Inside Third & Bond: The Second-Chance Sprint

Join us now for Week 2 of the Hudson Companies’ blog about its purchase and development of the 111 Third Street in Gowanus.

Last week, we told you that despite our bid, the owners of the Third & Bond development site signed a contract with Developer #1. But that wasn’t the end of the story: we learned months later that the contract hadn’t yet closed.

This spring, 8 months after our initial bid, the phone rang. Ken Freeman of Massey Knakal suggested we meet with Developer #1, since they were hoping to assign the contract. Thus began a process of shuttle diplomacy among the Seller (Vitanzas), Buyer (Developer #1) and Assignee (Hudson). Usually, these contractual issues can take a long time to resolve. Who pays for what, how much time would Hudson get to close, how much time could the Vitanzas have to move, etc. But thanks to a hugely important deadline, all the issues were quickly resolved.

The property tax laws, referred to as the 421-a program, were due to change by year’s end. Under the program, the project would be eligible for a 15-year tax exemption, allowing the buyers to save tremendously on their initial taxes. But the City Council was working to pass a law that would, among other things, exclude Carroll Gardens/Gowanus from the tax exemption. The new law meant we had to start construction by December 28, 2007.

And before we could start construction, we had to get a demo permit, demo the existing buildings, excavate, design the project and get a new building permit. A process that could easily take over a year in normal circumstances. To get it all done between May and December would be a sprint.

Seller, Buyer & Assignee all knew…

…that without the tax exemption, the future condos would not sell for as much money, and by extension, the land would not be worth as much. For the Seller & Buyer to recoup their investment meant they were as tied to the December deadline as we were.

Usually, documents are signed at an attorney’s office. We were in a rush, so I (David) invited Developer #1 and one of the Vitanza brothers to my house to sign the documents one early morning. I also figured that there would be less of a chance that an angry blow-up between Buyer and Seller could kill the deal in the 11th hour if they felt the need to behave in front of my 3 young kids. Everyone behaved, we all signed. The site was ours to develop.

This week’s punch line: So as it turns out, the City Council and State Legislature extended the 421-a deadline until June 2008. The deadline that hung over all of us like a tax-exempt guillotine was helpful in creating a sense of urgency for everyone.

Next week: We’ll discuss the first important decisions we made.

Finally, in response to some of last week’s postings:

Guest 9:43 pm asked about the 20′ width. When we started, we just made some quickie assumptions, i.e., 9 houses x 20′ equals 180′ of frontage. Once we got into architectural planning, we realized that the corner should be a different dimension, and we decided to increase the width of the other houses to 21′. This meant not having 2 equal sized bedrooms but a master bedroom and a smaller bedroom. In future postings, we’ll discuss and post the floor plans we’re considering.

Guest 12:42 pm asked about cleaning up metals in the soil and sewage capacity. The soil, thankfully, is much cleaner than Whole Foods based on the prior uses of the site. We’ll be discussing sewer calculations with our friends at DEP in a later posting.

From our lawyers: This is not an offering. No offering can be made until an offering plan is filed with the Department of Law of the State of New York.”

Inside Third & Bond: Week 1 [Brownstoner]