning plan submitted [an important date in light of what follows].

While the above evidences a process underway, the following events appear guided by its inception:

• 11/30/2007 – GS UDC PARTNERS MEMBER LLC purchases 6 Vacant Lots in Brooklyn New York, a foreign limited liability company whose domestic filing exists in Delaware.

Almost a year passes and then we see an acceleration of the process by a number of city agencies and institutions below;

• 10/9/2008 – NYC Department of Housing, Preservation and Development submit an application to NYC Department for City Planning under UDAAP (Urban Development Action Area Program)
• 10/22/2008 – A formal Environment Impact Study is conducted and reviewed by the City Planning Commission and finds negative adverse environmental impact by the proposed plan
• 10/27/2008 – City Planning Commission refers plan to Community Board #3 and Brooklyn Borough President’s office for approval.
• 12/1/2008 – Community Board #3 unanimously approves plan with only 1 condition: That the name of the project reflects the community
• 1/15/2009 – Brooklyn Borough President issues a recommendation approving the application for the plan
• 2/18/2009 – City Planning Commission conducts a public hearing with 2 speakers present representing the sponsor of the plan and 3 speakers present to testify that they are in favor of the plan, with the Architect for the plans present as well

On March 4th 2009, the City Planning Commission publishes the final report, application # C 090142 HAK, that publicly discloses the disposition of city owned properties designated for the Fulton Park Urban Renewal Area.

Included in the parcels designated for the project is block 1699, lots 11-15, or what you’ve come to know as 1576 Fulton Street as a result of this series.

The Fulton Park Urban Renewal Area will include a new public playground, off street parking for 32 cars, new retail space, 96 resident units (a mix of studio, one and two bedroom condominium units).

Oh, and it will also include a woefully less defined plan for Inclusionary Housing in a developement approximately 140 feet away from the 96 unit development.

Below is an outline in the re-zoned area’s distribution of residential units according to affordable housing guidelines for the project.

1. Does the Sponsor of the Plan take into consideration the migration of “baby boomers” and “surburbanites” into an ethnic urban neighborhood?
2. Who are the “Members” in GS UDC PARTNERS MEMBER LLC; a pass through tax entity that is not required to disclose it’s operating agreement or it’s members.
3. Who is the Developer that’s been chosen by NYC Housing, Preservation and Development?  (is it Pratt Center for Community Development?)
4. What employment / vendor opportunities will be made available to local business owners and community residents?

All of the above are questions Community Board #3, Al Vann, Marty Markowitz, Colvin Grannum and Pratt Center for Community Development should be able to answer for you, as it could be assumed that all were integral in making this deal happen.

As for Goldman Sachs Urban Investment Group, I’ll let you judge how profitable the deal has been for them so far.  Let’s recap…

11/30/2007 – Purchased 6 vacant lots for $9,705,000, approximately 12,000 sq. ft.

10/29/2007 – City Council approves plan that re-zones the area, creating 111,978 square feet for residential occupancy; of which only 14,565 sq. ft. is required for affordable housing.

3/4/2009 – Goldman Sachs GS UDC PATNERS MEMBER LLC will have exclusive development rights for the Fulton Urban Renewal Area.

Goldman Sachs Urban Investment Group’s initial cost per square foot for this project is approximately $86, after the rezoning.

Even after you exclude the inclusionary housing square footage, GS UDC PARTNERS MEMBER LLC has 97,413 square feet to sell at the prevailing market value when the time comes.

The last Condominium sale in proximity to the Fulton Park Urban Renewal area occured on 5/22/09 at 1062 Bergen Street for approximately $669 per sq. ft.

The GS UDC PARTNERS MEMBER LLC currently hold an investment valued at approximately $65 million.

Not bad for an Investment Bank that isn’t in the real estate development business.

As for the residents of Community Board #3, well, just remember when you see signs like this on boarded up, city owned property warning you of a possible danger within…sometimes things don’t always appear as warned.

You can read the previous articles in this 3 part series at:

• Whose Responsible for the Blight at 1576 Fulton Street
• Goldman Sachs Finds Opportunity in Bedford Stuyvesant

Related posts:

1. Goldman Sachs, Politics and Foreclosure
2. Goldman Sachs Finds Opportunity in Bedford Stuyvesant
3. Whose Responsible for the Blight at 1576 Fulton Street

Tagged as: 1576 Fulton Street, Al Vann, Bedford Stuyvesant Restoration Corporation, Brooklyn Borough President, Colvin Grannum, Community Board #3, Fulton Park Urban Renewal, Goldman Sachs Urban Development Fund, GS UDC PARTNERS MEMBERS LLC, HPD, Marty Markowitz, NYC Dept. of City Planning, Pratt Center for Community Development, Pratt Institute, The Bradford, The Garvey