September 1st 2014
The Real Deal
An eroded relationship with City Hall and a weak GOP challenger have prompted the industry to double down on its support for the governor.
Those who thought that Gov. Andrew Cuomo’s cozy relationship with the real estate industry would suffer because of the recent allegations that he overstepped in his dealings with an anti-corruption panel should think again.
In late July, one day after the release of a damning news report that accused the governor of directing the Moreland Commission to stop investigating his real estate ties, some of the industry’s biggest names sent an unequivocal message of support. In a 24-hour period, they and other business leaders opened their checkbooks to the tune of $329,950 for his campaign — among the largest single-day hauls in this entire election cycle.
Individuals tied to the real estate developer and investor Fisher Brothers shelled out $40,000 for Cuomo, while an entity sharing an address with Vornado Realty Trust gave $25,000, according to state campaign finance filings. Top brokers also ponied up — Cushman & Wakefield’s Bruce Mosler gave $10,000, while Newmark Grubb Knight Frank’s Brian Waterman and Mark Weiss each gave $5,000.
Conventional political wisdom would suggest that even the hint of a scandal should have sent Cuomo’s supporters underground, at least for a while. But with Cuomo’s gargantuan lead over Republican challenger Rob Astorino (see related story) and with a less-than-stellar relationship with Mayor Bill de Blasio, industry players have been doubling down on Cuomo.
“Short of a major problem, Andrew will win by maybe 60 percent,” said billionaire businessman and real estate mogul John Catsimatidis, the chairman of oil, gas and real estate firm Red Apple Group and a big Cuomo supporter.
While the industry considered former Mayor Michael Bloomberg a strong ally, its relationship with City Hall has since eroded. Though the Real Estate Board of New York, the industry’s main lobbying group, has publicly established a working relationship with de Blasio, individual developers and brokers regularly express concerns about the mayor’s policies. The mayor, for example, unsettled developers by mandating, rather than incentivizing, that they include affordable housing in projects that need zoning approvals. He’s also spoken out against providing tax breaks for corporations to relocate or stay in New York, making commercial landlords anxious.
“They’re still feeling de Blasio out,” said Warburg Realty’s Jason Haber, “but with the governor, they know who their dance partner is.”
Cuomo, in fact, scored points with real estate players by extending the 421-a tax abatement bill that encourages affordable housing development, but also controversially benefited luxury projects such as Extell Development’s One57. De Blasio has publicly bashed making luxury developments eligible for the incentives.
While Cuomo and de Blasio are both Democrats, like many mayors and governors before them, their relationship is lukewarm at best. Neither of their offices returned calls for comment.
From the outset, Cuomo has capitalized on de Blasio’s lack of popularity with the real estate community. During the mayoral campaign, sources said, Cuomo used de Blasio’s stance against big business and real estate interests as leverage to strengthen his own relationships. During the primaries, when de Blasio promised voters a “reset” in the city’s relationship with developers, for example, Cuomo was meeting with many of these same developers to express his support. And a month after de Blasio’s primary-night victory speech in which he took a dig at Bill Rudin’s redevelopment of St. Vincent’s hospital, saying that he would change the dynamics of a market “in which luxury condos had replaced community hospitals,” Cuomo appointed Rudin to his Tax Relief Commission.
“Certainly the rhetoric of the mayoral campaign gave the governor an opportunity to solidify his reputation with the business community as a centrist political player,” said Kathryn Wylde, president of the influential pro-business group Partnership for New York City.
On Cuomo’s watch, the state, through programs such as Excelsior Jobs and Start-Up NY, has doled out financial incentives to attract new companies to New York and to dissuade existing businesses from fleeing to other states. Under Bloomberg, the city also provided large tax breaks for companies such as Fresh Direct. But de Blasio has said he would look to curb those breaks for wealthy corporations.
“The state is the only player in that game right now,” Wylde said, referring to the practice of incentivizing corporations, which she noted boosts demand for office space and benefits commercial landlords.
The sheriff of Albany
Cuomo has consolidated power more effectively than any of his recent predecessors, sources said. Former Gov. Eliot Spitzer, for example, came into office guns blazing, but then notoriously failed to win over the state legislature — even before his infamous sex scandal abruptly ended his tenure.
But Cuomo’s ability to line up political support isn’t solely attributed to his charm. Multiple real estate and political sources used the word “bully” to describe Cuomo’s negotiating style, echoing characterizations of Spitzer.
“He really is a fascinating political character — Citizen Kane-worthy,” said one source, who claimed he’d been pressured into donating to Cuomo several times. “He’s a king and has his minions, and they serve him.”
The perception of Cuomo as ruthless has been around since at least the 1980s, when he was working for his father’s gubernatorial campaign, and the press dubbed him the “prince of darkness” for his take-no-prisoners style.
Last July, Cuomo established the Moreland Commission to help him clean up the pervasive corruption in Albany and “investigate whatever they believe needs to be investigated.”
But in March, the governor abruptly disbanded the commission, saying its mission was complete.
This July, however, the New York Times dropped a political news bomb when it reported on the results of its three-month investigation, which found that Cuomo and his top aides routinely meddled with the commission’s work. Among other things, the Times said the governor helped ensure that a December report issued by the commission made no mention of REBNY’s political donations.
A spokesperson for REBNY told The Real Deal only that the trade group “cooperated with the commission’s investigation at all times and responded to the commission’s requests for information.”
Cuomo has defended himself, saying that his office merely offered advice and did not force the commission’s leaders to do anything, an account many of the commission’s members have backed.
But U.S. Attorney for the Southern District of New York Preet Bharara, who is picking up the commission’s investigations and is also looking into Cuomo’s alleged interference, has warned the governor that pushing commission members to make statements of support for him could constitute obstruction of justice.
Cuomo hired prominent white-collar criminal defense lawyer Elkan Abramowitz to defend his office in Bharara’s probe, according to news reports last month. The governor has said he will not comment on the commission because of the ongoing probe. Abramowitz did not respond to requests for comment.
Though it’s anybody’s guess what Bharara’s investigation will turn up, voters seem unfazed so far. A Quinnipiac University poll released late last month showed that 56 percent of voters surveyed supported Cuomo, while 28 percent backed Astorino.
Real estate titans, too, aren’t too concerned about Cuomo’s chances, and have backed him up with their immense wealth. Thanks in large part to them, Cuomo has about $35 million in his campaign war chest (see related story) compared with Astorino’s modest $2.4 million.
“Businessmen, we’re pragmatic,” said Jim Wacht, the president of commercial brokerage Lee & Associates NYC and a Cuomo supporter. “We want people who are effective at what they do. Every politician who is effective is an arm-twister.”
The industry is, unsurprisingly, more worried about policies coming out of City Hall than the New York State Capitol.
Real estate leaders are more focused on issues under de Blasio’s purview such as property taxes and crime, several brokers said, adding that confidence in the governor is high.
Along with 421-a abatements and corporate tax incentives, de Blasio and Cuomo have been at odds on other real estate issues, too, including a long-debated and under-construction marine waste transfer station on the Upper East Side. The station is designed to reduce the amount of Manhattan’s trash hauled to other boroughs for processing — a move de Blasio emphatically supports, saying every borough should “handle its fair share of the waste we all create.”
But Cuomo’s father, former New York Gov. Mario Cuomo, who lives in Sutton Place, recently joined the opposition to the station. If plans for the station fall through, it would be a boon to Leonard Litwin’s Glenwood Management, which has an empire of rental apartments in the neighborhood. Glenwood is by far the younger Cuomo’s greatest financial supporter, donating over $1 million to his campaign since 2011.
To be sure, some of the mayor’s recent moves have gone over well with the industry. One of de Blasio’s signature issues, a blueprint to create 200,000 units of affordable housing, has received high marks.
“The housing plan did not contain a lot of details,” one top executive at a major New York City–based developer said, “but overall it was an extremely bold statement that bucked the conventional wisdom that new development raises costs. The mayor is looking to build our way out of the affordability crisis, and that’s good for us.”
Conversely, Cuomo, to secure the crucial support of the pro-labor Working Families Party, had to move somewhat to the left, Wylde said. He’s vowed, for example, to fight for Democratic control of the state senate and to push for an increase of the minimum wage.
And de Blasio and Cuomo do depend on each other politically. In April, de Blasio and the governor stood side-by-side in Albany to announce state legislation providing tax relief to city homeowners impacted by Hurricane Sandy.
“Now, [Cuomo and de Blasio] are working together in reinforcing each other in very public ways,” Wylde said.
A departing spin doctor
In addition to the industry’s reset relationship with City Hall, it is also on the brink of losing REBNY president Steven Spinola, who is stepping down next year.
For nearly three decades, Spinola has been the industry’s primary cheerleader and garnered serious influence and respect in Albany, including with Cuomo, sources said. Though he will still be involved with the organization as a consultant, his departure leaves a question mark for the industry.
“Right now we have no idea who his successor is going to be,” said Wacht. “He or she will have very, very big shoes to fill.”
But the vast sums of cash REBNY and its associates invest on the political scene — which according to good-government group Common Cause New York has totaled more than $44 million in state and local races since 2005 — should help Spinola’s successor quickly find his footing with Cuomo.
Singer-songwriter legend Billy Joel put it this way in a song he performed at a $50,000-a-head December fundraiser for Cuomo: “If you run for governor, don’t be too concerned. Find a bunch of millionaires with lots of cash to burn.”
And if the Republicans lose control of the state senate, which real estate operators are ever fearful about, Cuomo will have even more sway.
In that case, Wylde said, “the governor will be the only defense the real estate industry has.”