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Who Sacrifices Money To Uphold Their Principles In Real Estate?
January 2, 2010 by Neil · Leave a Comment
All too often, parties in a real estate transaction will quibble over an amount that pales in comparison to the purchase price. “It’s not the money. It’s the principle.” More specifically, it’s the principle that the other side not get the money. This same thinking applies in divorces and will disputes. Cold economic concerns give way to emotion.
In the following case, however, principle seems to be the motivator, plain and simple.
Forty-year-old Daniel Goldstein, his wife and daughter are among a handful of holdouts still living on several once-thriving urban blocks being cleared to make way for a new arena for the NBA’s Nets (Hat Tip: Canadian Press).
Goldstein’s family is the only one left in their nine-story condominium building. Everyone else sold out years ago when the team’s owner, the developer Bruce Ratner, offered nearly double what their homes were worth to try to get control of the site quickly.
Other owners have cleared out, too. The two biggest apartment buildings nearby have been vacant for some time. Several structures have been reduced to rubble.
A hardy few – the stray tenant here, the homeowner there – remain.
As Goldstein’s neighbours negotiated rich buyout deals, he ignored invitations to join the talks and instead became the lead spokesman for a neighbourhood group opposed to the arena plan.
Money wasn’t the issue. Nor did he have any burning love for the neighborhood – not initially, anyway. He only bought his place a few months before the arena project was announced.
He just didn’t like the idea of being pushed around.
“I made a commitment to myself that I wasn’t going to be forced to sell. … I wasn’t going to be pressured or bullied,” he said. “I didn’t know what that would mean. But I knew I was committing myself to it.”
Only now is the cost of defiance becoming clear.
After a six-year fight, the state has begun the final legal steps to seize the family’s condo using eminent domain law and hand it to Ratner’s company.
In November, Goldstein got a letter saying the state planned to pay him $510,000, about $80,000 less than what he paid in 2003.
That’s a fraction of what Ratner was offering years ago, and nowhere near what he needs to buy a comparable place in the same part of Brooklyn…
Goldstein still isn’t ready to concede defeat, but he isn’t blind either.
“We’ll have to find somewhere to live,” he said. “Look, we’re human and rational. We need to think about it now,” he said.
While perfect may be the enemy of good, good may be the enemy of mediocre in the case of Atlantic Yards.
Over time, many things that excited people about Atlantic Yards have disappeared.
Gehry was fired because his designs were too expensive. Plans for the towers and apartments have been put on hold because of the uncertainty in the real estate market.
The latest renderings of the arena show a conventional dome that will, at least for awhile, stand alone while the cleared blocks around it lay empty or are used as parking lots. Arena boosters promise that the project will, indeed, all get built, including units of affordable housing that will replace the inexpensive rental dwellings being torn down.
As readers of this blog know, Atlantic Yards project was supposed to provide 2,250 units of affordable public housing — the crux of the basis for eminent domain. Records released under the Freedom of Information Act, however, reveal that Forest City need only seek funding through subsidies for affordable housing. If the developer cannot secure this money, he is under no obligation to build the proposed number of units. There is no guarantee that the project will include any affordable housing.
This site and many other observers were stunned when the Court of Appeals recently ruled against Columbia University on an eminent domain matter that was factually indistinguishable from Atlantic Yards.
George Will recently posted this opinion piece on Atlantic Yards. It touches on many of the same themes covered here, only more articulately. It deserves reprinting and reading in its entirety:
Avaricious developers and governments twist the meaning of ‘blight’
By George F. Will
Sunday, January 3, 2010; A17BROOKLYN
On Aug. 27, 1776, British forces routed George Washington’s novice army in the Battle of Brooklyn, which was fought in fields and woods where today the battle of Prospect Heights is being fought. Americans’ liberty is again under assault, but this time by overbearing American governments.
The fight involves an especially egregious example of today’s eminent domain racket. The issue is a form of government theft that the Supreme Court encouraged with its worst decision of the past decade — one that probably will be radically revised in this one.
The Atlantic Yards site, where 10 subway lines and one railway line converge, is the center of the bustling Prospect Heights neighborhood of mostly small businesses and middle-class residences. Its energy and gentrification are reasons why 22 acres of this area — the World Trade Center site is only 16 acres — are coveted by Bruce Ratner, a politically connected developer collaborating with the avaricious city and state governments.
To seize the acres for Ratner’s use, government must claim that the area — which is desirable because it is vibrant — is “blighted.” The cognitive dissonance would embarrass Ratner and his collaborating politicians, had their cupidity not extinguished their sense of the absurd.
The condo of Daniel Goldstein, his wife and year-old daughter, which cost Goldstein $590,000 in 2003, is on part of the land where Ratner’s $4.9 billion project would be built — with the assistance of more than $1 billion in corporate welfare from the state and city governments, which are drowning in red ink. The Goldsteins’ building would not seem blighted to anyone not paid to see blight for the convenience of the payers. Which is of constitutional significance.
The Constitution says that government may not take private property other than for a “public use.” By “public,” the Framers, who did not scatter adjectives carelessly, meant uses — roads, bridges, parks, public buildings — directly owned or primarily used by the general public. In 1954, however, in a case concerning a crime- and infectious-disease-ridden section of Washington, D.C., the court expanded the notion of “public use” to include removing “blight.”
Since then, that term, untethered from serious social dangers, has become elastic in the service of avarice. In 2005, the court held, 5 to 4, that New London, Conn., could take the property of a middle-class neighborhood and transfer it to a corporate developer who would pay more taxes to the city government than the evicted homeowners had paid. Justice Sandra Day O’Connor, dissenting, warned that the consequences of the decision would “not be random.” The beneficiaries would be people “with disproportionate influence and power in the political process.”
Enter Ratner, with plans to build a huge complex of high-rise residences, commercial properties and a basketball arena for the NBA’s New Jersey Nets, which he bought. The city and state governments salivated at the thought of new revenue — perhaps chimerical — to waste. The problem was, and is, that people live and work where Ratner wants to build.
So blight had to be discovered. It duly was, by a firm that specializes in such discoveries. New York’s highest court ratified that finding, 6 to 1.
But a week later, Columbia University, which has plans for a $6.3 billion expansion in Manhattan, was stymied in its attempt to wield the life-shattering power of eminent domain against several local businesses that do not want to be shattered. A state court held, 3 to 2, that condemnation proceedings had been unconstitutional. The court said the blight designation was “mere sophistry”: “Even a cursory examination of the study reveals the idiocy of considering things like unpainted block walls or loose awning supports as evidence of a blighted neighborhood.” The idiocy was written on Columbia’s behalf by the same firm that Empire State Development Corp. hired to find blight at the Brooklyn site. Both Columbia and Ratner are operating in partnership with the ESDC, an arm of the state government. Both Columbia’s and Ratner’s attempts at seizing property are “pretextual takings,” using trumped-up accusations of blight to concoct a spurious “public use” for a preconceived project.
The Atlantic Yards nonsense was compounded when Ratner, to bolster his balance sheet after the real estate collapse, sold the Nets to a Russian billionaire, who stands to benefit from Ratner’s government-subsidized seizure of other people’s property. Those people can only hope that New York’s highest court will grant their appeal for reconsideration on the grounds that Ratner’s argument is about as good as the Nets are. Through Saturday, their record was 3-30.
