The Recession Hops the 7 Train

Hours after Lehman Brothers said it would file for bankruptcy on the now infamous Sept. 15, 2008, Deputy Mayor Robert

Hours after Lehman Brothers said it would file for bankruptcy on the now infamous Sept. 15, 2008, Deputy Mayor Robert Lieber—a former Lehman executive himself—professed an aggressive approach to the Bloomberg administration’s economic development agenda.

With a little over a year left in office, Mr. Lieber said during an interview in City Hall at the time, the administration would rapidly press forward on its projects, particularly Willets Point, the planned $3 billion housing and retail complex by the old Shea Stadium. He said he planned to bid out and award the site to a developer some time in 2009.

Of course, the world—and the political scene, with Mayor Bloomberg now bidding for a third term—has shifted dramatically. The administration has now revised its approach to the project, which would redevelop the long-neglected hub of auto repair shops and other industry. 

With an eye on the economy, the city is following a more gradual strategy at Willets Point than it once planned, according to officials involved. Rather than pick a developer to build out the entire project, as previously considered, the plans now call for the 61-acre site to be developed in three successive phases. The city plans to wait until the economy has sufficiently stabilized before bidding out the project to private developers—a bidding that could start in 2009 or later.

Such a revision comes as financial institutions have been loath to lend a dime to the real estate industry for more than six months now, stopping almost all large-scale development that did not have financing in place pre–Sept. 15. Taken with the broader decline in the economy, the city has had to reevaluate numerous projects in its portfolio, as developers and landlords have come back with pleas to renegotiate earlier deals. Some have been successful—Related Companies asked for, and was granted, added incentives for a Bronx retail project, according to the city—while others have scrapped their plans, as did Time Equities on a Brooklyn project.

With Willets, the city now is planning to start taking bids for design of about $150 million in infrastructure work later this month, and is prepared to bid out development of a portion of the site later this year, if the market should improve by then. That section would be the southwest corner of the site—which sits across the street from Citi Field and the No. 7 line—where a developer could build up to 2.5 million square feet of mostly housing and retail. The developer ultimately selected for that section would likely have an option on the second and third phases.

This would seem to give the city some room to breathe financially and put less weight on a single developer. Expensive acquisitions would not be necessary all at once.

“Given the state of the economy, the $150 million in the budget for off-site infrastructure, and the 5,300 permanent and 18,000 construction jobs it will allow us to create, will help set the table for development at a time that will coincide with economic recovery,” said Seth Pinsky, president of the city’s Economic Development Corporation, in a statement.

Whatever path the Bloomberg administration takes at Willets Point, it is bound to face a lengthy legal battle, as more than 50 property owners there have yet to reach deals with the city to buy their property. The others would likely face eminent domain if they do not sell, and many are vowing to fight back with lawsuits as long as they are able.

Willets Point United Against Eminent Domain, a group which includes numerous landowners in the area, last month filed a challenge to the city’s environmental review of the area, and has enlisted the successful environmental attorney Michael Gerrard.

“Let’s face reality,” said Jake Bono, a spokesman for and member of the group, “no one here is going anywhere.”

The Recession Hops the 7 Train