Developer Klein Makes a Big Bet on Waterfront

A waterfront lumberyard in Brooklyn’s Greenpoint section would seem an unlikely place for a Manhattan office developer to recover his fortune. But with his agreement to purchase a 23-acre parcel along the East River and NewtownCreekfromalocal land-owner,George Klein-whose real-estate fortunes have taken a public dive over the last severalyears, even as his political influencehas widened-plans to do exactly that.

WhileMr. Klein, who heads the Park Tower Group, won’t say what his plans are, he has been in informal talks with Greenpoint community groups who say that his dream for the banana-shaped stretch of waterfront property-if he can execute it-is just what they’ve been waiting for. According to several neighborhood sources, Mr. Klein wants to build a public esplanade along the river to rival the promenade in Brooklyn Heights, promising dazzling views of the midtown skyline from a public plaza at the center of the property. Fanning out from the plaza, Mr. Klein imagines 10 blocks of residential towers, townhouse-style apartments and retail stores that will open out onto Greenpoint’s street grid and bring the waterfront back to the public.

Stephen Stulman, owner of the Lumber Exchange Terminal, which has occupied the site for some 80 years, also has had dreams of improving the Greenpoint waterfront, and he was pitching stories to the local media four years ago about an entertainment complex and park. But with development along the Brooklyn and Queens waterfronts stalled by politics and the vagaries of the real-estate market, the idea seemed like just another pipe dream.

Now, with the city pushing expanded ferry and water-taxi routes along the East River, and with Dan Doctoroff-creator of the city’s bid for the 2012 Olympic Games-sitting at Mayor Michael Bloomberg’s right hand as the deputy mayor for economic development, a new frontier has opened up in New York real estate. It’s roughly defined by Mr. Doctoroff’s still-imaginary “Olympic X” transportation plan: an axis formed by some 30 ferry routes traveling up and down the East River, and into the harbor and the Long Island Sound, crossing a high-speed rail service that would connect eastern Queens with Newark International Airport. With his recent purchase, Mr. Klein is right at the center of the action.

“We don’t have anything that we’ve gone public with,” said Elizabeth Counihan, an executive vice president at Mr. Klein’s Park Tower Group. (Through Ms. Counihan, Mr. Klein declined to comment for this story.) “We’re taking a look at what all our options are right now.”

Recently, options-at least in real estate-have been in short supply for Mr. Klein.

Unlike many of his peers, Mr. Klein does not have a family history in real estate. Raised a religious boy in Brooklyn, his family made its fortune as the founders of the Barton’s candy company. Mr. Klein made his connections in government early on, participating in one of the city’s first experiments in public-private partnerships when he developed the Con Edison and New York Telephone buildings in downtown Brooklyn. In 1981, the year after he made his play in Manhattan-parlaying a small Park Avenue site into a money-making glass-and-steel office building-his parents sold the candy company for $2.5 million, and the family has not looked back since.

In a way, Mr. Klein’s plans for Greenpoint represent his return to Brooklyn. But in other ways, he never left: His deep Orthodox roots have stayed with him to this day. He stuck with the Museum of Jewish Heritage through two real-estate downturns that seemed to threaten its very construction; when it came time to cut the ribbon on the museum in 1997, George Klein was standing alongside Manhattan District Attorney Robert Morgenthau and former Mayor Edward Koch to receive the plaudits for finally getting the thing built.

His hand in politics has been equally powerful. A go-to guy for Republicans eager to make inroads in the real-estate and conservative Jewish communities, Mr. Klein has given the maximum donation to a massive slate of Republican candidates over the years. As a result, he keeps company with the likes of Governor George Pataki, former Mayor Rudolph Giuliani, current Mayor Michael Bloomberg and even President Bush.

But none of this could protect him from the vagaries of Manhattan real estate.

In the mid-1990’s, just as the market was cycling out of a severe recession, Mr. Klein found himself squeezed out of many of the properties he had developed since entering the Manhattan real-estate game in 1980, with a speculative tower at 499 Park Avenue designed by I.M. Pei that paid off in spades. In 1995, Mr. Klein sold his interest in that property to Sumitomo Trust, which held the mortgage on the building. The following spring, Mitsubishi Trust sold the mortgage on another Klein property, 33 Maiden Lane, at a discount to another bank, and Park Tower Group lost its stake. In 1996, a last-minute deal with the group’s lenders saved its stake in 535 Madison Avenue when leases came up for tenants occupying 270,000 square feet in the building and the Park Tower Group was unable to cover its mortgage and offer the tenants competitive rents. That building and 65 East 55th Street are Mr. Klein’s last remaining claims to being a major player in the Manhattan real-estate market.

Mr. Klein has been able to keep some other properties by virtue of his political connections. He has been close to Mr. Koch and Mr. Giuliani, and he remains a conduit between Republican-leaning high-end donors and the G.O.P. Mr. Klein was a member of Mr. Bloom-berg’s transition team, and one of the fund-raisers willing to pay $15,000 to attend a dinner at Mr. Bloomberg’s Upper East Side mansion when he hosted Mr. Bush and Mr. Pataki.

In recent years, Mr. Klein has lost on many of his most ambitious gambles. He lost a bid to develop an office tower above the Port Authority Bus Terminal west of Times Square in 1998. In 1999, he lost a bid to develop the Con Edison site on the East River, just south of the United Nations.

But perhaps his most notable defeat of the late 1990’s was at the hands of real-estate rival Douglas Durst. More than 15 years after he got Prudential Insurance Co. to back his plan for four office towers in Times Square-to the tune of $2 billion-Mr. Klein was still clawing his way out from under 27 lawsuits challenging his right to develop the site. When he emerged from all the paperwork, the real-estate market had gone south and the city’s plans for the site were scaled back.

By 1996, Mr. Durst had won the right to build the only one of the four planned towers that stands today-4 Times Square-and had lined up Condé Nast as an anchor tenant.

Now Mr. Klein has a chance to make it up to Mr. Durst.

“It’s a good investment,” Mr. Durst said of the Greenpoint plan. “Especially with the new water-taxi routes.” In fact, Mr. Durst’s organization had taken a look at the site-but this time, Mr. Klein won out.

An Olympian Project

Critical to the site’s prospects is the city’s evolving plan to bid for the 2012 Summer Olympics. With a team of city planners led by Yale University professor Alex Garvin, who is now the chief planner for the agency nominally charged with overseeing the redevelopment of lower Manhattan, Mr. Doctoroff conceived massive transportation initiatives meant to link possible Olympic sites all over the city. While the games themselves are a decade away-assuming New York is the winning bidder-the city already is pushing to have elements of the plan operating by 2005, when the International Olympic Committee is slated to decide on a bidder. That means a significant number of the 30 ferry lines called for in the Olympic bid will be running in the next few years, and developers have taken note, seizing properties that had languished for years.

Funding was just arranged for a major park development along the waterfront in DUMBO; a site just south of Mr. Klein’s, near the border of Greenpoint and Williamsburg, is in the early planning stages for a mixed-use development to be built by loft king Joshua Gutman; and last month, tenants started moving into Avalon Riverview, the first of three sites scheduled to be built by AvalonBay at Queens West, a 74-acre, $2.3 billion proposed development on the East River waterfront at Hunters Point, just across Newtown Creek from Mr. Klein’s new property.

Mr. Klein is now playing with major developers on the waterfront. Queens West, which languished for some 15 years, is showing new signs of life. Conceived as a 19-building, 6,400-unit housing and retail complex, only two buildings stand; but in January of last year, LCOR, a Pennsylvania-based builder, was chosen to develop a 13 1¼2-acre parcel of the site for commercial space. In February of last year, Rockrose Development Corp. took possession of 21 3¼4 acres on the site. There, a $1 billion development plan calls for 3,000 apartment units in seven buildings.

Not only does Mr. Klein have the acreage to compete with any of these projects-he has political will behind him. Community groups are eyeing him with cautious optimism.

Christine Holowacz, president of Greenpoint Property Owners Inc., said the community would welcome anything that gave Greenpoint access to the waterfront, which the Stulmans’ lumberyards have blocked for as long as anyone can remember.

“We need to develop the East River waterfront-it’s the jewel of Brooklyn,” Ms. Holowacz said. “This is a community that is surrounded by water, yet there is no way for us to get to the water. It’s downright wrong.”

Adding that the local community board had recommended mixed-use, mixed-income development with a significant parks component, Ms. Holo-wacz said the community seemed ready to talk to Mr. Klein about his plans.

What’s more, Mr. Klein’s acres come with few strings attached: He made a private deal with a private owner, while Queens West developers will have to deal with that untidy trinity: the city, the state and the Port Authority.

On the other hand, that also means Mr. Klein will likely have to go it alone when it comes to financing his project-and that hasn’t been easy for him of late. Ms. Counihan of the Park Tower Group would not say how much money will change hands when Mr. Klein completes the deal on the Greenpoint property, and would not comment on Mr. Klein’s plans for financing the development.

But from now on, anyone who wants to develop on the Brooklyn waterfront will be competing with Mr. Klein. And when it comes to developing the city’s waterfront, competition is being taken as a good sign.

“I do think that we have a tremendous opportunity to reclaim the waterfront in Greenpoint and Williamsburg,” said David Yassky, the City Council member who represents the district where Mr. Klein’s new property is located. “I think housing on at least a portion of the waterfront makes a lot of sense.