OPINION: When developers call upzoning a public benefit, check their bottom line
Giant 625 Fulton tower, said to help Brooklyn, deserves scrutiny as private benefit.
The real estate company Rabsky Development, in partnership with the consultancy group Totem, has very big plans for a 1.73-acre lot in Downtown Brooklyn: a hybrid office/apartment building far bulkier, if not taller, than the Chrysler Building.
That site, 625 Fulton St., is one block east of Flatbush Avenue and just up the street from the BAM Harvey Theater and BRIC.
“A first look at what could become one of Brooklyn’s tallest buildings,” is how the Brooklyn Eagle headlined coverage of a recent presentation before Community Board 2. But Rabsky has proposed not merely a 942-foot tower (79 stories); it seeks city permission to double the available square footage. With nearly 1.6 million square feet, it would cover far more of the lot than currently allowed.
“This project will bring exciting benefits to Brooklyn,” a developer’s representative claimed, citing “commercial space that encourages entrepreneurship, a much-needed school, new indoor and outdoor open spaces and space for the local arts community.” Plans for affordable housing and corporate-friendly floor design are said to justify the requested upzoning.
Unmentioned, though, is the significant private benefit Rabsky seeks, an increase in buildable square footage worth, by my estimate, well over $100 million. No wonder they’re paying at least $1,125 an hour to have attorney David Karnovsky, former general counsel to the Department of City Planning, lobby for the project.
Assessing the value created for Rabsky — or any developer asking for such a dramatic upzoning — should become a central point in the land use process, better informing communities and lawmakers facing such proposals.
Seeking FAR-reaching gains
To decipher the Rabsky strategy, consider the acronym FAR, for floor area ratio. It’s the amount of square footage calculated as a multiple of the underlying lot. Rabsky’s proposed building would have an FAR of 21.
That’s well above the standard set in the 2004 Downtown Brooklyn rezoning, an FAR of 10, which can become 12 thanks to a bonus from a public plaza or affordable housing. It’s also well more than what the city allowed last year for the two-tower 80 Flatbush project nearby, with an FAR of 15.75. The upzoning there gained favor because two schools and affordable housing were included.
In fact, if built without a plaza bonus, 625 Fulton would actually have an FAR of just 8.57, according to the draft scope of work for the project’s environmental impact statement. The adjacent residential tower, 36-story 80 DeKalb — bulkier than allowed on the underlying lot, less than one-third of an acre — had to use development rights from a parcel that Rabsky later bought.
Thanks to some maneuvering, the plaza bonus — which, like the upzoning, would apply to the lot encompassing the entire “Project Area,” including 80 DeKalb — would boost the new building’s FAR above 10.
The doubling in bulk is key to the developer’s bottom line. “Look, there’s only two legal ways to create money in the United States,” architect Vishaan Chakrabarti told Curbed in 2017, “the Federal Reserve and an upzoning. So free FAR is worth its weight in gold.”
Doing the math
How much is that 625 Fulton upzoning worth? Well, Rabsky paid increasingly higher prices for land, a total of $226 million. Simple math — and it gets more complex — suggests that, if Rabsky can double available square footage, that’s adding space worth some $226 million.
How did Rabsky spend that sum? In October 2015, Rabsky agreed to buy the main 625 Fulton site, known as Ten MetroTech, from Forest City Enterprises, for $158 million. Under current zoning, the price was about $255 per buildable square foot, the seller said. Rabsky then planned a 36-story office tower, about 618,000 square feet, according to the Real Deal.
(Unmentioned at the time: Forest City, which also owned 80 DeKalb, agreed just before the sale closed — presumably in coordination with Rabsky — that any future upzoning to the entire “Project Area,” including that apartment tower, would shift square footage only to the Rabsky property.)
Rabksy’s ambitions increased. In May 2017, it paid $68 million for a far smaller adjacent property, the modest three-story building with Dollar Deal on the ground floor. The two properties together would enable a tower containing some 770,000 square feet, the Real Deal reported.
But it made no sense for Rabsky to pay nearly $450 per additional buildable square foot (and push the overall price per square foot toward $290) unless they had bigger plans. That latest transaction was over market. After all, more than a year later, Ariel Property Advisors’ Sean R. Kelly observed (in the Commercial Observer) that “pricing for development sites in Downtown Brooklyn has increased to between $300 and $400 per buildable square foot.”
The value of upzoning: the equivalent of a new building
Without upzoning, the developers could still build a narrow, tall tower, 78 stories and 821 feet, with 889 market-rate apartments, ground-floor retail and a plaza, according to the draft scope.
Surely that’s not why Rabsky partnered with Totem, run by former Downtown Brooklyn Partnership President Tucker Reed, and hired attorney Karnovsky.
Their plan for an upzoned 625 Fulton tower would essentially stack a large apartment building — 902 units, with up to 25 percent of them affordable — on a new large office building. That’s before adding retail space, below-grade parking and space for a 640-seat elementary school. (While no documents specify the school plans, often a developer provides the “core and shell,” before the school is built out by the School Construction Authority.)
The rezoning would approximately double the square footage, to 1.83 million gross square feet and 1.56 million zoning square feet (which eliminates below-ground and other space).
Simplified, they not only want to build an apartment tower, albeit with affordable units, similar to the one they could already build with that plaza bonus. They also want the public to supply a free building site — or, in this case, square footage — for a major office tower right under it.
Consider alternative math, using Kelly’s suggested valuation range. With 725,082 more zoning square feet (not counting school space), the rezoning might be worth $217.5 million, at $300/square foot, or $290 million, at $400/square foot.
All told, the rezoning as proposed by Rabsky cuts the price per buildable square foot (not counting school space) down to about $152 — a discount well below market value.
Of course, there are caveats. Office space typically isn’t as valuable as space for market-rate housing. Nor is space for affordable housing, though it should gain tax breaks and cheap financing. Hence my more cautious estimate of “well over $100 million.”
The public deserves technical assistance, perhaps from an unbiased entity like the New York City Independent Budget Office, to assess the true value of such rezonings. The discourse around developments like this one too often focuses only on height and proposed public benefits — and, of course, neighborhood impacts.
How much demand for office space?
The upzoning is justified, according to the draft scope, because it “would facilitate large-floorplate commercial office space in Downtown Brooklyn,” which offers the borough’s best transit. Karnovsky spoke similarly, according to the Eagle. That deserves consideration. Then again, Amazon, in seeking a new campus, ignored 625 Fulton and Downtown Brooklyn to choose, at least temporarily, Long Island City.
Such large floor plates in new buildings that are wide rather than narrow, such as in Williamsburg, have not attracted major companies as anchor tenants. “It’s no secret there are a number of major commercial buildings being built for the most part on spec, here in Brooklyn,” developer Jeffrey Levine said at a real estate panel in May, lamenting the lack of uptake.
In Downtown Brooklyn, curiously enough, developers of the 570 Fulton project across the street proclaim the opposite tactic: “The office floor plates in the project are designed to be smaller than those of other office buildings in Downtown Brooklyn — more appropriately sized for local, boutique businesses that want to remain in Brooklyn.”
It’s likely 625 Fulton has been proposed as far larger than the developers need to earn their desired profit. After all, when the site was offered in the city/state bid for that Amazon campus, it was said to include 1.33 million square feet, some 15 percent less bulky.
If that’s a fallback figure for Rabsky and Totem — after all, developers typically position projects for a future “compromise” regarding bulk and/or affordability — the math still seems good for them.
The value of that additional bulk should be considered, as the rezoning moves toward the city’s land use process, known as Uniform Land Use Review Procedure, or ULURP. (That requires public hearings, an advisory vote by the local community board, and votes by the City Planning Commission and the City Council.)
Meanwhile, the developers and their high-paid consultants deserve skepticism when framing new FAR as a gift to — rather than from — the public.
Brooklyn journalist Norman Oder writes the Atlantic Yards/Pacific Park Report, a watchdog blog, and is working on a book about the project.
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