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1980-1989: The Decline and Fall of the New York Empire

Moscow on the Hudson

“Overturn, overturn, overturn! is the maxim of New York. The very bones of our ancestors are not permitted to lie quiet a quarter of a century and one generation of men seem studious to remove all relics of those who precede them,” Philip Hone, an upper class mayor of New York, told his diary in 1845. He would have written the same thing had he been around in the 1980s. Overturn, overturn, New York was again pulling down the old and replacing it with the new as small groups of anti­quarians rushed from one street to the next throwing themselves in front of landmarks to protect them from the wrecking ball. Donald Trump announced his intention to erect a shaft so high its shadow would turn the city into the world’s largest sundial.

Yet the earlier building booms were happier building booms. This decade ends with millions more square feet of spanking new office space and the grow­ing conviction that, physically, the city is going to pieces.

The decade began with the fear of the mugger and it ends with fear of the mug­ger, but in the interim a new element of danger has been added. The fear of death by drowning in the Holland Tunnel, or death by falling if you’re unlucky enough to be on the Queensborough Bridge when it goes down. Graffiti, that mark of civic shame, has been scrubbed off the subway cars, but not the queasy thought that the next water main break may flash flood half the system, killing thousands, or es­cape with such force that it undermines the foundations of a highrise tower. The condition of the paving on Madison Ave­nue, one of the world’s most famous thor­oughfares, is that of the main drag of a western mining camp in the 1880s.

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The deterioration of the city’s physical plant began long before Mayor Koch’s time. A celebrity/politician of a type com­mon in our era, Koch let it continue. Such office holders are afflicted with a form of St. Vitus’ dance that sends them everywhere around the globe but to their desks. George Bush is the same, another man who’d rather be on a jet airplane than doing the hard labor of making government bureaus work as they are sup­posed to. New York in this decade has had a mayor who loved the title and the perks, but didn’t do the job. The work bored him. Tiffs with Jesse Jackson, run­ning for governor, sounding off in semi­nars, globe trotting in Europe and the Middle East, were more exhilarating and satisfying. His deputies could do the scut work of seeing to it that the hospitals performed and school principals didn’t bill the City for their 900 number sex calls.

In the course of the ’80s, the city came to have an air of Moscow about it. More than any other municipality in the Unit­ed States, New York regulates, super­vises, prescribes, proscribes, and pro­vides — on paper that is. It has the apparatus and the apparatchiks and, as in Moscow, you’ll stand on line and whis­tle forever while hundreds of thousands of municipal employees keep the city on the hold button.

And just like in the communist coun­tries, New York subsidizes the archaic and uncompetitive, paying to keep its foremost business anachronism, the sky­scraper, on life support. An artifact of the early 20th century city, Manhattan’s high density mountain ranges soak up public money in subsidies and service costs, but even so, company after company has found the cost of doing business too high and has fled. Nevertheless, the decade has seen the Himalayas on the island’s southern end and the glass and steel Alps girdling the middle grow and move closer together. The valleys of Murray Hill and Hell’s Kitchen are all but gone. Will Gra­mercy Park and Chelsea be next?

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For much of this century the culture of New York has been Brechtian; the place has its own version of the humorous cyni­cism for which Berlin is also known. In the ’80s something else has been added­ — complicity. Other people living on a col­lection of islands who found out their bridges were in a state of advanced de­composition because somebody stole the money to paint them would have assem­bled in front of city hall in large numbers with a stout hemp noose. The absence of furious indignation and enraged taxpayer reaction in the face of the scandals of the 1980s marks a departure from the past.

New York’s middle classes have been compromised. The people who brought a measure of probity to the public life of the community, by example and political activity, now hold on to their Mitchell­-Lama apartment by hiding the Mercedes­-Benz and the house in the Hamptons. There is the story of the billionaire landlord who always has a high quality rent controlled apartment in reserve for judges, journalists, and communication executives. Everybody’s got a little racket going, if it’s only a tiny, unmerited tax abatement on the co-op. A civic demoral­ization has set in among members of groups that once trooped the streets bearing aloft the gonfalons of reform.

The effort to keep New York a middle income, middle-class family city irretriev­ably failed in the decade that witnessed another half a million such families depart. In the 1980s the average household size in Manhattan dipped below 2 per­sons as the island became the New Age citadel of yuppies and homosexuals. (Even in Queens household size was go­ing down, but the rate was slower.)

Although New York hemorrhaged na­tive born families, the city grew in the 1980s. According to the estimates of the Regional Plan Association, three quarters of a million immigrants flocked into the city, and their contribution is prodigious. They have revitalized retail business all over the city, catering to every income level in every neighborhood.

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While many are persons of color, for a multiplicity of reasons, few of the foreign born are to be met on the streets begging. Unlike the parasitical professions — law, accountancy, and investment legerde­main — which return nothing for what they get, the immigrants give value. They are producers. Immigrant manufacturing in clothing, furniture, and jewelry is rean­imating the city’s economic base. It is a reminder that before New York became the world center for swindling junk bond salesmen it was the biggest manufactur­ing center in the United States.

True, much immigrant economic activ­ity is off the books and under the counter to escape taxation and regulation. Exam­ples of conduct have been set for immi­grant business people in this regard. The ’80s was the decade in which the best names from the finest old families collud­ed with the most exclusive bijouteries to cheat on their sales taxes.

Now comes the ’90s and nobody knows what will happen. From the immigrants, New York can draw hope. From its sister city Moscow, some touring mayor might bring back the gift of a little perestroika for Gotham. ■

NEXT…

An ’80s Memoir: A Decade of Death 
By Gary Indiana

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Donald Trump Cuts the Cards: The Deals of a Young Power Broker

Long before the New York Times and the Washington Post started digging into Donald Trump’s finances and shady business dealings, the Voice’s Wayne Barrett spent years dogging the real estate baron. The below article, from 1979, is the second in a two-part report Barrett wrote about the real estate empire Trump and his father built; the series was the product of two months of research and fifteen hours of interviews with Donald Trump himself. You can read the first part of the story, from the January 15, 1979, issue, here.

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This is the profile of a power broker at work. It is also the deal-by-deal account of how a $400 million convention-center site was acquired and selected. Next to Westway, the convention center has been New York’s single largest development issue of this decade. At center stage is Donald Trump, the young man who managed the land deals, profiting by his relationship with a mayor and a governor. He has left a trail of tradeoffs behind him that is — in a city where political brokers learn to cover their tracks — exceptionally clear.

It is a November day in Philadelphia, 1974. On sale in a federal bankruptcy court are the largest undeveloped tracts of land left in Manhattan — the West Side rail yards, stretching along the waterfront from 30th to 39th streets and 59th to 72nd streets. One of these properties — the 30th Street parcel — has since become the designated site for the city’s convention center. The other is being promoted as a 5,000-unit housing project surrounded by parks and a shopping area.

The seller is the bankrupt Penn Central Transportation Company (PCTC), which is attempting to reorganize itself by turning its real-estate portfolio into capital. The buyer is Donald Trump, then 28 years old, the son of Brooklyn’s largest apartment builder.

Trump proposes to build up to 30,000 units of partially subsidized housing on the sites. He seeks an exclusive option on the property and offers Penn Central the promise that he will obtain the required zoning changes and taxpayer subsidies to guarantee a minimum land-purchase price of $62 million — the least he expects to obtain in government mortgage funds. Trump’s firm advances no cash.

But, of course, without City Hall’s cooperation, this remarkable proposal would have remained just that. Trump’s father, Fred, had known Abe Beame, then the mayor, for some 30 years — and had been a campaign contributor for 20; the firm is tied to the same Brooklyn Democratic machine which spawned Beame’s political career. Trump’s attorney Bunny Lindenbaum, seated beside him in the courtroom that morning, is Beame’s oldest and closest friend. Penn Central representatives began negotiating with Trump two weeks after Beame became mayor. Trump’s option is scheduled to end when Beame’s term is up. There can be no misunderstanding: Trump, in that Philadelphia courtroom, was executing a political option.

Edward Eichler, who had represented the railroad in its negotiations with Trump, explained what had led to the acceptance of Trump’s proposal. In a 150-page deposition he said the railroad had had lists of real-estate brokers, developers, and attorneys who were interested in the sites. But PCTC chose not to contact any of them. “It seemed self-evident that they would be interested,” he said, but Penn Central had to find a developer who was “very, very high in his political position. We proceeded to make a judgment as to which one we thought would be best, and we judged that Trump would.” The basis for that judgment — at least in part — could have been a meeting Trump had arranged some months prior to submitting his proposal. Present were Abe Beame, Trump and his father, and Eichler. According to Donald Trump: “I called the mayor because Penn Central wanted to know whether or not the city was interested in developing the land. The mayor said his administration would be…” Eichler told me that Beame had indicated “he’d known the family and that it was a good organization.”

Further, Eichler said, Penn Central was looking for the developer “who seemed best positioned in the New York market to get rezoning and government financing.” He emphasized that zoning is a “highly political activity in the City of New York,” and that there had not been a “rezoning of this magnitude on a piece of property this politically sensitive in the recent history of the city.

“There are going to be opponents from the neighborhood,” Eichler continued, “who have already…stated that they are going to oppose anything but very low densities. They are going to oppose very high buildings and view-blocking…and the real swing in value is…to a high density.”

Trump was selected to transcend these petty community interests. After all, records on file with the board of standards and appeals show that over a 10-year-period, clients of his attorney, Lindenbaum, have received more zoning variances than clients of any other attorney in the city. With Beame as the new mayor, Lindenbaum’s batting average was improving.

But there were two other significant actors in the courtroom drama unfolding that morning. One was Herman Getzoff, a Manhattan real-estate broker who had previously worked with PCTC and had opposed the Trump transaction for months. The other was David Berger, senior partner of Berger and Montague, a Philadelphia law firm representing the stockholders and unsecured creditors of the Penn Central Company. Berger’s clients, whose stock had lost its value with the PCTC collapse, had the strongest interest in maximizing profits from the sale of the railroad’s properties. So, Berger, too, was opposing the Trump deal.

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Earlier, Herman Getzoff had brought in other potential buyers. Through friends, he’d learned of the Eichler/Trump negotiations — which had been conducted in secret — and, in July, he’d submitted to Eichler a formal offer from the Starrett Brothers and Eken Co., another major New York builder. According to Getzoff, Starrett had offered a $150 million purchase price for the railroad’s land, as opposed to Trump’s offer of $62 million plus a share of the potential development profits. Though Getzoff had made daily efforts to reach Eichler after the bid’s submission, he never did. And, toward the end of July, a week after the Starrett bid had been submitted, Eichler went to court and put forth Trump’s bid as the recommended proposal of the trustees. He had not met with Starrett, though he wrote an internal memo conceding that Starrett’s 30th Street offer “would generate more money than the Trump deal.” But he stuck with Trump because “the rezoning will only be the result of an especially powerful political effort, which Trump is much more likely to pull off…” Then he wrote Starrett a letter, suggesting it apply for “other parcels.”

On August 7, Trump and Starrett’s chairman, Robert Olnick, met. The same day, Olnick withdrew the Starrett offer. According to Trump: “Starrett and Trump are partners in Starrett City, of which we own 25 percent, and they own 5 percent. Frankly, if we hadn’t put in the $7 million equity, the project wouldn’t have been built. We have a big relationship with Starrett. Olnick never responded to a half-dozen calls from me.

Getzoff then obtained a second bidder, HRH Construction Company, another housing developer, Richard Ravitch, HRH president, wrote to the court: “We’ve been interested in developing the yards over a period of almost a decade…However, we were not advised that the trustees were considering selling the yards until after a petition was filed with the bankruptcy court…”

The HRH offer, like Starrett’s and Trump’s, was dependent on obtaining a government-guaranteed mortgage to finance both the land purchase and the housing construction. The difference between Trump’s proposal and the HRH/Starrett offers was that neither Starrett nor HRH sought a percentage of the land profits. Trump required 15 percent, which meant that in fact Penn Central would only get 85 percent of the sale price. Another difference was that neither Starrett nor HRH demanded that Penn Central foot the bill for $750,000 worth of risk capital investment to be used to develop the project. Trump did.

What Trump offered the railroad that Starrett and HRH did not was an option for the company to pay for and obtain an equity interest in the projects eventually built. According to HRH, the primary value of such an interest in a Mitchell-Lama housing project was in a highly speculative tax-loss sale. The return to Penn Central on such an interest depended on the unpredictable state of the tax laws four to 10 years later.

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The final, and most important, difference between the Trump and HRH offers was that Trump’s attempt to share in the land profits appeared to violate the then-applicable Mitchell-Lama guidelines barring a developer from profiting on land he does not own when he submits the site to government agencies for approval.

The consequence of Trump’s ill-conceived sharing plan was that, if the project were approved at all, the government agencies would have to purchase the land at its minimum price in order to eliminate potentially illegal Trump profits. The HRH offer contained a minimum that doubled Trump’s.

Getzoff’s early ally in opposing the Trump transaction was David Berger, attorney for the Penn Central stockholders. An associate in Berger’s firm at the time, Edward Rubenstone, took the deposition from Eichler, stating on the record that “no honest attempt was made” by Eichler to “determine what other persons were willing to pay for these properties.”

Rubenstone also grilled the appraiser selected by Eichler in a 235-page deposition that revealed that:

  • The Philadelphia appraiser had never estimated a New York residential or industrial property. His appraisal assigned no value to the existing structures on the two sites, which had been previously assessed by the city at $6 million. In arriving at his value for the 30th Street yards (as zoned), the appraiser compared the parcels exclusively with land sales in Queens, Brooklyn, and the Bronx.
  • The resultant appraisal pegged the 30th Street yards at $4 per square foot — or $8 million — as currently zoned, with the value increasing to $27 million if rezoned for residential use. These depressed values were compared by Rubenstone and Getzoff to two nearby Penn Central sales — at $26 and $32 per square foot. The land under Manhattan Plaza, located in between the two yards on the West Side, had gone for as high as $82 per square foot after rezoning. Even the land for Trump’s own Starrett City project in Brooklyn had sold for $11 per square foot.
  • Most important, the appraiser conceded that he had applied a 50 percent discount on the land to cover the time and costs a developer would incur over the years it would take to complete such a large project. The appraiser did not anticipate that under the Trump deal a major portion of these costs were to be assumed by Penn Central. He figured them as the buyer’s burden and discounted for them. HRH had indicated a willingness to pay the undiscounted price of $124 million for the 30th Street and 60th Street properties.

Rubenstone told me: “I thought we had the deal broken. The appraiser’s deposition was pretty devastating in terms of the fair-market value of the property.”

The same day Rubenstone took the appraisal deposition he called Getzoff and asked him to come to Philadelphia to testify at the hearing as a witness for the stockholders. Getzoff was to testify about the Starrett bid and withdrawal as well as the terms of the forthcoming HRH offer.

When Getzoff arrived in Philadelphia on November 11, he learned that Berger, Eichler, and Trump (Rubenstone had been taken off the case a few days before the hearing) had been meeting for several days and Berger no longer wanted him to appear as a witness. In fact, Berger said, he would now speak on behalf of the Trump deal, which had been amended to increase Penn Central’s share of the land price as well as the size of its option in the development project. Trump had also amended the contract to provide that if he were not allowed to share in the land profits — as the guidelines indicated he would not — then he could walk away from the deal. The only loser would be Penn Central, which would then forfeit the $750,000 it would have advanced to cover the developer’s preliminary expenses.

Getzoff was stunned. But even more indicative of Berger’s new attitude was his approach to Getzoff and a housing consultant who had accompanied him to Philadelphia that morning. Getzoff wrote a memorandum to himself immediately after these events. It reads: “Mr. Berger took us aside and suggested that ‘instead of fighting,’ wouldn’t I ‘withdraw the HRH proposal so the whole matter could be settled at the hearing.’ Mr. Berger stated that he was ‘sure that if we played ball, he could work out a very satisfactory brokerage commission’ for us…We [Getzoff and his consultant] informed Mr. Berger that ‘we don’t play that kind of game.’ ”

Getzoff also recalled that later that day Trump approached him with a similar question: “This arrogant young man patted me on the back in a most patronizing manner and asked me if I might be his broker. I assured him that I was not in the need of having a patron builder. He said that it’s rare that you people — meaning brokers — are honest.”

“I don’t think I said that. If I did, fine,” Trump said to me.

I also talked with Edward Rubenstone, now a member of another Philadelphia law firm, who confirmed Getzoff’s account of his conversation with Berger. “I do recall being a little distressed at what happened there.” Asked if he could explain the Berger shift, he replied: “To tell you the truth, I really can’t…The negotiations were really taken over by Berger. What happened was that at some point it was decided that we were not going to continue to oppose the sale to Trump. And there was really no substantial explanation given. I thought I had ’em nailed. I wasn’t in a position to argue or make a stink. I thought we had a pretty solid case and suddenly it was decided not to pursue it. That troubles me.”

One immediate consequence of the Berger switch was that Getzoff would no longer be able to present the HRH case as a witness for a party to the action. Indeed, Penn Central attorneys tried to prevent him from detailing the offer in court at all by arguing that he had no legal standing. But Judge John Fullam wanted to hear it, complaining that, “I am not at all satisfied…that there has been necessarily adequate consideration given to the competing offers…” Fullam reserved decision and ended the hearing.

The debate continued. Ravitch wrote Fullam in January 1975, enclosing a 20-page comparison of the Trump and HRH bids and requesting that he re-open the hearing. Instead the judge issued an order that March, confirming the Trump deal. His basic reason: “No party to the reorganization proceeding has expressed objections to the present proposal.” Berger’s switch had been decisive.

Fullam said that it is “the function of the trustees to make business judgments” and that he “should interfere with the trustees’ proposed actions only if they are legally impermissible.” The Eichler firm’s (and thus, the trustees’) support of the transaction had also been decisive.

Fullam concluded that the HRH had not “placed itself in a position of litigating.” Ravitch had expressly refused to file a motion to reopen the case. His attorney later explained: “He did not want to litigate. He was content to make the bid and not go beyond the bid.”

This curious reluctance might have been prompted by the relationship both Ravitch and Trump enjoyed with the new governor, Hugh Carey. Trump had been Carey’s largest post-primary contributor in 1974, having donated a total of $35,000. Both he and Ravitch had just been named by Carey as the only developers on the statewide housing task force. Ravitch had also just been asked by Carey to take over the fiscally troubled state Urban Development Corporation. A public court fight between Ravitch and Trump over two prime Manhattan housing sites would have been unseemly and time consuming. Ravitch told me that his failure to press his bid legally had nothing to do with his and Trump’s relation with Carey. He said that his appointment at UDC had left him “with no time to pursue new business ventures.” In the end, Trump got his land, investing nothing but his time and effort, and squeezing every ounce of potential profit out of the deal.

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The Berger Connection

On January 19, 1977, Fred and Donald Trump filed a $100 million antitrust suit in Brooklyn federal court against nine major oil companies for fixing the price of heating oil. The suit was not a class action; only those landlords listed as plaintiffs will benefit from a favorable settlement. It seeks damages, to be divided between Trump and the law firm that had originated the case in 1974 and is listed on all court records as attorney for the Trumps: David Berger of Philadelphia. It should be remembered that in 1974 David Berger was also the attorney representing the Penn Central stockholders.

The suit began in July, 1974, with a single plaintiff — the Lefrak organization. Richard Lefrak says that “Berger felt that more than one plaintiff should be involved.” Berger’s reason for having additional clients was not just to raise the total amount of damages from which Berger takes one-third. Each plaintiff landlord also paid an advance to Berger, a former Philadelphia corporation counsel and unsuccessful candidate for D.A. Berger was experienced in oil-company conspiracy cases, having won a $29 million settlement in a gas-price-fixing case in New Jersey in 1973. “Berger is running the case,” Lefrak said. “He’s the bandleader.”

The record of the heating-oil case revolves around the issue — raised by the oil companies — that in 1974 and early ’75 Berger actively engaged in the recruitment of potential plaintiffs for it — a violation of the legal canons and grounds for disqualifying Berger from the suit. As evidence of this allegation, the oil companies introduced blank law-firm retainer forms on Berger letterhead, describing the terms of the agreement between Berger and the plaintiffs. The forms were being widely distributed to co-ops and apartment owners by a New York real-estate firm.

Berger denied that he’d had any knowledge of the real-estate firm’s activities through an associate in his law firm stated in court in January 1975: “We are going to have to have a substantial number of additional plaintiffs, some of whom fall into the commercial relationship as Lefrak, others who may be cooperatives and the like.”

The judge dismissed the issue, commenting that “The distribution of the law-firm retainer forms…was regrettable, since one not privy to the intricate chain of events could misinterpret the distribution as involving improper solicitation.”

Eight plaintiffs joined Lefrak, bringing the damages sought to almost a billion dollars. Berger’s advance fees were based upon the number of apartment units each plaintiff brought into the case. Trump’s number of apartments was among the largest.

I asked Trump how he’d gotten involved in the suit and first he described himself as one of the “original instigators” of the case. “Though I was involved in the case from its inception,” he said, “I didn’t file as a plaintiff until later.”

When I raised the subject again, noting Berger’s roles in the Penn Central case at the same time, Trump began to emphasize that his suit had occurred two years after the Penn Central sale. He also contended that it was another attorney, Eugene Morris of Demov and Morris, who contacted him about the case, not David Berger. But Richard Lefrak, who’d started the suit with Berger in 1974, recalled that “Trump was involved in the beginning. He joined the case within 90 days of the filing of the complaint.” Lefrak said that Trump had attended meetings at the office of realtor George Mehlman “three or four years ago.” Mehlman confirmed Trump’s attendance at an early meeting: “He went along right away. This was in 1974, and may have been prior to the filing of the case. Berger came up and attended the meeting, too.” Lefrak said, however, that Trump “may not have filed his complaint until 1977,” because there were different categories of complaints, and the case was broken into separate parts.…”

Last month Trump made a deposition in this case. While he would not pinpoint just when he began his involvement with it, he said it was ” a very substantial number of months” before the January 1977 filing. Whenever the oil company attorney attempted to question him about how he’d entered the case, Berger’s associate instructed Trump not to answer. At one point he said, “There will be no questions about the nature of why the Trump organization is or is not a plaintiff in this lawsuit.…”

In my brief interview with Berger, he was just as evasive. He began by contending that he hadn’t represented Trump on the case; that Demov and Morris did. I countered by pointing out that Demov and Morris’s name didn’t appear in any case records until November 1978. He replied that he couldn’t explain that. I pointed out that his name had, again and again. In fact, Berger had been present at Trump’s deposition.

What seems clear is that Trump’s association with this case — one of Berger’s most important and potentially profitable legal actions — dates back to the same time frame of his sudden switch on the Penn Central transaction.

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The Palmieri Connection

In September 1973, prior to the Trump negotiations in the sale of the Penn Central railyards, a small Los Angeles-based investment-and-management firm, Victor Palmieri and Co., had been retained by the PCTC trustees as an outside contractor “to develop, sell or lease” PCTC properties. Edward Eichler was then Palmieri’s vice-president. The Company’s profits were, in part, pegged to a percentage of sales negotiated. Palmieri and Co. would negotiate a sale, propose it to the trustees, and, with their approval, petition the court for acceptance. That is how Trump obtained not only the 30th and 60th street yards, but the Commodore Hotel, which he is now transforming into a government-aided $80 million Hyatt Hotel. All of Trump’s historic Manhattan ventures, and the extraordinary terms he negotiated for these purchases, are rooted in his relationship with Palimieri.

Victor Palmieri, 49, is the founder of VPCO, a company that has made a fortune out of the collapse of Penn Central. In addition to the fees he has received managing Penn Central real estate, he’s already made in excess of $21 million in incentive fees alone — on top of salaries, expenses, and a flat annual fee — for handling the assets of other Penn Central subsidiaries. In a profile last year, the Wall Street Journal cited Palmieri critics who claimed that he’d gotten his lucrative court assignments “due to his influence with the important people he knows.” The Journal said he is described by these critics as “an active Democratic Party member.” Other critics have gone even further. They say that Palmieri’s contracts create a momentum to dump properties simply to accumulate fees.

There is no question but that Palmieri’s political connections are national in scope. In 1967, he was named deputy executive director of the Kerner Commission on Civil Disorder by President Lyndon Johnson. In that position, he made contact with a host of national political figures — including commission member John Lindsay. His aide at the commission, John Koskinen, wound up working for Lindsay and Connecticut senator Abraham Ribicoff, before rejoining Palmieri as a principal of VPCO in 1973. Palmieri was active in John Tunney’s 1970 Senate campaign in California and, through Tunney, is said to have entered the Kennedy political circle.

Last year Palmieri was selected by the scandal-ridden Teamsters’ Central States Pension Fund to manage its $600 million worth of real estate west of the Mississippi River. The selection was made by the Teamsters themselves, though approved by the Department of Labor.

Palmieri and Trump were drawn together. It is clear from the Eichler affidavit in the Penn Central case that the Palmieri strategy is to identify political entrepreneurs not merely to develop sites, but to develop relationships. Palmieri and Trump operated in the same way — Palmieri was a national broker in search of a local broker and ally. One sign of the relationship was that in 1976 Trump located an office for himself next door to Palmieri’s. Recently a note on the door indicated that packages for Trump could be delivered to Palmieri’s office. The business relationship between Trump and Palmieri soon extended beyond the Penn Central Properties. In July 1975, Palmieri was named by a Connecticut federal judge to manage Levitt and Sons, Inc., a home-building company that International Telephone and Telegraph was being forced to divest as part of a government antitrust action.

The judge told me he’d picked Palmieri in part on the reference of another federal judge who’d known Koskinen when both had worked for Ribicoff. A bonus was built into the contract with Palmieri. The quicker they sold Levitt, the larger Palmieri’s take. But that was no simple task: For four years there’d been no takers.

In early 1977, Palmieri suddenly had an interested potential buyer, Starrett Housing Company. The leadership and name of Starrett had changed since the 1974 bid on the Penn Central sites: Olnick was gone, but Donald Trump was still a principal equity owner of Starrett City and had just selected Starrett to build his Hyatt Hotel (Starrett’s largest domestic contract that year). Starrett studied Levitt and its potential market for what it described in its annual report as “many months.” In February 1978, Starrett purchased the company for $30 million. Although Trump admitted to being the broker for the deal, he refused to say what his commission was.

Neither Palmieri nor the judge was too clear on just what Palmieri’s profit on the sale was either — though the judge was certain that part of the healthy fee was due to his speedy disposition of the company.

As part of the acquisition package arranged by Trump, Starrett gave a five-year employment contract to Levitt’s top executive, who had been installed by Palmieri. Levitt’s president — now operating on a lucrative Starrett contract — is none other than Trump’s old friend, Edward Eichler, who’d handled the Penn Central deal with Trump.

Birth of a Convention Center

Even before Trump’s deal on the 30th Street yards had been confirmed by the court, he had dropped any pretense of developing it as a housing site: “I envisioned it as a convention center prior to the final court decision,” he said. Despite the clear terms of his agreement with Penn Central, which called for housing on 30th Street and foreclosed a role for him in any government purchase, he began to promote the site.

The problem was that Abe Beame and City Planning commissioner John Zuccotti, both of whom had aided him in the acquisition of the yards, were committed to another convention-center site, on the waterfront at 44th Street. Even Bunny Lindenbaum, his son Sandy, and publicist Howard Rubenstein — the brokers closest to Beame — were under retainer to the 44th Street convention center corporation formed by the state legislature.

In 1974 some Clinton opponents of 44th Street had actually advocated the 34th Street site as a possible alternative. However, after the Board of Estimate voted to fund a rehabilitation plan for Clinton around the 44th Street site, neighborhood groups became persuaded that the only way the city would deliver on its promised rehabilitation was to accept the convention center.

But, just as community opponents were becoming resigned to the center, its political supporters were pulling back. Tom Galvin, then executive vice-president of the Convention Center Corporation , said he quit in May 1975, because: “With Beame as mayor, I could see the death knell of the project coming.” Though the city continued to pour money into the site, paying $1,500 a month for Rubenstein and $36,000 to the Lindenbaum firm — ultimately wasting up to $17 million on it — the project was going nowhere.

Neither Beame nor Trump can recall when they first discussed the 30th Street yards as a convention-center site. But Trump told me that when he conceived the idea, his “initial approach was to Beame directly.” Since he had been spending money on the site, Beame, clearly, had not discouraged him, although Trump remembers the mayor as “skeptical.”

A Palmieri affidavit filed in Philadelphia dates the beginning of Trump’s negotiations with the city as October 1975, around the same time as Beame, citing fiscal problems, announced that the city would pull out of the 44th Street convention-center project.

A few weeks after the Beame announcement Trump retained Howard Rubenstein, quickly ending three years of Rubenstein’s promotional efforts on behalf of of the 44th Street site. The same week Trump brought in Sandy Lindenbaum, who had handled zoning on 44th Street. Bunny Lindenbaum, who also left the 44th Street project, told me he began working with Trump “more in the role of an informal family adviser than as a lawyer.”

Trump’s proposal of a privately financed state-guaranteed center was, on the face of it, dubious. If attainable at all, it was as applicable to 44th Street as it was to 34th. He now concedes that this proposal — made primarily to counterbalance a sudden Battery Park City proposal — was not serious. “I never wanted to be the developer of the convention center,” he said. “I wanted the site to be chosen…There was no way a profit could be made as a developer.” But Battery Park City emerged with its own financing. Tom Galvin recalls that the Port Authority had been quietly trying to strike a deal with Beame, offering to finance the center. The Port Authority’s willingness to take the expected operating losses on the center could have been counterbalanced by the city’s willingness to waive other Port Authority payments. Beame balked. He and the Port Authority did announce, however, that the authority would do a $100,000 feasibility study of the Battery Park City site for the city.

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The Sun Shines on 34th Street

For this new enemy — which Trump characterized as the “Rockefeller interests” — Trump needed new, up-front, allies. Trump says that “in the middle of 1975” he had begun discussing his convention-center idea with Carey fundraiser Louise Sunshine at a dinner to pay off the governor’s campaign debts. Sunshine, who was the finance director of Carey’s 1974 and 1978 campaigns, was the right person to talk to. In addition to her role with Carey, she was treasurer of the State Democratic Party and national Democratic commiteewoman from New York. She had been a fundraiser for former assemblyman Albert Blumenthal and had important political relationships on the West Side, where Trump needed allies to counter 44th Street. One significant contact was with State Senator Manfred Ohrenstein who, as minority leader, had named her to the Advisory Council to the Democrats of the New York State Senate.

“I told her I was looking for someone to take the burden of the convention center off my back,” Trump told me, “and asked who she’d suggest I hire. She called me the next day and said she’d driven to the site herself. She said it was the greatest site for the convention center. She worked on it a long time without pay. Finally she came on staff.”

Rubenstein issued a press release announcing Sunshine’s position in February 1976, at the peak of the enthusiasm for Battery Park. She registered as a Trump lobbyist with the secretary of state. In November, Trump filed the obligatory, end-of-session, corporate statements, detailing $13,058 worth of salary and expenses associated with Sunshine’s lobbying efforts.

[Sunshine failed to file her pre-session lobbyist statements in 1977 until she was reminded by the secretary of state’s office at the end of the session. She didn’t file at all in 1978, nor did Trump file his corporate report. Since Trump refers to her continuing efforts on behalf of the convention-center site, it appears that she is currently an unlicensed lobbyist, having failed to file her 1979 pre-session statement. The last record of Sunshine’s lobbying activity is Trump’s report of her $25,000 salary in August 1977. Failure to file annually constitutes a class “A” misdemeanor for both employer and lobbyist under the existing disclosure laws.]

In her 1976 filing, Sunshine had stated that she “intended to appear before the legislative committees and the governor upon all measures affecting the proposed 34th Street convention-center site.” While she lobbied, she would retain her position as an advisor to Senate Democrats and fundraiser to the governor. Carey has since appointed Sunshine to the Thruway Authority and the Job Development Authority.

Her alliance with Trump was widely perceived as the tangible sign of Carey’s commitment to Trump’s site. That is how Trump intended it, to counter any movement toward Battery Park.

Working simultaneously for Trump and Carey, Sunshine’s functions as Carey appointee, lobbyist, and fundraiser had blended together. The largest individual Carey campaign contributor (exceeded only by the governor’s brother) was none other than Donald Trump’s companies — $125,000 since 1974.

Howard Rubenstein says that Sunshine made the great bulk of the contacts that produced lists of 34th Street supporters. Not surprisingly, those lists read like a Carey campaign financial statement. Many of the new corporate and real-estate boosters were quickly shifting allegiance from the 44th Street site, which had become the site championed by the Clinton groups and Community Planning Board 4, whose area included both the 44th and 34th Street sites.

Trump eventually forced the Port Authority to add his site to its study. By the time the Port Authority reported in June, the political impetus and financial feasibility of the Battery Park City idea had already receded. The report gave the Port Authority’s evenhanded blessing to either site. It also put to rest Trump’s ruse of private financing and concluded that a bond-issuing authority would have to develop the center.

Trump started manufacturing reports. In November 1976, a group of graduate students at the New School for Social Research did a class study of the available sites and favored 34th Street. Then-City Councilman Robert Wagner, Jr., who taught at the school, served as an adviser on the study, which was never released. He and the school agree: “The study did not, in any way, represent Wagner’s views.” But Trump wound up with a copy and started touting it as the Wagner report. Wagner says that he later told Trump and Sunshine to stop using it. Nonetheless, Trump described it to me as “a professionally done report” and said: “Bob Wagner Jr. came out with a very strong statement that 34th Street was the best site.”

Then Trump parlayed Sunshine’s relationship with Manfred Ohrenstein into a stunning blow against the 44th Street site. In 1973–74, Ohrenstein had refused community pleas that he support 34th Street. But, by 1976, after the special zoning district had been created and Clinton had been promised rehabilitation, there was a near-unanimous community consensus around 44th Street. Beame’s decision to forego building the center was seen as merely a temporary setback.

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Suddenly, according to neighborhood activists, Ohrenstein released a report favoring 34th Street. “He consulted no one in the neighborhood,” said one. In 1976, Trump began contributing to Ohrenstein’s personal and Senate-majority campaign committees. He’s given $10,000 since.

But the Ohrenstein — and implicit Carey — support did not move the defenses now formed around 44th Street, headed by Deputy Mayor John Zuccotti. Around the time of Ohrenstein’s report, Zuccotti had formed the State/City Working Committee and stacked it with proponents of 44th Street. Beame told me: “I didn’t name anybody to the thing. Zuccotti sparked that. I had no objection.” The working committee had a staff component and a quasi-board of high-level officials. The staff favored 34th Street, with various caveats. The board leaned toward 44th, with some advocates of the Battery. So, in April 1977, the committee disbanded without reaching any public conclusion. Zuccotti later left the city and Beame moved into his mayoral primary campaign, promising that after the election, he’d finally settle this thing.

Beame had, in effect, killed the 44th Street site in 1975. He’d killed Battery Park City in 1976, when he’d turned a cold ear to those Port Authority officials who had wanted to finance and operate a center, but only at the Battery.

Indeed, court records suggest that Beame had quietly acquiesced to the 34th Street site as early as April 1976, when Palmieri and Co. had asked Judge Fullam to change 34th Street from a housing-use to a convention-center site. The new terms anticipated approximately a $17 million increase in the cost of the land to the city and built into the agreement a Trump fee of up to $2 million. (Not surprisingly, David Berger, who was only months away form formally representing Trump in the oil-company case, raised no objection to the new deal — even though Trump’s fee would come out of whatever amount the city or state would pay Berger’s clients, the Penn Central stockholders.)

Since the Penn Central appraisal had valued the convention-center portion of the site (roughly half of the 30th Street property) at $4 million, the city could have probably acquired it by condemnation for that amount and avoided the payment of any fees to Trump.

Under the amendment, Trump was cut into a condemnation sale and guaranteed a flat fee of $500,000. He was also given a third sales price if he could drive the city’s price past a minimum of $13.5 million. Trump is now seeking $21 million for land the city or state might have got for roughly $4 million 3-and-a-half years ago. Ironically, Palmieri and Co. had described the site as a “wasting asset,” declining in value, in order to get court approval of the original sale in 1975.

These amendments — plus the affidavit stating that Beame had “abandoned” 44th Street and indicating that the Port Authority was the only obstacle to the 34th Street site — were formally served on the city. The court awaited any comments or objections. Finally, Judge Fullam approved the amendments in late May, 1976. By an act of omission, the city had permitted approval of the terms that had made Trump’s search for convention center-support so potentially profitable to begin with.

Shortly after his primary defeat, Beame appointed another committee. Richard Ravitch — who’d lost the site to Trump in Philadelphia and whose firm had subsequently been retained by Trump to cost out his convention center — chaired it. Ravitch’s report, while favoring 34th Street, concluded that the differences among the three sites were marginal.

Ravitch reported and Beame endorsed the site right before he left office. Last April, Koch, Carey, Ohrenstein, and Trump confirmed Beame’s selection and jointly announced agreement on 34th Street. Since then, Ohrenstein has been introducing legislation and the Republicans have been blocking it. After last month’s special legislative session, Carey and Majority Leader Warren Anderson indicated that they’d agreed on a plan of state funding.

But word out of Albany is that State Senator John Marchi, angered by what he regards as the Ohrenstein-organized and Trump-financed electoral challenge he just went through in November (a product of Ohrenstein’s drive to elect a Democratic majority in the Senate) says he will block any convention center built on Trump-owned land. No one is quite sure how serious Marchi is. But in Trump’s world, there is something fitting about Marchi’s strange reasoning. It is a kind of ultimate quid-pro-quo in a transaction plagued, in every detail for half a decade, by quid-pro-quos. There is bound to be at least one deal too many in this chronology.

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There is nothing terrible about Trump’s convention center site. It is, I am sure, as good as the others. In hours of interviews Trump almost sold me on it and he’s clearly prevailed with some government officials — like City Planning Commissioner Robert Wagner — despite, rather than because of, his brand of political intrigue. My quarrel is that $400 million of state funds could salvage entire neighborhoods; that New York City already is the top convention city in America and has an exhibition hall that is turning a profit for the city; and that Trump’s site will never pass any fair environmental test, precisely because it sees midtown as the city and will concentrate thousands of people — with their cars and their sewage — right where the city can’t cope with them. Trump’s answer to this kind of pro-neighborhood argument was contained in a New York Times piece about him two years ago: “I think the city will get better,” he said. “I’m not talking about the South Bronx. I don’t know anything about the South Bronx.”

What he doesn’t understand is that the South Bronx is this city. Its problems were created by someone else’s deals. And the problems remain, at least partially because of deals that ignore them. Deals like his own.

There is one final twist to this story. State laws provide that no one can get a broker’s commission on a transaction unless he was a licensed broker throughout the negotiations of the deal. Trump and the City Planning Commission have described Trump’s services on 34th Street as those of “a broker.” The problem is that young Donald Trump didn’t become a licensed broker until after his contract with Penn Central had been completely negotiated and approved by Judge Fullam. But brokerage licenses are merely pesky requirements of the law. ❖

***

In this two-part history we’ve been looking into a world where only the greed is magnified. The actors are pretty small and venal. Their ideas are small, never transcending profit. In it, however, are the men elected to lead us and those who buy them. And in it, unhappily, are the processes and decisions that shape our city and our lives.

Read Part One of the Village Voices 1979 profile of Donald Trump.

Categories
Housing THE FRONT ARCHIVES

Cuomo Lets Scofflaw Landlords Make Good — by Raising Rents

Mark Scharfman may not be the most infamous of New York landlords — at least not on the scale of a Croman, Walentas, or Kushner — but he’s still managed to attract a bit of notoriety in his decades-long real estate career. The owner of an estimated 4,000 apartments in the city through his Scharfman Organization, Beach Lane Management, and other holding companies, Scharfman has earned headlines for bringing the Gap to St. Marks Place and doubling the rent on the Cornelia Street Café. He landed a spot on the New York Press’s “50 Most Loathsome New Yorkers” in 2003 for his “Dickensian tales of tenant abuse.” In 2016, tenants at one of his Bronx buildings called Scharfman a “criminal” after he was charged with falsifying renovation documents to claim that the 125-unit building was vacant.

In that same year, Scharfman was one of numerous New York City landlords who received a letter from Gov. Andrew Cuomo informing him that he had illegally deregulated apartments that were required to be kept rent-regulated as a condition of getting city tax breaks — a measure that Cuomo said would end up re-regulating 50,000 apartments citywide. “There will be zero tolerance for those who disregard the law and reap these benefits while denying tenants affordable housing they are obligated to provide,” the governor said at the time.

Scharfman did indeed re-regulate more than 400 of his apartments, tenant advocates say — but this didn’t mean anyone’s rents went down. Instead, they say, Scharfman and other landlords used a scam they have dubbed “scheme swapping” to keep rents high while still raking in city tax breaks. And the Cuomo administration, they charge, has done little to crack down on the practice.

The Scharfman Organization, according to Aaron Carr of Housing Rights Initiative, is “one of the biggest, if not the biggest, J-51 tax cheats in New York City.” HRI, which has filed more than thirty class-action suits against owners over J-51 violations, estimates that Scharfman has received at least $10 million and probably more than $20 million in J-51 benefits over the past ten to twenty years.

“Scheme swapping is real estate fraud 2.0,” says Carr. It provides a way for landlords to keep rents high while the state can still claim credit for returning apartments to the rent-regulation rolls, he explains. “Our affordable housing stock is descending into a sinkhole, and all the governor wants to do is decorate it with Christmas lights.”

***

The city’s J-51 tax abatement program was created in the 1950s to help property owners improve rent-controlled buildings, such as by installing hot water in “cold-water flats.” In exchange, landlords agree to keep the buildings rent-regulated for the duration of the tax break, which can last between fourteen and 34 years.

For more than two decades, though — starting with the 1994 vacancy decontrol law that allowed landlords to deregulate vacant apartments if the rent was high enough — owners regularly removed apartments getting J-51 abatements from the rent-regulation rolls, and the state did little to check up on them. Even as Cuomo and then-attorney general Eric Schneiderman announced a crackdown on illegally high rents, noted ProPublica in 2015, “state and New York City officials have tolerated the problem for years — and ignored pleas to investigate.”

That article helped spur Cuomo’s 2016 enforcement effort. But instead, according to Carr, many landlords simply swapped in a new scheme for keeping rents high: If they had to re-regulate apartments, they would — but at the high rents they’d set while the buildings were illegally deregulated, not what the rents should have been if they’d followed the law.

Here’s how the scam works, according to some of the scores of rent histories HRI has helped tenants obtain from the state. At 709 West 176th Street, a six-story 1920s-vintage brick apartment building in Washington Heights, one Scharfman tenant’s apartment was registered with the state at a rent of $872 a month in 2010, then not registered at all from 2011 to 2015. After Cuomo’s letter, the landlord re-registered it in June 2016, setting the legal rent at $2,895 — though the tenant was charged a discounted “preferential rent” of $2,450, which can be raised to the legal maximum once the lease expires.

(The Scharfman Organization did not respond to phone messages left at its Westchester County office number.)

HRI has identified more than 1,000 buildings that had received J-51 benefits which had unregistered apartments in 2016. In more than 95 percent of cases where landlords later re-established them as rent-stabilized, Carr says, they scheme-swapped — re-registering the apartments at the illegally deregulated rent levels. The result, he adds, is that those apartments are now “rent-stabilized in name only.”

The method by which landlords are supposed to set re-regulated rents is complicated: For buildings that already had some legally deregulated apartments when they started receiving J-51 benefits, the rent in those units can be raised above the last previously registered amount by adding vacancy bonuses, increases for apartment renovations, and other legal charges.

But one thing is for certain: The state Division of Housing and Community Renewal flatly states in its J-51 FAQ that “the legal regulated rent to be registered cannot exceed the actual rent being paid by the tenant.” So while it’s hard to determine precisely where rent should be set for a re-regulated apartment, at most it should be the rent the current tenant is paying — meaning setting “legal” registered rents higher than tenants’ preferential rents, as the West 176th Street lease shows, is undeniably illegal.

“That’s the smoking gun,” says Carr.

DHCR insists it is enforcing the law. “We have zero tolerance for landlords who are trying to game the system by benefiting from the J-51 New York City–administered tax abatement and not registering their apartments as rent-regulated,” state Homes and Community Renewal spokesperson Charni Sochet told the Voice. As for setting rents too high on re-registered apartments, DHCR indicated that it can impose penalties on landlords who violate the law.

The state agency, however, has long had a reputation for weak enforcement. Until the creation of its Tenant Protection Unit in 2012, it only investigated whether apartments had illegally high rents if the tenant filed an overcharge complaint. But if landlords ceased to register apartments, they didn’t have to report rents to the state at all — making it nearly impossible for new tenants to tell if they were being overcharged.

“The DHCR is imposing, in most cases, no penalty for failure to register. That’s the real bottom-line problem here,” says tenant lawyer David Hershey-Webb, who says he has numerous cases involving scheme-swapped apartments.

The state housing agency says it is working to crack down on J-51 abuses. It says the Tenant Protection Unit analyzed rent-registration data to identify units that appeared to have disappeared from the registration rolls, including apartments receiving the J-51 benefit, and told their landlords that they had to either re-register them or document that they were lawfully deregulated. It adds that its Office of Rent Administration and statistical analysis unit are “using data mining and creating algorithms” to look through the registration rolls to find irregularities that could show illegal overcharges and deregulation.

Tenant lawyers, though, say it’s hard to tell if the state is cracking down on scofflaw landlords when DHCR won’t even release the names of the landlords that were caught violating J-51 rules in the first place. Attorney Robert Grimble filed a request for the list of names under the state Freedom of Information Law, but says it was denied on the grounds that it would “interfere with law enforcement.”

In May, Grimble, Carr, and other lawyers filed suit against DHCR to demand those names. “The list is important because it will better allow tenants, tenant attorneys, and tenant advocacy groups like HRI to enforce the rent-stabilization requirements of J-51 buildings that no agency is currently enforcing,” says Shaina Weissman, an attorney with Grimble & LoGuidice. “This could ultimately result in thousands of illegally deregulated apartments being returned to rent stabilization.”

***

The J-51 fight is complicated by the fact that until 2009, DHCR allowed landlords to deregulate buildings receiving J-51 benefits, so long as the tax breaks were not the only reason the apartments had been regulated. But in that year, the state Court of Appeals ruled in favor of Stuyvesant Town/Peter Cooper Village tenants in the Roberts v. Tishman Speyer Properties case, who had sued their landlord, Tishman Speyer, after it raised rents in some apartments to more than $4,000 despite receiving J-51 benefits.

Two years later, a state appeals court ruled in Gersten v. 56 7th Avenue LLC that the rent-regulation requirement could be applied retroactively to apartments illegally deregulated before the Roberts decision. “There’s no argument anywhere for not registering after Gersten,” says Hershey-Webb, “but the DHCR still lets them not register.”

On August 16 of this year, the same appeals court muddied the waters, ruling 3–2 that an Upper West Side landlord who’d deregulated apartments while receiving J-51 benefits in 2003 did not have to re-regulate them, on the grounds that the 1997 state vacancy-decontrol law prohibits investigating rent overcharges more than four years old unless there’s evidence of fraud.

That ruling, however, would not seem to protect landlords who deregulated apartments after the Roberts decision, such as Trump son-in-law Jared Kushner. Kushner is another scheme-swapper, according to rent histories obtained by tenants with HRI’s help. In March 2015, his Kushner Companies bought 310 East 83rd Street on the Upper East Side as part of a sixteen-property portfolio for $131.5 million. (The seller, Stone Street Properties — notorious for harassing rent-stabilized tenants so it could charge more rent for vacant apartments — had paid $73 million for the buildings in 2012.)

Afterward, the rent on one vacant apartment almost doubled from July 2014 to July 2015, from $1,875 to $3,619, according to a rent history obtained by the current tenant. In 2016, Kushner stopped registering the apartment entirely, and when a new tenant moved in that September, he received an unregulated market-rate lease for $2,675.

Two months later, according to documents obtained by the Voice, Kushner attached a rider to the tenant’s lease informing him that while the apartment was permanently deregulated, it had to be rent-stabilized “solely because” the building was in the J-51 program. The rider set the “legal rent” at $4,279 — the last registered rent plus an 18.25 percent vacancy bonus — but said the tenant could keep paying $2,675.

In reality, according to Department of Finance records available online, the building had been receiving J-51 benefits since 1996, when the apartment cost $725. (The benefits expired in July 2017.) DHCR said it could not comment on whether the $4,279 “legal rent” was illegal, as its policy is not to release rent histories to anyone except the tenant of the apartment in question.

In April 2017, DHCR sent Kushner a letter directing the company “to register ALL individual apartments as rent-stabilized.” Two months later, it followed up with a threat to fine him at least $1,000 for each apartment that wasn’t registered. Kushner has not yet registered any apartments in the building, according to the state housing agency, and failed to show up for a pre-hearing conference this May. An evidentiary hearing, the equivalent of a trial, was scheduled for August 1, but was postponed.

Asked about the relatively low fines being charged — which could be worth no more than a month or two of the rent overcharges Kushner is receiving, Carr quips: “More than 10 percent of all political contributions at the state level are from real estate. This is what they’re paying for.”

Meanwhile, many of the buildings whose landlords received letters from Cuomo — including Scharfman’s at 709 West 176th Street and 710 West 173rd Street — are still receiving J-51 benefits, according to the Department of Finance. When the Upper Manhattan Scharfman tenant moved in in 2014, she says, her rent was about $1,650, but the lease said the legal rent was $2,650 — and she had to sign a rider stating that she understood that the apartment was “not subject to any form” of rent regulation “whatsoever.” When she renewed it in 2016, it didn’t include that rider, but it raised her rent to $1,770, and the “legal rent” to $2,770. (The maximum increase allowed by the city Rent Guidelines Board in 2016 was 2 percent.)

When she requested a rent history from DHCR, she adds, there were no records from 2012 through 2016. The last registered rent was $1,500 in 2011.

“How many more buildings is this happening in?” she asks.

Categories
Living NEW YORK CITY ARCHIVES NEWS & POLITICS ARCHIVES NYC ARCHIVES Portfolio THE FRONT ARCHIVES Uncategorized Washington, D.C.

Trump Tower’s Smoke & Mirrors

It’s spring, 1983. My Californian family is on a trip “back East,” a place still exotic to us. During a few days in New York — my first trip here — we visit the United Nations, Windows on the World, the Met. And we visit the partly opened Trump Tower, where we pay homage, as so many tourists did that year, to the sixty-foot waterfall, the marble atrium (described, over the years, as salmon, rose, or peach, but never pink), the brass TRUMP TOWER over the door (I’m sure I thought it was gold), and to Donald J. Trump himself.

We weren’t alone — “Tourists flock to 68 stories of elegance,” the Los Angeles Times, our hometown paper, reported later that year (breathlessly, and incorrectly: While Trump has always maintained the building has a 68-story height, it has only 58 floors). It seems astonishing that my parents, for whom “gauche” and “gaudy” were favorite disapprobations; who lived surrounded, but unimpressed, by wealth in Los Angeles; whose travel with us was usually geared toward exposing us to American history, would want to see such a place.

The exterior, seen from across the street.
Secret Service agents cleared the lobby moments before the president came downstairs for an unexpected visit.
Secret Service agents cleared the lobby moments before the president came downstairs for an unexpected visit.
An unknown man, in Grand Army Plaza, close to Trump Tower.

Clearly, to them, it was a piece of history. But of what kind? Were we marveling in the court of the Sun King, or gawking at his bad taste? I’m not sure it mattered to him. He had learned how to command our attention — with hyperbole, excess, gloss and shine (“we demolished a mountain of marble,” his wife, at the time, said) — and he never lost it. “My projects now sort of self-promote,” he told Graydon Carter, in an encounter better remembered for Carter’s light demolishment of his small hands. In the end Trump, diminutive hands and all, “self-promoted” his way to the presidency.

Like many megalomaniacs, he saw himself as an artist, with real estate as his medium. The power was nothing, he said in a 60 Minutes profile in 1985. It was the “creative process” he loved. In the twelve-hour documentary Trump: Made by America that will one day be crafted, the building of Trump Tower will be a pivot, like O.J. Simpson’s time at the University of Southern California.

With Trump Tower, Donald Trump realized what he could be, what people would let him be, what people wanted him to be. It is astonishing how many times he — a brash young developer with a few buildings to his name and the sulky mien of a teenager — was asked, in those years, whether he thought about running for president.

 

Trump Tower as seen from the Top of the Rock.
Trump Tower as seen from the Top of the Rock.
A carriage horse on 59th Street.
A carriage horse on 59th Street.

Is it uniquely American to believe that if one excels — or manages to convince people he excels — in one area, he is graced with the genius to excel in every other? By the fall of 1984, with Trump Tower open only a year, Trump was announcing to the Washington Post his desire to negotiate with the Soviets on nuclear arms:

“‘Some people have an ability to negotiate,’ he says. ‘It’s an art you’re basically born with. You either have it or you don’t….It’s something that somebody should do that knows how to negotiate.’”

Or doesn’t this, from the New York Times in 1983, sound like his presidency, with all its unfilled positions? “At Trump headquarters on the 26th floor of the Trump Tower astride Fifth Avenue, he opened the door of a room furnished with a vast table. ‘This was supposed to be a board room but what was the sense when there’s only one member,’ said Donald Trump. ‘We changed it to a conference room.’”

Twenty years later, when it came time to film The Apprentice, a boardroom set — a facsimile — was built in Trump Tower.

The intersection of 55th Street and Fifth Avenue.
The intersection of 55th Street and Fifth Avenue.
New York City police officers protect the entrance to Trump Tower during a snowstorm.
New York City police officers protect the entrance to Trump Tower during a snowstorm.

Trump Tower should have dispatched his father complex, his hunger not just to impress, but to outdo, his old man. (“Everything he touches seems to turn to gold,” the Trump Organization website modestly quotes Fred Trump saying about his son, a hilariously literal, and possibly tongue-in-cheek, statement.) But such complexes are never dispatched. Trump’s hunger — for approval, for celebrity, for public embrace — has no end.

Trump didn’t make Manhattan safe for the wealthy — they were already there — but he made it hospitable for the crass: the kleptocrats and oligarchs and criminals who eventually found their way to Trump Tower and buildings like it. From the start, Trump sold his Tower as a residence for a new generation of Astors and Whitneys. The reality, as the Voice’s Wayne Barrett wrote, was that Trump Tower’s first residents were as likely to be Medicaid cheats and mobsters. He anticipated so much of what Manhattan would become: the ostentation and phallic reach, concentrated along 57th Street; the leveraging of public money for private gain; the barely occupied pieds-à-terre and tax havens for wealthy foreigners.

Inside Trump Tower
Children in Trump Tower’s marble lobby.
Children in Trump Tower’s marble lobby.

The 1980s, when Trump built his Tower, planted his flag in Atlantic City, and bought the Plaza, turned out to be the apex of his career as a developer: Peak Trump. The milestones of his subsequent real estate career were golf courses and bankruptcies. Not only did I never visit Trump Tower during close to twenty years of living in New York, I never once thought about it, not even when I walked by.

None of that mattered. The myth was impermeable by then, the long con well under way. The dazzle of Trump Tower — the dazzle of publicity around Trump Tower — obscured everything afterward.

Coffee mugs for sale in the Trump gift store.
Coffee mugs for sale in the Trump gift store.
A doorman looks out from the entrance of Trump Tower.
A doorman looks out from the entrance of Trump Tower.

I met Trump once, although “met” may not be the correct word. It was the summer of 2001, six weeks before the September attacks. I was at a party in Jane Rosenthal’s apartment in the Dakota (I was there as a reporter, I should say, not a guest). The penthouse was packed with the famous and wealthy — Oscar de la Renta, Robert De Niro, Harvey Weinstein — who had come to hear former president Bill Clinton speak about the International AIDS Trust. Donald Trump was there too, and he and Clinton greeted each other like the friends they were then. Trump invited Clinton to come golf at one of his courses, and Trump turned to me, whom he took for Clinton’s lackey, to take down his phone number.

It’s a reminder how cozy Trump once was with the Manhattan liberal elite. It was his celebrity — the myth cemented by Trump Tower — that had granted him access.

The view out through the entrance.
The view out through the entrance.
Trump Tower’s escalators
Trump Tower’s escalators

Looking back, it’s not the relationship between Clinton and Trump that interests me, but the relationship between the Dakota and Trump Tower. The Dakota, at 72nd and Central Park West, sits diagonally across the park from Trump Tower, and is its antithesis. Built a full century earlier, it bespeaks class, elegance, exclusivity. It’s a National Historic Landmark whose architects also designed the Plaza Hotel, which Trump so coveted. The Dakota to Trump Tower is East Egg to West Egg, old money to new. Trump Tower is Gatsby’s mansion: “a factual imitation of some Hotel de Ville in Normandy, with a tower on one side, spanking new under a thin beard of ivy, and a marble swimming pool….”

The Manhattan represented by the Dakota would never have been open to him, just as East Egg was closed to Gatsby. The Dakota is a co-op, where someone like Trump would run a high risk of rejection, if he would even agree to open his finances to what he once called “the scrutiny of a bunch of prying strangers.” (We taxpayers, asking for his tax returns: We also are a bunch of prying strangers.)

Trump had to create his own world — a building tall enough to look across the park and down on the Dakota, one whose lavishness would make up for its lack of history. Amid the financial euphoria of the 1980s instead of the 1920s, this is what he did. Most residents of the Dakota would likely never want to live amongst his marble and gold in the “Louis XIV style,” but bigger and more expensive was all he had.

The only thing that separated Gatsby from his mansion was death. Only the presidency extracted Trump from his Tower. In the weeks after his victory, it was almost as if he didn’t want to leave.

Pedestrians walk past a beggar on Fifth Avenue.
Pedestrians walk past a beggar on Fifth Avenue.
A Trump supporter in front of Trump Tower wears a ring shaped like a gun
A Trump supporter in front of Trump Tower wears a ring shaped like a gun
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StreetEasy’s Ad Campaign Is Neocolonialist Propaganda For The Seamless Generation

StreetEasy has all but usurped the apartment-finding role once held by Craigslist and, before that, by rushing out to pick up the Voice on Tuesday nights before your fellow would-be renters. Ever since the site launched its first subway ad campaign two years ago, the website has tried to position itself as your hip friend who will tell you the ins and outs of navigating the New York housing market. Two years ago, it was trafficking in homespun knowledge (“The only bad thing about a walk-up is every single step”); last year’s “Find Your Formula” campaign used StreetEasy’s search check boxes to lay out rental dilemmas as algebra: “West Village + Outdoor Space + Washer/Dryer = +4 Roommates.”

All this was partly amusing, partly annoying, as most subway ads end up being. But StreetEasy’s latest ad campaign, “Find Your Place” — designed by Office of Baby, the same ad start-up that did “Find Your Formula” — goes a step further, implicitly commanding you to be the kind of New Yorker who not just lives down to all the worst stereotypes of hipsters, millennials, and urban pioneers but revels in them. It is shelter-as-conspicuous consumption, neocolonialist propaganda for the Girls age, swathed in just enough low-hanging-fruit humor to make it go down easy, if you don’t think too hard about it.

An incomplete sampling — there seems to be no end to them — of 2017 StreetEasy ads, and how each of them hates humanity:

[Sublet] helps me cling to the idea that I’ll quit my job and travel soon.

The basic premise here is simple — if you cannot commit, sublets are for you — but whatever copywriter actually came up with this phrasing (and whichever StreetEasy exec approved it) is clearly working out some issues. That “cling to” turns this from a dream to a nightmare of lost hopes, one that you should really give up on as soon as you can, because New York, already.

I prefer a [Dishwasher] to a [Washer/dryer] because you can’t send dishes out and have them come back clean.

Because the highest aspiration of all true New Yorkers is to total laziness, where either machines or minimum-wage humans do all your dirty work for you. This entry is the StreetEasy companion to those Seamless ads that assume that actually making a phone call and speaking to a human being isn’t worth your time, let alone buying food and cooking it yourself.

I rented [West Village $3,000+] in hopes I could become the kind of person who could afford [West Village $3,000+].

If modern consumer capitalism has a credo, it would be aspirationalism, the notion that you shouldn’t pay what you can afford for things, but rather what you think you should be able to afford. Via this alchemy, overpaying for an apartment becomes not a sign of the unfairness of the New York housing and labor markets, but a way of changing your identity: I pay $3,000 a month for my apartment, eat that, college friends who still live in Iowa and can afford houses. It’s the fundamental reason why supply and demand has broken down as a means of setting prices, and why an ice cream cone now costs $7. (Look at me, I can eat $7 ice cream cones — single scoop. Suck it!) Equally accurate phrasing: “I rented a West Village $3,000+ because I wanted to feel like a success, and now the former tenant is living in a refrigerator carton under the FDR Drive.”

We’re hoping [Open space] keeps our kids happy enough that we don’t have to move to the ’burbs.

This is a tricky one to unpack, so bear with us: Why do people move to the suburbs? Because they grow up, get married, have kids, then want those kids to have the room to wander freely and you can’t do that in a floor-through, so off to Maplewood it is. (This is an anachronistic image in the age of the Great Inversion, mind you, but let’s roll with it.) But hey, what if you could have a little piece of suburbia in your own backyard? One where your kids don’t have to go play in a public park with the common folk? Maybe little Conor and Morgan could put up with that for a while.

Interestingly, “open space” doesn’t actually appear to be a real option on StreetEasy’s search form, so Office of Baby was clearly given free range to go full alternative-facts in the cause of parental-stereotype humor.

I was [Only pre-war buildings], then I lived in one, and now I’m [Only new buildings].

This is a weird one, since “pre-war apartment” has long been a signifier of ceiling height and general non-crappy construction. (A recently expanded building on the Upper West Side used to advertise itself as “21st-century pre-war apartments,” which always made me wonder what they knew that the rest of us didn’t.) Instead, this ad tries to instill a new common wisdom: Modern construction is the best, because who wants to live in something old? This is a perspective mostly held by real estate developers and people who have never been to New York before, which, come to think of it, is likely a fair description of StreetEasy’s target demographic — and certainly that of Zillow, the real estate website that purchased StreetEasy in 2013.

My roommate and I are thinking of becoming lovers so we can search for [1 bedroom] instead of [2 bedrooms].

This is the only ad in the entire series to so much as nod at the desperation that underlies the New York housing search process, and it buries it under a fog of creepiness. Points for being gender- and sexuality-neutral, though!

My girlfriend works off the [1] and I work off the [4] so we compromised and live off the [1].

The ladies, amirite?

[Laundry in building] changed the way I think about how often to wash sheets.

It’s OK to live like a 12-year-old boy. Take pride in it.

Put it all together, and it’s the perfect storm of classism and sexism, all wrapped up in real estate–porn cellophane. We have housing to meet your every need, the ads say, so long as you’re mostly concerned with how to spend as much as your budget can afford to support your lifestyle, and really, aren’t we all?

“Our current Out of Home campaign is focused on the notion that the real estate search in NYC isn’t finite – New Yorkers are always discovering new neighborhoods and facets of the city,” Peter Edwards, StreetEasy’s senior director of marketing and analytics, told the Voice in a statement. “As their lives in New York evolve, so do their real estate needs. As the real estate marketplace built specifically for NYC, StreetEasy is uniquely positioned to meet those changing needs through NYC-centric options ranging from ‘Pets Allowed’ and ‘Laundry in Building’ to filtering for specific school zoning.”

Edwards notes that StreetEasy has expanded its ad placement this year both by taking out ads for longer time periods and by posting more ads outside Manhattan.

“What StreetEasy’s ad campaign overlooks is that for most tenants, finding a well-maintained apartment in New York City is like navigating through a minefield,” says Aaron Carr, a former state assembly staffer who last year launched the tenant-support organization Housing Rights Initiative. “According to public records, there are over 2 million open housing maintenance violations in New York City. For many, finding an array of amenities is secondary to avoiding mice, mold, and hypothermia.”

There’s no pulldown for “hot water doesn’t regularly cut out” on StreetEasy’s site, significantly. (A start-up competitor, Rentlogic, allows searching by letter grades based on the number of violations a building has received.) But then, you wouldn’t want to be one of those people, would you?

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Say Goodbye to Little Italy’s Only Grocery Store

Little Italy’s only supermarket is closing on Saturday, to the horror of residents who for the past 25 years have relied on it for their food shopping.

Met Foods, located at 251 Mulberry Street, has been a neighborhood fixture since 1991, when the area was known more for its organized crime and old school Italian cheese shops than its multimillion dollar penthouse apartments and upscale eateries. Though a “For Rent” sign has been in the window since October, local elected officials, residents, and supermarket employees weren’t told that December 31 would be the store’s last day, the news having only been posted to its front window this week.

“We’re talking about people who are probably going to have to get food at Duane Reade,” Paul Leonard, chief of staff for Councilmember Margaret Chin, told the Voice.

Under their current lease, the Met’s owners pay around $90,000 for the space, Leonard said, though the abrupt closing of the store indicates that the building’s owner, Abington Properties, is thirsting for more. Leonard surmises they’re looking for as much as $150,000 to open what it termed “a more upscale operation.”

“If you’re living on a fixed income it’s really, really tough right now,” 63-year-old K. Webster told us. “This is a $90,000 rental space even now, so even when you shop there you have to shop carefully.”

Webster, who goes by her first initial, says she has lived on the Bowery near Prince Street since the 1970s, and noted that the supermarket’s closing “has an effect that goes beyond the one store.”

“It’s all these things that end up tearing the community apart. It’s a surefire way of ensuring low income people cant survive here.”

While the new tenant will likely be retail, even THAT may be delayed for years while the property owners search for a suitably high-paying renter. As Christopher Havens, the vice president of commercial real estate at AptsAndLofts.com, told us last year:

“A lot of people are looking for big numbers now, because of what they’re hearing,’” Havens said, meaning that their asking price is often untenably high as a result. Seventh Avenue in Park Slope has had a noticeably high number of vacancies thanks to owners who have controlled their spaces for 30 or 40 years. “They have no mortgage on the buildings, they’re not in a rush. They don’t have any debt pressure to lease the space,” he said. High paying tenants, like banks and Chipotles and Rag and Bone stores are equipped with brokers that move “glacially”—as in, two or three years. Nobody seems to be in any hurry.”

Chin’s office held a rally today in attempt to persuade the Met’s owners to sit down with the property manager and broker an agreement that would keep the space open for at least a few more months. Wayne Rada, the executive director of the Little Italy Street Art Project, says that while any extra time bought is merely delaying the inevitable, it would at least give residents the chance to process the news.

“Would you rather know that you have heart issues so you have time to go to the doctor, take the medication, schedule the surgery, et cetera. Or would you rather they say, ‘Hey, your heart is going to blow up, and the next day you die’?” he asked.

Rada has been closely involved with the neighborhood for the last 17 years, and said it began trending upscale once realtors shrewdly altered the area’s name from Little Italy to NOLITA.

“Labels are apparently very important to our culture. But now people can’t get food, which is absolute nonsense,” he said.

He surmises that the Met’s owner opted to dump the news between Christmas and New Year’s in the hopes that it would slide beneath the radar.

“It really is kind of shady that the building owner chose this route,” he said. “It’s his building, he can do whatever he wants. But 25 years?

Calls to Abington Properties for comment have not been returned.

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‘When It Rains Outside, It Rains Inside’: Tenants Say Notorious NYC Landlord Is Practicing ‘Construction as Harassment’

“I was sitting at my desk, and the ceiling came down on top of me and my computer,” the woman says, standing in the hallway of 159 Stanton Street on the Lower East Side.

The woman, a rent-stabilized tenant who asked to remain anonymous, lives in one of the ten remaining occupied apartments in the building, which was bought by Steven Croman three years ago. In August 2015, when a Croman construction crew was demolishing the floor of the apartment above her, the light fixture in her kitchen fell to the floor and shattered. A few days later, cracks suddenly appeared in her ceiling, and she complained to the workers, the city, and the building manager, who told her “we’re working quickly.” Later that afternoon, the chunk of plaster fell and hit her. She was unhurt, but “shaken.” It left a hole more than three feet wide.

Tenants document the damage to their apartments.
Tenants document the damage to their apartments.

Tenants in the building have endured a pattern similar to those that have Croman facing a lawsuit from state Attorney General Eric Schneiderman’s office — a combination of aggressive offers to pay them to leave and what Sarah Knispel of Stand for Tenant Safety calls “construction as harassment,” vacant apartments renovated in a way that leaves the building dirty, dysfunctional, and dangerous enough to make them want to leave.

The twist here is that the work stopped in the fall of 2015 — leaving nine apartments abandoned, with doorknobs removed and windows boarded up or covered with plastic. The remaining residents say the building regularly has intruders, and there have been several thefts and burglaries. In one case, people climbed into an empty apartment at the back of the building and defecated in the bathtub.

“When it rains outside, it rains inside,” Weiben Wang, a librarian who’s lived in the building for 20 years, said at a rally outside the building last week. Earlier, he’d showed cell-phone photos of wet plaster chunks that fell on the stairs during mid-November’s heavy rains.

Tenants announced at the rally that they’ve filed an “HP action” lawsuit in Housing Court to demand repairs and a ban on harassment. The suit also asks the court to order that future construction be done safely, promptly, and with minimum nuisance to tenants, said Urban Justice Center lawyer Sherief Gaber.

159 Stanton Street.
159 Stanton Street.

A group of five people tenants identified as Croman employees entered the building a few minutes before the rally and left during it. Asked to respond to the residents’ allegations, they walked away without turning their heads.

“Our good faith efforts are very transparent,” a spokesperson for Croman’s 9300 Realty responded, saying that the company has “on multiple occasions” offered to “immediately address any open issues at the building and in tenants’ apartments.”

“Management has not been informed of any open repair items in tenant apartments,” she added. “Additionally, past repair issues have been addressed promptly.”

Croman bought the building in 2013 as part of a $40 million four-property parcel from former Andy Warhol star Baby Jane Holzer, a socialite who married a real-estate heir. (According to The Real Deal, he sued her for extortion while negotiations were underway, charging that she threatened to rent out 18 vacant rent-stabilized apartments if he didn’t cough up another $2.5 million. The sale went through two months later.)

Francis Di Donato and his son, Max Wolf. Donato has lived in the building for 25 years.
Francis Di Donato and his son, Max Wolf. Donato has lived in the building for 25 years.

“It used to be a vibrant, lovely Lower East Side building,” says Francis Di Donato, who’s lived there for 25 years and shares the apartment with his 12-year-old son. “Now, it’s half empty.”

Croman’s efforts to drive people out “ramped up very slowly,” says Wang. “People started disappearing.” Wang’s first inkling came when he didn’t receive a routine response to his renewing his lease. Then, when the demolition began in 2015, he “woke up one day to horrendous banging on the wall — so hard my apartment shook.”

Di Donato says that at one point, the cracks in his bedroom wall were so big he could see into the apartment next door. Another time, a sewage pipe leaked into his kitchen, contaminating all the food he had there.

Tenants also began receiving visits from Croman representatives such as Anthony Falconite, the former police officer named in Attorney General Schneiderman’s lawsuit as the landlord’s enforcer. The woman whose ceiling collapsed says she had strangers knocking on her door “before, during, and after” the demolition, offering her $4,000 to move out.

Rents generally range from $1,300 to $1,700 a month, according to tenants.

Wang says that when Falconite “banged on my door” and he said he didn’t want to speak to him, Falconite responded by shouting, “Why are you being so rude to me? Don’t you know drug dealers live downstairs?”

A second woman, who also asked to remain anonymous, says she was offered a “pathetically small” buyout shortly after Croman bought the building. Soon after that, Falconite showed up at her door. He tried to speak to her several more times, she says, with the last visit in October 2015, more than a year after Schneiderman issued Falconite a cease-and-desist order in July 2014.

“I became very nervous about leaving my apartment and possibly running into him in the hall, because he was so intimidating,” she says.

Di Donato says Croman tried to evict him for “not paying rent that I already paid.”

The construction mysteriously stopped around October 2015, tenants say. None know why, but there were rumors that management had said the building was too structurally unsound for it to continue. In October 2015, the city Department of Buildings fined Croman $8,500 for doing major electrical work in six apartments without a permit. Croman paid $1,600, according to department records posted online, and was fined another $1,500 in January 2016 for failing to certify that the “extremely hazardous” violation had been repaired.

That left the vacant apartments half-demolished. Wang says that if you look under their doors, you can see that they have no floor, only bare joists. Early last summer, Di Donato came home to find a gaping hole in his ceiling and debris all over the floor and bed. A burglar had either broken through or fallen through, and stolen $150 in cash. In August, another burglar took his prize possession, a Gibson semi-hollow electric guitar he’d had for 30 years.

Intruders regularly come in through the open roof door, through unlocked windows accessible from fire escapes, and by “kicking in the front door because the locks are shoddy,” one of the women says.

A doorway to one of the gutted apartments at 159 Stanton Street. Residents say they have been abandoned since the fall of 2015.
A doorway to one of the gutted apartments at 159 Stanton Street. Residents say they have been abandoned since the fall of 2015.

The building’s situation is “not that unique,” State Senator Daniel Squadron said at the rally, as there are plenty of landlords “whose strategy is to drive you out of your homes… in order to make a quick buck.”

Croman is the landlord most notorious for “construction as harassment,” but others in the East Village and Lower East Side have included Ben Shaoul, Raphael Toledano, Samy Mahfar, and to a lesser extent, Jared Kushner, Donald Trump’s son-in-law. Sarah Knispel said it is becoming increasingly common in Williamsburg, Greenpoint, and Bushwick.

A package of 11 bills intended to stem such practices has been introduced in the City Council. One would require the city Department of Buildings to inspect buildings before allowing construction if they are partially occupied or if the landlord has recently been found guilty of harassment. Others would increase fines for violations, let the city put liens on buildings whose owners refuse to pay fines, and require owners to create detailed “tenant protection plans” and inform residents about them.

The measures are basically about “enforcing the rules that are already on the books,” says Paul Leonard, chief of staff for City Councilmember Margaret Chin.

Tenants of 159 Stanton say that the conditions have made their homes feel like anything but. “I don’t want to be pushed out of this building,” says Di Donato, but it’s uncomfortable living there while “knowing that things could get worse — and that’s the idea.”

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NY State to Give $25 Million in Tax Breaks to World’s Largest Investment Firm

New York State will give a $25 million tax break to a company with over $5 trillion in assets so it can move into a shiny new taxpayer-funded office building on the far west side, the New York Times reported this morning.

BlackRock, a global finance company, has promised that in return for the tax break, it will create 700 jobs. The building it will be moving into is owned by Related Companies, which has received almost half a billion in tax breaks from the city for building several properties over the Hudson Yards.

Back in January of this year, BlackRock signaled that it was looking for some new digs in New York City, having grown weary of its Midtown offices. “A firm like BlackRock, looking for a million square feet at once, should have the brokerage community as well as the development community salivating,” an analyst told Bloomberg at the time.

And salivate they did! Both Tishman Speyer and Related Companies began to woo BlackRock over to the Hudson Yards, each offering low rents and other incentives in the hope that once BlackRock called Hudson Yards home, other financial services firms would follow. For some reason however, New York State decided to sweeten the deal, even though the company was being actively courted.

“How many layers of subsidization can be justified?” asks Greg LeRoy, executive director of Good Jobs First, a group that tracks government subsidies nationwide.

“You’ve already got the property tax being given to Related, you’ve got the huge investment for the new subway line extension, which is a giant public investment and greatly enhances the value of the land,” LeRoy told the Voice. “And then you’ve got two landlords competing for BlackRock — giving them rent discounts or build-out allowances, and what’s BlackRock going to do? Move to Greenwich? I don’t think so.”

For decades, New York City and state have been trying to fend off the threat of companies moving to New Jersey or Connecticut by offering tax deals that keep companies in the city, but devastate tax revenues. Now, with landlords competing for tenants at various new commercial towers at the World Trade Center site and Hudson Yards, the city is mostly competing against itself. And yet public money is still getting thrown into the deal.

“It would be very difficult for the state to argue that they moved the needle here,” LeRoy said. “And if they can’t prove that they moved the needle, that they caused something to happen that wasn’t going to happen anyway, it’s a waste of money.”

In an email to the Voice, the Empire State Development, the state’s public-benefit corporation, said that the tax breaks would be given in the form of Excelsior Tax Credits tied to job creation. According to ESD, BlackRock had threatened to move 400 jobs out of the state instead of moving to Hudson Yards.

“The company is already in New York City, they’re simply not going to go someplace else,” said James Parrott, an economist with the Fiscal Policy Institute. “BlackRock is a huge investment company that manages several of New York state’s major pension funds. I think their customers would have a lot to say about it if the company ever tried to move out of the state.”

The only reasoning for the tax break that Parrott could see was that the state would be able to tout the job creation that it made possible. Even without the tax breaks however, the Times reported that BlackRock was looking to expand its workforce anyway.

This afternoon, Governor Cuomo presided over the Regional Economic Development Council Awards, a prize he created to award public-private partnerships across the state. There, Cuomo announced, “Our tax structure is as competitive as anyone’s.”

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Cuomo Strikes Deal To Revive Billions In Developer-Friendly Tax Abatements

The city’s building-trades unions and real-estate developers late yesterday afternoon announced a deal that could revive the 421-a tax subsidy for apartment construction.

Governor Andrew Cuomo had asked the Building and Construction Trades Council of Greater New York and the Real Estate Board of New York in 2015 to set wage and affordability standards for buildings that receive the property-tax exemption, which expired in January when they couldn’t. Reviving 421-a would need to be approved by the state legislature, either in a special lame-duck session or in January.

The agreement “provides more affordability for tenants and fairer wages for workers than under the original proposal,” Cuomo said in a statement. He added that it “allows lower-income individuals to qualify as it lowers the percentage of area median income needed to apply.”

The governor’s office did not provide details last night about how much the “affordable” apartments would actually rent for. A REBNY spokesperson said the levels would be similar to those in Mayor Bill de Blasio’s Mandatory Inclusionary Housing program. The agreement would require apartments with income limits to be kept that way for 40 years, five years longer than in the expired program, but it wouldn’t make them permanently affordable.

In buildings with 300 or more units in Manhattan below 96th Street, workers would be paid an average of $60 an hour in combined wages and benefits, unless the building contains at least half “affordable units.” In similar buildings within a mile of the Brooklyn-Queens waterfront from Brooklyn Heights to Astoria, they would get $45, including benefits. Other buildings wouldn’t have wage requirements.

State Senator Liz Krueger (D-Manhattan), a 421-a critic who hadn’t yet seen the details of the agreement, questioned it sharply on general principles. “Will these units actually be affordable to poor New Yorkers, or set at rent levels too high for the people who really need them?” she asked. “I seriously question the number of affordable units that will be built, and at what cost.”

She also lambasted the use of tax money to “subsidize building in the most expensive real estate in the city” and the governor’s outsourcing decisions about public funds to private parties “who will gain from it.”

Cuomo’s statement said he “would prefer even more affordability.”

The mayor’s office hadn’t seen the terms. “Our priority is ensuring that the ultimate legislation passed demands real affordable housing for our people and protects taxpayers from giveaways,” deputy press secretary Melissa Grace said in an email.

The Independent Budget Office released a report in September showing that leftover 421-a tax breaks will cost the city $1.4 billion in lost revenue this year.

The deal resulted from Cuomo’s attempt to resolve the three-way impasse that prevented the Legislature from renewing the 421-a program when it expired in June 2015. Tenant groups denounced the subsidy as a tax giveaway that produced almost no affordable housing. Developers said they needed it to keep building. The unions wanted to keep the flow of jobs coming and hold their market share against nonunion contractors. Cuomo said he wanted developers getting the tax benefits to pay union-scale wages.

The new agreement “will preserve traditional worker standards and benefits and create opportunities for new categories of workers which will ensure our long-term competitiveness in the industry,” Gary LaBarbera, president of the Building and Construction Trades Council of Greater New York, said in a statement. The council’s executive board “overwhelmingly” approved it.

How many buildings will the wage standards cover? Low-wage nonunion contractors dominate construction of residential buildings less than 10 stories tall in the city, and have been making inroads into larger buildings, such as the One57 condos on the 57th Street “billionaires’ row,” which received 421-a subsidies under a bill sneaked through by now-convicted Assembly Speaker Sheldon Silver.

The 300-apartment minimum would seem to leave a lot of room for nonunion work to expand. A “lot of what’s in the pipeline” will be buildings big enough to qualify, a spokesperson for the building-trades unions responded.

A 2014 study by the Real Affordability for All housing-group coalition found that of 61 buildings receiving 421-a subsidies in and around downtown Brooklyn, only seven had more than 300 units. But those seven, in the Flatbush Avenue corridor near the Manhattan Bridge, contained more than 60% of the 4,395 units in those buildings. Only eight of the others contained between 50 and 300 apartments.

Less than 1% of those tax-subsidized 4,395 units were affordable to people with incomes below $41,000 for a family of four. Only 257 qualified as affordable for people with incomes below roughly $85,000.

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Williamsburg Man’s $450/Month Closet Revives the NY Times Real Estate Section

Today the New York Times real estate section, the paper’s not-so-subtle attempt to start an all-out class war, brings us the story of one Jack Leahy, a young musician in Williamsburg who lives in what essentially amounts to a crawl space. The space is just nine feet long, only four and a half feet wide, and oh yeah, just five feet high. And how much is Leahy paying to live in this very obvious death trap? $450.

“I think I was happy to be in New York and that I actually had a place,” Leahy tells the newspaper. His main goal is to get signed to Captured Tracks record label, which, if he’s successful, might pay him enough to live in a place that he doesn’t have to climb a ladder to get into and that isn’t above a performance space Leahy almost accidentally fell into once. “Too much moving around up here doesn’t feel safe,” says Leahy.

Why not just call the column “How the Other Half Rents”?

“Yeah, the cholera is bad, and it gets pretty hot in the summer, but this deal really can’t be beaten. You end up exploring the city a lot, just to get away from the rats. Great waterfront.”

Close enough: The closet living space dispatch marks the first in a new column called “Renters” for the real estate section, which the New York Times is re-launching whole this weekend, promising to feature “more service-oriented and visual journalism.” Other new columns include “Voyeur,” which will feature photos of out-of-control development, “The Fix,” which will follow gut renovations of previously rent-stabilized apartments as they are flipped for the luxury market, and “360 View,” a column that will try to give life to the fun “quirks” of the real estate market, like displacement and eviction.

This is all being done as the luxury condo market, whose advertisements have packed the dwindling pages of the Sunday Times for years, dries up, and is replaced by the vagaries of the super-charged rental market, so accordingly the Times real estate section must change as well.

As for Leahy, he tells the paper he’s signed on to stay at the space for another year. Yes, things are getting so bad in the New York City housing market that someone has decided to sign up for another year of overpaying to live in a glorified coffin. Who knows? Maybe his landlord will decide to just randomly give him a roommate one day. Anything’s possible now. The world is the Real Estate section’s oyster. Wait —anyone out there living in an oyster? Would make a great photo spread!