New Willets Point Deal Will Cause More Delays

The city is close to a deal with The Related Cos. and a real estate firm controlled by the Mets' owners, to remake a 12-acre portion of Willets Point, Queens. The move that simultaneously advances and delays one of the administration's most complicated development initiatives - virtually ensures the project will not get off the ground before Mayor Bloomberg leaves office.

The proposal by Related and Sterling Equities for a retail and residential development in the shadow of CitiField involves zoning changes that require a new environmental impact study and City Council approval.

The study will take about a year to complete, making it likely that one of Mayor Michael Bloomberg's signature projects will not get off the ground before he leaves office in 20 months.

The city recently withdrew its bid to condemn land in Willets Point to clear way for development. Eminent domain is still possible, but the city will restart the process after the new plan is officially announced.

The city's goal is to get the environmental study and zoning amendment done before the mayor leaves office, which could prove challenging. The Bloomberg administration nevertheless insisted its plan to remake the so-called Iron Triangle into a retail, residential and entertainment district remains on course.

“We're very close to having a deal in place that will transform Willets Point into New York City's next great neighborhood and continue the historic progress we've already made there,” said a representative for Mr. Bloomberg.

It will also likely lead to a battle in the City Council, which would have to approve the zoning amendment even though a second land-use review will not be needed. Related has been in discussions about leasing space at a Brooklyn development to Wal-Mart Stores Inc. for several years, angering council members who oppose the retail giant's potential entry into the city and feel they were misled about whether a Wal-Mart store would be built there.
 

Regaining control over the Willets Point approval could give the council advantage to pressure Related to drop its dalliance with Wal-Mart. The council has rejected two Related projects—a mall at the Kingsbridge Armory and a BJ's Wholesale Club, mostly over concerns about workers' wages.

The challenges of Willets Point—a rundown, 61-acre swath of land in northeast Queens—have for decades bedeviled officials, including Robert Moses and Mayors Robert Wagner, Ed Koch and Rudy Giuliani.

In 2007, Mayor Bloomberg appeared to be on his way to a solution, calling the future of the area “very bright indeed.” However, the city's ambitious plan was based largely on the mid-decade boom, and the path to that future quickly developed Willets Point-size potholes.

The City Council approved the mayor's vision for Willets Point in 2008, just as the economy tanked. Residential projects in nearby Flushing—by all accounts a more vibrant neighborhood—struggled. Deals that required developers to pay prevailing wages to building service workers, use union construction workers and make 35% of housing “affordable” were difficult for developers to swallow in a down market.

Moreover, a gritty group of area business owners used legal maneuvers to throw the project off course. City officials found themselves without full control of the site, challenged in their quest for highway-ramp approvals and staring down a brutal financing environment. They divided the project into three stages to help it get started faster.

Even as selection of a developer for the first phase nears, questions remain. The redevelopment is complex, requiring environmental remediation, infrastructure upgrades and land acquisition.

The city controls 90% of the phase-one areas but has not ruled out using eminent domain to secure the remaining parcels, which would trigger opposition.

It has set aside $400 million for the project, of which about $100 million has already been spent on land acquisition.

Perhaps more significantly, the division of the project into stages raised doubts that it would work financially for developers. The first phase calls for up to 680,000 square feet of retail space, as many as 400 units of mixed-income housing, up to 387 hotel rooms and about two acres of open space.

None of the bids the city received conformed to what it asked for in its request for proposals. The Related/Sterling bid included residential, but sought to build more retail than was called for.

Two other joint proposals, by World Trade Center Developer Silverstein Properties and retail developer Taubman Centers Inc. and shopping center developer Macerich and residential developer AvalonBay, also strayed from the parameters outlined by the city.