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Tuesday, January 24, 2012
Dan Garodnick and Vornado Realty and Rising Rents in Manhattan
The future: 15 Penn Plaza or "Vornado Tower"
First, some background. Vornado Realty, according to its website:
Vornado Realty Trust (NYSE: VNO)("Vornado") is one of the largest owners and managers of commercial real estate in the United States with a portfolio of over 100 million square feet, primarily located in the New York and Washington, DC metropolitan areas. Vornado's core businesses include: New York Office Properties; Washington, DC Office Properties; Retail Properties and Merchandise Mart Properties.
Its Wikipedia page is more detailed, to include properties the company owns in NYC (a lot): Vornado Realty Trust.
Vornado was at the epicenter of a controversy in 2010 regarding the prospective demolishing of Hotel Pennsylvania to be replaced by 15 Penn Plaza. The controversy involved the height of the proposed building (68 stories), which, being so close to the Empire State Building,would forever change the iconic "postcard" view of Manhattan. Not only was this a controversy on an aesthetic, historical and architectural level, but zoning did not allow for the erection of such a tall building in that area. As is known by now, though, zoning laws in NYC can be done away by the powers that be. (Also term limits, landmark designations, you name it.) The City Council, by a vote of 47-1 granted Vornado Realty the rights to build 15 Penn Plaza.
My lengthy, and angry, post when this occurred is here. Bloomberg News' James S. Russell, in this review of the proposed 15 Penn Plaza building, wrote: "A behemoth office tower that may rise opposite Pennsylvania Station would deface New York City’s skyline and cast a pall over surrounding streets already shortchanged on light and air. " Former Parks Commissioner Henry Stern testified that 15 Penn Plaza "could do irreparable harm" to the city and, writing for the Huffington Post, made a blistering attack on the travesty that occurred with the vote: "This is a case of the city making an extraordinary gift, probably worth hundreds of millions of dollars, to one of its richest and most influential developers."
Dan Garodnick voted in Vornado's favor.
Now we move to the present, and the yet unannounced candidacy of Dan Garodnick for City Comptroller. So far he has received over 1 million dollars in donations, a sizable portion of which come from real estate firms--to include, surprise-surprise, Vornado.
According to NYC's Campaign Finance Board Database, Vornado's CEO, Steven Roth has donated twice, once in 2010, for 1K (before the 15 Penn Plaza vote) and then recently (after the 15 Penn Plaza vote) for whopping $4,950. The latter number is the maximum allowed by law, so unless there is some glitch in the accounting or other mistake, that earlier 1K is suspect, as its addition seems to go over the legal amount allowed for an individual donating to someone running for city comptroller.
It doesn't just end there. Steven Roth's wife, Daryl Roth, has also donated money for Garodnick's campaign. Yes, the max: $4,950. So, one household, with clear ties to Vornado (the CEO and the CEO's wife), has donated almost $10,000 to Dan, and over that amount if we include that suspect 1K.
Though I'm sure Dan Garodnick has his public-relations justifications for voting in favor of 15 Penn Plaza (jobs/a city that can't stand still/whatever), the appearance of a quid-pro-quo is troubling. Garodnick is not the only politician accepting monies from real estate interests come election time. The other City Council politicians, like Christine Quinn (who stated she would NOT accept such donations, but has, including over 15K from Vornado in past campaigns) and Scott Stringer (whose coffers have been one of largest and heftiest with real estate money deposits; the guy's running for mayor, may the Lord help us) have all held out their collective hands.
Why should real estate concerns donating to local politicians be troubling? The fact is that real estate enterprises are in the business of maximizing profits. "Affordable" middle class housing does not maximize profits. Housing for the rich, the sons and daughters of the rich, and for tourists spending big bucks in Manhattan, maximize profits. The middle class are only useful as workers and consumers in Manhattan. Live in Brooklyn, Queens or New Jersey, otherwise.
The stark reality is that the middle class is being priced out of Manhattan, both as tenants and as mom-and-pop businesses. And real estate companies, by their very nature, are behind this price-out.
Let's take a look at Bloomberg Tower, a property developed and owned by Vornado. This NY Times article details the progress of a neighborhood. While the article is very much pro-Vornado, you will find a sentence that hints at another part of the story. The money shot comes near the end of the article: "Other retailers east of Third Avenue, an area that has traditionally had more service-oriented retailing, like restaurants, locksmiths, dry cleaners, cocktail lounges and delicatessens, said they were feeling the pinch of the Bloomberg Tower, either in the form of rising retail rents or more competition for the potential customers in the office tower and in One Beacon Court."
Rising rents.... Rising rents serve only to benefit the real estate entities that own property or build it. When real estate firms maximize profits, rents go up and the middle class gets displaced. Even if the favorable real estate situation goes bust (a pattern when greed runs rampant), the fallout will not bring middle class tenants and mom-and-pop stores back once they have left.
So the real estate people are the major players in what Manhattan is turning into, aside from the influence of a mayor like Bloomberg. And if you had any doubts about these companies lording over Manhattan in a game of real-life Monopoly, actualizing their conquerors' dream of altering a city forever, you may find this of interest, as you recognize some familiar real estate business names. Vornado's CEO, speaking a couple of years ago about the development of mid-town's West Side:
"Much has already happened," Mr. Roth continued, "to increase the value of our Penn Station assets. The Penn Plaza District and the West Side of New York have been discovered and are the beneficiaries of an enormous amount of recent and current activity. A huge swath has already been rezoned as the future growth corridor of Manhattan. Tishman Speyer has won the bidding to develop the Hudson Rail Yards into a 12 million square foot, 20-year, Canary Wharf-type project. Brookfield has announced 5 million square feet…. Vornado was the pioneer here, and owns the best and the lion's share of the real estate surrounding Pennsylvania Station - the gateway to the new West Side….The Hotel Pennsylvania, Seventh Avenue at 33rd Street, generated a best ever $37.9 million of EBITDA in 2007, $10.4 million more than in 2006, a 37.8% increase ….The credit crisis and Merrill's management changes disrupted this deal, but the fact remains that our site was the last man standing in a rigorous citywide search."
To be fair, one must note that some plans for development contain, through political and public pressure, the assurance of middle class housing or rentals "below market rate." So, in such a scenario a real estate entity would be required to provide a percentage of apartments for people of moderate means in any mass development project. How this will play out in reality remains to be seen. We here in Stuy Town/PCV are already getting, possibly, a similar equation brewing with the TA/Brookfield plan which hints at a percentage of apartments being set aside as permanent rentals for tenants of moderate means, with possible financial assistance thrown into the mix. Assuredly, real estate firms will wish to keep this percentage of forced give-aways as low as possible.
The reality was and remains that real estate entities are the natural enemies of affordable middle class housing. Politicians who want to see a different version of Manhattan than the one that we've been speedily heading toward (blocks of high rises w/ground floor banks, chain drug stores, Starbucks), politicians who are 100% sincere about "affordable middle class housing" (a mantra continually repeated by every politician who speaks to Stuy Town/PCV residents), should not be accepting money from real estate companies. If they do, then you know which side they are really on and what their "progressive" vision is for New York.