Saturday, June 6, 2015

Real Estate Deal Revelations In Scott Sherman’s New “Patience and Fortitude” About NYPL Central Library Plan Fight: Observer-Owning Kushner Family In At Outset of Donnell Sale

I am reading and now am almost at the conclusion of Scott Sherman’s new “Patience and Fortitude- Power, Real Estate, and the Fight to Save a Public Library.”  It’s about the fight to save the famed 42nd Street Central Reference Library from the NYPL “Central Library Plan” that would have also sold off the Mid-Manhattan and 34th Street Science, Industry and Business libraries.

The book’s official release date is a few days from now, but ordering directly from the publisher makes it available earlier, which is the way I got copies.

I am fascinated to see how Mr. Sherman ties it all up, although I already suspect that there will be a few threads left tantalizingly hanging.  The book deserves a thorough Noticing New York review, which I hope I will get around to soon.

In the meantime, the book produces some revelations in what I already have read.  One of them involves confirmation of something that was easy to suspect but was never before reported: The Kushner family that owns the New York Observer was in on the sale of the beloved Donnell Library from the outset.
Two November 7, 2007 NY Times stories about real estate deals that turned out to be connected
Why was that easy to suspect?  As reported previously by Noticing New York, on November 7, 2007 the New York Times published two stories that reported separately (even in two different sections of the newspaper) about two real estate deals that ultimately turned out to be connected: The New York Public Library’s announced sale of the Donnell Library and Jared Kushner’s purchase, for a record-setting amount (taken home by Tishman Speyer) of 666 Fifth Avenue.  Jared Kushner is the owner of the New York Observer.

In my previous NNY reporting on these tandem sales I asked: “Did somebody know when 666 was bought that there was other potential value in the building?”  Why? Because ultimately $30.825 million was paid to the owners of 666 Fifth Avenue for `air rights’ freeing the Donnell site developer from restrictions that would have limited what could be built there.

The purchase of 666 Fifth Avenue announced December 2006 occurred in January 2007, ten months before the announced sale of Donnell.  The Times reporting that November said it was the “first major foray into the Manhattan office market, the buyer, the Kushner Companies.”

Scott Sherman’s book reveals that in 2007:
[Marshall] Rose moved rapidly to dispose of the Donnell Library.  Two bidders emerged: The Kushner family, which owns many properties in Manhattan, and a subsidiary of the Bermuda-based Orient-Express company, which owned the abutting “21" Club.
When Citizens Defending Libraries (I as a co-founder of CDL was part of the interview team) interviewed NYPL Chief Operating Officer David Offensend about the NYPL’s library sales he was evasive about the bid process that wasn’t public so it isn’t a surprise that only these two bidders “emerged.”    It is interesting that behind the scenes, the Kushners, looking to make a second major foray into the market, apparently understood the connection and what it meant in terms of the transaction that would ultimately be structured.

Certainly others understood too, but that connection was not furnished publicly at the time Robin Pogrebin was reporting about the announced Donnell sale.  She was misled by the NYPL’s description of a very different transaction involving only an 11-story hotel, not a 50-story luxury tower in which the inclusion of a luxury hotel would be only a small part.

As the Kushner deal to acquire of 666 Fifth was solidified by the end of 2006 at a then suspiciously high price, it looks all the more likely that the Kushners knew of the likeliness of a Donnell sale somewhat earlier that year. . .

. . .  That, checked against the reporting in Scott Sherman’s book, seems to mean that the Kushners knew the outlines of the deal that was shaping up before the NYPL board knew about or approved it.  Notwithstanding, the Kushners were apparently taking significant action presuming they knew how things would unfold.

2006 seems to have been an interesting year for the Kushners.  Jared Kushner acquired the Observer in July 2006.  Also, as the Times reports, his father was released from prison:
Mr. Kushner’s father, Charles B. Kushner, is a company founder and a newsmaker in his own right. A major Democratic fund-raiser, Charles Kushner was convicted last year of 18 counts of tax evasion, witness tampering and illegal campaign donations. He was released from prison earlier this year.
Interesting thing about the owner of the Observer being involved in this deal?: It’s one more New York City news organ less likely to do investigative reporting about New York City library sell-offs. . .
At 53rd Street accross from MoMA, the 97,000 square foot Donnell on land from John D. Rockefeller out of stone that matched Rockefeller Center's
Mr. Sherman’s book has other revelations.  There are, for instance, revelations concerning the loss the NYPL suffered selling Donnell.   Noticing New York and Citizens Defending Libraries have previously made the point that Donnell was sold to net the NYPL less than $38 million.  It turns out the NYPL netted far less than that.  The NYPL collected a gross price of $59 million for the 97,000 square foot library, much of which had been recently renovated.  It is so far costing the NYPL at least $21 million to build the much smaller 28,000 square foot, largely bookless, largely underground library that will `replace' Donnell in 2015 or maybe 2016.

Additional losses must be subtracted.  The NYPL paid millions to professionals to tell them that its essentially stupid real estate transactions were the opposite of that.  That’s the way that you cover your ass when are doing something that you shouldn’t.

But, if the NYPL had tried to build a library that replaced Donnell full scale it would have lost money on the transaction even taking just these figures into account.

There is more information that will come out associated with the cost of removing the books from Donnell.
Books ready to be shipped off, disappearing from Donnell.  Many illions of books that were in Manhattan Libraries are not there anymore.  And there is substantial cost associated with not having them there.
Mr. Sherman’s book identifies some other costs that turned out to be huge in comparison to how little Donnell was sold for:
the outfitting of a temporary replacement library for the Donnell in a cramped space on 46th Street, which turned out to be a very costly proposition–  [NYPL President] LeClerc and Rose had inked a rental lease whose terms called for payment of $850,000 for the first year (with possible increases thereafter), but the Library also spent nearly $5 million to outfit that new temporary facility.
Ergo, even before recognizing that the NYPL would have suffered a net loss if it had to build a full-scale Donnell, the $5 million to outfit the temporary replacement means that the NYPL netted less than $33 million for selling the library and from that there needs to be further subtractions of the $850,000 annual rents for all the years since Donnell closed in spring of 2008.

Meanwhile, the penthouse apartment in the 50-story luxury tower replacing Donnell is on the market for $60 million.  Several weeks ago another single lower-level condo unit in the building, 43A, sold for $20,110,437.50.  There is also a 114 guest room luxury hotel in the tower and earlier this year Chinese investors made that hotel, according to the Wall Street Journal, “the most highly valued hotel in the U.S.” after agreeing to buy it for “more than $230 million. . .  .more than $2 million a room.”

Having checked via the index, I know that there is one thing that Mr. Sherman didn’t report.

He reported how NYPL COO David Offensend (now replaced- not reported by Sherman- by Iris Weinshall, Senator Schumer’s wife) was a key driver of the Donnell sale and NYPL real estate plans.  Some flatteringly refer to Offensend as a `mastermind' of the plans.

But Sherman did not report that while David Offensend was engaged in such plans at the NYPL his wife, Janet Offensend was named to the board of the Brooklyn Public Library where she was instrumental in the introduction of parallel plans for the sell-off and shrinkage of Brooklyn libraries, including a sale very closely modeled on, almost exactly duplicating, the sale of Donnell: The sale of the Brooklyn Heights Library,   Brooklyn’s central destination library in Downtown Brooklyn on Cadman Plaza at the corner of Tillary and Clinton.*
(* The sale of Donnell was sudden and secretive, but the first ever public hearing about the sale of a major New York City library will be held Wednesday, June 17th, about the proposed sale and shrinkage of the Brooklyn Heights library.) 
On the left the Grand Army Plaza Library.  On the right the Brooklyn Heights Library.  Both central destination Brooklyn libraries were designed by Francis Keally, former president of the Municipal Art Society when it was a vital organization

1 comment:

Toosin Beymen said...

NYPL has ordered 1 ( !!! ) copy of Scott Sherman's book “Patience and Fortitude: Power, Real Estate, and the Fight to Save a Public Library.” Not surprising I suppose if one takes a cynical point of view. In addition, I was prevented from placing a hold on the book and I get the message "This item is not available for request." Perhaps the 7 people ahead of me who where already queued up waiting for the book to come in were too many.
So I went to the publisher and bought it instead. Take a flying leap, Mr Marx and library "trustees". I'll read it in spite of your efforts.