SOURCE/NOTES
In several analyses by Freeman/Frazier Associates (FFA) on behalf of Shearith Israel’s Trustees, Jack Freeman shows a developer paying the same $12,347,000 for development rights to build 2, 4, 5, or 6 condos, comprising areas of 7,584; 12,575; 18,006; 21,798; 22,352; or 28,724 sq.ft..
He would have us believe that the use to which the rights are applied, the development, does not affect the price paid for the rights. For example, he provides an analysis showing the developer paying $12,347,000 for development rights for condos with a selling price of $11,940,000, even without incurring construction costs.
As an experienced real estate consultant, Freeman knows this to be false.
Implications: First, applying an artificial, inappropriate, high rights purchase price forces smaller, As-of-Right developments into unprofitability on paper. Second, the lack of (apparent) adequate AoR return is used to justify larger developments, using the same rights price, that appear profitable but require zoning waivers. In effect, the waivers, granted on the basis of false statements, create wealth to the applicant.
The analyses showing $12,347,000 are found in his letters to the BSA dated: 12
Aug 08**, 8 Jul 08, 17 Jun 08, 13 May 08.
Earlier analyses similarly applied even larger figures: $13,384,000 on 11 Mar 08
$14,816,000 on 21 Dec 07
$17,050,000 on 24 Oct 07
$18,944,000 on 6 Sep 07
Same property; same uses, same expert.
Freeman/Frazier Assoc cites its credentials saying “We are experienced in every step of the real estate development process”. See first page of
See Freeman letters dd 21 Dec’07, 11 March 08, Exhibits One and Two.
Freeman used an undeveloped space price of $625/sq.ft., derived by marking up allegedly similar
space from other New York developments, rather than its worth to this project. He got
$625 x 19,755 = $12,347,000. Should be a maximum of:
$625 x 17,845 = $11,153,125.
But see also “Rights Allocation, below.
MISREPRESENTATIONS
Click to see topics:
FFA derives the $12,347,000 price to be paid for development rights for residential condos from a building, “the sliver tower”, identified as an As-of-Right (no waivers) building. The statement is false; it is not an AoR building. It cannot be built because it violates a ban on tall skinny buildings. Freeman acts as though the Synagogue ‘owns’ the tower space, amounting to 19,755 sq.ft., which it has no right to, but charges a developer for it. Further, the architect's drawing shows the available residential area not as 19,755 sq.ft. as claimed by Freeman, but as 17,845 sq.ft.
The pricing is based on a fiction. In effect, the Synagogue is attempting to sell ‘land’ to which it does not have a right.
Implications: As long as an applicant for a zoning waiver can provide its own self-serving rights price rather than an objective, auditable, or negotiated figure from an unaffiliated third party, the procedings will be a sham, and may constitute criminal or civil fraud.
Shelly Friedman of Friedman and Gottbaum said about an enclosure
“Freeman Frazier concluded that due to the existing physical conditions on the Zoning Lot, including the need to address the Synagogue’s circulation problems and the need to replace and enlarge the functions in the Community House, there is not reasonable possibility that a financially feasible mixed-use building could be developed in strict confirmity with the Zoning Resolution”
Freeman Fazier said none of those things. The claim is a complete fabrication, intended to mislead the reader.
Implications: There is no indication that the BSA took note of or challenged this egregious misstatement. One assumes that the BSA was effectively misled, perhaps willingly.
Jack Freeman of Freeman Frazier stated The area [of 19,755 sq.ft.] is less than the residential area approved by the Landmarks Preservation Commission,
The LPC, a city agency, does not approve floor area. The statement is false, intended to place pressure on the BSA, another city agency.
The BSA requires zoning waiver applicants to provide figures for Equity and Return on Equity in their financial analysis. Instead, Jack Freeman presented figures for project expense, and return on project expense and labeled them as Investment and Return on Investment. This misleads the reader into thinking the Synagogue had provided the required information.
Implications: The BSA Commissioners were so anxious to approve the requested zoning waivers they ignored their own rules, as well as the obvious fiction. This is prima facie evidence of corruption, a situation ripe for investigation.
In response to the BSA’s question about why Freeman Frazier had not included rental income from an unaffiliated school in their financial analysis, Jack Freeman replied that the market rent for community facility use was provided to the Board in an earlier submission, according to the Resolution granting the requested waivers.
The Freeman statement is not only false, it doesn’t answer the Board’s question. See Community Facility Value, below for answer.
Implications: There is no evidence that BSA Commissioners or staff checked the claim or understood that they were swindled. The omission makes As-of-Right options appear less proftable when they are quite profitable, enabling the Synagogue to appear to justify waivers, and the BSA to grant them. It is another example of the BSA's failure to follow the law.
See “Statements in Support... ” dated 13 May 2008 and 8 July 2008.
Freeman letter of 17 June 2008.
Board of Standards and Appeals Application Instructions for condominiums, Item M (6).
Freeman letter, 12 August 2008, refering to his letter of 6 September 20007.
The Synagogue’s submissions to the NYC Board of Standards and Appeals have contained many misrepresentations and serious omissions. Here is a sample. (Pseudo footnotes are in the boxes on the right.)
In rationalizing the area used to determine residential condo rights price, Freeman explains that now part of the space is obtained from the right inherent in the New Building site and 10,321 sq.ft. from the adjacent parsonage.
Implications: It facilitates the Synagogue selling the same rights a second time because future transactions may not review this one. Because the BSA has based its waiver decision on ambiguous statements, the BSA becomes a party to them.
Available As-of-Right area defined in 28 March 2007 Freeman report. Freeman letter, 12 August 2008.
As of 11 March 2008 letter, Freeman continues to refer to the sliver tower as “as of right”
Community Facility Value (Market Rate)
Freeman concludes that community facility space would have to rent for $87/sq.ft. to break even on its development. He then identifies this as “not feasible”, asserting that the maximum rate possible would be $40/sq.ft.
An unaffiliated school is currently paying $156.85/sq.ft. for part time use of space in the old, inadequate community facility building. At the time he did the analysis, Freeman knew that it was incorrect. The relevant numbers were in the CSI submissions.
Using the 2006 rental rate for classroom space for the entire community facility produces a capitalized value of $44,935,284 according to figures supplied by Freeman. But in his letter of 24 October 2007, he stated that the community facility had no value.
Implications: Freeman's ignoring the Synagogue's own, relevent market price data, and making a false statement allows the Synagogue Trustees to hide the very favorable financials of the New House, and pretend that there is a hardship.
The failure to hold applicants responsible for their statements and the Board's complicity by accepting false statements, indicate the need for presentation under oath, in addition to the verification of truthfullness by an officer of the applicant. Prosecution under criminal fraud statues would also serve the public interest while reducing the BSA's workload.
Freeman letter dd 24 October 2007.
Current rented space is 2,818 sq.ft. per Friedman Gottbaum revised Statement of 13 August 2008. $442,000 paid by Beit Rabbin per 2006 IRS 990 report.
$442,000/2818 = $156.85/sq.ft.
$156.85/sq.ft x 20,054 sq.ft =
$3,145,470 annual rental, or
$44,935,284 capitalized value.