Developers Widely Reject Large 485x Projects

It’s common knowledge among New York City’s developers that large-scale projects are virtually a nonstarter under the 485x program. Seeing the data behind that narrative is nevertheless shocking.

This week, six months’ worth of data was released by the city. The data dump revealed that developers are capping their buildings at 99 units, even when zoning allows more, because of wage and affordability requirements that soar at 100 and 150 units.

Let’s dive into those numbers.

Of 152 registered 485x projects in the last six months, 20 contained exactly 99 units; only one contained more, according to a preliminary analysis by Nate Bliss, founder and CEO of Latent Urban Ventures. BedRock Real Estate Partners and LMXD’s 35-10 Steinway Street in Astoria broke the trend with an expected 560 units.

Overall, 49 projects of exactly 99 units and only four larger ones have applied to use 485x. About a dozen developers are using a workaround to build larger projects, clustering 99-unit buildings on single development sites. One recent filing shows 10 adjacent buildings, all just under 100 units.

The Building and Construction Trades Council, an umbrella group for construction unions, called that a loophole and asked state legislators to close it. That seems unlikely.

A slide prepared by Helen Hwang of Meridian Investment Sales demonstrated that the projected yield on cost for an actual 99-unit project was 6.1 percent, but only 5.2 percent if it had 150 units. Industry leaders have been showing her slides to elected officials in private meetings to persuade them that changes are needed.

“The numbers are clear: 485-x is not producing the large-scale housing New York City desperately needs,” Real Estate Board of New York President Jim Whelan said in a statement. “We cannot solve a housing crisis 99 units at a time.”

To that end, Wednesday’s data dump was the last one before the state legislature reconvenes in January and considers changing the program or creating a different one for larger projects.

A property tax abatement is necessary for most rental projects because they don’t tend to pencil out without one. But the one New York City developers have at their disposal today doesn’t seem to be working for them.

The New York Knicks are officially back this week, receiving championship rings on Tuesday for the first time in more than five decades. Never a bad time to relive the vibes from the summer, when the team secured its historic title.

Until then, real estate news awaits.

Federal agents raid Bert I. Dweck’s in-laws’ home: sources

On Oct. 6, federal agents searched the Midwood home of Bert I. Dweck’s in-laws, where he and his wife live, according to multiple sources.

Dweck is facing 11 civil fraud lawsuits alleging he used phony contracts to solicit funds for real estate acquisitions and diverted the money toward personal and family expenses.

The ongoing legal saga involves millions in diverted loans and has become a major talking point within the Syrian-Jewish communities in Brooklyn and New Jersey.

“You just walked into hell”: Jona Rechnitz hits back in Black Spruce lawsuits

Frist Apex sued Black Spruce Management and founder Josh Gotlib, claiming they wrongfully withheld distributions owed from multifamily portfolio investments.

The lawsuit comes after Floyd Mayweather Jr. dropped his claims against Jona Rechnitz and Frist Apex.

Gotlib and Meyer Orbach previously filed a suit alleging fraud and defamation against Rechnitz.

Former Naftali manager accuses longtime execs of pregnancy discrimination

Former Naftali Group senior project manager Claire Gondon filed a lawsuit against the developer and two of its executives, Michael Witek and Eva Malachi, alleging pregnancy discrimination.

Gondon claims she was told her position was winding down just four days after disclosing her pregnancy and was fired three months later, whereas Naftali maintains the termination was made for legitimate, nondiscriminatory reasons.

After Gondon’s departure, the firm hired a man to take over her role managing the finances for the Williamsburg Wharf project.

Doug Middleton leaves CBRE I-sales group for Cushman

In big broker news, Doug Middleton resigned from his co-head position in CBRE’s New York investment sales group to join Cushman & Wakefield.

Although he took over leadership following Darcy Stacom’s departure, his group faced challenges gaining traction in the high-end institutional space.

During his tenure, his team facilitated notable transactions, including the Archdiocese of New York’s $250 million headquarters sale, Sotheby’s $175 million building deal and a $100 million sale for Nuveen Real Estate.