For ‘Ultimate Insider,’ It’s Sunnyside Up

A behind-the-scenes political insider could become the city’s next big development kingpin, if Mayor Michael Bloomberg pursues a plan to put a platform over the Sunnyside rail yards in Queens and open it up to developers.

Michael Bailkin, who is known as the best go-to guy if you’re a company looking for a tax break from the city, bought an option in February to get first dibs on about 43 acres of the rail yards closest to Long Island City.

That property has suddenly become much more valuable since the revelation in August of a confidential plan drawn up by architect Alex Garvin for Deputy Mayor Daniel Doctoroff, which envisions a new Battery Park City to be built on the site.

The option, purchased for an undisclosed price, means that Mr. Bailkin could hold such a plan hostage, leverage his stake for a cut of the action, or demand a high price to relinquish his rights should such a housing scheme come to pass.

A new neighborhood over the vast Sunnyside Yards, which is still actively used by railroads, is several steps—and years—away from fruition.

Mr. Bailkin’s option would kick in only after the Metropolitan Transportation Authority decided that it no longer needed the yards—and maybe not even then.

But Mr. Bailkin’s expertise lies in getting what he wants from government. He won $37 million worth of sales-tax exemptions and other incentives for Condé Nast and Reuters in the late 1990’s, in an effort to ensure that New York didn’t lose its title as media capital of the world to a place like Jersey City.

Four years ago, he won $26 million in tax incentives for Met Life to move to Long Island City, virtually next-door to the rail yards.

(Despite that effort, Met Life is now seriously considering moving back to midtown Manhattan without any tax incentives at all. So much for retention!)

“He is who you hire if you want a retention or development deal. He is kind of the ultimate insider,” one longtime New York City business figure said. “He has deep connections in city government that go way back.”

The option itself, according to transaction records filed with the city, permits Mr. Bailkin to buy an underlying option, held by a New Jersey property manager named Paul Marshall, on the Arch Street Yard on the southwestern triangle of the yards between 21st Street and Thomson Avenue, and Yard A, which runs in a thin strip on the north edge of the yards parallel to Jackson Avenue.

In an arrangement dating back to the days of the Penn Central Railroad, Mr. Marshall’s option applies only to the land and the first 22 feet of air rights, and he would have to buy the property at fair market value.

The city controls the air rights above that plane, but would likely need permission from below to drive supports for its platforms into the ground.

By controlling that narrow layer of land and air, Mr. Bailkin in essence controls any development above it—and the future possibilities of solving the city’s housing shortage.

“It’s a strategic position,” said Mr. Marshall, who bought the underlying option in 1987, when he was doing deals on what became the Queens West development nearby.

He said he did not know about Mr. Garvin’s report and the possibility of city-led development until told of it by The Observer.

“It is something that everyone has long thought of,” Mr. Marshall told The Observer. “It’s terrific. The city’s focus is always on Manhattan—that is every outer borough’s lament. There are things that you can’t do in Manhattan.”

Mr. Bailkin did not return telephone messages for comment.

An individual with knowledge of the transaction said, “There is no specific plan for the area. They are in a position to negotiate for the air rights.”

‘Let’s Deal With Bailkin’

Real-estate developers with legendary names like Lefrak and Zeckendorf have attempted to develop Sunnyside Yards before, with no luck. Mr. Bailkin may have more success if the city gets behind the effort, now that the residential market is booming.

“It is very complicated to say how this translates into real value,” said John Reinertsen, first vice president of CB Richard Ellis, a Long Island City real-estate broker who represented Mr. Marshall in the past. “There has got to be a directive to say, ‘We need to maximize the value of this thing. Let’s deal with Paul. Let’s deal with Bailkin.’”

A native of Philadelphia, Mr. Bailkin became an adventurer in his teen years, joining the Army before he was of age and later the circus before settling down to a bureaucrat’s life at a city economic-development agency.

Then one day, Donald Trump stopped by his office to ask for help in reviving the Commodore Hotel on East 42nd Street, now the Grand Hyatt. Mr. Bailkin fashioned a financial-aid package that helped institutionalize a whole way of doing business in New York City—real-estate tax breaks—that was just beginning to emerge.

Investigative reporter Wayne Barrett, in his biography Trump: The Deals and the Downfall, says that Mr. Bailkin “had already been chasing dreams for a lifetime” by that point. The night after the first approval, he sat on the steps of City Hall with his counterpart from the state, David Stadtmauer, the two men “savoring their triumph and sensing that the business incentive plan that had grown out of the Commodore deal might have also created an opportunity for them.”

The next day, Mr. Bailkin quit his job to set up a law firm dedicated to economic-development incentives, and Mr. Stadtmauer joined him a few months later. They have been in business together ever since.

The idea proposed by Mr. Garvin in his secret report was to build a platform above the train tracks, much like the one north of Grand Central Terminal or the one proposed for the Atlantic Yards project in central Brooklyn, on which high-rise towers with 18,700 to 35,300 apartments would be built. Mr. Bailkin’s position affects only one golf-club-shaped piece of the entire yards, although it would be developed first, according to Mr. Garvin, because it is closest to the city and four subway lines.

Mr. Doctoroff did not return messages placed through a spokeswoman and his office.

But the Sunnyside Yards plan is believed to be just part of the overall strategic plan that Mr. Doctoroff has been working on to ensure his boss’ legacy.

On Sept. 21, the Mayor formally announced the creation of the Office of Long-Term Planning and Sustainability, which will oversee the creation of the strategic plan and be headed by Rohit Aggarwala, a former McKinsey consultant and Columbia University graduate whose dissertation focused on postcolonial New York City. No deadline for the plan was announced, though it is already several months overdue after being announced last January.

It is unclear whether Mr. Bailkin knew about Mr. Garvin’s report when he purchased the option, although drafts of the Garvin report had been going back and forth for months before it was finalized in June, according to one source. Mr. Bailkin had purchased a short-term option on the option before, when he was also trying to develop an office building at nearby Queens Plaza. That deal fell through four years ago, when Mr. Bailkin’s partner, the Louis Dreyfus Property Group, backed out after Sept. 11.

Joe Conley, the chairman of the local community board, said that the economics are still not there, and that diverting the focus from undeveloped Long Island City parcels that are ready to go would only hurt those efforts.

“This is unfortunately going to divert attention from the real issue, which is how are we going to get Long Island City developed,” Mr. Conley told The Observer. “Most people will sit back and be the dreamers, but once you put pen to paper and make these things work, they look very futuristic.”

For ‘Ultimate Insider,’  It’s Sunnyside Up