Nearly two full years after winning City Council approval for “The New Domino,” the Community Preservation Corporation (CPC) appears to be finally giving up on ever building the project. Reports emerged today that CPC is in advanced talks to sell the site to Two Trees Development for $160 million. CPC’s silent investment partner, the Katan Group, is opposed to the sale and is threatening to fight in court to win the right to procure a better deal. CPC and Katan, who teamed up to fund the $55 million purchase of the Domino site in 2004, have been at odds ever since reports emerged earlier this year that CPC was attempting to sell the property due to mounting losses at other speculative luxury projects throughout the tri-state region.
CPC’s lending in Brooklyn was a subject I investigated back in the winter of 2010-2011. We all heard CPC claim to be a benevolent affordable housing developer during the Domino hearings yet the majority of their funding goes to speculative luxury real estate developments, including some of the most notorious and unethical developers in the City. CPC was rather inept in choosing profitable luxury projects to fund. They nearly filed for bankruptcy in January. And they must now sell the Domino site in order to bail out their losses elsewhere. CPC’s marriage of “affordable housing” and luxury real estate has failed for all parties involved.
So now we meet the new character in the drama, Two Trees Development, a very successfully luxury developer that has thus far only dabbled in the world of “affordable housing.” Two Trees is the firm of the Walentas family, one that would be considered “new money” in the world of New York real estate dynasties. Founder David Walentasgrew up poor in upstate New York and arrived in the City in in 1966 determined to make in the real estate business. His timing placed him in the perfect position to take advantage of the cycle of disinvestment that peaked in the 1980’s, when Walentas’ Two Trees bought nearly all of the old industrial buildings in the DUMBO neighborhood for only $12 million in total. The firm has spent the last three decades shepherding the transformation of DUMBO from a gritty industrial area home to industry and artist lofts to one of the most expensive neighborhoods in the City.
The Walentas family and Two Trees are a different breed from most of the condo and apartment developers Williamsburg has seen. Most Williamsburg developers have built quick and cheap and prefer to rent their commercial spaces to the highest bidding Duane Reade and Chase branches (if there is any retail space at all) and get out while the getting is good. In DUMBO, Two Trees has followed a very different path of long term investment and what I call “Jane Jacobs Gentrification.” Rather than rent every space to the highest bidding chain store, Two Trees often lowers rents in pursuit of character and “authenticity” (as Sharon Zukin would put it). Two Trees deliberately subsidizes a variety of art galleries and small independent restaurants and shops. It was Two Trees played White Knight to Williamsburg’s own Galapagos Art Space by offering an affordable refuge. But it is not an act of charity – the underlying belief is that these kind of cultural consumption spaces will greatly enhance the value of the residential real estate in the long term. So a Two Trees version of “The New Domino” may offer much more in the way of dedicated spaces for cultural capital like art galleries and performance spaces
But what about affordable housing? As we’ve shown in detail in our film, the Community Preservation Corporation’s plans were never the panacea that the company presented them as. Only 100 of the “660” units would have actually been affordable to the majority of Williamsburg households. And more importantly for Two Trees, CPC’s presented plan for affordable housing is not locked in to the zoning – only 20% affordable housing will be legally required. Since Two Trees has yet to respond publically, it is an open question whether or not they will pursue CPC’s promised 30% or the legally required 20%, or what mix of affordability levels will be included. Two Trees has a very mixed record of community relations in DUMBO. Two Trees has developed “affordable housing” before – such as in the 20% affordable housing building at 125 Court Street in Downtown Brooklyn – but it has not been a major part of their business thus far.
With regards to affordable housing, the largest threat from Two Trees may come from an aggressive push to redevelop the surrounding neighborhood of Southside Williamsburg. Consider the current leader of Two Trees, David Walentas’ son Jed’s comments to the New York Times earlier this year”
“Unlike someone on Wall Street, who can make a lot of money in New York and then move on,” he said, “we are in it for the long term…for it to be successful, the neighborhood needs to be successful.”
If we go by the standard of “successful” Walentas has pursued in DUMBO, this means the displacement of working class residents, artists, and industrial spaces and their replacement by high-end residences and cultural consumption spaces like art galleries and expensive boutiques. Of course this is already happening in Williamsburg, but the neighborhood has never experienced a developer like the Walentas who will engage on the neighborhood level rather than site by site.
How will Williamsburg respond to a single-minded developer investing long term in the transformation of the entire area? This is a different beast than Williamsburg has encountered before, a new challenge but perhaps a new opportunity as well.