Brooklyn Heights

EXCLUSIVE: How Levin crafted final deal for Brooklyn Heights Library

Negotiations went down to the wire

December 15, 2015 By Mary Frost Brooklyn Daily Eagle
On Saturday, Levin sat down with the Brooklyn Eagle and described in greater depth some of the thinking that went into crafting the final outline of the deal to sell and develop the Brooklyn Heights Library. Photo by Mary Frost
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Councilmember Stephen Levin has called the proposal to sell and develop the Brooklyn Heights Library branch at 280 Cadman Plaza West “the most controversial issue I’ve seen in my district since being elected in 2009.”

After almost three years of polarizing debate and sometimes-raucous public hearings, the proposal was approved last week by the City Council Land Use Committee and was  overwhelmingly passed by the full Council on Wednesday.

The approval came after Levin announced a host of concessions he had wrung from the developer, the city and Brooklyn Public Library (BPL).

On Saturday, Levin sat down with the Brooklyn Eagle and described in great depth some of the thinking that went into crafting the final outline of the deal.

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Increased floor space, smaller library

 Negotiations with developer Hudson Companies went on until just moments before the City Council subcommittee meeting, Levin said.

One major concession increases floor space in the new branch library to 26,620 square feet from the developer’s original proposal of 21,500 square feet. (The building’s current usable space equals 32,431 square feet, with roughly 27,000 publically accessible. BPL says that an additional 27,500-square-foot area is inaccessible.)

Levin’s tours of the library convinced him that some of the current space was poorly planned.

“The lunchroom is bigger than it needs to be. The offices are a little bit bigger than they need to be. They were constructed in 1961,” he said.

“We received word back from the Department of City Planning that there was another wrinkle. They could go up to about 26,500 square feet — and if they went beyond that they would need to go back through the ULURP process because it would be ‘out of scope,’” he said.

 “Eventually they came back with this other idea of acquiring, through a lease, 5,000 square feet in DUMBO/Vinegar Hill/Farragut area for a new branch. There hasn’t been a new neighborhood branch in the system since 1983, and this would be slightly smaller than any other neighborhood branch — but 5,000 square feet is nothing to sneeze at.”

“So if you add that 5,000 square feet to the 26,500 you’re getting very close — it might not be 32,431 but it’s pretty close,” he said.

“I think that’s a fair way to look at it,” he said. “Obviously it won’t make everybody happy.”

New STEM lab

 As part of the agreement, a 9,000-square-foot STEM (science, technology, engineering and math) lab, administered by the NYC Department of Education (DOE), will be built at the site of the new Brooklyn Heights branch.

“This is the thing I’m most excited about,” Levin said. The lab will be on the first cellar floor, which was originally going to be the upper part of the Saint Ann’s auditorium. (That deal was cancelled.)

That space will now be leased by DOE, which will have an option to buy after 10 years at cost, Levin explained. “If the cost is around $350 per square foot, we estimate it will cost about $3 to $3.5 million at the end of ten years to buy it. But in the meantime it will be fully fitted out as a STEM lab — and I insisted on the language of STEM lab because that means something. There are other STEM labs out there — that means full equipment. It doesn’t exist in New York City so we don’t have a model to do this, and so we are eager to see how it can work.

“NYU Tandon, formerly Poly, has a K-12 STEM program,” Levin said, adding that he has spoken to Ben Esner, who runs the program. “We’re eager to see what they’ve been doing.” Yale has also opened a STEM lab of comparable size — 8,700 square feet – for its students, he said.

“It might make sense to partner with another institution of higher education,” Levin mused. “You look at what’s going on in Downtown Brooklyn — you have NYU Tandon, City Tech, there’s going to be the CUSP Center, [NYU’s Center for Urban Science and Progress] at 370 Jay St., and then you’ve got the whole Tech Triangle — it can really be exciting as a part of this.”

DOE estimates the lab will hold three full STEM classrooms, Levin said. DOE “didn’t give an actual amount of capital funding commitment because they don’t know how much it would cost,” he said. The lab should be open by the time the library opens.

Technology & Business Services Center

 As part of the upgraded deal, a Technology & Business Services Center will occupy 3,000 feet of below-level space in the new branch library.

The space will be dedicated to business and career services, Levin said, adding it’s “very 21st century-oriented. Basically I think it’s a smaller version of the Information Commons at the main branch.”

The Technology & Business Services Center will provide patrons with both laptops and desktops, Levin said. “They’ve committed to more computers than are there now, and more shelf space than there now.”

Hudson plans to build a 36-story condo tower (shown center), with some ground floor retail, and 114 units of affordable rentals in Clinton Hill.  Rendering courtesy of Marvel Architects

Profit sharing

 In response to accusations that the $52 million sale price is too low, Levin established a framework whereby Hudson will return to the city a quarter of all profits exceeding an internal rate of return (IRR) of 19 percent.

“I thought a lot about, this ability to do profit sharing,” he said. Something similar was being done at the John Street and Pierhouse projects in Brooklyn Bridge Park, though the methodology differs at each project, he added.

John Street’s arrangement is based on the price per square foot of condo sales, Levin said. “Brooklyn Bridge Park (BBP) gets a quarter of the profits over $1,050 a square foot.”

“They’re selling the condos at much higher than $1,050 a square foot,” Levin noted. “So Brooklyn Bridge Park is recashing quite a bit.”

At Pierhouse, the profit sharing was calculated on an IRR basis, Levin said. “They did 10 percent over 20 percent. So 10 percent of the profits over 20 percent IRR.”

In the library deal, “We eventually got to 25 percent over 19 percent IRR, with the caveat that the first $1.5 million of that would then go back to the developer because we lowered the Area Median Income (AMI) on the affordable units. So that would then go in to help pay for the AMIs to go down.” [The affordable units will be built in Clinton Hill.]

Levin said he didn’t want to see the AMIs in the 165 percent range, as originally proposed. In the new arrangement, units formerly at 165 percent AMI (31 units) have been lowered to 125 percent AMI, and units formerly at 100 percent AMI (60 units) have been lowered to 80 percent AMI. An additional 23 units will be at 60 AMI.

“So that was kind of a last minute thing. He [the developer] couldn’t take city subsidies for the affordable units, so driving down those AMIs would cost significantly more.” Eventually, the developer said that he would add a return on the 19 percent “if we could offset that with the first $1.5 million.”

That aspect of the deal makes the assumption that the economy is going to do well and that the real estate market is going to do well in the Downtown Brooklyn / Brooklyn Heights area, as it has been over the last three years, Levin said.

“So that speaks to the question of if the developer makes an excessive profit based on the sale,” Levin said. If the sale price was “excessively low,” as some opponents of the deal claim, the developer’s IRR would be much higher.

“And so if that is the case, then there’s an ability for us to recapture some of that,” Levin said. “Now it’s impossible for us to predict how much that will be. Because it’s all dependent on the market and the economy. But I was comfortable that it was a reasonable place to be, where the public’s asset can be protected in terms of what it goes for.”

“The industry jargon that I’ve heard is that this is a way for the city and BPL to participate in the upside of the project,” he added.

AMI and the size of apartments

“What I was concerned about was 165 percent of AMI is very high. And I don’t really consider that affordable housing,” Levin said. AMI in New York is $85,000 for a family of four.

“The developer made the case that in 30 years, 165 AMI in Clinton Hill will be below market. But for the moment it’s not. It might be for new construction but if you were just looking for a new apartment in Clinton Hill, you could get it below 165 AMI. I didn’t think that was appropriate, so 125 is the max.”

One thing Levin is not thrilled about is the number of studios in the affordable housing versus one, two and three bedroom units.

“It’s almost kind of a quantity vs quality argument. You get more units in by making more studios, but these are not going to be for families, they’re going to be for singles or couples.

“It’s not really where I wanted it to be, but you can only do so much. It would have reduced the number of units … And I know that my colleges as well were eager to see the affordable housing get built.”

Enforcing the deal

The agreement Levin brokered now has to be written into the contract and then written into the deed, he said. “So the way that this would all be enforced is that it’s written into the deed.” The deed transfers the library property from the city over to Hudson Cos.

“I’m going to continue to insist on, and the parameters of this were agreed upon, that whatever he gives to his equity investors, that’s what we want to see. So he’s not going to be telling his equity investors that he’s getting an 18 percent IRR — that means they’d be getting an 18 percent IRR. They’re going to insist on as much of a return on their investment as is possible. If he were to try to not give them their rightful share of the proceeds, they would sue him,” Levin said.

“I’m going to be following this over the next six months as the contract moves towards the sale and then gets recorded in the deed, and that all of this is in as restrictive language as possible,” he said.

Levin said, however, that the agreement to build a new neighborhood branch in the DUMBO vicinity can’t be recorded into the deed. “That would be a commitment by BPL, which is a quasi-governmental agency and there has to be some accountability there,” he said.

A commitment from the city beats a Memorandum of Understanding (MOU) from the developer, he added.

“I’ve had to do this a number of times with other ULURPs, and developers have made commitments in an MOU that are meaningless. And they break those, and they’ve broken them on me before,” Levin said. “When the city does it, it is in my experience, not meaningless. If I have a letter from a deputy mayor saying we agree to do this, that and the other, there’s accountability there.”

Interior of the new Heights Library. Rendering courtesy of Marvel Architects

Hours and programming

Keeping the Heights branch open seven days a week is linked to the Kings Highway branch because Kings Highway has taken on the role of being the main south Brooklyn branch, Levin said.

“And if we go through a recession that’s worse than what we just went through in the last few years, it may be that we could just afford to keep the Central Library at seven days a week, but we might not be able to keep Kings Highway at seven,” he said.

Levin said that as part of the deal, BPL agreed that “this would have the most robust programming of any neighborhood branch in the system, including Kings Highway.” He added that the Heights branch today has a significantly lower amount of programming than other neighborhood branches.

Maintenance fund

Though Community Board 2 had “pegged a reserve fund” for maintenance, Levin decided that was not a priority, since the branch would be a brand new facility.

“It might not be the best use of resources to just have them siting in a reserve fund for 20 years.”

Tough negotiations

Levin gave such a thorough explanation to this paper because “I think honestly that public needs an accurate presentation of exactly what was involved,” he said.

“Unfortunately, it’s not appropriate to negotiate these things in public. All parties need to be able to trust that they’re having candid conversations and it’s not subject to somebody leaking it. There’s an argument to be made that that’s not transparent enough, and unfortunately it’s hard. You can’t do the negotiations in full public view.”

The negotiations went down to the wire, he said.

One of the last issues to be hammered out had to do with the lobby space of for the STEM lab, Levin said. “How much lobby space was going in and how that was going to be counted. Another negotiation involved how much square footage was going to be in the STEM lab.

“I wanted 9,000 square feet. I wanted more than 9,000 square feet, but DOE wasn’t quite there,” he said.

Some of the AMI issues weren’t resolved until the morning of the City Council committee hearing on Thursday, as well as the labor issue.

“There was an agreement between the developer and the unions, and that’s what I wanted to get to,” he said.

Plan doesn’t please all

The plan to sell and develop the Heights branch has received enormous criticism, even after the proposal was beefed up by Levin.

Many of his colleagues on the City Council hailed the agreement, calling it a better deal for the public than the original proposal, but some disappointed library advocates maintain that Levin “sold out.”

“I certainly understand people are really upset. I’ve gotten some very disappointed and angry emails,” Levin said. “People are saying that I have sold out, and I will say this: I’ve gone through ULURPs where I was not satisfied with the result and still felt like I had to go out there and defend it … And I kind of swore that I would never do that again.

“I said early on that I’m not going to go out and try to defend this if I’m not satisfied with it,” he said. “And ultimately I was. I felt like I set a reasonably high standard. I laid out a set of issues that I felt had to be met, and they all ended up getting met, for the most part … I wouldn’t have voted for it if I didn’t think that it was ultimately a good deal for the public.”

“It’s not going to be apparent for five years, but at that time I think we will see that it’s going to be a better library than what’s currently available, and we’re going to have a new library [in DUMBO], and the STEM lab is actually very exciting.”

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