Real Estate Prospect Lefferts

Meet the developer of 626 Flatbush Avenue

June 13, 2014 By Matthew Taub Special to Brooklyn Daily Eagle from Brooklyn Brief
Here's the developer of 626 Flatbush Avenue
Here's the developer of 626 Flatbush Avenue
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A proposed 23-story tower in Prospect-Lefferts Gardens is the subject of protests and a lawsuit, with pouring concrete on hold pending a judge’s ruling. But Alison Novak of the Hudson Companies just wants to build something that will benefit the neighborhood.

Brooklyn Brief: the 626 Flatbush development is partaking in the 80/20 Housing Program, whereby at least 20 percent of the units are set aside for very low-income residents, and construction is financed using funds raised through the sale of bonds. This is a voluntary program. What’s the incentive for a developer to do this?
Alison Novak: There are a couple of reasons to do an 80/20. At Hudson, we have three main lines of business: affordable housing, middle-income institutional housing–we’ve done building for Weill-Cornell, and Memorial Sloan-Kettering–and our third line, market-rate projects, like J Condo, or Third and Bond. 626 Flatbush is 80% market rate and 20% affordable so it straddles the business lines.

One reason you do an 80/20 is that it’s a good thing to create affordable housing. We think that’s true. Another reason in particular for Flatbush is that it’s inside the 421-a exclusion zone, which is a tax exemption program. In short, the City says that if you build twenty percent affordable units within this exclusion zone, you can be eligible for the abatement. So that’s a very attractive incentive.

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BB: Are you required to use city or state financing as part of the 80/20 / 421-a program?
AN: No, you can build with conventional financing and be either an 80/20 or in the 421-a program, or both. For example, just up the street is another construction project at Lincoln and Flatbush, and that particular developer is doing a mixed income project without housing bonds.

For us, it also makes sense to do an 80/20 in a neighborhood that’s transitional or changing because we don’t know how strong the market is. So if a portion of the units are affordable, there’s a little less risk there.

We also decided to go to the State Housing Finance Agency, and ask them for housing bonds.

BB: Do those housing bonds lower the cost of financing?
AN: Sometimes it’s lower cost financing. Right now, because interest rates are so low, the interest rate difference is not the reason to do it. But using bonds to finance it also makes us eligible for low income housing tax credits which is a Federal tax credit program commonly known as LIHTC [pronounced “Lye-tech”].

BB: Let’s talk about the property parcel itself. It juts out away from Flatbush, and is mostly set back from the storefront line, is that correct?
AN: That’s right. The site has a hundred feet of frontage but the bulk of the site is behind other properties that front on Flatbush. The previous owner had a two-story commercial building on Flatbush, and the rest of the site he basically used as a parking lot.

BB: When was the deed transferred to you?
AN: We went into contract a couple of years ago and it closed–that’s when the deed is transferred–last June.

BB: There’s a claim by the opposition protestors that they’ve had a request for a zoning variance pending. Is that incorrect? Did they lose that battle already? 
AN: I don’t know a lot about the history of their original request. I didn’t find out about their original request until they started talking about it in the media. But as I understand it, in 2008, the Community Board issued a request to [the] City Planning [Commission] saying ‘we’d like you to look at rezoning of the area,’ and City Planning either said, ‘no thanks, we think it’s right,’ or ‘we’re too busy.’ I haven’t seen any documentation. Suffice it to say they didn’t proceed.

And that was a time when City Planning was doing a lot of re-zonings in New York City. I’m sure you’ve read plenty of articles about the hard work of Amanda Burden and her team. There were a lot of changes.

BB: Have they renewed their request in light of your development proposal?
AN: Now, I believe, there are people who’ve gone back to the Community Board, and the Community Board has issued another request to City Planning. I don’t think City Planning has responded. But for us, when we purchased the site–you know, when I even look at a site, the first thing I do is go to the zoning code and ask, ‘what’s allowed here?’ The zoning code sets out the rules and creates predictability for New Yorkers and developers.

BB: You’re not going to buy a property if you can’t build what you want to build there. So you obtained the property under the premise that the zoning allowed for the construction you’ve proposed. 
AN: Right. So I look at sites where maybe I can only build a one story building and I think, with all of the costs that come with design and permitting and building, and salaries, I’ll lose money. So I’m not going to build.

Or at least the purchase price will reflect that. We do a zoning analysis, underwriting–what we think the rents and costs are–and we go back to the site owner. And we tell them ‘this is what we’d like to pay. Does this work for you or not?’ And most of the time, generally, I feel like it doesn’t work for them [laughter] — we don’t pay top dollar. But we pay the most that we think is reasonable for us, based on our risk profile and what we think is going to work there.

So we signed a contract [on 626 Flatbush] a year before we closed, and on that contract we said, ‘site owner, we’re going to pay you x millions of dollars,’ he said ‘okay,’ and immediately after that we hired an architect and we start designing. So by the time we closed with the property owner, we had a building that was completely designed.

BB: When did you start hearing from community opposition of any kind?
AN: I talked to different people over the course of last summer–neighborhood groups, residents I know–for the most part they said that they were excited. One person said to me, ‘I don’t want any more low-income units in the neighborhood because we have a problem with gangs.’ Most often I heard people say, ‘I can’t wait for retail space to open because we really need another restaurant–we don’t have enough restaurants.’ Those were the kind of comments I was hearing.

There was a neighbor directly adjacent to the property who said, ‘we’d really like to learn more about what you’re planning to do. Would you come over to my house? I’ll have a meeting with neighbors.’ We had a meeting in October, and at that meeting, there were maybe ten people, some of whom said they had concerns about the development. I told them I understood their concerns and tried to address what I could with information–I came to the meeting with a drawing that showed how far the building was from the property line, because often times that’s the question people have. ‘Where’s your building going to be exactly? Is it going to be near my building?’ There are thirty foot side yardsetbacks.

And that was really it. We never expected a lawsuit. The next thing I heard was that there were legal papers being delivered! Which, needless to say, was surprising.

BB: Now what’s the latest on that lawsuit? Is there some kind of temporary moratorium so the judge can look everything over?
AN: The judge issued a temporary restraining order in the pouring of concrete. So we’re doing things like excavation, and formwork, and hauling soil. We poured a very small amount of the foundation, because the contractor wanted to do it in a sequence: you excavate, you pour, you excavate, you pour. That’s the process we were in.

We had our court hearing in January. And the judge has been deliberating. He said at the most recent hearing that he would decide the issue within the next two weeks, which would be the end of this week.

BB: What are the possible decisions the judge could make?
AN: He could rule against the plaintiffs [protestors] and say ‘sorry, I don’t think you have a case,’ and we can go ahead, or he could say that there’s merit to the claim and therefore the State Housing Finance Agency must do another environmental review.

BB: Had they done an environmental review?
AN: Yes. They did one already.

BB: Can we have a copy of that original environmental study? 
AN: We aren’t releasing anything that’s evidence in the lawsuit. But HFA has gone to court saying we did everything that we are required to do.

BB: What about the protestors’ claims that the development is going to cause shadows in the park, and that it’s too dense for the area, which is a low-level area?
AN: It’s really interesting–and I think this is a conversation we’ll be hearing more and about as the city grows and changes. Obviously, we have a housing crisis. The Mayor wants to build a lot more housing units to solve it. 200,000 units have to go somewhere. But I agree that density doesn’t always mean a 23-story building. I think San Francisco is the second-densest city in America, and I don’t think of that being a city of high-rises necessarily. But density and verticality is definitely on the table for being able to create enough units.

One of the things people who oppose the project frequently forget to mention is that there are two sixteen story buildings half a block away. Now, there are beautiful historic districts, that are very limited in height. But Flatbush Avenue is one of the busiest commercial corridors in all of Brooklyn. There are other towers there, which have been there for over forty years.

BB: What about concerns over transit access? That there’s not enough infrastructure to support this influx of new residents?
AN: The area has great transit access. I looked at ridership data for the four nearest subway stops. The Prospect Park stop and Parkside Avenue are both the Q and B, both express trains an almost equidistant five-minute walk from the site. Then there’s the 2 and the 5, which are maybe a ten to fifteen minute walk away. The net change in ridership for those stations is actually negative over the last year. One of the stations was down 23%, which is probably because it was closed for a period of time. You would think the other station would see a concurrent rise in ridership, but the net of the other stations is still far below that.

The evidence doesn’t seem to bear out a transit crisis for this area. When I go there–I go there on the weekends, I have friends that live in the neighborhood, I go there on weekdays to visit the job site–there’s never been a time that the subway platform has been crowded. I’ve never not been able to get onto a train because there were so many people.

BB: Have you gone at rush hour?
AN: Yes, and I’ve not experienced any problems. If you look at the census between 2000 and 2010, this area actually lost some people. So, I think those fears are overblown.

BB: You have an extensive background in environmental building. Can you tell me about your background in making buildings environmentally friendly, and how that plays into this building? 
AN: At 626 Flatbush we’re shooting for a LEED-Gold certification and Energy Star label. The Energy Star label comes with a lot of very carefully modeled and verified energy improvements, energy efficiency requirements. LEED comes with some of the same energy requirements, as well as special types of materials, distances that materials are brought from, recycled materials, and we’re also doing cogen, which is a way to produce energy on site utilizing waste heat, such as for heating hot water for showering. So what that means for the building is that we pull less energy from the grid. It doesn’t power the entire building, but it’s a contribution, a way to lighten the footprint.

All the buildings Hudson does now are green. We did the first LEED for Homes Platinum building in Brooklyn–that was Third and Bond. We have the state record for solar panels on a residential building. We try to match the green features to the building–what we can afford to put in, what we think will make the biggest impact, and then what works with the city’s zoning and building code as well.

BB: Do you have any more buildings planned for the Prospect Lefferts-Gardens neighborhood? 
AN: We are very busy. There’s another site of ours, some people would debate whether or not it’s in the neighborhood.. [laughter].. you know how people love to debate neighborhood boundaries. It’s near Kings County and SUNY Downstate.

BB: Between Crown Heights and Lefferts-Gardens?
AN: I still want to call it PLG [Prospect Lefferts Gardens], but we’ll see what other people say.

BB: The affordable units in this building–will they be low income housing or moderate income housing?
AN: The requirement is twenty percent low income housing. Low income housing, as defined in order to get low income housing tax credits, means no more than fifty percent of AMI [Area Medium Income], which is set by the Federal Government based on the New York City metropolitan area. So this is the number used HPD uses, and the HDC, HFA.

So we’ve got twenty percent of the units–what this really means is seventeen percent are at fifty percent [AMI] and then an additional three percent are at forty percent [AMI], even lower. We’ve signed all kinds of guarantees and pledges because we want to get the tax credits. These affordable units are going to happen.

BB: And the affordable units–studios, single bedrooms, two-bedrooms, enough space for a family? Something else?
AN: Yes. Every type of unit available in the building will have available companion affordable units. There are studios, 1-bedrooms, 2-bedrooms, 3-bedrooms. They have the same finishes as the market-rate units.

BB: What about access to amenities? Lots of new developments are being criticized for their “segregation” of affordable housing tenants into separate entrances and other restrictions of access.
AN: Affordable units will have the same access to amenities, and the same doors to enter and exit. There’s no separate “poor door,” no segregation, no restriction to the amenities.

BB: What kind of amenities do you have?
AN: There’s a gym, a community garden for residents on one of the roofs, we’ve got another roof that has barbecues, and a playroom. It’ll be a really nice place.

In many ways, it’s a great thing for the neighborhood to bring in an 80/20. One of the other interesting things about this neighborhood that I read recently in the Furman State of the City Report is that something like eighty-nine percent of the rental units in this neighborhood are rent-stabilized or rent-controlled.

BB: Between all the units–affordable and market-rate–are they all rentals?
AN: Yes. In our portfolio we have a mix of rental buildings and condos. But 626 Flatbush is all rental, and most of what we’re doing right now is rentals. It sort of depends on the neighborhood, the economy, and our partners. On this project, we think rentals will be a good fit for the neighborhood.

BB: Going forward with the situation right now, are there any concessions you’re willing to make (or have been asked of you) to appease the opposition protestors, or have you been told the opposition doesn’t want you to build at all?
AN: We’re open to having a conversation about ideas. We’re not going to change the building itself. But we can talk about other ways we can try to be a good neighbor.

There’s definitely a conflict between competing claims against density and in favor of affordable housing. We’re going to put more than fifty units of affordable housing on a site where there were no units before. This was a commercial building. We’re going to put back a commercial building, plus fifty-one affordable units, set back from the street. That should be a benefit for the neighborhood.

I also think that adding market-rate units is a good thing. People who live in the building will be clientele for the local businesses. I think the historic districts in the neighborhood are great–both of them–I’ve been in homes there, they’re really lovely. But because of what they are, which is really single-family homes, there’s a limit to the size of the consumer base.

BB: Anything else you want to say?
AN: Just that, ultimately, we want to be a good neighbor, and we think this is a good building. We believe that, as time passes, and the building goes up, and the sky doesn’t fall, the people who live in the building will get to know people in the neighborhood. They’ll see each other at Tip of the Tongue, and Scoops, and the hardware store. It will be an even more wonderful place. It’s a wonderful neighborhood, and I don’t see this building changing that.


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