Crain's New York Business, January 29, 2024

CRAINSNEWYORK.COM I JANUARY 29, 2024

Owner of Gucci pays astonishing price for Fifth Ave. building

GREEN ENERGY

The nearly $1 billion deal follows a similar sale to Prada across the street

By Aaron Elstein and C. J. Hughes

NEW YORK’S OFFSHORE WIND INDUSTRY FACES A

FINANCIAL RECKONING Developers want the state to share more of the risk to avoid the collapse of projects | By Caroline Spivack An economic hurricane has swept up New York’s offshore wind industry.

The developers behind the offshore wind farms that are crucial to New York’s ambitious clean energy targets have taken a staggering series of financial losses in the last three months that add up to nearly $2 billion.

Similar debacles have unfolded up and down the northeast coast, in states such as Connecticut, Massachusetts and Rhode Island. Projects

BY THE NUMBERS

13,000 The amount of city jobs that the offshore wind industry will generate by 2035

totaling more than a quarter of President Joe Biden’s 2030 goal for 30 gigawatts of offshore wind electricity have been canceled or are at risk of canceling power purchase agreements with states; two New Jersey projects were scrapped altogether.

The carnage is so severe that observers on all sides acknowledge that the state must rework some early deals to avoid the collapse of projects and serious setbacks to the state's climate goals.

The turmoil has lit a fire under Gov. Kathy Hochul's administration to do just that by rebidding contracts to make them commercially viable for developers, though it remains to be seen if that will be enough to secure projects. Meanwhile, New York City’s Economic Development Corp. is pushing ahead with $191 million in investments in port infrastructure, workforce training, and research and development — in a wager that the offshore wind industry will right itself and generate some 13,000 city jobs by 2035.

When unveiling write-downs to New York projects in October, BP’s head of gas and low carbon, Anja-Isabel Dotzenrath, described the U.S. offshore wind industry as

See GUCCI on Page 22 717 Fifth Ave.

BUCK ENNIS

Crews work to assemble an offshore wind turbine for the South Fork Wind project east of Long Island. | COURTESY OF SOUTH FORK WIND

Price really is no obstacle for some Fifth Avenue shoppers—and, apparently, for some gold-plated retailers too.

To buy the building at 717 Fifth Ave., Gucci parent Kering paid more than triple the property’s estimated value, a top real estate analyst said, a sum all the more astonishing considering the building’s $655 million mortgage was more than a year overdue.

Kering ponied up $963 million. The deal comes just a month after Prada paid $822 million for 720 and 724 Fifth, across the street.

“It’s clear that well-capitalized tenants are willing to pay for the right space that they want to call home for the long run,” said Evercore ISI analyst Steve Sakwa in a report Jan. 23.

The deals call attention to a major pivot by one of the city’s retail moguls, billionaire Jeff

See WIND on Page 11

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Adams leans heavily on allies in State of the City speech. PAGE 2

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Proposals call for nearly 7,500 homes to be built around four new Bronx Metro-North train stations. PAGE 3

GOTHAM GIGS This Grammynominated harpist accompanies an A-list of pop acts.

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Adams demands housing help, leans on allies in campaign rally-style State of the City speech The mayor promised to regulate bike deliveries, open a climate hub and build housing on city-owned land

By Nick Garber and Caroline Spivack

Mayor Eric Adams touted his progress on public safety and the city’s economic recovery while promising modest action on housing in a State of the City speech on Jan. 24 that had the feel of a re-election campaign rally.

With the city’s finances under strain despite a rosier-thanexpected budget plan that Adams unveiled this month, the mayor’s 2024 policy agenda appeared

tion for migrants.

“Two years in, we’re seeing real results,” Adams said in the speech at CUNY’s Hostos Community College in the Bronx. “Crime is down, jobs are up, and every day we’ve been delivering for workingclass New Yorkers.”

Adams leaned heavily on his allies during the event, as he faces record-low approval ratings amid unpopular budget cuts and a federal investigation into whether his campaign received illegal donations from the Turkish government. Two powerful labor unions that supported Adams in the tight 2021 mayoral primary had their members out in force at the speech: Building workers’ union 32BJ and the Hotel and Gaming Trades Council, which will play a key role in the downstate casino process.

A recorded video message that played before his speech featured more laudatory remarks from congressmen Greg Meeks and Adriano Espaillat — political bosses in Queens and Upper Manhattan that backed the mayor two years ago.

“We need Albany to clear the way for the housing we need. Let us build.”

— Mayor Eric Adams slimmer than it was last year. At that time, he announced plans to rezone a swath of Midtown, expand composting and boost city contracts to minority- and women-owned businesses.

Instead, Adams vowed on Jan. 24 to build affordable housing on city-owned land, create a new agency to regulate bicycle deliveries, and declare social media a public health hazard for the harm it does to young people. Adams also repeated his frequent calls for state lawmakers to pass a housing plan that would incentivize more construction and office conversions, and for the federal government to speed up work authoriza-

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Housing on public land and a department for deliveries Adams’ housing proposal calls for advancing development projects on 24 city-owned sites by the end of this year, which he said would create or preserve more than 12,000 units. Not all sites were immediately announced, but they will include 388 Hudson St. in Greenwich Village, where the city has already floated a housing proposal, and the present site of the Grand Concourse Library in the Bronx, where the New York Public Library will help shape a new housing development, the mayor’s office said.

Other sites announced on Jan. 24 include one of the remaining undeveloped sites at Hunters Point South in Long Island City, and a current parking lot at 4095 9th Ave. at the northern tip of

Mayor Eric Adams touted his progress on public safety and the city’s economic recovery while promising modest action on housing in his State of the City speech at Hostos Community College in the Bronx on Jan. 24. | MICHAEL APPLETON/MAYORAL PHOTOGRAPHY OFFICE

Manhattan in Inwood.

For the first time since 2009, Adams said the city would reopen a waitlist for public housing tenants to apply for federal Section 8 rental vouchers, and the administration aims to issue 1,000 vouchers per month. The mayor also proposed a “Tenant Protection Cabinet” that would coordinate work across different agencies.

Adams also alluded to his major pro-housing rewrite of the city’s zoning code, whose fate will be decided by the City Council later this year. As the mayor said he was “excited for the City Council to say ‘yes’” to his so-called City of Yes plan, Council Speaker Adrienne Adams could be seen sitting in the audience displaying a poker face.

But he also acknowledged the city will struggle to build on a large scale unless state lawmakers replace the 421-a tax break for developers, lift a decades-old density cap and enact the incentives for office-to-residential conversion that City Hall has pushed since last year. The mayor praised

Gov. Kathy Hochul’s State of the State address this month, in which she argued for letting New York City lead the state when it comes to building housing.

“We need Albany to clear the way for the housing we need,” Adams said, to cheers from the sizable contingent of union workers in the crowd. “Let us build.”

Meanwhile, to grapple with the rise of e-bike delivery services, Adams said he was in talks with the City Council to create a city Department of Sustainable Delivery that would regulate the industry and consolidate work that is now spread among different agencies.

But it is unclear how the city would staff such an agency, given its ongoing hiring freeze, even if the council approved it.

Climate hub planned for Brooklyn Army Terminal

Adams trumpeted the city’s efforts to transform underutilized waterfront spaces into destinations for the burgeoning climate technology sector, including the Brooklyn Navy Yard and the New York Climate Exchange planned for Governors Island. To build on those initiatives, the mayor announced a new $100 million investment for the Climate Innovation Hub planned for the Brooklyn Army Terminal.

“This hub will bring business development incubation and Members of Mayor Eric Adams’ administration watched his State of the City speech on Jan. 24. | MICHAEL APPLETON/ research to a 4 MAYORAL PHOTOGRAPHY OFFICE

million-square-foot campus, turning Sunset Park into a center for clean tech innovation and manufacturing,” said Adams.

“The green economy is already here — it is expected to support a total of 400,000 jobs by the year 2040.”

The investment, the mayor said, is a preview of new initiatives in a Green Economy Action Plan the city will roll out in the coming weeks. The blueprint will detail how the city aims to harness the economic potential of reducing emissions and building a more sustainable city.

The mayor’s office designed a festive atmosphere at the Jan. 24 address, but Adams’ political headwinds were not hard to spot.

Speaker Adams is battling the administration over a pair of public safety bills that the mayor vetoed this month, prompting lawmakers to threaten an override vote.

“I love you and there’s nothing you can do about it,” the mayor told the speaker, quoting a favorite saying of his mother’s.

This month, Mayor Adams drew his first Democratic primary challenger of the 2025 campaign: former comptroller Scott Stringer.

The palpable labor presence at the mayor’s speech could function as a warning shot for Stringer — despite his troubles, Adams has largely maintained his support from unions and their powerful get-out-the-vote apparatuses, thanks in part to the new contracts he has secured with city workers.

“The mayor ran on a platform of being the blue-collar mayor and he promised that he would bring back the economy and bring back jobs,” Rich Maroko, president of the Hotel Gaming Trades Council, told Crain’s after the speech. “He’s delivered on that promise.”

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A stretch of East Tremont Avenue in the Bronx as it appears today (top) and as it could appear under the zoning changes proposed by the Adams administration. The changes aim to encourage more density. | DEPARTMENT OF CITY PLANNING

Almost 7,500 homes could surround new Bronx Metro-North stops under city plan The Adams administration kicked off a rezoning review that aims to take advantage of the Penn Station Access megaproject

By Nick Garber

Mayor Eric Adams’ administration wants to allow for more housing and commerce along 46 blocks of the East Bronx where Metro-North is building four new commuter train stations — a plan that kicked off a monthslong public review on Jan 22.

Nearly 7,500 new homes could be built by rezoning the area surrounding the rail line in Bronx neighborhoods such as Parkchester/Van Nest and Morris Park, where two new stations are scheduled to open by 2027. Two additional stations are also planned for Hunts Point and Co-Op City.

The City Planning Department has been at work since 2018 shaping the plan, which is linked with the Metropolitan Transportation Authority’s Penn Station Access megaproject that will bring Metro-North trains to the West Side rail hub for the first time. Notably, it appears to enjoy tentative early support from local City Council members as the rezoning enters a roughly seven-month public review that will

culminate in a council vote.

Adams called the proposals “a once-ina-generation opportunity to deliver transportation and neighborhood investment” to the East Bronx in a Monday statement.

Supporting rezoning Amanda Farías and Kristy Marmorato, the two council members who represent most of the Bronx blocks being rezoned, have spoken mostly positively about the proposals thus far. That the Republican Marmorato would support the rezoning is hardly a foregone conclusion, given that she won her seat last fall in large part by opposing a controversial housing development supported by her predecessor, Democrat Marjorie Velázquez.

The 46 blocks eyed for changes are now

zoned mostly for a mix of industrial uses and residences ranging from townhomes to mid-rise apartment buildings. The city’s plan would allow for bigger apartment buildings like those found in Upper Manhattan, and change commercial uses to foster more job-generating industries including the life sciences and medical offices.

The fate of the Bronx plan could serve as a test for the Adams administration’s much larger City of Yes housing plan, which would make similar changes to encourage housing near transit on a citywide scale. That plan will begin its own public review this spring and face a vote in the fall.

City Planning based its Bronx proposals on years of input from local residents, elected officials and city agencies, officials said at a public meeting Jan. 22.

Any new housing projects built after the

The four new Metro-North stations will significantly expand transit access to an area of the Bronx that is poorly served by the subway.

rezoning would need to set aside some income-restricted units through the city’s mandatory inclusionary housing program — resulting in some 1,900 affordable units, according to City Planning. That would provide a rare infusion of affordable housing in a corner of the East Bronx where only 140 affordable units have been built since 2014, officials said Jan. 22.

Cut commute times The four new Metro-North stations will significantly expand transit access to an area of the Bronx that is poorly served by the subway, and the eventual connection to Penn Station will shave as much as 50 minutes off commutes for people traveling from the Bronx, Westchester and Connecticut into the West Side of Manhattan.

The project has been delayed by staffing problems at Amtrak, however, since the federal rail company must provide support staff to advance the work. Future MetroNorth trains will use Amtrak’s Hell Gate line to access Penn Station.

January 29, 2024 | CRAIN’S NEW YORK BUSINESS | 3

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RESIDENTIAL SPOTLIGHT

Veteran broker Elizabeth Stribling sells her Brooklyn penthouse first listed in August 2022 The two-bedroom condominium traded for $6.5 million, about what she paid in 2009.

By C. J. Hughes

E

ven seasoned brokers may sometimes misread the market.

Elizabeth Stribling, who chaired the longtime firm Stribling & Associates before selling it to Compass in 2019, has finally found a taker for her penthouse home on the Brooklyn waterfront.

The two-bedroom condo at 1 Brooklyn Bridge Park has sold for $6.5 million, according to the city register.

The deal went into contract Nov. 7 and closed Jan. 12, the register Elizabeth Stribling | GETTY IMAGES said. But as with many city homes The buyers were Richard and to brave the market in recent years amid elevated loan costs, Strib- Lisa Zabel, according to the deed. ling’s unit didn’t exactly fly off the Richard served as the deputy U.S. attorney for the Southern District shelf.

Indeed, she first listed the of New York from 2011 to 2015 before becoming in-house 3,400-square-foot unit in counsel for the hedge August 2022 for $8.5 milfund giant Elliott Manlion, before selling it agement, Paul Singer’s more than a year later at Sale price for company. about a 25% discount.

Stribling’s unit According to the offerIn 2009 Stribling pur- at 1 Brooklyn ing plan for the condo, chased the unit, a combi- Bridge Park whose official address is nation of two adjacent 360 Furman St., one of apartments that the condo’s developer joined before Strib- the units making up the apartling moved in, for $6.3 million, ment originally had two bedabout what she got this time rooms, just as the one next door did. But after those neighboring around, records show.

“While the dollar appreciation, units were combined and their or price per square foot, of the floor plans dramatically rearapartment was limited, the EPSF, ranged, some of the bedrooms or enjoyment per square foot, was went away.

In fact, one of the bedrooms bepriceless,” said Compass agent Leonard Steinberg, one of the bro- came a dressing room, while another turned into a library. kers who marketed the home.

$6.5M

Photos from the penthouse Elizabeth Stribling sold | COMPASS

Stribling’s former unit also had an enormous, 1,900-square-foot, three-exposure terrace with sweeping views of Lower Manhattan’s skyline. The apartment also features three fireplaces, herringbone wood floors and several walk-in closets.

But the small number of bedrooms for a home of its size might have turned off some buyers. Indeed, its marketing materials included an alternate floor plan that showed how the unit could become a four-bedroom instead.

“The apartment was set up to host big events, with few bedrooms and lots of entertaining space that captured the breathtaking helicopter vistas,” Steinberg

wrote in an email.

In 2008 RAL Cos. developed 1 Brooklyn Bridge Park, which originally had about 450 studios to three-bedrooms, by converting a 14-story prewar warehouse complex in a once-industrial area that was being transformed into parkland. Ultimately, RAL sold $702 million in real estate at the site, according to the offering plan.

Stribling founded her eponymous firm in 1980. Specializing mostly in uptown Manhattan

properties, it had four offices and 270 agents when Compass acquired it. Stribling’s daughter, Elizabeth Ann Stribling-Kivlan, was the firm’s president at the time after having taken the reins from her mom in 2013. She’s a senior managing director at Compass today.

Barry Sternlicht’s REIT flexes muscle with equity sale

By Aaron Elstein

Barry Sternlicht did something almost nobody in commercial real estate can do: He raised money by selling shares in his business.

Starwood Property Trust, a mortgage-debt investor, raised $380 million last year by issuing a type of debt that converts to equity. Only four publicly traded commercial landlords have been able to pull off this feat of financial strength over the past 12 months, according to a report Jan. 19 from JPMorgan, mostly those with tenants like the U.S. Department of Defense or senior-living centers.

Sternlicht’s firm negotiated better terms for itself than the other real estate investment trusts. Starwood Property Trust raised money by issuing a convertible bond last June, when its stock was $18.45 a share, and the debt converts to equity when the stock reaches $20.76. The conversion premium

lost his job at a Wall Street trading starting another fund.

At a recent conference, Sterndesk and his wife was pregnant. He borrowed $1 million to buy some licht said the Biden administraapartment buildings from busted tion’s climate and infrastructure savings and loans at bargain prices. He tripled his money in 18 months and later sold the enterprise to Sam Zell.

As head of Starwood Hotels & Resorts Worldwide, Sternlicht ushered in such innovations as the W Hotel and Westin’s “Heavenly Bed,” which turned plush — Barry Sternlicht mattresses into a selling point. The mattress was modeled spending packages are lifting the after one in Sternlicht’s home, ac- economy while the private sector grapples with the aftershocks of cording to his Wikipedia page.

Today Sternlicht manages $115 nearly two years of soaring interbillion through his Green- est rates. The real estate business wich-based Starwood Capital is mostly “OK.” Housing demand Group. Forbes estimates his net is strong, and hotels are full.

“There’s only really one asset worth is $3.8 billion. In 2021 Sternlicht raised $10 billion to invest in class that’s injured at the moment distressed real estate, and in Octo- — almost permanent injury — ber Bloomberg News said he was and that is U.S. office,” he said.

“There’s only really one asset class that’s injured at the moment — almost permanent injury — and that is U.S. office.”

Barry Sternlicht | BLOOMBERG

of 12.5% is about half the amount agreed to by the other four REITs. Starwood traded Jan. 19 at $20.30, about 20% higher than just before the pandemic, while the

Nareit Mortgage REIT index has fallen nearly 50%.

Sternlicht earned this clout over a real estate career that began more than 30 years ago, when he

4 | CRAIN’S NEW YORK BUSINESS | January 29, 2024

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ON POLITICS

Why Eric Adams can’t discount Scott Stringer The ex-comptroller has weaknesses, but also longstanding relationships that could boost a campaign.

T

his month, Scott Stringer his 2021 campaign isn’t helping, of opened an exploratory com- course. The FBI raided the house mittee to run against Mayor of his chief fundraiser and even Eric Adams. It’s not implausible seized his own cellphones and Stringer ultimately decides against iPad. An indictment of a top aide is a run — technically, nothing is of- plausible. Fundraising is slowing.

All of this adds up to political ficial — but there is little to indicate that he isn’t serious. In fact, at weakness. Adams entered City this point, there’s far more upside Hall two years ago with a formidafor the ex-comptroller than down- ble coalition that is slowly crumbling away. He was the mayor of side. working-class Black and Adams is, at the moLatino New York, and he ment, remarkably unhad the full support of the popular. He had the lowcity’s business class and est approval rating of any its large labor unions.

New York mayor surIf Adams had a more veyed by Quinnipiac left-wing challenger, he University since it started could hope for real estate polling the city in the and business elites to fi1990s. Whatever travails nance super PACs to save Rudy Giuliani, Michael him. Stringer identifies as Bloomberg and Bill de Ross Barkan a progressive, but he’s Blasio endured, they never alienated voters as much as been in city government a very Adams has done over the last year. long time and knows powerful deThis speaks less to any visceral velopers and financiers quite well. hatred of the first-term mayor — They don’t fear him. He can talk in some form, Giuliani, Bloomberg up his competence and at least and de Blasio aroused more fury win neutrality from some of the from their greatest detractors — donors who heavily supported Adthan a general sense, among large ams in 2021.

Labor unions, for Adams, are parts of the electorate, that the city is not being managed well. Adams also a mixed bag. The influential has rolled out few new policy ini- building workers’ union, 32BJ, is tiatives of note and he’s made cro- still sticking with him. But others nyism far more central to his gov- might be up for grabs. The United ernment than any of his recent Federation of Teachers supported Stringer in 2021 and could back predecessors.

The criminal investigation into him again. Stringer could force the

largest union of all, 1199 SEIU, to stay on the sidelines, and not help Adams.

Stringer does have serious weaknesses. His 2021 campaign imploded after a former staffer accused him of sexual misconduct during a race he ran in 2001.

Stringer strenuously denied the allegations, but there will be voters who don’t want to give him another chance.

The other knock on Stringer is that he’s not terribly compelling.

He’s 63, he’s been in Democratic politics since he was a teenager, and he doesn’t captivate many imaginations. When he last ran for mayor, he was struggling to break out in a large field with bigger personalities.

But Stringer’s blandness could serve him well this time around. It appears Adams isn’t drawing any higher-profile challengers. Andrew Cuomo, the disgraced former governor, is unlikely to directly run against Adams. Jumaane Williams, the public advocate, has become more critical of the mayor of late but has also said he’d decline a race against him.

Other contenders, like state Sens. Jessica Ramos and Zellnor Myrie, aren’t as well-known as Stringer and will struggle to assemble multimillion dollar campaign apparatuses.

The Working Families Party, the

Former city Comptroller Scott Stringer (right) announced recently that he is exploring a primary challenge against Mayor Eric Adams. | ED REED/MAYORAL PHOTOGRAPHY OFFICE; BUCK ENNIS

organ of the professional left, would like someone other than a white man to be the progressive standard bearer, but they don’t have many options at this point.

Come June, the Democratic primary will be just one year away. It takes many months to raise the cash needed to be competitive.

Stringer is the underdog who can’t be counted out. At this point, he can’t ask for much else.

Quick takes ◗ Expect less risk-taking out of Al-

bany this year. With the fate of the House tied up in swing districts on

Long Island and in the Hudson Valley, Gov. Kathy Hochul and Democratic lawmakers are going to be afraid of lending the Republicans any campaign fodder. ◗ Speaking of which, Nick LaLota, the freshman congressman out of the Suffolk County seat once held

by Lee Zeldin, endorsed Donald Trump for president. His endorsement of Trump is evidence that the ex-president’s brand is stronger than ever on Long Island, and multiple indictments will not chase representatives in swing districts away from him.

Ross Barkan is a journalist and author in New York City.

Banks hasten retreat from embattled commercial real estate sector as signs of credit stress emerge Banks are some of the most enthusiastic proponents of office work, but they’re no longer putting their money where their mouths are.

M&T Bank disclosed Jan. 18 that its commercial real estate loan portfolio last year shrank by 6%, or $2.3 billion, to $33.5 billion, including an $800 million decline in the fourth quarter. Management said criticized CRE loans, or loans showing signs of credit stress, rose to nearly 27% of the portfolio from 24% in the third quarter.

“I’d love to tell you this is the peak,” Chief Financial Officer Daryl Bible said on an earnings call.

last year, to $134 billion, with almost half of the drop coming in the final three months of 2023.

Credit losses emerged in the office portfolio last quarter for the first time, with the big bank charging off $377 million worth of CRE loans, and management warned more pain lies ahead.

Record U.S. vacancy rates “We’re past the opening credits, but we’re still in the beginning of the movie,” CEO Charles Scharf said. “It’s going to take some time for this to play out.”

Altogether the nation’s banks have nearly $3 trillion worth of commercial real estate debt on their books, according to Federal Reserve data. That figure grew somewhat last year, reflecting continued strength in the broader economy. But with Moody’s Analytics reporting office vacancy rates of nearly 20% nationwide, breaking the record set in 1991, banks are facing losses, and some are making no secret of their plans to with-

“As we move into 2024, there should be opportunities for further dispositions.”

— Denis Coleman, Goldman Sachs CFO “But I can’t here tell you today that we’re at the top.”

The song is much the same at Wells Fargo, which cut its CRE loan exposure by nearly $4 billion

BLOOMBERG

By Aaron Elstein

draw.

Goldman Sachs cut its CRE loan portfolio by 10%, to $26 billion, last year, and management indicated more is to come.

“As we move into 2024, there should be opportunities for further dispositions,” Goldman Sachs CFO Denis Coleman said on an earnings call this month, “and we’ll re-

main very focused on what the mix of that disposition activity is.”

In the meantime, bankers are building up large reserves to protect themselves from a wave of loan losses.

Regional lender Citizens Financial Group boosted its office-loan loss reserve to a figure equal to 10.2% of its $3.6 billion portfolio,

up from 9.5% in the previous quarter. The bank assumes a 67% drop in the value of office buildings and a default rate of as high as 24%.

“These assumptions represent an adverse scenario that is much worse than we’ve seen in historical downturns,” CFO John Woods said, “so we feel the current coverage is very strong.”

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Office buildings worth more now than prepandemic, city says

What to know about the latest attempt to replace 421-a

By Eddie Small

Politicians, developers and the construction industry are ready for another round of efforts to replace New York’s controversial, now expired 421-a affordable housing tax break.

The proposal in Gov. Kathy Hochul’s latest budget is dubbed 485x, or Affordable Neighborhoods for New Yorkers. It would give rental projects in the city with affordable units a 35-year property tax break and affordable homeownership projects in the city a 40-year tax break.

However, the city’s Department of Housing Preservation and De-

they would need to reach a “memorandum of understanding” by Jan. 1, 2025, for the program to take effect.

The plan is something of a middle ground between Hochul’s two prior efforts to replace the 421-a program, which expired in June 2022, and it echoes the strategy used by former Gov. Andrew Cuomo the last time the state was trying to replace it. Her first attempt, proposed before 421-a expired, was a specific replacement plan of her own, 485-w, that would have put stricter income limits on who was eligible for affordable apartments, but the Legislature did not pass it. Hochul did not propose any specific replacement last year, instead only calling for the program to be replaced, but the Legislature once again did not act on this — or pass much housing legislation in general.

Hochul referred to the current plan as “a placeholder” in comments made after her budget address earlier this month.

“We hope that there can be some very robust and productive negotiations over what that looks like,” she said. “I don’t expect that’s going to look identical to the current 421-a, but this will again be by the Legislature.”

The 421-a tax break had been a major point of controversy over the years, with many critics celebrating its expiration and blasting it as a giveaway to developers. But plans for new residential projects have plummeted since it expired, and real estate groups have almost universally said the lack of a replacement program is the main reason why.

REBNY President Jim Whelan praised Hochul for including an

“If we want a housing deal, there’s got to be something in it for developers and tenants.”

— Carl Heastie, Assembly speaker velopment would determine the percentage of affordable units and income levels necessary for projects to be eligible for the tax break.

These have long been major points of contention, with critics saying the requirements of 421-a were not strict enough to ensure that projects’ affordable units were truly affordable to those who needed them most.

The program would leave the required labor standards for projects to be eligible for the tax break, namely wages, up to the Real Estate Board of New York and the Building and Construction Trades Council. The bill refers to them as the “largest trade association of residential real estate developers” and “the largest trade labor association representing building and construction workers,” and says

affordable housing tax break proposal in her budget and said the organization “is committed to working with a broad range of stakeholders, including public officials, labor unions and other advocates, to advance this plan.”

Wild card The Legislature remains something of a wild card in the latest effort to resurrect the tax break.

Members have shown virtually no appetite for passing a replacement program since it expired, and a deal that would include this replacement in exchange for passing “good cause” eviction, which would limit the ability of landlords to evict their tenants, has long been rumored but has yet to materialize.

However, more than a year of anemic plans for new residential buildings despite a widely agreed-upon housing shortage could make them feel more compelled to pass some type of replacement. And although Assembly Speaker Carl Heastie did not specifically address 421-a or “good cause” eviction in his comments after the governor’s budget presentation, he did seem to express support for a housing package that would include both.

“We’ve got to do something for people currently in housing when it comes to tenant protections,” he said. “If we want a housing deal, there’s got to be something in it for developers and tenants.”

Representatives for state Senate Majority Leader Andrea Stewart-Cousins, BCTC and HPD did not respond to requests for comment by press time, although Mayor Eric Adams expressed support for Hochul’s housing proposals and stressed the need to replace 421-a at a Jan. 18 press conference.

The city’s office buildings are worth more now than they were before the pandemic despite their being put through the wringer since Covid arrived, according to new figures from the Department of Finance.

The city agency recently released its tentative property tax assessment roll for fiscal year 2025, which put the market value of office buildings at about $173 billion. This was not just a 3.5% increase year over year but also an increase from the roughly $172.4 billion the city valued them at before Covid arrived.

The Department of Finance estimated the overall value of the city’s commercial properties at about $330 billion, also higher than its prepandemic estimate of $326 billion. Officials valued them at about $301 billion for fiscal year 2022/2023, which was 92.3% of their pre-Covid value, and at $317 billion the following fiscal year, which was 97.3% of their preCovid value.

Many office landlords may still be receiving income from tenants on long-term leases even if they allow for remote work. This could help explain the relatively high office valuations, as they are based on income and expenses for office buildings, not sales prices, according to New York University professor and former Department of Finance commissioner Martha Stark.

Still on the hook “Even though a lot of office building owners have claimed that they’re empty or that people are giving up their space, if the tenant had a long-term lease, they’re still on the hook for rent,” she said.

The Department of Finance itself attributed the growth in office values to a resurgence in spending on construction and renovations.

This growth was also largely concentrated in high-end office buildings, according to the agency —

evidence of what some in real estate have dubbed the “flight to quality,” where companies leave the city’s older office buildings in favor of its newer and nicer ones.

Sharpest growth year The city’s trophy office buildings did indeed see the sharpest growth year over year, rising by about 5.6%, from $27.3 billion to $28.8 billion, according to the data. Class A office buildings rose by about 3.8%, from $48.8 billion to $50.6 billion, while Class B buildings rose by about 3.2%, from $34.2 billion to $35.3 billion.

One factor that may be keeping the value of the city’s less glamorous office buildings from falling too low is their potential to be converted into residences, according to state Deputy Comptroller Rahul Jain.

“There does seem to be at least a belief that office-to-residential conversions could happen,” he said, “and I think that is creating a little bit of a floor for some of the Class B-, Class C-type buildings that could be eligible.”

Manhattan’s office market did end 2023 on a strong note. Companies leased roughly 8.2 million square feet of space during the fourth quarter, higher than the borough’s 10-year average, according to data from Colliers.

However, supply continues to far outpace demand, with the borough’s availability rate still at a record 17.9% and about 96.5 million square feet of available office space.

Sean Campion, director of housing and economic development studies at the Citizens Budget Commission, pointed out that the valuations the city released are still tentative, and their final numbers could be lower.

“If you look at the total amount of office space that’s in the property tax roll, it’s up by about 5 million since before the pandemic,” he said. “Even though the value is basically flat, there’s more office space, so on a per-square-foot basis, it’s actually down a bit.”

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BUCK ENNIS

By Eddie Small

January 29, 2024 | CRAIN’S NEW YORK BUSINESS | 7

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EDITORIAL

A bold step toward housing equity

PHOTO ILLUSTRATION BY DAVID JUNKIN

N

ew York’s agreement to scale back the community preference policy in its affordable housing lotteries marks a watershed moment in the city’s housing history. The settlement, reducing the advantage given to current residents of a neighborhood from 50% to 15% over time, is a smart move to repair a well-intentioned but outdated policy.

Community preference was originally conceived to protect neighborhoods from gentrification. However, ironically, it may have cemented segregation. By giving a substantial leg up to locals, the city inadvertently disadvantaged aspiring residents from diverse backgrounds, particularly when the lotteries occurred in affluent, predominantly white areas.

The lawsuit was filed in 2015 in federal court by three Black women who challenged the systemic barriers to living in neighborhoods like the Upper West Side and Murray Hill. They highlighted the need for a policy that doesn’t just serve the status quo but actively fosters integration and inclusivity.

Craig Gurian the executive director of the Anti-Discrimination Center, who represented the plaintiffs, succinctly captured the essence of the settlement: It is a decisive turn away from “the discredited politics of racial turf.”

The lawsuit sought to eliminate community preference entirely. By settling, Mayor Eric Adams’ administration has managed to preserve an essential tool in the fight against displacement, albeit in a diminished capacity. It’s possible that the calibration between the two goals — preventing displacement and nurturing inclusivity — will need to be revisited in the

future. For now, this compromise seems right.

The implications of this shift are profound. For one, it strikes at the core of a longstanding political dynamic where City Council members could entice their constituents into accepting a new development with the promise that they might qualify in the lottery. This argument loses

potency now, and it’s not clear what will take its place.

Also, this change will be particularly palpable in low-income neighborhoods, as Rachel Fee from the New York Housing Conference told Crain’s reporter Nick Garber. It may discourage housing in low-income neighborhoods that need it, because the politics will be so much tougher.

This settlement should serve as a springboard for further reforms. The fiercely competitive nature of housing lotteries, which last year saw approximately 430 applications for each home, is a stark reminder of the city’s housing crisis.

It’s time to envision a New York where the lottery system is not just fairer but where the supply of affordable housing meets the overwhelming demand. The city’s leadership must ensure that while fighting against displacement, they also champion the construction of new housing, encourage inclusive growth, and foster communities reflective of the city’s rich diversity.

As New York goes, so often do other cities. This decision has the potential to inspire a re-evaluation of local preference policies across the country. It’s a momentous step, but it must be the first of many — because every New Yorker deserves a fair chance at a place to call home.

PERSONAL VIEW

Incentives position commercial core to recover faster of foot traffic — in some instances as high as 80% in a week, according to the Real Estate Board of New York. If we can move our average closer to 80%, in Midtown alone that would mean another 200,000 workers coming to the office every day, providing an enormous boost to our local retailers and economy.

The M-CORE program will also facilitate the greening of outdated buildings while meeting the requirements of Local Law 97. It will create a more dynamic public realm with experiential retail, provide on-site amenities such as day care, and incentivize the creation of small business incubators and accelerators targeting New York City’s innovation sectors like life sciences, technology, AI, digital gaming and climate technology, among others.

Past economic crises led to real estate incentive programs that have helped transform the city for the better. For example, the fiscal crisis of the 1970s and subsequent decline of Times Square led to tar-

850 THIRD AVE.

BUCK ENNIS

L

ike major cities all over the world, thoroughfares such as Broadway, the Penn New York is grappling with the new Station area, and 5th Avenue’s retail core reality of hybrid and working from from Bryant Park to Central Park.

Third, the city’s Industrial Development home that is sapping the energy and economic vitality of urban commercial cores. Agency authorized the first two projects of That’s why in December 2022, a group a new incentive, the Manhattan Commercommissioned by Gov. Kathy Hochul and cial Revitalization Program (M-CORE), Mayor Eric Adams, the “New” New York designed to upgrade 10 million square feet of aging and underperforming Panel, released 40-plus recombuildings to modern state-of-themendations for recovery in a art office space — the kind that is post-Covid environment. drawing workers back to the ofCo-chaired by former Deputy fice at significantly higher perMayors Dan Doctoroff and Rich centages.

Buery, the recommendations inAbsent the tax incentives proclude how to address the record, vided by M-CORE, these buildnearly 100 million square feet of ings would likely languish for a vacant office space in Midtown decade or more before being upand Lower Manhattan, while graded or retrofitted to the office making our commercial core into Andrew space today’s workers are de24/7 live, work, learn and play Kimball is the manding. The M-CORE program districts. president and will generate far more net tax revThe Manhattan commercial CEO of the enue to the city than the incentive core transformation has three New York City forgoes. In a financing environmajor elements. First, legislative Economic ment in which commercial conand regulatory changes were in- Development struction has ground to a halt, the troduced to facilitate the conver- Corp. incentive will be a shot in the arm sion of 20 million to 30 million square feet from vacant office to residen- for our local economy — particularly for tial. The proposed changes are now work- local small businesses that serve these ing their way through the state Legislature workers.

New York exceeds the return-to-work and City Council; the Adams administration also continues to make progress with levels of most other big cities, hovering at around 60% on average. However, for our its Office Conversion Accelerator.

Second, streetscape and public realm newest ground-up or renovated office improvements have been initiated on key buildings, we are seeing higher amounts

geted incentives that transformed this iconic area into the epicenter of the city’s thriving tourism sector. The tragedy of 9/11 led to a reimagining of Lower Manhattan as a mixed-use neighborhood, facilitated by incentives to build housing in what had been an office-only district.

The M-CORE program, in combination with the other “New” New York initiatives, will position our urban commercial core to recover faster and become more resilient.

With Manhattan’s business districts generating 58.5% of citywide office and retail property tax revenues, and 45% of all city jobs, the cost of inaction is far too high.

Write us: Crain’s welcomes submissions to its opinion pages. Send letters and op-eds of 500 words or fewer to opinion@CrainsNewYork.com. Please include the writer’s name, company, title, address and telephone number. Crain’s reserves the right to edit submissions for clarity.

8 | CRAIN’S NEW YORK BUSINESS | JANUARY 29, 2024

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PERSONAL VIEW

T

here is no doubt the medical benefit tion related to medical cannabis discusses of cannabis is gaining more aware- cultural and structural competence to imness among the medical communi- prove patient-provider communication.

Studies continue to show ty and the public. More physithat patients of color have betcians believe cannabis has ter medical outcomes when medical uses, and several studtheir doctors are of the same ies acknowledge the need for race. Medical professionals ongoing education related to tend to have a higher level of medical cannabis. cultural competency and can However, race and ethnicity adjust their care based on culare known predictors for the turally specific needs. That’s quality of health care a person why there is significant support receives in this country. While in the medical community to cannabis consumption “is Dr. Torian roughly equal among Blacks Easterling is senior increase diversity in health care and encourage more Black and and whites,” the vast majority of vice president for brown students to become medical cannabis patients are population and doctors. This is a positive develwhite. One can assume that community health opment, but to uplift medical people of color are utilizing can- and chief strategic outcomes across the board, we nabis for medical purposes such and innovation can’t stop at doctors. Patients as sleep, anxiety and pain man- officer at One agement, but they’re not able to Brooklyn Health and should see themselves reflected in all the medical care they access medical cannabis be- founding partner of cause wealthier, white commu- Black Star Wellness. receive, including medical cannities have been prioritized.

He previously served nabis.

We need to open medical Simply put, communities of as the first deputy cannabis dispensaries in more color can’t benefit from the commissioner and medical cannabis program chief equity officer at diverse areas. In New York, the and its incentives — lower the city Department medical cannabis dispensaries are in predominantly white costs, products designed for of Health and neighborhoods. Not only does medical purposes, and cus- Mental Hygiene. that mean people of color are tomized care and recommendations from medical professionals and forced to travel longer distances, but it also pharmacists — where there is no access to means that the employees working at each dispensary are more likely to be white. We medical dispensaries.

Several strategies are needed to ensure must open medical cannabis dispensaries equitable access and care to medical can- in communities of color and then hire from nabis, including making sure that educa- within those communities.

According to the Association of American Medical Colleges, some studies find that cultural concordance (a shared identity between a patient and physician including race) improves adherence and follow-through with medical recommendations. In a medical cannabis dispensary this could translate to patients of color being more willing to explore and ultimately benefit from medical cannabis when working with a Black pharmacist or receiving product recommendations from Black associates. Cultural concordance in the cannabis industry can ensure companies and staff better understand the structural and cultural influences cannabis has in communities and be more equipped to dispel myths.

2021 New York law New York’s 2021 cannabis law, MRTA, also provides a strong platform to ensure we see cultural concordance among leadership. Across the country, medical cannabis companies are largely owned and operated by white executives. This influences where the dispensaries are located, but also other operating functions like store hours, the approach to employee

BLOOMBERG

How to ensure equity and access in New York’s medical cannabis industry to better serve communities of color

training, the type of organizations that are invited to partner, even the languages used in educational resources or interpreter services available. With more diverse ownership and culturally competent staff, cannabis dispensaries will be better designed for diverse patients.

If we want to treat the cannabis plant as medicine, as we should, we must treat it as such in every facet. This includes investing in the education and recruitment of medical cannabis professionals of color in positions across the board and conducting training, including a cross-cultural approach- to meet patients where they are at.

These simple, yet bold changes can have a significant impact on improving health and well-being for individuals and communities.

LETTERS TO THE EDITOR

GETTY IMAGES

To the Editor:

Columnist Ross Barkan woefully misrepresents Jamaal Bowman’s record in Congress by glossing over Bowman’s lack of concern not just about Israel but Jews in general [“House primary in Westchester will be most contentious in the country,” Dec. 18].

In April 2023, Bowman voted against supporting the Abraham Accords, a peace agreement between Israel and Jamaal Bowman four Arab countries.

He has refused to sign bipartisan letters to the Department of Education to combat anti-Semitism on college campuses (February 2022) and actually voted against a resolution condemning antiSemitism in July 2023.

As a columnist for a business publication, Barkan also omits some of Bowman’s anti-business comments and positions such as stating that “our current system of capitalism is slavery by another name” (December 2020) and his desire to tax unrealized gains by 30% every year.

Bowman is simply the wrong fit for that district.

Jason A. Muss President of Forest Hills-based real estate development company Muss Development.

West Park church repair estimate is exaggerated I read, with interest, your article about West Park Presbyterian Church [“Upper West Side Church gives up, for now, on controversial demolition plans,” Jan. 8], which has requested that the New York City Landmarks Commission allow them to demolish a historic building on Manhattan’s Upper West Side due to financial “hardship.”

Your article implied that the church requested the demolition to provide more housing for the neighborhood and that (in their opinion) the cost of repairing the building would exceed $50 million.

As a lifelong advocate for arts and culture in New York, and as a supporter of The Center at West Park, I am questioning several of the claims made by the church.

The Center at West Park believes, based on the contractor’s and architect’s estimates, that the church has substan-

tially inflated the cost of repair. In addition, more market rate “luxury” housing, which is what the church’s developer partner, Alchemy, has proposed, is the last thing the city needs, especially on the Upper West Side; it certainly is the opposite given the current affordable housing crisis.

Finally, The Center at West Park has done a full “test fit” proving that the building renovation could accommodate a first-rate theater with accompanying community and education space to serve neighborhood families and visitors.

The landmark laws were designed to protect the few historic buildings we have left in New York City. To tear them down so that commercial developers, and the 10 remaining parishioners still active in the church, can reap both a profit of $31 million, and build more high-end

GOOGLE MAPS

Rep. Jamaal Bowman’s record on Israel misrepresented

apartments, would be a significant and outrageous disservice to the citizens of New York City.

Let’s show some respect to the old building and give it a full new life as an arts center.

Karen Brooks-Hopkins President emerita of Brooklyn Academy of Music January 29, 2024 | CRAIN’S NEW YORK BUSINESS | 9

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GREEN ENERGY

South Brooklyn Marine Terminal in Sunset Park, Brooklyn | COURTESY OF THE NEW YORK CITY ECONOMIC DEVELOPMENT CORP.

WIND From Page 1

“fundamentally broken.”

"There is a fundamental reset needed in the speed of permitting, security of permitting, etc.,” she told an FT Energy Transition conference in London.

Among the recent jolts to New York’s nascent wind industry: ◗ BP reported a $540 million write-down in November on three projects planned for the waters off Long Island: Empire Wind 1 and 2 and Beacon Wind. The company’s partner on the projects, Norwegian energy giant Equinor, similarly booked a $300 million write-down. ◗ Early this month, BP and Equinor terminated a contract to sell New York energy generated by the Empire Wind 2 project. ◗ Denmark-based Ørsted, the world’s largest offshore wind developer, reported $500 million in writedowns in November on its two New York projects: Sunrise Wind and the partially-constructed South Fork Wind, which began sending electricity to Long Island in December. ◗ Eversource, the New England utility that was partnering with Ørsted on both projects, said it’s in advanced talks to divest its 50% stake. For Sunrise Wind specifically, Eversource aims to sell its stake to Ørsted. The utility said it expects to take at least a $600 million write-down on Sunrise Wind alone. ◗ In New Jersey, Ørsted outright canceled its Ocean Wind 1 and 2 projects — a decision that sent shock waves throughout the sector and helped sink the value of the company’s stock to a 5-year low. Ørsted executives pointed to supply chain bottlenecks and surging interest rates that have complicated the math of projects once perceived as profitable investments.

“The world has in many ways, from a macroeco-

nomic and industry point of view, turned upside down,” Ørsted chief executive Mads Nipper told reporters on a November call.

Despite these challenges, New York officials are steadfastly investing in offshore wind’s potential turnaround. The state's commitment will soon be tested as the governor's administration reviews a new set of bids from major wind developers. This evaluation represents not only a crucial milestone for the industry but also a testament to New York's belief in the sector's vital role in a sustainable energy future.

“If you think of any new industry, it’s probably filled with stories like these, because it’s really hard to build a supply chain from scratch.”

— Robert Freudenberg, vice president of the Regional Plan Association’s energy and environmental programs “The industry is going through some fits and starts,” said Robert Freudenberg, vice president of the Regional Plan Association’s energy and environmental programs. “If you think of any new industry, it’s probably filled with stories like these, because it's really hard to build a supply chain from scratch.”

Hochul’s administration has raced to keep the state’s projects on track by offering a lifeline: a new, expedited bid process that enables existing project developers to rebid contracts and argue for higher payments for the energy they produce. Bids are due Jan. 25; awards are expected in February.

“I'm still hopeful that the lion's share of the existing portfolio of legacy projects will be able to move

forward,” said Fred Zalcman, the director of the New York Offshore Wind Alliance, a trade group for developers. “These developers have made pretty significant supply chain commitments and workforce development initiatives that are seemingly on track, so I think there’s still some cause for optimism.”

Bureaucracy tries to cope State officials had projected that four of the developments — Empire Wind 1 and 2, Beacon Wind and Sunrise Wind — would generate $12.1 billion in economic activity throughout New York. Last summer, however, the developers behind those projects petitioned New York regulators for an inflation adjustment to their contracts — a request that regulators declined.

“Ratepayer funds are not an unlimited piggy bank,” said Public Service Commission Chair and Chief Executive Rory Christian in denying the petitions.

In some ways, the disruption was inevitable, said Chelsea Jean-Michel, a wind analyst at BloombergNEF, a clean energy research firm. “I don't think anyone anticipated seeing the slew of contract cancellations and asks for renegotiation,” she said. “But when you take a step back and take a look at how the market is structured, in some ways, it makes sense.”

Compared to established wind developers in Germany, the Netherlands and the United Kingdom, the U.S. offshore wind sector has some fundamental differences.

One is that projects tend to be contracted at an earlier stage. For example, in order for a developer to bid for a power contract in the U.K., the company must already have their project permits in hand, along with a power grid interconnection agreement. That is not the case in the U.S. Several years can elapse beSee WIND on Page 12 January 29, 2024 | CRAIN’S NEW YORK BUSINESS | 11

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GREEN ENERGY

WIND From Page 11

tween a signed contract and developers’ acquisition of federal permits and other necessary agreements.

“They're adding a little more risk to the game for whether or not the price at which they said they'll be able to deliver electricity is going to be as real,” said Jean-Michel. This is complicated by decentralized U.S. permitting, she said, requiring a ping-pong of federal, regional, state and local processes.

Similarly, elsewhere it's not uncommon for a contract to include inflation adjustments over the life of the agreement.

New York hasn’t gone that far, but the state is moving to share more risk with developers. One example is the accelerated bid process Hochul announced in October that gives legacy projects an opportunity to negotiate more favorable terms.

The New York State Research and Development Authority has also awarded contracts to three new offshore wind farms — Attentive Energy One, Community Offshore Wind and Excelsior Wind — at rates updated for the current financial conditions.

Developers of those projects include TotalEnergies, Rise Light & Power and Corio Generation; RWE Offshore Renewables and National Grid Ventures; and Vineyard Offshore.

“We stay the course and we realize this transition together,” Doreen Harris, president of NYSERDA said to a room of clean energy exBY THE ecutives during a November sustainability summit.

NUMBERS “The Public Service Commission's denial of the industry petitions is The expected in-state one that we obviously respending generated by acted very quickly to three projects knowing that we need provisionally awarded these projects to move forin 2023 ward,” Harris added. “Not only in an affordable way but in a competitive way.”

Even with the new proNew York’s projected curement process anoffshore wind jobs nounced, Equinor and BP growth from 2019 to canceled a power pur2040, depending on chase agreement for Emfuture investments pire Wind 2 on Jan. 3. The and policies enacted developers stressed that the project, which was approved by the federal Bureau of Ocean Energy The projected number Management in Novemdead. So too was a contract of homes powered by ber, is still alive. with Dutch-manufacturer Sif three provisionally Equinor said it does not for turbine foundations. awarded 2023 publicly discuss bid stratA contract for rock installaoffshore wind projects egy, but Molly Morris, tion, which stabilizes the seaSource: New York State president of Equinor Refloor around marine strucResearch and Development newables Americas said tures, with Texas-based Great Authority in a statement that the Lakes Dredge & Dock Corpocancellation “provides ration was also terminated. the opportunity to reset The deal was the first rock inand develop a stronger and more ro- stallation contract awarded to a U.S. combust project going forward.” pany for offshore wind. The company, it’s worth noting, had planned to procure rock from a quarry near Albany.

Ripple effect for suppliers The trickle of cancellations speaks to Empire Wind 2’s canceled contract the near and far effects of reshuffling an sent shocks further down the supply offshore wind project. Ørsted said it lacked a ship suitable to chain.

The day after Equinor and BP complete its New Jersey projects.

The company blamed a “vessel delay announced the cancellation, Singaporebased Seatrium said its $250 million deal to on Ocean Wind 1 that considerably imbuild a substation for Empire Wind 2 was pacted project timing.” The vessel in

$15B

18K-23K

2 million

needs of offshore wind installation that currently comply with the Jones Act — a colossal obstacle for the industry, according to Jean-Michel.

Developers have ways to get around this, but they’re awkward and expensive. For example, they can charter Jones Act-complaint feeder barges to shepherd pieces of wind turbines to foreign-owned and -operated vessels parked offshore. From there, foreign ves— Fred Zalcman, director of the New York Offshore Wind Alliance sels and crews can legally take over.

There’s little expectation that this will So why didn’t Ørsted just charter existing vessels from overseas? The answer is change, as the federal government has the Jones Act: a 1920 law that requires made sparing exceptions to the Jones vessels carrying goods on domestic water Act. One such waiver was granted in routes be built, owned and operated by 2022 to ensure fuel was delivered to U.S. citizens or permanent residents. Puerto Rico in the wake of Hurricane There are no vessels specialized for the Fiona. question is specialized for wind turbine installation and is being built in a Texas shipyard, but its delivery is behind schedule.

“New vessels are coming online.

The state is trying to address inflation in procurement. The market is starting to respond.”

12 | CRAIN’S NEW YORK BUSINESS | January 29, 2024

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Z Win ting tha mis “C seem gua “We whe ing side stat cure spo

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GREEN ENERGY OFFSHORE WIND WORKERS The number of offshore wind workers in New York is expected to grow 1,431% by 2030 vs.

2021.

9K 8,127

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398 0 2021

2030

2030 with induced employment

Source: New York State Research and Development Authority

Zalcman, of the New York Offshore Wind Alliance, said new vessels are getting close to operational, and argued that there are other reasons for optimism.

“Certainly the inflationary pressure seems to be abating somewhat, so we're guardedly optimistic about that,” he said.

“We've seen project cancellations elsewhere, and so I think that may be relieving some of the pressure on the demand side. New vessels are coming online. The state is trying to address inflation in procurement. The market is starting to respond.”

Prepping New York ports and people Speeding up the growth of the local supply chain is also key.

“The entire port ecosystem is needed.

It’s ensuring that we have not just the

space but the workforce behind it,” said Freudenberg of the Regional Plan Association. “We have one port operational right now and that's up in New London, building our South Fork Wind project, but at this point, there are no other operational ports and a pipeline of projects being developed.”

To that end, the New York City Economic Development Corp. is overseeing a 15-year, $191 million vision, unveiled in 2021 at the end of Mayor Bill de Blasio’s administration, to grow offshore wind manufacturing and build its workforce across the five boroughs. The plan is focused on leveraging city assets to develop port infrastructure, prepare local workers and businesses for new opportunities, and promote research and innovation.

When all is said and done EDC estimates the sector will create as many as

13,000 jobs in New York City by 2035, and generate $1.3 billion in average annual investment.

Currently, EDC’s efforts rest in phase one: laying the groundwork.

Staten Island and Brooklyn are poised to play an outsized role through the redevelopment of a number of industrial waterfront facilities. Plans for the South Brooklyn Marine Terminal in Sunset Park, Brooklyn — a sprawling 73-acre maritime complex — are perhaps the city’s crown jewel in its ambitions to become a hub for the region’s offshore wind industry.

In March, Mayor Eric Adams' administration finalized a deal with Equinor and BP, along with terminal operator Sustainable South Brooklyn Marine Terminal, to transform the waterfront complex into what EDC says will be the largest offshore wind port facility in the U.S.

The plan seeks to outfit the marine terminal as an operations and maintenance base for the Empire Wind and Beacon projects, as well as for the industry more broadly. It will also serve as a power interconnection site for the Empire Wind 1 project. Heavy-lift platforms will be built on the 39th Street Pier to assemble components of mammoth wind turbines.

“In order to unlock the broader industry of turbine development you first need an offshore wind port,” said Melissa Román Burch, the executive vice president and chief operating officer of EDC. “Many folks are focused on what's happening offshore and with the turbines themselves, but this is all the critical infrastructure that's needed to support that eventual goal.”

Despite fluctuations with Empire Wind 2, Equinor has doubled down on its support of the marine terminal and indicated that the project would break ground this year; Burch said EDC isn’t ready to put a firm date on shovels in the ground. The effort, she said, has received positive input for state permits and is “nearing the final stages” ahead of construction.

She acknowledged that the city’s supply chain investments are “certainly not immune” to the broader market disruptions faced by the U.S. offshore wind industry, but said pulling back now would serve to weaken the long-term success of the sector and make it harder to achieve the climate targets set by the city, state and country.

“I sort of liken this to a period of eating your spinach and knowing that you can come out of the other side stronger than you went in,” said Burch. “We are really thinking about delivering projects and infrastructure that are robust and can ultimately stand the test of time.”

January 29, 2024 | CRAIN’S NEW YORK BUSINESS | 13

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GREEN ENERGY

What to know about New York’s nascent offshore wind industry

By Caroline Spivack

THE GOALS

T The nacelle of an offshore wind turbine | GETTY IMAGES

The New York state Legislature in 2019 passed the most aggressive climate legislation in the country.

Offshore wind is pivotal to those plans.

he New York state Legislature in 2019 passed the most aggressive climate legislation in the country. Offshore wind is pivotal to those plans. The Climate Leadership and Community Protection Act — known as the CLCPA — positions large-scale renewable energy, like offshore wind, front and center in the state’s efforts to decarbonize the economy.

The CLCPA requires New York to draw 70% of its electricity from renewable sources by 2030 and rely exclusively on zero-emission electricity by 2040. As part of the law’s directive New York must procure 9,000 megawatts of offshore wind by 2035. That’s enough energy to meet 30% of New York’s electricity needs, or enough to power some 6 million homes, according to state projections.

New York is poised to play an outsized role in the Biden administration’s goal of deploying 30 gigawatts of offshore wind electricity generation by 2030 — enough to power more than 10 million U.S. homes with clean energy.

THE PROJECTS THE PLAYERS

W

ithin the Hochul administration, NYSERDA is the architect of New York’s offshore wind plans. The agency, upon receiving the goahead from the New York State Public Service Commission, issues competitive solicitations or calls for proposals from offshore wind developers to deliver energy to the state.

To date, NYSERDA has selected projects through three offshore wind solicitations and is in the process of a fourth round; the state is expected to announce winners in February. Developers must meet certain requirements to participate in the state’s solicitations, such as already having leased ocean property from the federal government.

Competitively selected projects enter into contracts to sell what’s known as offshore renewable energy credits or ORECs to NYSERDA. The cost is then passed on to the state’s electricity users as part of their utility bills.

Equinor, BP, Ørsted and Eversource are the early developers currently driving New York’s transition to offshore wind. But the companies, in recent months, have collectively taken more than a $1 billion in write-downs to their New York projects since the contracts were signed. Their executives point to inflation, rising interest rates and persistent supply chain challenges as having made the projects vastly more expensive.

These factors are what led all four developers to petition the Public Service Commission in June for inflation adjustments to their contracts.

State regulators shot down those requests, so as not to weaken the state’s competitive procurement process and tempt others to ask for more money.

Instead, the governor directed NYSERDA to launch the current, expedited solicitation. Her directive opens the process to new bidders and gives developers of existing projects the opportunity to rebid their contracts.

T

o date, New York has eight offshore wind farms in various states of development.

The farthest along is South Fork Wind located 30 miles off the coast of Montauk. Construction on South Fork’s 12 turbines began in early 2022, following a competitive bidding Gov. Kathy Hochul annouces the start of construction of South Fork Wind, New York’s first offshore wind process by the Long Island Power Auproject, jointly developed by Ørsted and Eversource thority; ultimately, South Fork Wind will off the coast of Long Island. | GOVERNORKATHYHOCHUL/FLICKR produce 132 megawatts of electricity.

In December, the first skyscraper-sized turbines spun to life and began powering Long Island homes. The moment marked a U.S. milestone as the first large-scale offshore wind farm to provide electricity to consumers. The undertaking is a joint venture by Ørsted, a Danish company, and the New England utility Eversouce.

Nearby, Ørsted and Eversource are also collaborating on Sunrise Wind, a 924megawatt project contracted with the New York State Research and Development Authority in 2019.

The bulk of New York’s offshore wind projects are with Norwegian-based Equinor and British Petroleum. The developments — Empire Wind 1 and 2 and Beacon Wind — total 3.3 gigawatts, or about 12% of the energy needed to meet New York’s 2030 target. NYSERDA also awarded these contracts, in 2019 and 2022.

Empire Wind 2 made headlines in early January when Equinor and BP decided to cancel the project’s contract with NYSERDA. A number of observers interpreted the announcement as the death of Empire Wind 2, which is a plan to build more than 140 wind turbines 15 miles off of Long Beach. In reality the developers are likely positioning themselves to seek better contract terms through a new, accelerated bidding round due Jan. 25.

NYSERDA announced the new process in November after the Public Service Commission rejected petitions from Equinor, BP, Ørsted and Eversource to pay them at least $12 billion more for the power their projects would generate.

Gov. Kathy Hochul’s administration announced a fresh round of provisional awards to new offshore wind farms in October: Attentive Energy, Community Offshore Wind and Excelsior Wind. NYSERDA will now negotiate final contracts for the projects, which are expected to generate 4,032 megawatts of renewable energy.

14 | CRAIN’S NEW YORK BUSINESS | January 29, 2024

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Formerly home to Dylan’s Candy Bar, Upper East Side shopping center at risk of default in less than 2 months

By Aaron Elstein

to requests for comment. Moody’s said a loan modification is being A shopping center on a busy sought, and talks are underway Upper East Side corner is at risk of with the special servicer, a firm that handles distressed loans. default in less than two months.

Founded in 1959 by Morton OlThe retail space at 1011 Third Ave., at the corner of East 60th shan and chaired by his daughter, Street, has been nearly half empty Andrea Olshan, Olshan Properties since 2021, when the flagship owns or manages 9 million square Dylan’s Candy Bar and Mediterra- feet of retail space across 11 states, nean restaurant Zavo both closed. 3 million square feet of office A new tenant recently agreed to space, 13,000 apartments and move in to the candy store’s space 1,500 hotel rooms.

The 36,000-square-foot Upper later this year, but as of late 2022 the property was generating only East Side shopping center was de41% of the rental income needed veloped by Olshan in 1986 along with the Savoy, a 43-story luxury residential tower. Dylan’s Candy Bar, founded

by Ralph Lauren’s daughter, rented 22% of the retail space in 2001, according to DBRS Morningstar.

The sweets shop with — Rob Byrnes, president of East Midtown Partnership towering bins of candy became a popular to pay the mortgage, with a $31 destination for birthday parties million balance, Moody’s said in a and tourists and attracted 2.5 milreport this month. The mortgage lion annual visitors, DBRS said in matures on March 6, according to a 2014 report, not far below the Metropolitan Museum of Art’s a securities filing.

The shopping center’s owner, more than 3 million.

In 2014 Olshan took advantage Olshan Properties, didn’t respond

“There are still obstacles, but we feel good about the economic growth in that building and generally along that stretch of Third Avenue.”

of the era’s ultra-low interest rates by taking out a $35 million mortgage at a 4.4% interest rate for the retail property, a securities filing shows.

Nearly $18 million refinanced older debt, and Olshan pocketed most of the rest, DBRS said. The loan was transferred to special servicing last summer and stands to be refinanced at a higher rate because mortgage rates have gone up in the last two years. Payments on the loan were made through November, but December’s payment was late, the securities filing shows.

Good news 1011 Third Ave. | BUCK ENNIS

In November the shopping center got some welcome news when Canada-based home goods retailer Blinds to Go agreed to lease the space vacated by Dylan’s Candy Bar. It will move in toward the end of this year, said Richard Skulnik, vice chairman at commercial broker Ripco Real Estate.

Rob Byrnes, president of East Midtown Partnership, a business advocacy group, said the shop-

ping center “is finally on a rebound.”

“There are still obstacles, but we feel good about the economic growth in that building and generally along that stretch of Third Avenue,” he said.

The shopping center has one remaining large vacancy: the former Zavo restaurant space that DBRS said accounts for 25% of the rentable area.

Will Brightbill, district manager for Community Board 8, said the area around East 60th Street has been challenging for shop owners ever since the pandemic struck.

There are lots of pedestrians on the sidewalks, he said, but also lots of cars driving onto or off the Queensborough Bridge.

“It’s a heavy-traffic neighborhood,” Brightbill said, “and very loud.”

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January 29, 2024 | CRAIN’S NEW YORK BUSINESS | 15

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Mayor Adams’ campaign fundraising slows amid FBI probe

By Nick Garber

Mayor Eric Adams saw a major dip in donations to his re-election campaign in recent months, coinciding with the revelation that the FBI is investigating potential wrongdoing in his 2021 fundraising for mayor, according to new disclosures filed on Jan. 16.

The new filing for Adams’ 2025 campaign shows that he raised just under $525,000 between July 2023 and Jan. 12 of this year. That’s less than half of what he raised in the six-month cycle from January to July 2023, when he raked in $1.3 million.

Much of the slowdown may be

paign representative said. That review, which the campaign says uncovered no wrongdoing, followed the Nov. 2 FBI raid at the home of his chief fundraiser, Brianna Suggs. Just 20 donations were recorded in the two months since the raid, compared to nearly 700 in the four months preceding it.

Legal costs The dropoff is also due in part to Adams’ competing imperative to raise money for his legal defense fund, created in November to cover the significant attorneys’ fees he has incurred since the probe began. A separate disclosure for that fund, also released Jan. 16, showed it has raised $733,000 from donors including billionaires Michael Bloomberg, Leonard Blavatnik and Alexander Rovt. Adams has already spent more than half of that money on legal costs.

The people who have given to Adams’ campaign since the investigation became public include real estate developer Sam Charney and several attorneys from the law firm

“The Adams campaign continues to draw strong support from New Yorkers, raising more than $3 million in contributions from more than 2,500 contributors.”

— Vito Pitta, Adams’ campaign compliance attorney, in a statement explained by the fact that Adams’ campaign paused its active fundraising for about six weeks to conduct an internal review, a cam-

Mayor Eric Adams reported raising about $525,000 in his most recent six-month fundraising cycle, far less than the $1.2 million he took in during the previous period. | ED REED/MAYORAL PHOTOGRAPHY OFFICE

King & Spalding, which has worked with the mayor on a legal fellowship program. Among those lawyers was Randy Mastro, a former Giuliani administration official who has lately represented Madison Square Garden in the lawsuit involving its policy of banning rival attorneys from events.

Other donors to Adams’ campaign since July include the attor-

ney and radio host Arthur Aidala, a friend of the mayor’s, who donated the maximum $2,100 in September, while several fellow employees of his law firm gave smaller sums. Sal Smeke, head of the development firm CSC, donated $2,100, as did Ralph Herzka, CEO of the mortgage brokerage Meridian Capital.

Adams’ campaign also doled out a hefty $181,000 to Suggs be-

tween March and November of last year, before the campaign removed her as chief fundraiser in the wake of the FBI raid. Politico first reported on those “unusually high” payments, which the Adams campaign did not immediately explain.

Adams has still raised a formidable $3 million for his 2025 campaign — more than twice as much as then-mayor Bill de Blasio had raised for his own 2017 re-election bid through the same period. Expected matching funds from the city will bring in another $2.4 million, a representative said.

“The Adams campaign continues to draw strong support from New Yorkers, raising more than $3 million in contributions from more than 2,500 contributors,” said Vito Pitta, Adams’ campaign compliance attorney, in a statement.

Adams’ potential primary challengers, while encouraged by his declining approval ratings, are no doubt mindful of his record as a prodigious fundraiser. New York City Comptroller Brad Lander and Brooklyn Borough President Antonio Reynoso, among the most frequently mentioned potential candidates, have raised a respective $464,000 and $142,000 for their campaigns, which, as of now, are devoted to seeking re-election to their current offices.

16 | CRAIN’S NEW YORK BUSINESS | January 29, 2024

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Hochul’s transformation plan for SUNY Downstate could relocate services, cut staff in restructuring

By Amanda D'Ambrosio

Gov. Kathy Hochul has directed SUNY Downstate in East Flatbush to devise a “transformation” plan to aid the financially struggling teaching hospital that has the potential to unlock up to $300 million for the facility in the final budget this spring, hospital leaders say.

But with the upgrades come the potential for a major restructuring of hospital services. The plan will likely include the relocation of patient care services to surrounding Brooklyn hospitals, as well as health care worker layoffs, according to Valerie Grey, senior vice chancellor of health and hospitals at SUNY. Grey told Crain’s that SUNY Downstate is considering moving some patient services to New York City Health + Hospitals/Kings County, which is located across the street. Grey did not specify which services will be relocated.

SUNY Downstate also anticipates employee cuts — it projects

the long term given the state of disrepair and financial instability that our facility is currently facing,” Grey said.

“We will put forward a blueprint that strengthens our partnerships with neighboring hospitals in a way that preserves the vast majority of existing jobs,” Grey added, noting that the hospital plans to implement programs to connect people who lose their jobs with comparable positions.

A need for change Administrators say that years of financial struggle have created a need for change at the Brooklyn hospital, and have committed to making investments in the medical school while restructuring hospital services.

Chancellor John King said in a statement on Jan. 16 that “Downstate has weathered years of financial instability and seen many of its facilities fall into disrepair, jeopardizing the viability of our hospital facility.” He added that fewer than half of the hospital’s available beds are in use on a regular basis.

But while SUNY leaders say that change is necessary to help the medical center stay afloat, the details of the plan remain sparse — leading to fears among union leaders and elected officials that a restructuring will swiftly erode access to care in Central Brooklyn.

“We have deep-seated concerns about what is being proposed,” said Dr. Fred Kowal, president of United University Professions.

“We will put forward a blueprint that strengthens our partnerships with neighboring hospitals in a way that preserves the vast majority of existing jobs.”

— Valerie Grey, senior vice chancellor of health and hospitals at SUNY that it will lay off 10% to 20% of the roughly 1,725 union members of United University Professions that work at the medical center, according to a source familiar with the matter.

“Transforming Downstate is what will protect our employees in

The state budget could commit up to $300 million for capital projects at SUNY Downstate, a financially struggling teaching hospital. | COURTESY OF SUNY DOWNSTATE MEDICAL CENTER

“Moving these services, wherever they end up, will close SUNY Downstate’s hospital.”

“What we see is the need for capital investment in downstate, so as to address the clear racial disparities in health care which is a nationwide issue, but particularly in New York City and in Brooklyn,” Kowal added.

While it remains unclear which units the medical center is considering relocating, union members fear that the changes will impact inpatient services at Downstate.

Sen. Zellnor Myrie, who represents parts of Central Brooklyn including East Flatbush, called attention to the possibility of chang-

es to the medical center’s maternal health units.

"Central Brooklyn is the epicenter of the maternal healthcare crisis,” Myrie said in a statement to Crain’s. “We desperately need investments in closing the racial and economic health disparities in this community and others like it across the city.”

The Department of Health was required by the state in the 2022 budget process to conduct a report analyzing maternal and infant health services in Central Brooklyn and make recommendations to address disparities. Myrie said that “no discussions about the future of SUNY Downstate should take

place until we've seen that report and analyzed its findings."

Anthony Hogrebe, a spokesman for the governor’s office, said that the state has been in conversations with SUNY and is aligned on the need for transformation.

Hogrebe said there’s approximately $970 million in unallocated capital funds in the Department of Health’s budget, which the state plans to draw from to support SUNY Downstate’s transformation. The actual amount allocated to the plan will be determined through Downstate’s engagement process and will be included in the final budget, he said.

After a nearly decadelong debate, lawmakers urge passage of Medical Aid in Dying bill for terminally ill State legislators renewed their calls to pass the Medical Aid in Dying Act this month, continuing a nearly decadelong legislative debate to decide whether terminally ill New Yorkers have the right to prescription medication that could facilitate their own death.

Assemblywoman Amy Paulin and Sen. Brad Hoylman-Sigal, co-sponsors of the legislation, called on their colleagues during a press conference in Albany Jan. 16 to pass the Medical Aid in Dying Act, a bill that would allow New Yorkers with less than six months to live to request a prescription for lethal medication that they could ingest to end their lives. Paulin and Hoylman-Sigal have called the bill a “top legislative priority” of this year.

“People have a right to die with dignity,” Paulin, who chairs the health committee, told Crain’s.

“We bring it back to allowing everyone to have a choice.”

It’s not the first time lawmakers and advocates have coalesced around the legislation — New York’s version of the aid-in-dying bill originated in 2016, and Paulin has sponsored the legislation since then.

Building momentum But despite New York’s long process, legislators have overcome many obstacles to gain support for the bill, with education around its guardrails helping to build momentum, Paulin said. The bill includes measures that require a mental health evaluation, a signoff from two doctors and two

statements from independent witnesses.

Ten other jurisdictions, including New Jersey, Maine, Vermont and Washington, D.C., have passed their own aid-in-dying bills, with some states going through their own decadelong debates and implementation processes. Paulin said she is hopeful for New York’s bill this session because New Yorkers want to see it pass. Recent polls show that a swath of New York voters back the legislation, with 58% showing support for the aid-in-dying bill, according to a Siena College poll conducted in November.

Paulin said that she is working to ensure there are enough votes in the committee to move the Medical Aid in Dying Act forward.

The legislators aim to pass the bill before the end of this session.

BLOOMBERG

By Amanda D'Ambrosio

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City Council shakeup demotes some progressives, empowers newcomers in rare exercise by the speaker

By Nick Garber

City Council Speaker Adrienne Adams shook up the body’s leadership structure this month, rolling out a new list of committee chairs that demoted some progressive lawmakers but empowered two of the council's newest members.

Left-wing members Tiffany Cabán, Chi Ossé and Shahana Hanif, all of whom voted against the budget enacted by the council in June, lost their positions chairing council committees, according to a resolution introduced by the speaker. Cabán had led the Committee on Women and Gender Equity, Ossé chaired the cultural affairs committee, and Hanif had been chair of the immigration committee.

The moves marked a relatively rare exercise of raw political power by the speaker, a moderate Democrat from Southeast Queens who is well-liked by the council’s 51 members and not generally known for bare-knuckle tactics. But some outsiders perceived the moves as retaliatory toward members who refused to support the budget deal she reached with Mayor Eric Adams last year, which included cuts to some city agencies that the council had tried to mitigate.

move ensured that the mostly symbolic position would be held by a member with more time left to serve in government. (Powers will be term-limited after 2025, while Farías can serve through 2029).

At a press conference on Jan. 18, Speaker Adams downplayed speculation that the shakeup came in response to budget votes but conceded that “some people are going to be unhappy about the decisions.”

“It’s good to reorganize, it’s good to get new energy behind different desks,” she said.

No changes to several panels

Poignant outcome Meanwhile, Yusef Salaam, an exonerated member of the Central Park Five who was elected to represent Harlem last fall, will be the new chair of the council’s public safety committee — a poignant outcome for a man who served nearly seven years in prison for a wrongful rape conviction. The committee oversees the NYPD, local prosecutors and the city’s court system.

Chris Banks, who unseated longtime incumbent Charles Barron in East New York last year, will chair the body’s public housing committee.

While most of the council’s power resides in the speaker’s office, committee chairs have the ability to control which bills come for a vote, and enjoy a perch they can use to speak out on their pet issues.

Not all progressives lost power in the reshuffle. Brooklyn member

City Council Speaker Adrienne Adams stripped some progressives of their committee chair positions while empowering two of the council’s newest members. | JOHN MCCARTEN/NYC COUNCIL MEDIA UNIT

Lincoln Restler, a co-chair of the council’s progressive caucus, will now chair the Committee on Governmental Operations, and fellow Brooklynite Sandy Nurse will take over the criminal justice committee after previously leading sanitation.

“I can't say with certainty what considerations went into this decision,” Cabán, a socialist from Queens, said in a statement posted to social media on Jan. 18, adding that she remained proud of her vote

against last year's budget. Nurse, a vocal advocate for composting, tweeted that she is “disappointed” to give up her sanitation role, which will be filled by Shaun Abreu of Manhattan.

Adams stunned many lawmakers earlier this month when she removed ally Keith Powers as the council’s majority leader, replacing the Manhattan lawmaker with Bronx member Amanda Farías. The speaker said only that the surprise

Several council committees saw no change in their leadership. The powerful oversight and investigations panel will still be led by Manhattan's Gale Brewer; the finance committee by Justin Brannan of Brooklyn; and the land use committee by Rafael Salamanca of the Bronx. Lynn Schulman of Queens will continue to lead the health committee, and Selvena BrooksPowers of Queens will stay at the helm of transportation.

The shakeup also comes as the council prepares for another likely battle with Mayor Adams. The mayor vetoed two bills passed by the council in December that would ban solitary confinement in city jails and require police officers to document more low-level stops. Speaker Adrienne Adams said Jan. 19 that she was prepared to override both vetoes. If successful, they would mark the council’s second override during Adams’ mayoralty.

Council caucus backs lawsuit against congestion pricing

By Caroline Spivack

Nine conservative City Council members are the latest lawmakers attempting to block the spring launch of congestion pricing, joining a class-action lawsuit filed Jan. 18 by a group of Lower East Side residents and small business owners.

The lawsuit argues that New Yorkers “will suffer negative environmental and socioeconomic consequences” as a result of the Metropolitan Transportation Authority’s plan to toll drivers entering Manhattan south of 60th Street due to “issues left unexamined or unresolved by virtue of Defendants’ unlawfully abbreviated and truncated environmental review process,” according to a draft of the lawsuit review by Crain’s.

All nine members of the City Council’s Common-Sense Caucus, which is co-chaired by Robert Holden and Joseph Borelli, are listed as plaintiffs in the lawsuit.

The lawsuit adds to a growing stack of legal challenges against congestion pricing, which proposes to charge most motorists $15 during the day and trucks between $24 and $36, depending on their size.

“It’s insane that we have to pay to move around this city,” said Holden, who represents a part of Queens that has a dearth of subway lines, at a Thursday press conference near City Hall. “We just won’t come into Manhattan, and I think that’s what some people

would like, but the businesses are not gonna like it.”

One plaintiff, Baruch Weiss, owner of East Side Glatt Kosher Butcher Shop, said he is bracing for increased costs due to the frequent truck deliveries that his business depends on. Daniel Buzzetta, another plaintiff who owns Peter Jarema Funeral Home, fears that extra tolls will create an unavoidable financial strain on his business, which relies on vehicle transportation to cemeteries, crematories and hospitals outside of the congestion pricing zone.

“For obvious reasons, Mr. Buzzetta cannot use public transportation to transport deceased New York City residents,” the lawsuit states.

Other plaintiffs Other plaintiffs include Queens Assemblyman David Weprin, retired state judge and former council member Kathryn Freed and the New Yorkers Against Congestion Pricing Tax coalition.

The lawsuit’s arguments echo those made by plaintiffs in two other anti-congestion pricing challenges: One led by New Jersey Gov. Phil Murphy and another filed jointly by the United Federation of Teachers and Staten Island Borough President Vito Fossella. The suits allege that the MTA's environmental review was inadequate.

“We're here today to show support for those other lawsuits and to bring in the entire community of

Vickie Paladino is one of nine City Council members who support a class-action lawsuit to halt congestion pricing. | GERARDO ROMO / NYC COUNCIL MEDIA UNIT

New York City,” said Jack Lester, the attorney spearheading the new class action lawsuit.

The intent of congestion pricing is twofold: To reduce the crush of traffic in Manhattan’s core and the planet-warming emissions they produce, while raising revenue to support and promote the use of the city’s mass transit as an alternative.

Each day some 700,000 cars, taxis and trucks clog Manhattan’s central business district. The MTA projects that congestion pricing tolls will reduce the number of polluting vehicles traveling in the

Manhattan district by at least 10% every day, and slash the number of miles traveled within the zone by 5% each day.

The state law that authorized the tolling program requires that it generate $1 billion in annual revenue for the MTA. The agency will then issue $15 billion in bonds to pay for critical mass transit upgrades, including modernized signals, accessibility projects, and new train cars and buses.

MTA Chief of Policy and External Relations John McCarthy maintained that the authority believes

its environmental review of the tolling program will stand up to scrutiny.

“This issue has been exhaustively studied in the 4,000-plus page environmental assessment, and will be re-evaluated for the adopted tolling structure before tolling commences,” said McCarthy in a statement.

“It’s time to move forward and deal with the congestion that’s clogging roads and slowing down emergency vehicles, buses and commerce while also polluting the air we breathe,” he added.

18 | CRAIN’S NEW YORK BUSINESS | January 29, 2024

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1 High Line penthouse sells for $49M in the second recent blockbuster deal at the 236-unit West Chelsea project

By C. J. Hughes

A sloping project that teetered after original developer HFZ Capital Group went bankrupt during the pandemic continues to right itself under its new owners.

One High Line has sold a penthouse, No. PH26, for $49 million, according to the latest Olshan Luxury Market Report, a weekly round-up of contract signings, in what represents a hefty score for a new condo and the latest in a series of big-ticket trades at the 236unit West Chelsea site.

And the deal, which occurred Jan. 8, according to Olshan, is the

The median sale price of a new-development unit at the end of last year was just above $2 million, according to the brokerage Douglas Elliman.

Other penthouses that have traded since last year have nabbed lofty numbers too. In December No. PH33A sold for $26.5 million, according to listings service StreetEasy, a few months after No. PH32A went into contract, in August, at $25 million.

Similarly, No. PH34A found a buyer at $28 million, according to the data, and No. PH35A fetched $30 million, though none of the penthouse deals have yet closed.

No. PH35B, a four-bedroom listed at $26 million, remains on the market. And four penthouses appear to have not yet been released for sale, based on a review of the offering plan.

The buyer of the most recent penthouse, No. PH26, is not yet in public records and unknown. Deborah Kern, a Corcoran Group agent marketing the project, which uses the address 500 W. 18th St., had no comment.

About a quarter of 1 High Line’s 236 units were in contract when buyers began to close on their purchases in September. second blockbuster sale at the two-towered project in recent months. Another penthouse at the West Chelsea site, No. PH36, went into contract last June for $52 million, records show.

A 7,400-square-foot unit with five bedrooms, six and a half baths and four exposures, plus a 4,800-square-foot wraparound terrace with Hudson River views, No. PH26 sits in the complex’s eastern tower, which is the one nearest to the High Line elevated park. Both the east and west towers, with 26 stories and 36 stories, respectively, and both designed by avant-garde architect Bjarke Ingels, appear to twist and lean.

Its own twists The project’s journey to completion had several twists of its own.

In 2015, at the height of the last condo boom, HFZ, under the leadership of once-high-flying Ziel Feldman, bought the fullblock property at 11th Avenue for $870 million from Edison Properties when it contained parking lots.

The $1,000-per-square-foot rate for the site, one of the last developable parcels along the popular High Line, was among the highest prices ever paid for a development parcel in New York. Feldman later borrowed almost $1.3 billion from British hedge fund TCI for the project, then known as XI, as in

1 High Line, No. PH26 | CORCORAN GROUP

the Roman numerals for 11, but he apparently ran out of funds after breaking ground on the $2 billion project and halted construction in 2019.

Covid brought more problems to XI and other HFZ projects, as investors sued to recover funds while Feldman became enmeshed in a nasty dispute with longtime partner Nir Meir. TCI moved to foreclose at XI after Feldman reportedly owed $160 million on a portion of his debt. By 2022 the Witkoff Group and Len Blavatnik’s

Access Industries had taken over the project for undisclosed terms and resumed construction.

About a quarter of 1 High Line's 236 units were in contract when buyers began to close on their purchases in September.

The complex will also offer a 120-room hotel with a restaurant and 17,000-square foot spa operated by the Faena brand, which will be located across the lower floors of the eastern tower. It’s supposed to open by the end of the year.

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POSITION AVAILABLE Notice of Formation of SONCATA PRESS LLC Arts of Org filed with Secy of State of NY (SSNY) on 12/2/23. Office Location: NY County. SSNY designated as agent upon whom process may be served against LLC to: The Limited Liability Company 340 W. 57th St #2, NY, NY, 10019, USA, RA: United States Corporation Agents, Inc. 7014 13th Ave, Ste 202 BK, NY, 11228, USA. Purpose: any lawful act.

Software Engineer (Citadel Enterprise Americas Services LLC – New York, NY); Mult. Pos. Avail. Offer’ng salary range of $130,000 - $170,000 / year. Dsgn, dvlp, test & dply next gen. sftwr solutions for various business ops activities across the firm. Work closely w/ bus and tech leadrs to define priorities & dlvr tech solutions.

Resumes: citadelrecruitment@citadel.com. Reference JobID: 7472759.

PUBLIC & LEGAL NOTICES Notice of Qualification of HAY HOUSE, LLC Appl. for Auth. filed with Secy. of State of NY (SSNY) on 01/10/24.

Office location: NY County. LLC formed in Delaware (DE) on 12/06/23. Princ. office of LLC: 1745 Broadway, NY, NY 10019.

SSNY designated as agent of LLC upon whom process against it may be served. SSNY shall mail process to Corporation Service Co., 80 State St., Albany, NY 12207-2543. DE addr. of LLC: 251 Little Falls Dr., Wilmington, DE 19808. Cert. of Form. filed with Secy. of State, 401 Federal St., Ste. 3, Dover, DE 19901.

Purpose: Any lawful activity.

Notice of Qualification of MPF GREENWICH LENDER LLC Appl. for Auth. filed with Secy. of State of NY (SSNY) on 01/04/24.

Office location: NY County. LLC formed in Delaware (DE) on 12/15/23. Princ. office of LLC: 125 W. 55th St., NY, NY 10019. SSNY designated as agent of LLC upon whom process against it may be served. SSNY shall mail process to Corporation Service Co. (CSC), 80 State St., Albany, NY 122072543. DE addr. of LLC: CSC, 251 Little Falls Dr., Wilmington, DE 19808. Cert. of Form. filed with DE Secy. of State, Div. of Corps., John G. Townsend Bldg., 401 Federal St., Dover, DE 19901. Purpose: Any lawful activity.

Notice of Qualification of 500 SUMMIT AVENUE LLC Appl. for Auth. filed with Secy. of State of NY (SSNY) on 12/05/23.

Office location: NY County. LLC formed in Delaware (DE) on 12/14/17. Princ. office of LLC: 520 Madison Ave., Ste. 3501, NY, NY 10022. SSNY designated as agent of LLC upon whom process against it may be served. SSNY shall mail process to Corporation Service Co., 80 State St., Albany, NY 12207-2543, regd. agent upon whom and at which process may be served. DE addr. of LLC: 1209 Orange St., Wilmington, DE 19801. Cert. of Form. filed with Secy. of State, Div. of Corps., John G. Townsend Bldg., 401 Federal St., Ste. 4, Dover, DE 19901.

Purpose: Real estate investment.

NOTICE OF QUALIFICATION of LGRLEARNINGGROUP LLC. Authority filed with Secy. of State of NY (SSNY) on 12/4/23. Office loc: NY County. LLC formed in DE on 5/18/23. SSNY designated as agent upon whom process may be served and mailed to c/o Poler Legal LLC, 15 Metrotech Ctr, 7th Fl, Brooklyn, NY 11201.

Principal business address: 145 4th Ave, #16A, New York, NY 10003. LLC address in DE: 1201 Orange St, Ste 600, 1 Commerce Ctr, Wilmington, DE 19801. Cert. of LLC filed with Secy. of State of DE loc: 401 Federal St, Ste 4, Dover, DE 19901.

Purpose: Any lawful activity.

Notice of Qualification of ISOMETRY CAPITAL, LLC Appl. for Auth. filed with Secy. of State of NY (SSNY) on 01/09/24.

Office location: NY County. LLC formed in Delaware (DE) on 01/13/20. Princ. office of LLC: 900 Third Ave., NY, NY 10022. SSNY designated as agent of LLC upon whom process against it may be served. SSNY shall mail process to the LLC at the princ. office of the LLC. DE addr. of LLC: c/o Paracorp Inc., 2140 S. Dupont Hwy., Camden, DE 19934. Cert. of Form. filed with Secy. of State, Div. of Corps., John G. Townsend Bldg., 401 Federal St., Ste. 4, Dover, DE 19901. Purpose: Any lawful activity.

Notice of Formation of IHGS18 LLC Arts. of Org. filed with Secy. of State of NY (SSNY) on 01/16/24.

Office location: NY County. Princ. office of LLC: 150 Charles St., Apt. M6, NY, NY 10014. SSNY designated as agent of LLC upon whom process against it may be served. SSNY shall mail process to the LLC, Attn: Isabelle Sakhaie at the princ. office of the LLC. Purpose: Any lawful activity.

Notice of Formation of BXI CONSULTING, LLC Arts. of Org. filed with Secy. of State of NY (SSNY) on 12/01/23.

Office location: NY County. SSNY designated as agent of LLC upon whom process against it may be served. SSNY shall mail process to Kent Beatty & Gordon LLP, 11 Times Sq., 10th Fl., NY, NY 10036.

Purpose: Any lawful activity

Notice is hereby given that a license number NA0340-23151409 for a Restaurant on Premises Liquor License has been applied for by LAYLAYS NYC LLC under the Alcoholic Beverage Control Law for premises located at 237 Madison Avenue, New York, New York 10016-2818, County of New York, for on-premises consumption.

Notice of formation of AC City Construction LLC Articles of Organization filed with the Secretary of State of New York (SSNY) 10/17/2023 Office in BRONX Co. SSNY designated for service of process.

SSNY shall mail a copy of any process served against the LLC to 300 E 151St Street Apt 1 Bronx, NY 10451, USA. Purpose: Any lawful purpose

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From Page 1

Sutton, the seller in both cases.

Sutton, the president and founder of 34-year-old firm Wharton Properties, once owned long lines of storefronts across the city’s top retail hubs as part of a portfolio of more than 100 properties.

But he has significantly trimmed his holdings over the past few years in a series of massive transactions, particularly in the rentrich stretch of Fifth known as the Plaza District, while at the same time making unexpected plays for modest rentals, aged warehouses and even closed diners that presumably have significant upside.

His September purchase of 14-16

near Central Park. The stake, for a multiberth space that’s home to outposts of Bulgari, Ermenegildo Zegna and other luxury brands, was picked up by partner Brookfield for $779 million. Sutton declined to comment. But some analysts have described the sale as extremely prescient, seeing as Covid pummeled retail real estate just a year later.

Although 717 Fifth enjoys a prime location at East 56th Street, last year it suffered from some of the same issues afflicting commercial buildings all over Midtown.

Rental income in the second quarter fell by more than 40%, to $29 million, even though the occupancy rate was unchanged at 90.4%.

The only rational explanation, Sakwa said, was a reduction in rent or a lease restructuring for the 115,000square-foot building.

The luxe tenants there include Giorgio Armani and Dolce & Gabbana, neither of which are owned by Kering.

The building’s mortgage matured in July 2022, and Sutton was trying to hammer out a loan extension to resolve the “past maturity” balance, according to an October filing from SL Green, which holds a 10.9% stake in the building. Sutton declined to comment on the matter.

SL Green’s stake was valued at

Although 717 Fifth enjoys a prime location at East 56th Street, last year it suffered from some of the same issues afflicting commercial buildings all over Midtown.

Bedford St. for $13.5 million, his latest buy in the West Village, was typical of the recent pack.

In 2019 Sutton unloaded his stake in the berth at the base of 730 Fifth’s Crown Building, which anchors one of the city’s highestprofile corners at busy 57th Street

BUCK ENNIS

GUCCI

$32 million by Sakwa, based on its share of 717 Fifth’s rental income and indicating the building was worth a total of about $300 million. Kering, of course, paid much more, valuing the property at a level Sakwa described as “head-turning.”

SL Green said it will generate about $28 million in net proceeds from the sale. That indicates about $250 million would go to Sutton.

The deal demonstrates the prestige of Fifth Avenue retail real estate is really in another world.

Improving retail climate Whether Sutton has become bearish on Manhattan retail or is

instead taking advantage of a golden opportunity to exit as the retail sector seems to be rebounding is unknown. To be fair, he does not appear to be unloading other can’t-miss, big-ticket retail properties in shopping hubs such as Herald Square, SoHo and Times Square, though the Fifth Avenue portfolio may be the most lucrative of the lot.

But his striking deal-making does indeed come amid an improving retail climate. The average asking rent in Manhattan in the fourth quarter of 2023 was about $670 per square foot annually, a rate that represented the sixth increase in a row by quarter, according to a report from CBRE. The

firm added that the busiest neighborhood in terms of leasing activity was the Plaza District, which saw a total of eight deals spanning 55,000 square feet.

Gucci knows the neighborhood well. For many years it has been the largest commercial tenant at Trump Tower, where its flagship U.S. store occupies nearly 50,000 square feet, according to a 2012 regulatory filing. The filing showed the lease expires in 2026, though in 2021 The New York Times said it was extended but didn’t say for how long.

Gucci will need space to sell a new line of mini bags it’s launching in time for Valentine’s Day. They cost $1,750 apiece.

22 | CRAIN’S NEW YORK BUSINESS | January 29, 2024

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GOTHAM GIGS

CrainsNewYork.com President and CEO KC Crain Group publisher Jim Kirk (312) 397-5503 or jkirk@crain.com Publisher/executive editor Frederick P. Gabriel Jr. Editor-in-chief Cory Schouten, cory.schouten@crainsnewyork.com Managing editor Telisha Bryan Assistant managing editors Anne Michaud, Amanda Glodowski Director of audience and engagement Elizabeth Couch Audience engagement editor Jennifer Samuels Digital editor Taylor Nakagawa Opinions: opinion@crainsnewyork.com Director of visual media Stephanie Swearngin Creative director Thomas J. Linden Associate creative director Karen Freese Zane Digital design editor Jason McGregor Art directors Kayla Byler, Carolyn McClain, Joanna Metzger Photographer Buck Ennis Notables coordinator Ashley Maahs SENIOR REPORTERS Aaron Elstein, C.J. Hughes, Eddie Small REPORTERS Amanda D’Ambrosio, Nick Garber, Jacqueline Neber, Caroline Spivack CONTACT THE NEWSROOM editors@crainsnewyork.com www.crainsnewyork.com/staff

Cultivating deep connections with pedals and strings comes naturally for Kirsten Agresta-Copely. | BUCK ENNIS

Grammy-nominated harpist accompanies an A-list of pop acts Her ethereal, precise plucking has captivated the St. Regis, Broadway and Carnegie Hall

By C. J. Hughes

H

arpist Kirsten AgrestaCopely has taken an instrument associated with ancient civilizations and angels, and added a modern, earthly element.

During afternoon teas at the St. Regis hotel, where she had a standing gig for more than two decades prepandemic, Agresta-Copely, who’s in her “early 50s,” was known to sneak in some bars of pop songs such as The Weeknd’s ”Blinding Lights” amid the more typical Debussy and Bach.

“You have to be able to read the room and know who your clien-

“There are a myriad of wonderful opportunities here that just don’t exist anywhere else.” tele is,” she said. “But my regulars really loved it, and I even took requests.”

Cultivating deep connections with pedals and strings comes naturally for Agresta-Copely, whose career arc has had the same upward swoop as the edge of her instrument since she relocated from the Midwest in 1995.

Initially on call as a substitute for orchestras on Broadway, Agresta-Copely later landed a

stream of shows at Carnegie Hall while lending her talents to live shows with Jay Z, Enya and Alicia Keys. Another highlight was a 2010 concert with Beyoncé at a state dinner hosted by President Barack Obama at the White House.

Grammy nomination But this winter may present the biggest honor yet. Nominated last fall for a Grammy in the category of “Best New Age, Ambient or Chant Album” for her album Aquamarine — her third solo record, but her first Grammy nod — Agresta-Copely will find out on Feb. 4 if her soothing meditations on oceans can lift her to one of music’s top prizes. Whatever happens, though, some reviewers are already impressed. “This unique voyage into the deep blue sea feels significant, timeless and heartfelt,” wrote a critic in the New Age Music Guide.

Family ties might explain some of her soulfulness. Aquamarine is a tribute to Agresta-Copely’s mother, Valerie Strong Agresta, a music teacher and pianist who one day purchased a harp for herself only to discover her 5-year-old daughter was drawn to it more than she was. Mother would later accompany daughter on a Stein-

way during practice sessions and also fly with her from Michigan to New York frequently during high school so Agresta-Copely could study at Julliard.

The pair also shared many walks by the sea, even as Agresta’s spinal scoliosis worsened. She died in January 2023, missing the release of the record dedicated to her by a few months.

One of the album’s producers is also a familiar face: Agresta-Copely’s husband, Marc Copely, who mixed it at the couple’s new recording studio, Casa Copely, which is in the 3-story Bushwick rowhouse that doubles as their home. The studio’s grand piano is the one that graced Agresta-Copely’s childhood living room.

The couple bought in Brooklyn after a seven-year detour to Nashville, which despite steady work and a teaching job at Vanderbilt for Agresta-Copely, never quite felt right. “There’s only one Carnegie Hall, and there’s only one Lincoln Center, and that was gnawing at me,” she said. “And after the pandemic shut down concerts, we felt this is where we need to be.”

And Agresta-Copley has boosted her New York bona fides since returning. She has played in the Rockettes-led Christmas Spectacular at Radio City Music Hall for the show’s past three seasons.

“There are a myriad of wonderful

Kirsten Agresta-Copely From Bloomfield Hills, Michigan Resides Bushwick, Brooklyn Education Bachelor’s and master’s in harp performance, Indiana University Big break A 2005 performance with Kanye West in Philadelphia as part of a Live Aid anniversary concert led to a string of high-profile collaborations. “I guess it was just the luck of the draw,” Agresta-Copely said.

Classic connection Agresta-Copely and husband Marc Copely named their rescue dog Argos in honor of the pet of Homeric hero Odysseus that recognizes his master even after a decades-long absence. ”Our dog is so loyal,” Agresta-Copely said, ”and he had such a regal look about him as a puppy.”

opportunities here,” she said, “that just don’t exist anywhere else.”

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