Frustrated developers flee LI

By: David Winzelberg on January 13, 2012

HelmetThe grass really is greener on the other side of the street. That’s what Long Island developers are saying about current building opportunities off the Island, where other places have put out a welcome mat instead of giving their projects the cold shoulder.

Whether it’s long waits for approvals, expensive fees, NIMBYs or ever-changing public-benefit requirements, developers who are frustrated by the process here are finding it easier to build away from Long Island. And, they say, it represents a more certain return on investment.

The result is a loss of permanent and construction jobs, as well as fewer tax dollars for the local economy.

Mark Hamer, president of Harvest Real Estate Services in Jericho, said that before 2008, his company developed projects exclusively on Long Island, but that’s changed.

“About 50 percent of our investment in the last two years has been off Long Island,” Hamer said. “And I see that going further.”

When looking to do off-Island deals, most developers partner with or hire a local developer or builder with knowledge of the area. But even though that means sharing some of the profits, he said the certainty of getting something done more quickly in other places makes it more enticing for his investors looking for a safe bet.

“The return on investment is better because of time frames taken,” Hamer said. “The risks are dramatically reduced with time because the market doesn’t have time to change and there are no surprises.”

Harvest is currently developing a mixed-use project in Washington, D.C., multifamily housing in northern Virginia and suburban Philadelphia, and office buildings in Austin, Texas. Hamer said the approvals process takes a fraction of the time in most other municipalities than it does here. Because of that, his company will only invest in a Long Island development if it’s guaranteed to clear approvals.

“We’re getting more demanding in our contract negotiations,” Hamer said. “We want receipt of a building permit before we take that risk.”

Brad Blumenfeld

Brad Blumenfeld

For the Syosset-based Blumenfeld Development Group, Manhattan was the site of its most recently completed project, the 500,000-square-foot East River Plaza shopping center. BDG partnered with Forest City Ratner Cos. on the $500 million-plus project, which opened last year and brought the first Costco and Target stores to East Harlem.

“We realized years ago that getting things done in the city was quicker,” said BDG Vice President Brad Blumenfeld, mostly because they use a finite rulebook. “If you can paint within the lines you don’t have to go through a lengthy process.”

At least 50 percent of BDG’s development portfolio is now located off Long Island. The company that developed the Arches at Deer Park has built several retail properties in the outer boroughs and places like Port St. Lucie, Fla., where BDG has been building stores for Kohl’s, Home Depot and Wendy’s.

Blumenfeld said there is much more certainty about building in New York City and other states, where elected officials are on the same page as their planners and welcome investment in their area. He said many issues, like public-benefit packages and density, are moving targets in most of Long Island’s municipalities. But in other places, developers know what the deal entails from the start.

BDG has so far spent $20 million and has been waiting six years to get the green light from the Town of Brookhaven to build a mixed-use project of retail, entertainment and industrial on about 50 acres in Bellport.

Robert Coughlan

Robert Coughlan

Robert Coughlan, a principal of Tritec Real Estate in East Setauket, said his company waited 11 years to get final approval to start building a $50 million sewer line for the Brookhaven Technology Center in Yaphank, even though town officials thought it was a great idea.

Coughlan said the two years it took to get the OK for his company’s $100 million mixed-use redevelopment in downtown Patchogue was actually “refreshingly fast.”

But in contrast, it only took slightly longer to start building a massive $1 billion-plus, 420-acre mixed-use development now underway just 4 miles from Dulles Airport in Virginia. That plan includes 4 million square feet of office space, 450,000 square feet of retail, 1,400 rental apartments and 720 hotel rooms.

And Tritec is getting plenty of help from Virginia authorities for the project, including a state-built cloverleaf traffic interchange, a new sewer line and a new power substation.

In Patchogue, the village is being sued by a group of residents for approving the Tritec redevelopment, which will create 291 apartments over retail stores to replace the long-departed Sweezeys department store.

Coughlan said it took six months from application to shovel in the ground for the new $33 million, 141-unit apartment complex his company is building in Washington, D.C.

“They have a more centralized decision-making process,” Coughlan said of the other places he builds in. “There are fewer layers, more certainty and faster turnaround.”

Michael Polimeni

Michael Polimeni

BDG president Ed Blumenfeld said his firm has been invited to develop projects in Virginia and the Carolinas.

“They contacted us,” Blumenfeld said. “They said ‘We’ve seen the work that you’ve done. Can you do it here?’”

One Long Island developer went really far afield. Garden City-based Polimeni International has been building projects in Romania, Panama and Poland, where the company has developed nearly 2.5 million square feet of retail space and has another 5 million square feet in the pipeline. Polimeni now has 65 full-time employees in Warsaw and Gdynia, Poland.

Michael Polimeni, company vice president, said the wait to start a project is at least five times longer on Long Island than anywhere else the company builds. And, he said, there is resistance to development here, something the company rarely encounters off Long Island.

“There’s nothing to do here,” he said. “And when you find something to do here, the world wants to hang you for it.”

Polimeni, who travels to Poland for a week every month, added that property in some locales is not yet overvalued and available without land-use restrictions.

“There are codes and zoning in place, but a variance isn’t a nonstarter,” Polimeni said. “Here, it could be. That’s another four years I’ve got to tack on before I can ever see a return.”