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City Open to Selling Avenue D Lot to Developer

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The area outlined in orange, a total of six lots, is slated for redevelopment as a luxury rental building called Alphabet Plaza.

We have a follow-up on “Alphabet Plaza,” the 12-story residential and commercial building being planned at East 2nd Street and Avenue D.  Last week, the Real Deal reported that Queens-based Kahen Properties is preparing to start construction on the project within the next couple of months.

The plan is similar to one floated in 2010 by beer mogul Simon Bergson, who owned several empty lots along East 2nd Street. But according to the report, the project “did not come to fruition,” and he agreed to sell the parcels to Kahen for $21 million.

There is a key difference, however. Bergson’s project, known as the “Houston Dee,” would have utilized his property as well as an adjacent lot owned by the city. The parcel, labeled lot 49 on the map you see above, is located at 302 East 2nd Street.

The Houston Dee was approved by Community Board 3, the City Planning Commission and the City Council.  This process (ULURP), required anytime city-controlled property changes hands, gave the community a small amount of leverage.  CB3 asked and the developer agreed, for example, to close a proposed rooftop deck at 10 p.m. every night and to hire local construction workers.  The Department of Housing Preservation and Development (HPD), which managed the vacant property, touted the proposal as good for the Lower East Side, since it would result in the creation of 34 affordable apartments.

For whatever reason, the new developer decided not to incorporate the city lot. Eric Bederman, HPD spokesman, confirmed yesterday that the agency still controls the 5300 square foot parcel. He added, that the city would “definitely be open to starting a conversation with the owner regarding the inclusion of our lot as part of a plan to develop affordable housing at the site.”

The previous plan, incorporating the city parcel, would have resulted in just seven additional affordable units than the current proposal.   But from the community board’s perspective there’s a drawback to the new scenario. Kahen, proceeding with a project on a privately owned site, has no obligation to honor the agreement CB3 worked out with Bergson.

And what about that empty lot the city still owns? In theory, HPD could still build affordable apartments on the parcel. But in practical terms, it will be much more difficult to finance as a stand-alone building not associated with a larger market-rate project.  For this reason, it’s not very hard to understand why the city is interested in making a deal with Kahen.


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