Leonard Grunstein Proposes A Free-Market Solution To the Affordable Housing Crisis

Leonard Grunstein, Managing Member at Hanlen Real Estate Development & Funding, has published an op-ed piece in the Gotham Gazette, contributing his thoughts on the newly proposed affordable housing plan for New York City.

While Grunstein believes the plan to be a very detailed and progressive means of solving the city’s housing problems, he also suggests a more cost-effective solution – the current plan costing an estimated $41 billion with $8 billion coming from city funds.

Grunstein’s suggestions are outlined in a five-point plan, meant to solve a growing housing crisis and save New York City money in the process. The first two steps proposed in the plan involve the creation of a partnership between the public and private spheres to provide for low-income and mixed-income housing, and taking full advantage of profitable tracts of land in the NYC area – enabling development to reduce the land’s overall costs.

A third point would require developers to lease the ground on which new projects are built, generating ground rents through the luxury component of development. Funding generating by these ground-leases could then be used to assist struggling households, providing them with a transferable voucher to be used for apartment rental. Finally, the plan calls for the creation of an independent affordable housing authority with the power to solve city housing woes using a public-private model.

Success has been had in smaller segments of the city, where agencies of the proposed nature have repaired struggling neighborhoods. With the proper resources in place, this proven plan can bring aid to New York City as a whole.

Leonard Grunstein’s full article can be found at gothamgazette.com.

RKO Albee Theater Becomes Albee Square Mall (Brooklyn Cultural Landmark)

The Albee Square Mall opened in 1980 on the Fulton Street pedestrian plaza, immediately becoming a prominent spot in Downtown Brooklyn. Construction on the project began three years earlier when its namesake, the RKO Albee Theater, was demolished to make way for the development.

Albee Theater Opened in 1925 | Photo Courtesy of Frank Tilelli & William Gabel

Albee Theater Lobby (Courtesy CinemaTreasures.org – User Tinseltoes

Albee Theater Seating (Courtesy CinemaTreasures.org – User Tinseltoes

Edward Franklin Albee, a promoter, impresario and father of the famous playwright, built the Albee Theater in 1925, during the peak of the vaudeville era. With a beaux-arts exterior and an interior that featured crystal chandeliers in the lobby, paintings from Albee’s private collection and seating for 2,000, the Albee Theater sought to rebrand vaudeville and attract more affluent audiences.

After the theater’s demolition in 1978, the vacant space was developed by the Urban Development Corp., a city agency that worked to provide financial aid for the acquisition, construction or improvement of industrial, commercial, public and cultural spaces. The mall was designed by Gruen Associates, a firm founded in 1951 by Austrian architect Victor Gruen. Based in Los Angeles, Gruen and his firm designed the first suburban open-air mall near Detroit in 1954. Two years later, Gruen completed his best-known work – the 800,000-square-foot Southdale Mall in Minnesota.

Gruen is largely credited with inventing the suburban shopping mall as we know it; writer Malcolm Gladwell once wrote that Gruen “may well have been the most influential architect of the twentieth century.”

Albee Square Mall (Courtesy Gowanus Lounge)

With an unassuming glass exterior, Albee Square Mall might pale in comparison to some of Gruen’s other projects. However, along with its companion, Fulton Mall, Albee Square became a cultural landmark that nurtured Brooklyn’s rising middle class, a burgeoning hip-hop culture and rejuvenated an important commercial district.

Leonard Grunstein, working as an Assistant Corporation Counsel, helped draft the land disposition agreement and ground lease structure that enabled the development of the Albee Square Mall in the late 1970s.

Tax Incentive Fuels Three Hanover Square Renovation

Hanover Square Park, located in Lower Manhattan’s Financial District, is a mixed-use plaza bordered by Pearl Street to the east and William Street on its southern side. Historically, the square was at the heart of New York’s commodity market and housed the New York Cotton Exchange until the mid 1970s.

Three Hanover Square is a 23-story building located on the southwestern side of the plaza and was the first major residential conversion in the neighborhood. Valued at more than $3 million in 1976, it stood empty for three years after the Cotton Exchange vacated it. The conversion, completed in the late 1970s, was made possible by the application of a tax incentive similar to a J-51 structure that was embodied in the ground lease drafted by Leonard Grunstein, an assistant corporation counsel for the the City of New York at the time.

The J-51 program, administered by the City’s Department of Housing Preservation and Development, provides property tax exemptions and abatements for the rehabilitation or conversion of buildings for residential purposes. Prompting a wave of interest in the neighborhood, more than 7,000 apartments have since been added to the Financial District’s once-limited housing stock. However, in 1976, there were concerns by developers and financing sources about the unpredictability of the J-51 program and its application. To solve the problem, a UDC subsidiary that was tax exempt took title to the property. Concurrently, a financeable ground lease structure was put in place that incorporated the then existing J-51 tax benefits program as part of an in lieu of tax provision in the lease.

Today, 3 Hanover Square attracts tenants with its classicist, turn-of-the-century façade, spacious apartment units and convenient location. With developments like Battery Park City to the west – a project Mr. Grunstein helped realize a few years later – and South Street Seaport just a few blocks east, Lower Manhattan has become “a global model for mixed-use neighborhood success.

From Crime To CO-OP | Tudor City

Built in the late 1920’s by Manhattan real estate developer Fred F. French, Tudor City became one of the first residential skyscraper complexes in the world. Nestled in the east side between First and Second Avenues, it is bordered by 40th Street to the south and 43rd Street to the north.

At the turn of the century — before French’s development — the neighborhood was dominated by tenements and slums and was plagued by one of the highest crime rates in the city. With Tudor City, French sought to transform a haven for gang and criminal activity into a “residential enclave” that would attract the middle-class tenants who had been fleeing the city for the safety and comfort of the suburbs and outer boroughs.

Completed in 1932, this “city within a city” – as French often referred to it – is now home to over 5,000 New Yorkers and includes a number of residential apartment buildings, a hotel, businesses, three parks and a children’s playground.

2 Tudor City Place is a 15-story tower within the complex that was converted to a co-op in 1985 when Tudor City changed ownership. In 2000, Leonard Grunstein was involved in the re negotiation of the building’s ground lease, an agreement in which the tenant is permitted to develop property for a specified time. According to Barbara Corcoran, who was quoted in a 1998 New York Times article, an advantage to purchasing units in such properties is “that the owners typically keep them in excellent physical and fiscal condition…”

Grunstein Creates Subdivision Plan & Financeable Ground Lease Form | Battery Park City Redevelopment

By the 1950s, the once-prosperous Port of Lower Manhattan had fallen into disrepair following the funneling of sea traffic to Port Elizabeth in New Jersey. In the early 1960s, private businesses, with the support of Mayor Robert Wagner’s administration, proposed landfilling and redevelopment of the area in an effort to revitalize the blighted neighborhood.

In 1966, Gov. Nelson Rockefeller, after reaching a compromise with several other groups interested in developing the area, announced the proposal for what is now Battery Park City in a planned community at the southwestern tip of Manhattan.

Two years later, the State Legislature created the Battery Park City Authority (BPCA) to oversee development of the neighborhood, working with the Urban Development Corp. and several other public agencies on the project. In 1972, the landfilling process began, using material from construction sites around the area.

Although developers completed the landfilling by 1976, officials put the project on hold as the city dealt with dire financial problems.

South Cove | Battery Park City

But in 1978, Mr. Grunstein played a key role in jumpstarting the stalled redevelopment of Lower Manhattan. He helped create the subdivision plan, embodied in the Mapping Agreement he drafted and negotiated, and financeable ground lease form used by the BPCA that enabled redevelopment of the land.

A year later, the City – still grappling with severe financial issues — transferred the title to the land to the BPCA. A new plan, designed in 1979 by the architecture firm Cooper-Eckstut, incorporated the development into the existing infrastructure.

Soon after, redevelopment of Lower Manhattan blossomed. The first residential complex was built in 1980, followed by the completion in 1985 of the World Financial Center – home to the offices of companies such as Merrill Lynch and American Express. Development of the neighborhood continued throughout the 1990s, with the construction of more than 30 residential and commercial buildings.

According to the BPCA, Battery Park City is now home to 17,000 residences, 52 shops and services, 36 acres of green space, 20 works of public art, three schools and two hotels. It is also home to the Irish Hunger Memorial, the Museum of Jewish Heritage, the New York City Police Memorial, the Skyscraper Museum and Poets House.