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Related in the Bronx: Forging ahead where others hesitate to go.

Byline: Christopher Faherty

Although other large New York development firms have mostly avoided investing in retail projects in the Bronx, the Related Companies sees multiple opportunities in the borough.

With three major retail projects in the Bronx either completed or in the pipeline, Related Retail and Glen Goldstein, the company's president, appear to be poised to get in on the action in the Bronx once again.

One source, who asked not to be identified, and one official from a local community board confirmed a Daily News report that Related Retail is on the verge of completing a fourth deal with the city. The deal will make it a player in the South Bronx's Plaza at the Hub, a 1.1 million-square-foot project in the South Bronx that is slated to include a 14-screen movie theatre, a large supermarket and roughly 250 apartments.

"My understanding is that Related will be involved in the project," said Cedric Loftin, the district manager of Community Board 1, which includes the district the project will be built in. "They may have the lead on the project."

Related's Goldstein said at this point, his company's role in the project is undetermined. He referred questions on the matter to the New York City Economic Development Corporation, which did not return a phone call or e-mails seeking comment.

Regardless of whether Related gets involved with the Plaza at the Hub, it is clear that the company views the Bronx, a borough with a historically high crime rate and low median income, as a profitable investment.

But the credit crunch and the unraveling economy appear as dark clouds on the horizon for Related Retail's plan to invest what could reach over $1 billion in the Bronx.

Goldstein said that like other developers, Related Retail is concerned with the softening market but feels strongly that the Bronx retail market will make good progress.

When asked why Related is investing in the Bronx while other big players have shied away, Goldstein pointed out that his division has spearheaded successful projects in the other outer boroughs, notably Brooklyn and Queens.

"The retail that we've developed in the outer boroughs does tremendously well," he said. "As underserved as the outer boroughs have been, the Bronx, in particular, has been underserved because there has been less development."

Dan Fasulo, a Bronx native and managing director of Real Capital Analytics, said that the faltering economy is likely to affect the Bronx retail market less than others because it is drastically underdeveloped. He said that for years, Bronx residents have traveled to Westchester, New Jersey and Long Island to shop, and developers are now rushing to catch up with the needs of this market.

Benefits of the Bronx

Other large developers have chosen wealthier areas for their big retail projects, such as northern New Jersey and Westchester. But Related has developed a number of major projects in comparably lower-income areas with a higher density of residents. For example, Related Retail developed the Gateway Center, a 640,000-square-foot retail complex in the East New York section of Brooklyn, one of the city's most poverty-stricken and dangerous neighborhoods.

Goldstein said the demographic may not be as favorable in the Bronx compared with wealthier areas, but the population density is much higher, and retailers there have done tremendously well.

Developer Mario Procida of SDS Procida, who is now building a strip mall in the Morrisania section of the borough, said the biggest challenge for developers is convincing retailers, especially national ones, to come to the Bronx.

But Related has already proved that it can draw the big chains to the borough.

Related's Gateway Center at Bronx Terminal Market, a roughly $500 million project under construction near the new Yankee Stadium, will house national retailers such as Home Depot, Target, Best Buy and Bed Bath & Beyond. The center was expected to open in fall 2009, though Goldstein said it is now 85 percent completed, and the opening date has been pushed forward to early next summer.

However, the jury is still out as to how successful the big boxes and Related can be in the Bronx. Related has only finished one major retail project in the Bronx, the Hub Retail and Office Center. The 170,000-square-foot center, which is home to Staples, Rite Aid and a clothing retailer called Forman Mills, pales in size compared to the company's future projects.

As for Related's newest publicly announced major retail project in the borough, the Shops at the Armory, Goldstein said they are still fine-tuning a realistic timeline with the city and are easily 18 months to two years away from breaking ground on the complex. The project, which Related landed after the city sought proposals, calls for redeveloping the landmark Kingsbridge Armory, located in the northern Bronx, into an indoor and outdoor shopping center with a department store, restaurants and a cinema.

'Sweetheart deal'

While the Bloomberg administration has spurred the development of affordable housing in the Bronx through subsidies in recent years, the city is offering fewer incentives for retail developers in the borough, brokers said.

"It doesn't make sense to build free-market residential," said David Simone, a senior director of sales at Massey Knakal Realty Services, who focuses on the Bronx. "Pretty much every residential project is subsidized but not retail."

But unlike the average developer, Related has focused on projects in the Bronx that were the brainchild of the Bloomberg administration, a move that has resulted in some huge incentives.

After Related's proposal for the Hub Retail and Office Center was selected by the city, the company was able to purchase the city-owned vacant property for a relatively low price of $1 million, while also receiving a $4 million low-interest loan on behalf of the city's Economic Development Corporation, $1.8 million in real estate and tax benefits courtesy of the New York Industrial Development Agency, and $500,000 from the office of the Bronx borough president for the project. Since the center included new office space for the New York City Department of Finance, an additional roughly $16 million was provided by the city for the construction.

In the case of the Gateway Center at Bronx Terminal Market, several elected officials, including declared mayoral candidate Representative Anthony Weiner, have said that Related was given a sweetheart deal to redevelop the site. And the fact that Related's chairman, Stephen Ross, and former deputy mayor for economic development, Daniel Doctoroff, are good friends and ex-business partners drew ire from government watchdogs and competing developers at the time of the deal.

Goldstein downplayed the role incentives have played in Related's Bronx projects, saying they were similar to the ones his company obtained for their projects in other outer boroughs. He also said that Related and the city hadn't settled on any incentives regarding the Shops at the Armory.

"I think we've worked closely with EDC. They always take a hard look at giving incentives, and the Bronx isn't any different," he said.

As part of each of Related's two most recent Bronx retail projects, the company has agreed to include some sort of community space. Simone said that the city provides developers that include community space in their developments with a bonus permitting them to build additional square footage on their projects that wouldn't otherwise be allowed.

The community space is also important to elected officials.

"We have been working with Related Companies and the community to ensure that there will be job opportunities for residents, opportunities for local businesses, neighborhood improvements and adequate space for community use in all the projects they are developing in our borough," said Bronx Borough President Adolfo Carrion Jr.

Long-term investment

Considering the Bronx's large working-class population and the scarcity of developable land in the borough, Goldstein said he believes Related's made sound investments.

"We consider ourselves long-term holders and managers. We never look at things for a quick flip," he said.

Procida, whose company has been headquartered in the Bronx since the 1970s, said unlike other parts of the city, growth in the Bronx happens at a slower pace.

"I don't know if you'll get the accelerated growth that you see in parts of Brooklyn and Manhattan," he said.
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Author:Faherty, Christopher
Publication:The Real Deal
Date:Oct 3, 2008
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