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New Development Returns, Along With New Holdouts – The New York Times

After a pandemic lull, colorful tenants and homeowners are once again tangling with developers over megaprojects.
Credit…Karsten Moran for The New York Times
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The developers offered Joe Nastasi, a 73-year-old Sicilian mechanic, millions of dollars in cash, high-rise apartments, even to name their new luxury skyscraper after him — if only he would sell them his nondescript, three-story commercial building in Long Island City, Queens, which was key to building the project.
Mr. Nastasi, who has lived on the top floor of the squat bank building since the 1970s, was unimpressed: No deal.
“What am I going to do with the money?” he said on a recent afternoon from his nearby auto shop, gesticulating with his hands, motor oil under his nails. “Thank God, God bless America, I don’t need no money.”
Once again, it pays to be a holdout in New York City.
After more than a year of moribund sales and projects stalled by the pandemic, developers are attempting to move forward with large assemblages of land and unused air rights to create the next wave of towers, as the market turns the corner. But in their path are a small number of homeowners and tenants — the latest in a long tradition of headstrong and sometimes quirky residents — who won’t give up their hard-fought patch of dirt so easily. In other words, New York is back.
In 2020, during the first wave of Covid, there were 8,700 unsold condo units in Manhattan, which would have taken an estimated 8.7 years to sell at last year’s pace of sales, the slowest absorption rate in at least six years, according to Jonathan J. Miller, a New York appraiser. In a healthy market, sell out takes only about two and a half years.
But this year, thanks to rising vaccination rates and discounted prices, the sellout rate is down to 7.2 years, the first meaningful improvement since 2015. In August, new signed contracts on condos in Manhattan were up 35 percent, compared to the same month in 2019, before the pandemic staggered the market, according to a report by the brokerage Douglas Elliman. And in Queens, which has fared better than Manhattan, the median sale price for condos reached $704,481 in the second quarter, a record high.
“All of a sudden, there’s been this complete reversal of fortunes,” Mr. Miller said, and the faster-than-expected turnaround is encouraging some builders to proceed with ambitious projects.
But with vanishingly few sites that can accommodate large-scale buildings, developers have to cobble together several adjacent properties, either for demolition or to purchase their unused development rights, which can add value by allowing the project to be taller. These assemblages can take years, and often painstaking negotiations with residents who don’t want to give up their longtime homes.
On East 86th Street near First Avenue, Extell Development has bought out, or waited out, the tenants of neighboring low-rise, rent-stabilized apartment buildings that it bought several years ago, and demolition is underway for what could become a large mixed-use tower. Except there is one tenant, the last holdout in the last occupied apartment in the assemblage, who refuses to move.
The tenant, Greg Marshall, a longtime resident in his 40s, is fighting Extell’s attempts to demolish the building, arguing that the developer has not provided sufficient detail on what it plans to build, or proven its ability to pay for the project. The state agency that administers rent regulations in these cases is refusing to allow Extell to decline Mr. Marshall’s rent renewal until those conditions are met. Before his lease expired last year, his rent was $1,852 a month. He did not return requests for comment.
Fred L. Seeman, the tenant’s lawyer, said that it wasn’t uncommon for developers to demolish a building and leave a site empty for years as they muster financing or deal with other technical issues, while displaced tenants have to seek new apartments, often at much higher rents.
Gary Barnett, the founder and chairman of Extell, said the firm has met all the legal requirements for demolition, arguing that the firm is not required to provide more detail about what they plan to build. He said they “are looking at building” a school with apartments above, a portion of which would be listed below market prices. They will proceed, even if they can’t demolish this last building, he said.
“This is one person who’s trying to hold up the creation of hundreds of residential units,” Mr. Barnett said, adding that they have offered the tenant millions of dollars to move.
“My client wants to be left alone, period,” Mr. Seeman said.
Tales of holdouts receiving huge windfalls are legend, but it is much more common for holdouts to receive relatively small sums for leaving. Before sweeping tenant protections passed in 2019, which removed many of the financial incentives for developers to vacate rent-regulated tenants, renters often received little to nothing when a landlord refused to renew a lease, or were pushed out through harassment.
“You may be told the process is very tenant-oriented,” said David Rozenholc, one of the more prolific tenant lawyers in the city. “That’s bull,” he said, using the full expletive, adding that many rent-stabilized tenants might walk away with tens of thousands of dollars, a small consolation for losing a lifelong affordable rent.
But there are exceptions. Tom Chernaik, 49, a tech entrepreneur and a longtime rent-stabilized tenant on the Upper East Side, took a more than $3 million settlement, before lawyer fees, in 2019, to give up his two-bedroom apartment, according to sources familiar with the deal. The property has since changed ownership and the building has been demolished to make way for a 13-story condo with retail space and just 12 luxury apartments, where prices have yet to be announced, but will likely climb well into seven figures.
Mr. Chernaik discovered the apartment one morning in 1993, while browsing the Village Voice, and held on tight for 26 years, last paying $3,200 a month for the 1,100-square-foot space. He was sad to see it go, but with the settlement, he was able to move his family up to a three-bedroom rental nearby, and also bought a five-bedroom house with a pool in Connecticut “for less than the cost of the cheapest studio in Manhattan,” he said.
Others still, with the right sort of leverage and brio, have held out for more. Herbert Sukenik, a holdout tenant in the way of 15 Central Park West, a market-changing luxury tower completed in 2008, received $17 million to leave his single-room-occupancy apartment at the Mayflower Hotel, which was torn down to accommodate the new tower. He was also given a high-floor apartment at a nearby property overlooking Central Park for $1 a month, with the developer paying the rest of the rent, in what was perhaps the largest payout for a single tenant in city history. He was represented by Mr. Rozenholc, who collected one-third of the settlement.
An obituary in 2011 called him a “pioneer in the field of Nuclear Magnetic Resonance.” A relative, reached by phone, said “he was brilliant and misunderstood — and, at the same time, cantankerous.”
It can sometimes be more cost effective for developers to concede to holdouts, because time can be a builder’s most precious resource. “Development is a race against the clock, given the heavy carrying costs,” including interest on financing and taxes, said Doug Steiner, a Brooklyn-based developer.
By their nature, the deals are also secretive. “Assemblages are not something people want to talk about,” said Kael Goodman, the chief executive of Marketproof, a real estate data company. “Because that drives up the price” that holdouts can demand.
In Long Island City’s Court Square area, the developers Tavros Holdings and Charney Companies are preparing to build a 52-story, 560-foot tower that will have 300 rentals — of which about 90 will be listed below market rate — 41 condos, and a large commercial footprint. To that end, they have quietly made deals, beginning in 2016, to buy the townhomes of seven adjacent homeowners, which have already been demolished to make way for the new tower.
And then there were two.
Benito Barba, a retired baker and the owner of a tan-brick townhouse beneath the rumbling 7-train tracks, lives on one edge of the more than 11,000-square-foot development site. Adding his property to the site would create a wider base for the building, and contribute square footage that would help the project become eligible for significantly more height.
But Mr. Barba, who is in his 80s and bought the house in 1971, had no interest in selling, said Sam Charney, one of the developers. “He wanted to remain for the rest of his life.”
After months of trying, they reached a different deal: Mr. Barba would keep the house but transfer almost 17,000 square feet of unused development rights above his home to the new project, and allow the tower to cantilever over his three-story house.
In renderings of the new project, Mr. Barba’s tidy brick house is prominently featured beside the glassy skyscraper, like a Disney movie set.
Mr. Barba did not return requests for comment through his lawyer, Taso Pardalis. The developers would not say how much they paid him, but public record shows that a trust in Mr. Barba’s name recently bought three luxury condos at the nearby Skyline Tower, the tallest building in Queens, for over $3 million.
He is not the only one who is bullish on the neighborhood. From the start of the year through August, an average of 13 condo contracts were signed per week in Long Island City, three more per week than during the frenetic period in late 2018 and early 2019, when Amazon was expected to build a headquarters there, according to Patrick W. Smith, an agent with Corcoran.
But to build the tower they truly wanted, Mr. Charney and his business partner, Nicholas Silvers, of Tavros, knew they also needed to deal with Mr. Nastasi, the Sicilian mechanic who owns the building on the other end of the block.
They were not prepared. “He’s one of the most amazing personalities I’ve come across,” said Mr. Charney, who spent months making overtures to buy Mr. Nastasi’s building, because its unused development rights could effectively add several more stories to the proposed tower.
What quickly became clear was that they weren’t dealing with just any mechanic. Mr. Nastasi, a former racecar driver who immigrated to New York in his 20s, made a fortune in the 1980s and 1990s by converting imported sports cars to comply with stricter environmental standards in the United States.
He lives, with his girlfriend, Linda Killen, in a modest apartment with Mediterranean tile floors on the top floor of the building he bought in 1977, above a bank and an insurance company. But a few blocks away, in an industrial warehouse, he keeps a collection of nearly 30 exotic sports cars — mostly vintage Ferraris, Lamborghinis and Alfa Romeos from the 1970s and ’80s.
On a recent afternoon, while working on his Alfa Romeo Tipo 33 prototype, he wore a tucked T-shirt and shorts, socks with sandals, and glasses around his neck. Despite his collection, the only car he drives on the streets is a 2008 Toyota Tacoma pickup, with manual windows.
“Looking at him, you wouldn’t know he had $10,” said Ms. Killen, who first met him at a race in 1981. (He won. And he’s still competing in races.)
At one point, the developers offered $18 million to buy the building outright, the couple said, but Mr. Nastasi balked.
“I got no mortgage, I don’t owe nothing to nobody,” he said. “Why I should sell a gold mine?” Plus, he’s 15 minutes from LaGuardia airport. “I’m in the middle of the Earth.”
So he made a counteroffer to sell roughly 90,000 square feet of unused development rights to the developers, and he gets to keep his building. The deal closed late last year for an undisclosed sum, but Mr. Silvers said it was “multiples” of what was paid to Mr. Barba, because this property had significantly more development rights.
Of course, the couple will have to endure the dust and sounds of high-rise construction until about 2025, when the tower is slated for completion, but Mr. Nastasi is confident that sticking it out is the right choice.
“There’s a time you work for the money,” he said. “And there’s a time the money has to work for you.”
Research contributed by Alain Delaquérière
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