Why A Lower East Side Apartment Complex Turned Down $54M by the Forward

Why A Lower East Side Apartment Complex Turned Down $54M

The phone call informing Rob Kaliner that an old Lower East Side apartment complex had rejected his $54 million drove him out of his office and onto the sidewalk, where he started walking and didn’t stop.

“I did like 26,000 steps,” said Kaliner days later, still reeling from one of the most startling rejections in the whole florid history of New York City real estate. “My cardiologist told me to do 10,000. She would have been proud.”

Kaliner is the owner of the gutted shell of the Bialystoker Center for Nursing and Rehabilitation, an Art Deco landmark of the Jewish Lower East Side. A developer of luxury real estate, he wants to build two condos on either side of the Bialystoker. To make them as tall as possible, he offered $54 million to the Bialystoker’s neighbors, the residents of the Seward Park Cooperative, for their unused air rights.

The laws of capitalism, real estate, common sense, and gravity itself suggest that when a person offers you $54 million for air you don’t happen to be using, you take it. No one turns down good money to save a neighborhood, especially one that’s mostly gone already. But in the elevators and hallways of the Seward Park Co-op, subversive ideas began to circulate.

“The glass-tower change we’re considering is not inevitable,” read one letter slipped under apartment doors. “We are not passive bystanders.”

The Seward Park Co-op is a complex of four big redbrick towers built for workers in the 1950s, and now home to a frothy mix of young professionals and old-school Lower East Side Jews. Among the residents, Kaliner’s money almost started a civil war. In mid-June, when the air rights deal went up for a referendum, only 57% of the co-op voted in favor. The rules of the building required a two-thirds majority, so the $54 million stayed in Kaliner’s pocket.

“Who in their right minds would have ever thought that this thing wouldn’t pass?” Kaliner said the other day, standing outside his empty nursing home shortly after the vote, aviators hanging from the unbuttoned neck of his untucked white button-down.

The consensus up and down Grand Street had been that Kaliner would obviously win his air rights. The opposite outcome was unimaginable: A middle-income apartment complex in a gentrifying neighborhood deliberating long and hard before extending a long middle finger to a developer offering them ungodly amount of money.

In New York City, where development is an irresistible force that barrels through neighborhoods, leaving glass towers and renovated luxury rentals with new stainless steel kitchen appliances in its wake, such a rejection stands an insult to logic and reason. But on the Lower East Side, it might be something else: Evidence that amid all the shiny condos, something of old neighborhood is still hanging on.

The Flood

The northward vista from the corner of Clinton Street and Grand Street looks like a wash after a flash flood; everything recognizable swept away, with strange new objects dropped in out of nowhere. There are three new almost-completed buildings in the blocks between Grand Street and Delancey, and at least three more are already in process, all part of a mega-development known as Essex Crossing.

Essex Crossing isn’t so much changing the neighborhood as replacing the neighborhood. A corner of the city with a single supermarket and barely any restaurants is about to get a Trader Joe’s and a Target and a movie theater and a museum. There will be 1,000 new apartments, a new 24-story building on Delancey Street, a brand new skyline, and nearly a decade of construction.

For a generation, a triumvirate of Jewish power brokers worked to hold off development on the Essex Crossing site. The three men, State Assembly speaker Sheldon Silver, a nonprofit executive named William Rapfogel, and a building manager named Heshy Jacob, fought for years to oppose the construction of low income housing there. The men were old-school ward bosses with a power base among the Jewish stalwarts of the Seward Park Cooperative and its three sibling developments, known collectively as the Grand Street Co-ops.

“If you’re the person that somebody has a problem and he goes to [you] day and night, you take the time and effort to help them, then they think you’re in charge,” Jacob told the Forward in 2013. “They go to Willie, they go to Heshy, they go to Shelly.”

Built by trade unions in the 1950s, the Co-ops were home to the generation of middle-class Jews who stayed on the Lower East Side after its ghetto heyday had passed and the Yiddish-speaking masses moved away. The buildings came to symbolize an insular, parochial Jewishness, rooted in a half-remembered history of labor unions and socialist newspapers and Orthodox yeshivas.

As the co-ops privatized, allowing residents to buy and sell their apartments on the open market, and yuppies slowly bought out old-timers, the triumvirate’s influence began to erode. By 2013, as the Essex Crossing deal slowly solidified, Willy and Shelly had come out in favor of the new plan, which included a mix of low income and market-rate housing. Only Heshy held out.

When change came, however, it spared no one. Development on Essex Crossing plots came at the same time as an eerily coincidental neighborhood purge, in which Shelly got indicted, convicted, and then convicted again,Willy went to jail, and Heshy died.

Today, the whole neighborhood is a construction site. On the other side of the Seward Park Co-op, off to the south, a new 80-story condo blots the view of the Manhattan Bridge. Smaller condo projects dot the neighborhood, including one at the site of the old matzo factory and another in the old HIV/AIDS nursing home. Each block has its own ominous for sale signs, or newly-empty lots. (The Forward sold its historic headquarters, just across East Broadway from the Co-op, to a luxury condo developer in an earlier wave of gentrification a few decades ago. Today, building staff members wear the word “Forward” on the chests of their shirts, written in the font this newspaper used to use on its masthead.)

Amid all the new towers, Kaliner’s project at the Bialystoker is, as Kaliner tells it, just a blip. A pretty big blip, granted, but a blip all the same. To Kaliner, a glance around the neighborhood proved his point: Might as well work with me, because change is coming whether you like it or not.

“This is not the old Lower East Side anymore,” Kaliner announced, gesturing up and down Clinton Street, bordered on both sides by the Seward Park Co-op and ending at Essex Crossing. “Stand at the corner, you look to your right. What do you see? Target and Trader Joe’s. Do I need to say more?”

The Buzz

Dan Strum moved into the Seward Park Co-op in 2000. In 2004, he wrote an article for a building newsletter that got cancelled before the article ran, so he started his own website and he posted it there. A decade and a half later, his site, The Seward Park Buzz, is a busy ultra-local news website for the residents of the Seward Park Co-op’s four buildings.

It’s difficult to fathom an apartment complex that generates enough news to justify its own news website, but the Co-op is something more than just a large building. Over the decades, it’s developed a vicious political culture, with de facto parties, allegations of election fraud, barrages of political ads each campaign season, and deep currents of mistrust.

To explain it, Strum, who works in IT security, cites an Arthur C. Clarke line about combining bits of uranium and getting not a bigger bit of uranium, but rather “a hole half a mile across.” In the same way, Strum said, “when you get a community of 3,000 shareholders, you get something different than just a bigger co-op.”

Strum’s site tracks the long history of the air rights referendum back to April of 2016, when the co-cop’s board first told the shareholders that it had received an “expression of interest” from the owners of the Bialystoker. He has the first anonymous fliers opposing the deal distributed in May 2017, up through the barrage of signed and unsigned letters posted in the building in the weeks before the vote.

It was a debate that drew in hundreds of the Co-op’s residents. Tensions were high. Motivations were questioned. “There’s a lot of mistrust in our community,” Strum said. “I don’t know if that could be overcome.”

It was that very mistrust that led the shareholders, a number of years ago, to amend the building’s bylaws to require that any sale of air rights be approved by a two-thirds vote in a referendum of all the cooperators. Still, when the Bialystoker offer came through, it seemed obvious it would pass.

Bialystoker, built in 1929 by immigrants from the Polish town of the same name, had been the Co-op’s neighbor since the Co-op was built. Located at the intersection of Clinton and East Broadway, it looks more like a Masonic temple than a Jewish nursing home, with angular setbacks that ascend to a tower, and a stone symbols around the door representing the Twelve Tribes that look somehow occult. The nursing home closed in 2011 amid allegations of misconduct by the nursing home’s board, which had sold the ratty, squat office building next door to the board’s president. Following the intervention of the state Attorney General, the president returned the office building, and the board eventually sold it, along with Bialystoker itself, to Kaliner’s firm.

Last year, Kaliner knocked down the office building. Without it, the Bialystoker, its windows boarded, looks like the last dead tree in a clear-cut forest.

With the existing air rights, Kaliner could build two towers of 17 and 20 stories on either side of Bialystoker. With the purchase of the Co-op’s air rights, he could build the towers to 22 and 33 stories. Whatever happened, the towers would for the first time block air and light to certain apartments in the tower of the Co-op’s Building 2, which, like all of the Co-op buildings, is 20 stories tall. After months of negotiations, Kaliner offered the Co-op $53 million. The board voted unanimously to endorse the sale.

“Our board applied a very strict business rationale,” Strum said. “The board, to its credit, kept saying, ‘Give us more money.’ That was basically the guiding principle.”

Later, amid a lobbying campaign that included a free Shabbat kiddush lunch at a synagogue across the street, Kaliner goosed the offer. His company raised it a million dollars, to $54 million, with the last million earmarked to renovate the Co-op’s lobbies.

It was that $1 million that really ticked Elise Testa off.

The Lobbies

The Seward Park Cooperative is, in fact, famous for its lobbies. The main entrances to each of the buildings are relatively Spartan, aside from the massive socialist realist murals painted on the walls of each one by a Hungarian-American Jewish Marxist named Hugo Gellert. One of the Gellert murals depicts Abraham Lincoln, another Albert Einstein, another Franklin D. Roosevelt, and the last Thomas Jefferson. The great men are flanked by images of workers, mothers, broken swords and slaves in chains.

The lobbies have, in the years since privatization, repeatedly been a source of conflict among the cooperators. They are a symbol of the good and bad of the Co-op’s early history; the idealistic cooperative spirit, and the abiding resistance to change. The New York Times reported in 2003 that the board had considered covering the murals up on three separate occasions, the last time ending in a razor-thin preservationist victory that has kept them on display ever since, faded but visible.

So when Kaliner’s firm offered, on June 10, two days before the scheduled referendum, to throw in an extra $1 million specifically dedicated to the lobby, it really bothered a resident named Elisa Testa.

“That, for me was a particularly offensive strategy,” said Testa, who has lived in the building since 2008. “How dare he tell us how to spend our money?”

Testa’s apartment is in the tower directly affected by Kaliner’s project, and she had been part of the core group of organizers opposing the air rights sale from the start. But it was the $1 million for the lobby that she was still steamed about when we spoke on the phone a week after her side’s victory. “It was offensive because, in addition to erasing the history of that part of the Lower East Side by building these buildings that have nothing to do with it, he was giving us money to also erase the history of our own co-ops,” she said. “I think the desire for renovating the lobby is an aspiration to become more like any other building that has some cheesy, fancy furniture and some chandeliers.”

Not everyone is horrified by the idea of a modern lobby. Brett Leitner, a local activist who lives in the Co-op and supported the sale, doesn’t have much time for hand-wringing about yuppifying the place. “Having a lobby that literally hasn’t been touched since the year 1960?” he said. “I mean, please.”

Still, even the partisans of lobby renovation understand the conservative instinct. It’s hard to live in the Seward Park Co-op and not be sick of all the condos. “For many, the no vote was kind of a bulwark to stop and say, ‘We’re not going to succumb to every opportunity to redevelop each and every parcel of land,’” Leitner said. “I get that sentiment. I largely agree with that sentiment.”

No Winners

The most influential advocate in the complex of protesting the tide of luxury condos was a Margarett Jolly, a former president of the Co-op’s board who has lived in the building since 2003, and whose apartment is in the same tower as Testa’s. Jolly wasn’t one of the anti-sale organizers, but in early June she drafted a letter that was circulated among residents and posted, along with scores of others, on Strum’s site. In it, she argued that the residents of the Seward Park Co-op had a responsibility to make a statement.

“This moment is also a signal to our neighborhood and to our City,” Jolly wrote. “Our co-op is huge. We who call this our home have a considerable voice. What we choose to say responds not only to the proposed development project, but also what we say to those remote real estate interests that value our neighborhood simply in terms of profit.”

Over the phone a week after the vote, Jolly said that she wasn’t anti-development, per se, and that she supported the Essex Crossing project. But she said that she had watched Chelsea turn into “a non-place,” and didn’t want the same to happen to the Lower East Side. “It’s not anti-development no matter what no matter where,” Jolly said. “It’s [against] this particular type of bringing extremely wealthy people into a neighborhood that has a rich history and is trying to hold onto its roots as much as possible.”

Of course, while Kaliner will likely sell apartments in his co-op for millions of dollars, the Seward Park Co-op isn’t so cheap anymore, either. Plenty of old residents remain who paid a few thousand dollars for their apartments before privatization, but today, one-bedrooms list for as much as $1 million.

While battles on the Seward Park Co-op’s board often come down to disagreements between the old-timers and the post-privatization new arrivals, the fractures over the air rights issues were not nearly as neat. The residents haven’t formulated any unified theory about how the vote split.

The regular blocs were divided, Jolly said. Some of the old-timers wanted the financial relief that the $54 million would bring. Others, driven by longstanding distrust of the board, voted no. The new arrivals were split, too, Jolly said, between those who wanted to preserve the character of the neighborhood where they’d moved, and those who saw what the cash infusion could do for the building’s aging infrastructure.

Jolly recognized that Kaliner was going to build something, no matter how the vote turned out. But she said that she saw value in saying no, even if it would only limit, and not prevent, construction at the Bialystoker site.

“On one side the argument is, it’s just natural change and it’s inevitable,” Jolly said. “I think it’s a very sort of passive, victim-y stance that frightens me.”

Her letter was influential. It’s impossible to say what swayed the 9% of voters who made the difference between the sale going through and the sale failing, but her quixotic war cry against luxury condos and seems to have caught the imagination of the cooperators. On June 12, a firm called Elections America brought iPad voting machines into the co-op lobbies, and residents of 1,127 of the development’s 1,608 apartments cast ballots. As Strum reported in a detailed breakdown at the Seward Park Buzz, the air rights referendum fell 128 votes short of the two-third majority required for passage.

That’s when Rob Kaliner went for his long walk.

The Aftermath

Kaliner’s still going to build. He said so on June 19, just a week after the vote. He’s gone back to his architects, and is reevaluating his options. “I’m brushing off the old plans and we’re going to start again,” he said. He may build the two shorter towers, or he may build one large tower on one of the two plots. He hasn’t decided yet. He says he’s not going to sell the lot off to another developer.

“No,” he said. “We’re building.”

For the residents of the Seward Park Co-op, that means that they will still have a luxury condo or two popping up next door; that some of the cooperators will be losing their views; and that there will be no influx of $54 million in the development’s coffers.

“They will redevelop that land,” Leitner said. “I don’t see how that’s a victory. And in return, we get absolutely nothing.”

Some supporters of the sale aren’t giving up yet. A petition, circulated anonymously, calls for a re-vote. “WE DO NOT ACCEPT THAT THE MINORITY CAN CAUSE SUCH A HARDSHIP FOR THE MAJORITY,” its all-caps demand reads.

Even if the air rights deal is permanently defeated, it seems unlikely that the skirmishes over development within the co-op are over. A walk around the property’s perimeter reveals that the co-op owns a wealth of real estate assets, including an unsightly old office building and a strip of commercial storefronts that look positively dowdy across Grand Street from the gleaming new facades of Essex Crossing. Consumed with internal turmoil, the co-op has sat on these properties for decades, keeping them out of play amid the development gold rush. Maybe now, with the air right sales off the table, their time has come.

In the meantime, Kaliner is still bullish on his investment. “I’m a developer, so I look for emerging markets,” he said. “We were looking for sort of like the next frontier. So what do you look for? Do you see cool coffee shops opening? Are you near a train? Do you see cool ice cream places, sushi bars? So here, Ice & Vice opens,” he said, gesturing to the “experimental ice cream” chain across from the Bialystoker. “One of the hottest places.”

The Bialystoker site, in the lee of the Seward Park Co-op, checked all the boxes. Perhaps it’s just that 43% of the co-op’s shareholders don’t want to be someone else’s emerging market.

Contact Josh Nathan-Kazis at nathankazis@forward.com or on Twitter, @joshnathankazis

This story "Why A Lower East Side Co-op Complex Turned Down $54M" was written by Josh Nathan-Kazis.

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Josh Nathan-Kazis

Josh Nathan-Kazis

Josh Nathan-Kazis is a staff writer for the Forward. He covers charities and politics, and writes investigations and longform.

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