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Sitt’s empty storefronts P. 9 | The List: Top private school endowments P. 12 | Garment District braces for alterations P. 14
NEW YORK BUSINESS®
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With millions in uncollected fines every year,
the city is cracking down on parking cheats
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CRAINS
MARCH 20 - 26, 2017 NEW YORK BUSINESS
FROM THE NEWSROOM | JEREMY SMERD | EDITOR
IN THIS ISSUE
What the judges said 4 AGENDA
5 IN CASE YOU MISSED IT
NEWS THESE DAYS is a commodity. Everyone seems to have
it (even if they are simply regurgitating other people’s re-
6 ASKED & ANSWERED
porting). Crain’s New York Business, however, is different. 7 POLITICS
Digital
Most of the stories we write cannot be found anywhere 8 WHO OWNS THE BLOCK startups are
what heals
else. That’s what makes us indispensable for anyone who 9 REAL ESTATE the city’s
owns, manages, invests in or works for a New York company. 10 HEALTH CARE
economy
If you don’t believe me, just ask the judges at the Society
11 VIEWPOINTS
of American Business Editors and Writers.
Last week SABEW announced that Crain’s won its top 12 THE LIST
“
journalism award for publications—print or online, daily FEATURES
or weekly—with a staff of 50 or fewer and was one of only 14 READY TO WHERE?
six news organizations in the country to receive four or These are stories
16 METER CHEATERS
more honors. That puts our newsroom of 18 journalists I haven’t read
in league with Bloomberg News publications, Fortune, The anywhere else, and
Wall Street Journal, the Associated Press and the Milwau-
kee Journal Sentinel. I thought they did
I hope you agree with the judges who awarded us an outstanding job
SABEW’s General Excellence honors: “The quality, range
20
and impact exhibited by Crain’s New York made it the un-
rivaled winner in this category.” As one judge put it, “These
are stories I haven’t read anywhere else, and I thought they did an outstanding job.”’
P.
Anthony Taccetta
Crain’s also received three honorable mentions. Senior reporter Aaron Elstein’s
scoop revealed how Donald Trump received the STAR tax break reserved for 20 GOTHAM GIGS
households making $500,000 or less. “Smart reporting resulted in Crain’s New York 21 SNAPS
Business breaking news on a topic that other news outlets were chasing,” the judges
22 FOR THE RECORD
wrote. “The coverage advanced the story of how billionaire Donald Trump got a tax
break intended for the middle class—and resulted in a piece that stands out for its 23 PHOTO FINISH
sharp but fair writing, and its engaged and approachable storytelling.” CORRECTIONS
Elstein and web producer Peter D’Amato shared honors for explanatory report- Clarence Norman Jr. acts as a consultant to the Crown
ing on scaffolds, kosher restaurants and a potentially lifesaving crane that is banned Heights Local Development Corp. and will not be
involved in a development with BFC Partners. “A
in New York. And contributor Jeff Koyen wrote “In search of the hot dog million- curious partnership,” published March 13, misat-
aire,” a story the judges said “shed light on an industry whose vendors seem to be on tributed these facts.
every street corner in New York, but whose business model was not widely known.”
I share this because I am proud of our accomplishments and because we as a
news organization owe a debt of gratitude to our readers. We are only as smart
as our sources, and many of you are the ones who give us the insight we need to
expertly report on issues of importance to the city’s economy. And, of course, your
subscription—an investment that should pay dividends—helps us keep the lights
on and our journalists busy. Thank you. ON THE COVER
PHOTO: BUCK ENNIS
CONFERENCE CALLOUT MAY 11 DIGITAL DISPATCHES
SARAH KAUSS THE SECRET Go to CrainsNewYork.com
TO GROWING FAST
READ Dr. Norbert Sander,
Join Crain’s and the founders of some
of New York’s fastest-growing companies,
who in 1974 became
the first and only New >
such as Sarah Kauss of S’well, Yorker to win the New
to discuss how to create conditions York City Marathon,
for rapid growth while maintaining died March 17. The
quality and retaining staff. founder and CEO of The
Armory Foundation in Washington Heights
NEW YORK was 74.
ATHLETIC CLUB
CrainsEvents@crainsnewyork.com ■ The owner of a Midtown apartment build-
ing on West 41st Street that once operated
as an illegal hotel agreed to settle millions
Vol. XXXIII, No. 12, March 20, 2017—Crain’s New York Business (ISSN 8756-789X) is published weekly, except for of dollars’ worth of outstanding violations
double issues the weeks of June 26, July 10, July 24, Aug. 7, Aug. 21 and Dec. 18, by Crain Communications Inc., 685 Third for $375,000.
Ave., New York, NY 10017. Periodicals postage paid at New York, NY, and additional mailing offices. Postmaster: Send
address changes to: Crain’s New York Business, Circulation Department, 1155 Gratiot Ave., Detroit, MI 48207-2912. ■ The feud between ex-lovers about who
For subscriber service: Call (877) 824-9379. Fax (313) 446-6777. $3.00 a copy, $99.95 one year, $179.95 two years. should control TransPerfect could be over
(GST No. 13676-0444-RT) ©Entire contents copyright 2017 by Crain Communications Inc. All rights reserved. soon. The mother of owner Phil Shawe has
promised to vote her 1% stake to give Liz
BUCK ENNIS
Elting a majority hold of the translation firm.
March 20, 2017 | CRAIN’S NEW YORK BUSINESS | 3
P003_CN_20170320.indd 3 3/17/2017 7:46:38 PM
AGENDA If the mayor fears Trump’s cuts,
why won’t he prepare for them?
WHAT’S NEW March 20, 2017
M
ayor Bill de Blasio’s voice was practically trembling at a
news conference he called last week to assail the fund-
ing cuts New York City is facing under President Don-
ald Trump’s spending plan. “It’s extraordinary how many
SHORTSIGHTED?
negative things have been packed into one budget,” the mayor said, enu- De Blasio has
merating the reductions that police, education, housing and other services announced no
contingency plans
would endure. “New York stands to lose so much.” should proposed
Whether Congress will approve a budget that so drastically shifts federal cuts come
to fruition.
spending to the military from just about everywhere else is an open ques-
tion. But de Blasio, by calling the media briefing and urging New Yorkers
to rise up in opposition, indicated he is taking the plan seriously. If that is count is projected to reach an all-time high by 2021. Bloomberg’s annual
true, he should also prepare for its consequences. ritual of having agency heads find savings of 2% to 3% (on the theory that
But he won’t. It is business as usual at the mayor’s budget office, which some positions outlive their usefulness and that practically any operation
is making no special effort to create contingency plans or set aside addi- can be more efficient) ended when de Blasio took office in 2014. After
tional reserves to offset cuts from Washington in the federal fiscal year objections from budget hawks, he did resume the agency cuts, but the last
that begins Oct. 1. “I don’t do hypotheticals,” de Blasio said when asked three rounds have been in the 1% range.
how he would cope if the cuts materialize. “We are going to fight.” The mayor’s budget director, Dean Fuleihan, was asked at an event
There’s no harm in fighting. Indeed, the last week how the city was preparing for the
city should fight for every last dollar it has large federal cuts about to be proposed. “Our
been getting from Washington—which
Getting ready for hypotheticals, as answer,” he said, “is ‘We cannot accept this.’
already is far less than we pay in taxes. But Bloomberg did before the recession, … Once the public understands [the impact],
protesting doesn’t pay any bills. is part of de Blasio’s job they will inform our elected officials, who
Getting ready for hypotheticals, as will make the right decisions. That’s not a
Mayor Michael Bloomberg did by socking Pollyannish view. I have great faith in the
away billions of tax dollars during the mid-2000s boom, is part of a may- American people.” That was Hillary Clinton’s campaign strategy.
or’s job. Bloomberg’s savings softened the blow when the recession hit. Deputy City Comptroller Preston Niblack, seated beside the budget
De Blasio enjoyed a surge in tax revenues as well and began replenishing director, took a more responsible view. “We’re going to take some cuts,” he
the city’s reserves, but he has not made many sacrifices on the spend- said. “There’s a lot of risk. It’s time for the agencies to look more at their
ing side—even growing the city’s workforce by 10% to 327,000. The head own operations and do a more significant scrub.” — THE EDITORS
FINE PRINT An unidentified buyer last week paid $49 million—2,600% above the pre-auction estimate—for an ancient Song Dynasty scroll depicting twisting dragons. The sale, one of the priciest ever for a work of Asian
art, was part of a Christie’s auction of Chinese relics from the Fujita Museum in Osaka, Japan, and a sign of the strength of Asian buyers. Christie’s sold $263 million worth of art that night, well above estimates.
BY GERALD SCHIFMAN
STATS AND THE CITY
25 WORDS OR LESS
WHERE THE ‘MANSIONS’ ARE
MAYOR BILL DE BLASIO wants the state to enact a “mansion tax”—a 2.5% surcharge on city
residential sales exceeding $2 million. Nearly all such sales are in Manhattan; the rest are
“I think this is
almost entirely in Brooklyn.
HOME SALES GREATER THAN $2 MILLION
7.8%
Portion of city home sales from 22.6%
the dog that 2014 through 2016 that would
have been taxed under the proposal
chases the car
85.6%
Manhattan’s portion of city “mansion”
sales during that three-year period
—Gov. Andrew Cuomo, on
congressional Republicans’ 4.2%
attempt to repeal and replace
600
Residential sales exceeding
the Affordable Care Act—which $2 million last year in the 0.3% 0.2% 0.1%
could cost New York $4.5 billion SoHo–TriBeCa–Little Italy area, the lyn ns nx nd
n
e ro la
tta
ok e
most in the city ro Qu
B Is
through 2020
ha
BLOOMBERG
B en
an
at
M
St
ADDICTED TO NUMBERS? GET A DAILY DOSE AT @STATSANDTHECITY SOURCE: New York City
Independent Budget Office
4 | CRAIN’S NEW YORK BUSINESS | March 20, 2017
P004_CN_20170320.indd 4 3/17/2017 7:46:58 PM
EDITOR IN CHIEF Rance Crain
CRAINS
AGENDA NEW YORK BUSINESS
ICYMI
publisher, vp Jill R. Kaplan
executive assistant
Devin Arroyo, 212.210.0701
EDITORIAL
editor Jeremy Smerd Don’t have Fios yet? You
won’t get it anytime soon
managing editor Brendan O’Connor
assistant managing editors Erik Engquist,
Jeanhee Kim, Robin D. Schatz
web editor Amanda Fung
C
copy desk chief Telisha Bryan
art director Carolyn McClain
OLUMBIA PROFESSOR UPMANU LALL has been
photographer Buck Ennis trying to get Fios “Triple Play” for his West 121st Street
senior reporters Joe Anuta, Aaron Elstein,
Matthew Flamm, Daniel Geiger brownstone ever since Verizon hooked up an apart-
reporters Rosa Goldensohn, ment building around the corner on Morningside Avenue. That
Jonathan LaMantia, Caroline Lewis
data reporter Gerald Schifman was six years ago.
web producer Peter D’Amato LOW SPEED: More than a million New Yorkers await Fios.
columnist Greg David
He was still trying as of last week. That was when the city
contributing editors Tom Acitelli, sued the telecommunications giant for failing to make its
Theresa Agovino, Erik Ipsen, Cara S. Trager
ADVERTISING
fiber-optic TV service available to every residence in the five boroughs. The 2008 franchise agreement gave Verizon
www.crainsnewyork.com/advertise a 2014 deadline. The company has made Fios accessible to 2.2 million households, but it still has 1.4 million to go.
advertising director Irene Bar-Am,
ibaram@crainsnewyork.com, The lawsuit, however, is unlikely to speed things up. Deploying the service is a major headache. Verizon counts
212.210.0133 more than 35,000 failed service requests and blames them on landlords who won’t let the company into their build-
senior account managers
Zita Doktor, Rob Pierce, Stuart Smilowitz, ings. The city says Verizon should tunnel under sidewalks to reach subscribers if it can’t run fiber behind neighboring
Debora Stein
sales coordinator Devin Arroyo,
buildings.
212-210-0701, darroyo@crainsnewyork.com Economic forces may be the biggest factor. The company doesn’t make a lot of money from Fios. Operating in-
ONLINE
general manager come for its wire line business, which includes Fios, came to a mere $40 million last year; for its wireless business, on
Rosemary Maggiore, 212.210.0237
rmaggiore@crainsnewyork.com
the other hand, it was close to $30 billion.
CUSTOM CONTENT Recently the city asked Verizon to complete the network by the end of next year—after Verizon said it couldn’t
director of custom content do so until 2025. Then in a March 10 letter, Verizon threatened to pull the plug on its New York television offerings
Patty Oppenheimer, 212.210.0711,
poppenheimer@crainsnewyork.com altogether. “As you know,” the company wrote, “Verizon has the option of opening negotiations for a renewal of the
multicultural sales manager Giovanni Perla,
gperla@crainsnewyork.com
[franchise] agreement in July. Unfortunately, the city’s intransigence does not create a favorable environment for
senior custom marketing manager such negotiations. We would urge the city not to make it impossible for Verizon to continue to provide New York
Sonia David, sdavid@crainsnewyork.com
EVENTS City residents with a competitive alternative to cable TV. ”
www.crainsnewyork.com/events Lall, meanwhile, is making do with Spectrum cable service, which he considers overpriced. When he checked on
director of conferences & events
Courtney Williams, 212.210.0257, his Fios request last week, Verizon said it still needed his landlord’s approval.
cwilliams@crainsnewyork.com
manager of conferences & events
“I am the landlord,” he said. “I told them that six months ago.” — MATTHEW FLAMM
Adrienne Yee, ayee@crainsnewyork.com
events coordinator Ashlee Schuppius,
aschuppius@crainsnewyork.com
Bull market DATA POINT to its perch as a leader among its peers,
AUDIENCE DEVELOPMENT
director of audience & content Wall Street bonuses rose 2%, to $23.9 will be returning to the orchestra she
partnership development Michael O’Connor, billion, in 2016, the first increase in NINETY-EIGHT PERCENT OF CITI led in the 1990s. The philharmonic
212.210.0738,
moconnor@crainsnewyork.com
three years. The average bonus was up BIKE TRIPS ARE SHORTER THAN has run at a deficit since its 2001–2002
REPRINTS
1%, to $138,210. Meanwhile, the indus- season, and its endowment is down to
reprint account executive Krista Bora, try earned $17 billion last year, its high- 45 MINUTES, AND NEARLY HALF $183 million from $210 million in 1999.
212.210.0750 est total in four years. ARE LESS THAN 10 MINUTES.
PRODUCTION Gateway in danger
production and pre-press director Gossip mag deal TEN OF CITI BIKE’S 614 KIOSKS President Donald Trump’s proposed
Simone Pryce
media services manager Nicole Spell The publisher of the National Enquir- ACCOUNT FOR 7% OF ALL RIDES. budget would eliminate a key infra-
SUBSCRIPTION CUSTOMER SERVICE
er and Star has acquired celebrity gos- structure grant program that was ex-
www.crainsnewyork.com/subscribe sip magazine Us Weekly from Wenner pected to be the largest funding source
customerservice@crainsnewyork.com Media for a reported $100 million. Us for the Hudson River tunnel project
877-824-9379 (in the U.S. and Canada).
$3.00 a copy for the print edition; or $99.95
accounted for 65% of Wenner’s $330 ‘Operation Sticky Fingers’ known as Gateway. The $25 billion
one year, $179.95 two years, for print million in revenue for the fiscal year that A dozen people were charged with steal- effort would increase passenger-train
subscriptions with digital access. ended in June. Last year Wenner sold a ing and reselling more than $12 million capacity between New Jersey and New
to contact the newsroom:
www.crainsnewyork.com/staff
49% stake in Rolling Stone to BandLab in high-end electronics and other mer- York and allow two aging tunnels to be
685 Third Ave., New York, NY 10017-4024 Technologies, a Singapore-based music chandise in what state Attorney General closed for repairs.
phone: 212.210.0100 fax: 212.210.0799 tech company. Eric Schneiderman called a “textbook
Entire contents ©copyright 2017 example” of organized retail crime. Au-
Crain Communications Inc. All rights Hudson Yards gets its first grocer thorities say it’s one of the largest busts
reserved. ©CityBusiness is a registered
trademark of MCP Inc., used under license Whole Foods has signed a of a retail-theft ring.
agreement. 60,000-square-foot lease at Brookfield
CRAIN COMMUNICATIONS INC. Office Property’s upcoming mixed- Ivanka drops gems
BOARD OF DIRECTORS use development, 5 Manhattan West. Ivanka Trump’s fashion brand has dis-
chairman Keith E. Crain
president Rance Crain The upscale chain of markets had been continued its fine jewelry line to focus
treasurer Mary Kay Crain, Cindi Crain eyeing the spot for about a year. Whole instead on costume jewelry. The move
senior executive vp, William Morrow Foods has nine locations in the city and comes on the heels of Nordstrom and
executive vp, director of strategic
operations Chris Crain
plans to open a lower-priced store, 365, other retailers’ decision to drop the
executive vp, director of corporate in Fort Greene, Brooklyn, next year. company’s products. The president’s Historic bar to reopen
operations K.C. Crain daughter maintains a financial interest
senior vp, group publisher David Klein The Campbell Apartment has
Off the hook in the brand but no longer holds a lead-
vp/production, manufacturing David Kamis dropped the last part of its name
chief financial officer Bob Recchia Mayor Bill de Blasio and his aides will ership position.
GETTY IMAGES, BUCK ENNIS
and will reopen as The Campbell in
chief information officer Anthony DiPonio not be prosecuted for their fundraising
A new tune May under new owner the Gerber
founder G.D. Crain Jr. [1885-1973] tactics and actions on behalf of donors,
Group. The Grand Central Termi-
chairman Mrs. G.D. Crain Jr. [1911-1996]
Manhattan prosecutors announced. The New York Philharmonic has
secretary Merrilee Crain [1942-2012] nal bar was once office space for
Ending a yearlong investigation, the au- tapped Deborah Borda to reinvigorate
thorities chastised the mayor but said it the struggling orchestra. Borda, who railroad tycoon John Campbell.
would be difficult to prove criminality. elevated the Los Angeles Philharmonic
March 20, 2017 | CRAIN’S NEW YORK BUSINESS | 5
P005_CN_20170320.indd 5 3/17/2017 7:47:24 PM
AGENDA ASKED & ANSWERED HOMELESSNESS
INTERVIEW BY JUDY MESSINA
MUZZY ROSENBLATT BOWERY RESIDENTS’ COMMITTEE
A
s city officials race to open shelters and induce
developers to build affordable housing, one non-
“
profit is forging its own way. Bowery Residents’
Committee, led by Muzzy Rosenblatt, is a home- Why not every
less services provider turned housing developer. In 2015 the
time you build
group broke ground on a building that will include a 200-bed
transitional shelter for single, working adults plus 135 units of a shelter, you
permanent affordable housing for New Yorkers with low incomes. also build
The $63 million project is expected to open on Landing Road in housing?
the South Bronx in the fall and is the first purpose-built shelter
to rise in the city in three decades.
You’re a fan of data. What data prompted this initiative?
The shelter system is built on the assumption that it is a turnover
system. But to have throughput, you need housing, and the drain
to housing was completely clogged. In our workforce program, we
DOSSIER
were seeing more and more people finding jobs, but in the shel-
WHO HE IS President and
ters that we run for the Department of Homeless Services, fewer CEO of the Bowery Residents’
people were moving out, and they were coming back at a higher Committee
rate. Historically, our recidivism was around 4%, but in 2014 the
BUDGET $74 million
rate went up dramatically to 20%. We had to find a way to help.
EMPLOYEES 824
Why be the developer? SALARY $295,000
We had an aha moment: We could build a 200-bed shelter, take AGE 51
the income that a private developer would have taken out as profit GREW UP Yorkville
and use it to leverage low-income housing.
RESIDES Forest Hills,
Queens
How did you sell the city on the cross-subsidy model?
It’s in the public interest to strengthen the financial condition of EDUCATION B.A. in
government, Wesleyan
nonprofits the city depends on rather than for-profits that provide
University; M.P.A., New York
no public benefit. It gives the city more control and so much more
University, Wagner Graduate
for the same money. The city said, “If we pay the same rent to you School of Public Service
that we would pay to a private developer, go find a site.”
SERVICE Before joining
BRC, Rosenblatt was acting
Can that model be scaled for more or larger projects? commissioner of the Department
It’s so replicable! We’re recapturing $400,000 of shelter surplus of Homeless Services under Mayor
and reinvesting it. That is $12 million over 30 years that would Rudy Giuliani.
have gone right out the window. If you created 2,000 beds, it LOCATION, LOCATION,
would generate 1,000 units of housing. Why not every time you LOCATION The Landing Road
build a shelter, you also build housing? residence is near a Metro-North station
and the West Fordham Road bus, and
What does it mean that this is a “purpose-built” shelter? walkable to the 1 train. “We don’t believe
BRC’s philosophy is to create communal space in shelters where poor people should be shunted to the
residents and staff interact with frequency and mutual respect. edges. [They] should be in thriving
The lockers and beds are integrated into the design; there are commercial districts with transportation.”
no gang bathrooms at the end of a corridor. Having central air PHILOSOPHY “Homelessness has existed
and heat shows that the place is for people to live in, not to be and will continue to exist in society. For the
warehoused. For people to become goal-oriented and believe in homeless person, it’s a crisis. Will we be smart
enough to take the long view, to recognize that
themselves, they need to believe that we believe in them—rather
we’re going to have this shelter for 30 years and
than how many beds we can shove into this space. let it be a better one?”
HIS 15 MINUTES In high school Rosenblatt
BUCK ENNIS
How did you convince the locals that a shelter would not be a liability?
sang “Free to Be Me” in the chorus with actress
It’s understandably a hard conversation. The Landing Road resi-
Cynthia Nixon.
dence is zoned for shelter and housing, but we still met with the
community board and local elected officials. We said, “We are
invested in the community, and we’re accessible and responsible.”
People appreciated that we came even though we didn’t have to
and were intrigued that we are creating something different.
You’re upending traditional models. Should more nonprofits do that?
We should expect nonprofits to be entrepreneurial, disruptive and
problem-solving. ■
6 | CRAIN’S NEW YORK BUSINESS | MARCH 20, 2017
P006_CN_20170320.indd 6 3/17/2017 4:01:43 PM
AGENDA POLITICS
City promises to fight for A FRIENDLY FACE:
federal funding. But how? Donovan, NYC’s
lone GOP Congress
member, might be
What to do when your mayor has no pull in D.C. BY ROSA GOLDENSOHN de Blasio’s only ally.
M
ayor Bill de Blasio vowed last week to “We will mobilize, and we will
fight federal budget cuts that would gut hold everyone associated with
security, housing and human-services this agenda accountable.”
programs in the city. He would be better Donovan called the counter
off letting others make that case in Washington. terrorism money “very nec-
The consensus of the city’s business and policy essary” along with heating
leaders is that the cuts in President Donald Trump’s assistance, meal deliveries and
preliminary 2018 budget must be opposed. After housing support.
all, the city stands to lose $190 million in counter- “People in the wintertime
terrorism funds, $140 million for schools and $370 need heat—it’s not a want; it’s a
million for public housing—just in the first year. The need,” he said. “People with low incomes need sub- and regional economies “so that Republicans from
proposal also jeopardizes the Gateway project, which sidies for their housing—it’s not a want; it’s a need. red, nonurban areas get it,” said Carol Kellermann,
includes a crucial rail tunnel between New York and And certainly New York City needs the resources to president of the Citizens Budget Commission. “For
New Jersey. protect our citizens from our enemies.” example, Gateway is critical to the entire East Coast,
But de Blasio is toxic in Republican-controlled Donovan said he would make that case to his Re- not just New York and New Jersey.” If one of the two
Washington and hardly has the ear of Trump, who publican colleagues. century-old Hudson River rail tunnels goes out of
recently deemed him the worst mayor in city histo- Observers said New York leaders should stress service, it would create a choke point in Amtrak’s only
ry. One veteran of New York and Washington politics ways in which cuts would affect members’ districts profitable corridor. ■
said Rep. Dan Donovan of Staten Island was “literally
the only Republican in Washington who will take de
Blasio’s call.”
Being the lone GOP member of the city’s congres-
sional delegation, Donovan said, “puts me in a very
powerful position” to prevent the reductions. “You’ll
see a lot of restoration,” he predicted.
The city can stave off the cuts by persuading Re-
publicans that they would hurt the region as well as
the country eco-
nomically and that
“If the electeds slashing programs
that serve voters
argue our case on will threaten their
the basis of morality political careers, ex-
or ideology, we will perts said.
Democrats “have
get smashed” limited political
sway in Washing-
—Kathryn Wylde, ton at the moment,
Partnership for NYC so they have to rely
on substantive ar-
guments and hope
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Fierce reaction last week signaled the political con-
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sequences to local lawmakers, according to New York–
based Democratic strategist Neal Kwatra, who has From The Princeton Review, September © 2016 TPR Education. All rights reserved. Used by
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orchestrated advocacy campaigns across the country. permission and protected by the Copyright Laws of the United States. The printing, copying,
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“The subtext is, if you are serious about these cuts,
we are deadly serious about our response,” he said.
Ad_ZarbOnLineMBA2017_Crains_A.indd 1 3/9/17 11:05 AM
March 20, 2017 | CRAIN’S NEW YORK BUSINESS | 7
P007_CN_20170320.indd 7 3/17/2017 7:59:57 PM
AGENDA WHO OWNS THE BLOCK
70-74 CORNER OF
GANSEVOORT ST.
Meatpacking District’s historic renovation
Two projects move ahead despite preservationists’ protests
BY TOM ACITELLI
T
he Landmarks Preservation Com-
mission on March 7 approved retailer
Restoration Hardware’s request to re- 22 LITTLE W. 12TH ST.
develop 55 Gansevoort St. into a 14- This six-floor, 74,478-
room guesthouse. The project will unfold square-foot commercial
building was one of sev-
just across from a block-long redevelop- 71 GANSEVOORT ST. eral that investor Wil-
ment slated to transform several buildings Romanoff Equities, a White Plains, liam Gottlieb amassed 10 AND 16 LITTLE W. 12TH ST.
that prolific New York investor William N.Y.–based investment and develop- in Manhattan before his
death in 1999. His grand- Investors Isabel Litterman and Fred
Gottlieb once owned and that his estate still ment firm headed by father-son duo Tate acquired these buildings for an
Michael and Darryl Romanoff, acquired nephew Neil Bender now
partly controls. owns the building. undisclosed sum in 1982. The pair are
this 3-story, 21,562-square-foot com- deceased now, but a limited partner-
The developments represent a thunder- mercial building for an undisclosed ship they formed in 2000 still owns both
clap of change for this long-designated his- sum in 2005. The company took a sites. The building at 16 Little W. 12th
$13.5 million mortgage on it in 2007. St. is a single-story, 2,970-square-foot
toric district, which has become a destina-
commercial space. The 6,130-square-
tion for high-end residential, hotel and retail foot commercial building at 10 Little W.
development. In 2003 the landmarks commission 12th St. has two apartments.
established the area from Washington to Hudson
streets and from West 15th to Horatio streets as
the Gansevoort Market Historic District. Preserva-
tionists have been staving off developers ever since.
The Gansevoort plans have been revised to ac-
commodate legal challenges and Planning Depart-
ment reviews. The Restoration Hardware project
had to drop the height of a rooftop addition and
add a fiberglass cornice around the redeveloped
building’s top to hide a
planned windscreen be- 46–74 GANSEVOORT ST.
fore the landmarks com- Gottlieb amassed these low-slung
mission would approve it. buildings before his death. His
grandnephew Bender now owns
Last June the com- them. A joint venture between
mission signed off on a Bender and Aurora Capital Asso-
scaled-back version of ciates, a privately held investment
firm in Manhattan, is redevelop- 55 GANSEVOORT ST.
the project across Gan- ing the block-long stretch into Delshah Capital, which investor Michael
sevoort. But a state Su- 50,000 square feet of retail and Shah founded in 2006, bought the 5-story,
preme Court judge in 80,000 square feet of boutique 23,282-square-foot commercial building
commercial space. The project for $15.6 million in 2012. In 2015 he
February ordered con-
will feature more than 500 square leased the entire building to Restoration
struction work halted feet of retail frontage. The asking Hardware, which has its flagship store
pending the outcome of a rents for the ground floor range around the corner at 9-19 Ninth Ave.
from $500 to $600 a square foot,
lawsuit filed by neighbor-
and the commercial office rents
hood group Save Gan- will likely be in the triple digits
sevoort, which contends per foot, according to Aurora.
the plans run afoul of the
historic district’s protections. 69 GANSEVOORT ST. 67 GANSEVOORT ST.
The developers expect the case to be resolved Delshah Capital bought this then-2-story, Architects Anne Fairfax and Richard Sam-
within the next 60 days. Excavation work contin- 2,950-square-foot property for $8.6 million in mons own the 3-story, 6,146-square-
GOOGLEMAPS.COM, AURORA CAPITAL ASSOCIATES
2012. The address has seen so many eateries foot commercial building. They bought
ues along the site, and the Gottlieb estate and co- come and go that foodie blog Eater once named it for $620,000 in 1997. The relatively
developer Aurora Capital Associates obtained $55 it one of New York’s 10 most cursed restaurant low price did not include legal fees and
million in financing last month. spaces. The property comes with enough air lump-sum payments to later remove
rights to build to 10,110 square feet, but no rent-controlled tenants from the build-
The project includes a three-level,10,000-square- development plans are filed with the Buildings ing, according to Fairfax.
foot Hermès store and a new location for Keith Mc- Department. The entire site was eventually con-
Nally’s Pastis restaurant, both to open in the first verted from restaurant to retail space. In mid-
2015 clothier Madewell leased it for 10 years.
quarter of next year. ■
8 | CRAIN’S NEW YORK BUSINESS | March 20, 2017
P008_CN_20170320.indd 8 3/17/2017 4:02:15 PM
REAL ESTATE
Retail vacancies
put the squeeze on Sitt
Foreclosure looms as Thor Equities looks to sell BY DANIEL GEIGER
R
eal estate investor Joseph Sitt has placed a Sitt signed a 20,000-square-foot
slew of Manhattan buildings up for sale, lease with Italian clothing label
potentially to raise hundreds of millions of Valentino, which was said to
dollars as he faces costly retail vacancies in have paid $3,000 per square foot
his sprawling portfolio. for the ground floor—a record at
The tenuous circumstances reflect the challenges the time. Because retail income
facing high-end stores in Manhattan as exorbitant drives so much of a property’s
rents, online competition and a drop in tourist spend- value along a shopping corridor
ing have forced retailers to pull back on brick-and- like Fifth Avenue, Sitt was able
mortar locations. to sell the building last year for
Last year retail vacancy rates reached a high of 31% $525 million, a gain of more
on Fifth Avenue between 42nd and 49th streets, and than 260%.
8 of the 11 Manhattan retail neighborhoods tracked
by real estate services firm Cushman & Wakefield saw Times have changed
between 0.6% and 8.2% increases in available space. Retail vacancies now blanket SITTING EMPTY: Sephora has vacated Sitt’s 597 Fifth Ave.
The slowdown has stoked speculation that landlords Fifth Avenue. Storefronts for the
who bet that retailers would pay princely sums for addresses 511, 522, 592 and 636 sit empty, and bro- corner of Fifth Avenue and West 43rd Street for $130
marquee locations could find themselves in finan- kers say more are opening up. Doll maker American million in 2012 and razed the properties with plans
cial distress. Girl will soon leave its home at 609, Spanish apparel to erect a residential tower. As the ultraluxury condo
“Sitt could have problems because he bought at brand Massimo Dutti is emptying a corner store at market softened, Sitt managed to sell the site, whose
prices no one else would pay,” said Brad Mendelson, a 698, high-end shoe company Stuart Weitzman is said address is 520 Fifth Ave., for nearly $270 million in
retail leasing broker at Colliers International. to be planning to exit 675 and menswear brand Erme- 2015, doubling his money.
Sitt is the founder of Thor Equities, whose world- negildo Zegna is expected to vacate 663. More space To raise cash, he wants to sell 10 properties in his
wide portfolio includes 160 properties worth a total of is open or available on East 57th Street, an offshoot of expansive Manhattan portfolio, but a deal he and a
more than $10 billion. The company did not respond the Fifth Avenue luxury retail market. “Luxury ten- partner recently made with San Francisco investment
to a request for comment. ants aren’t renting space at the moment,” said Colliers’ firm Shorenstein for 875 Washington St. in the Meat-
For months Sitt has tried to draw a high-paying Mendelson. “They’re licking their wounds and hoping packing District fell through. Sitt next plans to sell
tenant to the retail space at 597 Fifth Ave., which for the world to become a better place, businesswise.” 25 W. 39th St., a roughly 200,000-square-foot office
cosmetics company Sephora vacated March 19. He This is not the first time Sitt has faced changing building where Thor has its headquarters. He hopes
recently failed to strike a deal with chocolatier Godiva circumstances. He purchased three buildings on the to fetch at least $200 million. ■
for the 12-story, 70,000-square-foot commercial
property he bought for $108.5 million in 2011.
Without retail income, several sources say, the
building will not produce enough cash to cover its
debts, including a mezzanine loan with SL Green
Realty. That could give the lender the right to seize the
property, something it has done in the past against
delinquent borrowers.
Other properties in trouble
SL Green, one of the city’s largest landlords, also
has a mezzanine loan on 590 Fifth Ave., a 19-story,
100,000-square-foot office and retail building Thor
purchased for $90 million in 2007. Thor had planned
to convert the first and second floors from an AT&T
store and a two-level souvenir shop into a flagship
retail space for a major tenant. Unable to find a taker, Attend a one-day cyber risk governance and
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the company put the property on the market for $170
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Sitt’s 100,000 square feet of retail space at the base
of 530 Fifth Ave., an office building that occupies the IN PARTNERSHIP WITH
entire block between West 44th and West 45th streets,
is also struggling. Sitt and his partner, public real estate
company GGP, have been unable to fill a 50,000-square-
foot availability at the location. Without a tenant, the
owners have delayed a multimillion-dollar plan to
renovate the space, according to a source.
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The challenges Sitt faces on Fifth Avenue are a
BUCK ENNIS, GETTY IMAGES
sharp turnaround from seven years ago. In 2010 he
purchased a 20-story office and retail property at 693 2017 NEW YORK CITY SAN FRANCISCO CHICAGO PRIVATE EVENTS
Fifth Ave., known as the Takashimaya Building, for CYBER RESOLVE May 1 August 1 November 7 Upon Request
$143 million and kept the retail portion vacant for SEMINARS
three years, waiting until he could secure a lofty rent cybervista.net/executives
for the space. That deal materialized in 2013, when
March 20, 2017 | CRAIN’S NEW YORK BUSINESS | 9
P009_CN_20170320.indd 9 3/17/2017 3:43:20 PM
AGENDA HEALTH CARE
Digital health is helping
A PRIME LOCATION:
Ryan, founder and
chairman of Nomad
to fuel the city’s economy Health, sees New
York City as the
preferred hub for
Why 100 health care tech firms with nearly $1 billion in venture health startups.
funding are calling New York home BY JONATHAN LAMANTIA
K
evin Ryan, dubbed the God- illion-dollar valuations, such as Zoc-
b
father of NYC Tech by For- doc, Flatiron and Oscar.
tune, has founded a stable New York City–based digital health
of successful technology companies received $908 million in
startups, including online retailer Gilt venture funding last year, a nearly
and database company M ongoDB. But tenfold increase from 2010, when 15
these days he’s focusing on what might companies raised $93 million, accord-
seem like an unsexy business—tempo- ing to CB Insights data in the center’s Bowles, executive director of the cen- practices at NewYork-Presbyterian/
rary medical staffing—with Manhat- report. ter. Bowles recommends that the city Weill Cornell Medical Center.
tan startup Nomad Health, an online There are almost 100 city compa- help create a more centralized digital Nomad Health isn’t alone in its hir-
job marketplace for doctors. nies in the sector, with at least eight of health ecosystem by forming cam- ing spree. For example, Flatiron, the
“The reason digital health is the them employing 50 or more workers. puses with affordable office space and oncology data company, grew from
biggest opportunity for New York Their objectives range from optimiz- hosting networking events. 30 employees in May 2014 to 375 by
City is that 15 years ago, you would the end of last year, according to the
have said the city has talented people Good-paying jobs report.
but no successful technology compa- “The city needs to “The city needs to be looking at As companies age—Zocdoc is now
nies. Now people would laugh that be looking at where where we are creating good-paying 10 years old—their founders and se-
you’d move a company to Boston,” said jobs in the years ahead,” Bowles said. nior executives often break off to
Ryan, who sold advertising-tech start- we are creating good- “Jobs in restaurants, in retail and as create new companies. “The seminal
up DoubleClick Media for $1.1 billion home health aides have low-paying companies in the beginning are the
in 2005.
paying jobs” salaries.” Adams and Eves,” said Ryan.
The city has emerged as a major —Jonathan Bowles, executive director Health care jobs in the city are pro- What’s still unclear is whether New
hub for health care technology compa- of the Center for an Urban Future jected to grow 22.5% in the 10-year York’s health care unicorns will bring
nies because they can take advantage period through 2022, but many of returns to investors. Oscar, a health
of the area’s renowned academic med- those jobs will be low-paying ones in insurance company founded by Josh-
ical centers as potential investors and ing appointment scheduling (Zocdoc) home care. ua Kushner, Kevin Nazemi and Mario
testing grounds, according to a new to organizing data on cancer patients Nomad Health has 14 employees Schlosser, lost more than $200 million
report from the Center for an Urban (Flatiron). and has raised $4.85 million in financ- last year.
Future, a nonprofit research group. Given the industry’s growth po- ing. The company plans to nearly dou- “There’s still a lot of proving that
The city is second only to the San tential, digital health should be part ble its headcount by the end of the year needs to be done,” Bowles said, but the
Francisco Bay Area in terms of ven- of the mayor’s plan to create 100,000 following “explosive” growth in the sector has “already created thousands
ture capital investment in digital jobs that pay more than $50,000 a year number of users, said Dr. Alexi Nazem, of good-paying jobs. That’s a huge
health and is home to companies with during the next decade, said Jonathan the company’s chief executive, who benefit for the city’s economy.” ■
NYC Health & Hospitals loses De Blasio’s report analyzing the sys- to the latest rankings from The Com- Lenox Hill adopts telemedicine
$776M in first half of FY17 tem’s problems and potential solutions monwealth Fund. The report, released for critical care
showed 69% of H&H’s patients were this month, compares health access and
New York City Health & Hospitals re- either uninsured or Medicaid bene- quality measures between 2012 and Lenox Hill Hospital has started an elec-
ported a $776 million operating loss for ficiaries in 2014, with that percentage 2014 or 2013 and 2015, depending on tronic intensive care unit that allows
the first half of fiscal 2017, according to rising to 80% for emergency room vis- the data source. a single team to monitor critical-care
unaudited financial statements. its. Treating mostly Medicaid patients The state, which entered the top patients at seven Northwell Health
H&H is trying to stabilize its financ- is problematic because the insurance quartile for the first time, was among hospitals.
es and avoid a projected $1.8 billion program for the poor does not cover those that showed the most improve- Patients who would benefit from
budget deficit in fiscal 2020. the full cost of care. ment. It saw gains on eight of 15 pre- the new technology include those un-
But the public health system’s oper- A spokesman for H&H downplayed vention and treatment measures, and it dergoing treatment for a stroke, a brain
ating loss widened by 84.5% over 2015, the financial loss, citing the timing of jumped from No. 10 to No. 6 in health tumor or a brain bleed, said Dr. Bushra
when it lost $420.4 million. After in- government payments and accounting care equity rankings, which take into Mina, director of the medical ICU
vestment losses and interest expenses, rules that count noncash costs, such as account income and ethnicity. at Lenox Hill.
the system lost $842.6 million. depreciation. New York improved on only two of Mina said the hospital has two
Enrollment in MetroPlus, H&H’s The spokesman added that the sys- five measures in access and affordabili- critical-care physicians in the unit,
insurance arm, showed modest gains. tem is still on track to reduce the bud- ty, however. Notably, the share of adults including at least one specialist in
But the system’s efforts to increase the get gap by $770 million for the current who went without care because of cost neurointensive care. Northwell’s eICU
number of patients it serves is in jeopar- fiscal year by increasing revenue and over the course of a year dropped from team can monitor patients when the
dy following declines in utilization at its lowering costs. 15% in 2013 to 12% in 2015. doctor is out of the room, potentially
hospitals and outpatient clinics, Crain’s Stanley Brezenoff, H&H’s interim The report’s authors emphasized shaving minutes off the response time
reported in January. chief executive, is scheduled to appear that states that expanded Medicaid when a patient’s condition changes.
The results aren’t directly compa- before the City Council’s health com- access under the Affordable Care Act “It’s an extra safety layer,” Mina said.
rable to estimates prepared as part of mittee this week to offer testimony on showed stronger progress than states Northwell, which spent $250,000 to
Mayor Bill de Blasio’s turnaround plan the system’s finances. — J.L. that did not. implement the program at Lenox Hill,
for H&H. But expenses are growing “That puts the onus on people who has invested millions in the technology
faster than revenue—a bad sign for the State moves up would change the current law to be sure across the system, a Northwell spokes-
system’s finances, said Charles Brech- that the proposals they’re making will man said.
er, director of research at the Citizens
in national rankings maintain or accelerate that progress,” Northwell joins NewYork-Presby-
Budget Commission. New York came in No. 12 in the coun- said Dr. David Blumenthal, president terian, whose telestroke program lets
BUCK ENNIS
“That’s not how you close budget try in health system performance, of The Commonwealth Fund. specialists at its regional hospitals use
gaps,” he said. moving up from No. 20, according — CAROLINE LEWIS videoconferencing. —J.L.
10 | CRAIN’S NEW YORK BUSINESS | March 20, 2017
P010_CN_20170320.indd 10 3/17/2017 3:44:11 PMAGENDA VIEWPOINTS
Obamacare replacement
merits debate, not drama
Despite critics’ hyperbole, it doesn’t look disastrous for New York
THE GOP’S PROPOSED rather than a percentage of the costs. the extension gets a political boost. people had bought insurance on the
Affordable Care Act Through March 2021, Gov. Andrew Nearly half the money New York state’s exchange, a little less than two-
replacement would Cuomo says, New York would lose would lose in 2021 is because the thirds received a subsidy and the fed-
be nothing short of about $4.5 billion. In the last of those Republicans would eliminate the Essen- eral government’s total cost was about
“catastrophic” for the four years, the hit would be $2.4 billion. tial Plan, which provides zero-premium $400 million.
city’s public hospital The state’s annual health care spend- health care to people with incomes a bit Under the GOP plan, those subsidies
system and its low- too high to qualify for Medicaid. Only would be replaced by tax credits. Insur-
income patients, the New York and Minnesota take advan- ance for younger New Yorkers would
GREG DAVID system’s CEO says. New York could handle tage of that ACA feature, the likely become less expensive,
1.5
The changes to Med- the reduction in end of which accounts for a while older ones would pay
icaid would be “disastrous for patients
and could create a fiscal crisis for New Medicaid without a
third of the projected loss in
the next four years.
% much more. In addition, the
state would receive signifi-
York,” adds a top official of the state The switch to per-capita cant funds—how much isn’t
health care association. The insurance
fiscal crisis and without aid might not hurt New IMPACT GOP cuts known—to aid people with
market for individuals would sink into forcing anyone from York if the state keeps Med- would have on pre-existing conditions and
quicksand, according to the Commu- icaid growth below national NYS spending other costly medical issues.
nity Service Society of New York. the program health care inflation—which The Republican plan will
Though facts mean little to President Cuomo has done for several be bad for some people and
Donald Trump, opponents of the GOP years now. good for others. It isn’t immediately
plan should stick to them and put them ing now exceeds $50 billion, and Cuo- The bottom line: New York could clear what the balance will be, but the
in context. To wit: New York might not mo’s next budget totals more than handle the reduction in Medicaid with- impact will not be that large.
be the best example of the damage the $152 billion. The lost funds would be out a fiscal crisis and without forcing The Republican plan might be bad
Republican plan could do. 4% of health spending and 1.5% of all anyone from the program. No mas- for the country and even for New
Start with Medicaid. The Repub- spending. The “millionaires tax” exten- sive increase in the uninsured would York, but hyperbole just undermines a
licans’ proposal gradually trims the sion proposed by the governor is worth occur here. responsible debate on the issue. ■
amount sent to states that expanded the $4 billion per year, and because those The individual market is also more
program under Obamacare and then rich people would receive a big tax break complicated than the rhetoric sug- GREG DAVID blogs regularly at
provides a per-capita amount each year if the Affordable Care Act is repealed, gests. Through January, about 242,000 CrainsNewYork.com.
No to Whole Foods, ‘Citi Broke’ grassicpas.com
Why New York’s poor reject fancy grocers and bike sharing
RE “THE PSYCHOLOGY OF POVERTY” (From the and heels, conceivably ride against traffic
Newsroom, March 6): Perhaps you’ve
heard the cheeky slang for Whole
and get to work within 45 minutes? Or is
it more practical to take the train?
BE YOUR
Foods—“Whole Paycheck.” Or “Citi
Broke,” for the bike-share program.
Do poor communities need
Practically, do Fairway, Whole Foods
and other “department food stores” carry
the imported groceries that New York’s
BUSINESS BEST.
alternative transportation and chain global constituents actually consume?
grocery stores? People in wealthier Not always, and most often not at the
neighborhoods can take for granted prices these communities can afford.
services they don’t immediately need, Most of these neighborhoods that
like a Fairway with generous parking remain populated by non-gentrifiers
or a costly bike-share that poses more don’t need bicycles or new grocery
risks for seasoned commuters than stores. They need better opportunities
benefits. (And hey, not everyone in for economic advancement.
poverty is looking to combine their Until people in poor communities
workout routine with their commute.) reach an economic level to best
It’s a perversion of psychology to try to use these resources, they’ll remain
improve a community via the excesses underutilized, regardless of how much
symptomatic of wealthy neighborhoods. funding is poured into neighborhood
Well-intentioned services such development. The interpretation that
as Citi Bike do not represent social many “low-income New Yorkers see
mobility. The reality is that people in themselves entrenched in poverty” is too
poverty cannot (or wisely choose not simple. It seems more likely that without
to) budget $163 annually for a bicycle real, measurable economic advancement,
when a MetroCard is a basic necessity most low-income New Yorkers can’t
for crossing boroughs and eliminates willfully move up the economic ladder,
bike-share problems including luggage, but rather are forcefully shuffled off. The
docking, the 45-minute ride limit, and attitude described as “this is too nice for 488 Madison Avenue, 21st Floor
risking damage to personal and public the community” should be translated as New York, NY 10022 l 212.661.6166
property. Can a girl from Bed-Stuy “this is nice … for you.”
JERICHO, NY l RONKONKOMA, NY l WHITE PLAINS, NY l PARK RIDGE, NJ
making $35,000 to $45,000 annually in ZAMANIYA BANKOLE
a Midtown office, wearing a blouse, skirt Harlem
March 20, 2017 | CRAIN’S NEW YORK BUSINESS | 11
P011_CN_20170320.indd 11 3/17/2017 11:51:46 AMAGENDA THE LIST NYC’S LARGEST PRIVATE SCHOOL ENDOWMENTS
Ranked by endowment size in fiscal year 2015
12 | CRAIN’S NEW YORK BUSINESS | March 20, 2017
P012_CN_20170320.indd 12 3/17/2017 3:46:11 PMYou can also read
