Sun. Jul 3rd, 2022

Clay Grubb (Glen Lennox, Getty)

Clay Grubb (Glen Lennox, Getty)

Grubb Properties is betting $ 152 million on affordable housing in New York – and has nine months to dig foundations and qualify for 35 years and tens of thousands of dollars in tax breaks.

Charlotte, North Carolina, the developer, in its first foray into the city, lowered $ 89 million for a site in the financial district and $ 63 million for one in Long Island City. It aims to build 700 units of what it calls “essential housing” for people earning between 60 percent and 140 percent of the area’s median income.

Still, stubbornly high land prices, driven by luxury developers, will test whether Grubb’s brand of affordable housing, built on innovations from more suburbs, can be adapted to New York City. Time is of the essence: The city’s most generous property tax reduction program, known as 421a, or Affordable Housing NY, expires in June.

If and when legislators renew the tax cut, they are likely to add more affordable requirements for developers. Meanwhile, “construction costs are only rising,” Grubb’s vice president Paul O’Shaughnessy said in an interview.

Grubb knows a few tricks. It attracts investment, for example by buying office properties and putting apartment buildings on top of existing parking spaces. It is also efficient and offers only six floor plans for 6,000 of its housing units in nine states.

In addition, Grubb only needs to price 30 percent of its units in a narrower range of 70 percent to 130 percent of local median income to qualify for a 35-year property tax reduction.

“New York has a reputation for being rude and tumble-drying, but our partners have been very open about what we want to achieve,” O’Shaughnessy said. The affordable units will span 500 to 600 square feet, he said.

The $ 1.7 billion that the city forgets to lure affordable housing every year is its biggest tax expense. The program has been used by about a third of the city’s new stock of such homes since 2014, according to figures kept by the de Blasio administration. The city has built or preserved nearly two-thirds of the 300,000 affordable units that Mayor Bill de Blasio promised in 2026, according to the administration.

For Handel Architects’ Frank Fusaro, the architect of both Grubb projects, affordable prices have meant “stepping on the size of things” to reduce transient areas, such as hallways, and give common areas, including kitchens, more space. The FiDi site has been a Commercial Architect project for nearly a decade, according to Fusaro.

“Creating efficient space is not a radical idea, but designing a building envelope that allows for more tightness is still a challenge,” Fusaro said.

Grubb has become a kind of evangelist for affordable housing since CEO Clay Grubb published a book on the subject last year. Pink Stone Capital’s Richard Ohebshalom, who sold the 11,255-square-foot package in FiDi to Grubb, said he found the book a mix of “compassion with economic reality.” Ohebshalom will continue to be a partner in the project.

Rashid Walker of BRP Companies helped bring together Grubb’s development team in New York, said two people familiar with the deal. Axos Bank made $ 42 million available to finance the FiDi acquisition, and Fortress Property Group and Carmel Partners jointly kicked in $ 18 million, according to Grubb.

Grubb’s LIC website, acquired with Opportunity Zone funding, was one of the area’s most expensive square meters since the pandemic, said Dan Kaplan of CBRE, who, along with Elli Klapper, mediated the sale.

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