Essex Crossing Keeps its Promises

6 min read

Reenergizing New York’s Lower East Side

After decades of broken promises, Essex Crossing is an attempt to make up for 40 years of lost time by providing a new home to some residents displaced by urban renewal. The initial building to open in the development will be the first piece of a massive, $1.2 billion project that will total 1.9 million square feet of residential and commercial space by 2024, supported by New Market and Federal and State Low-Income Housing Tax Credits.

Along the way, Essex Crossing plans to fulfill a whole new set of promises made to its neighbors on Manhattan’s Lower East Side just a few years ago – including affordable housing, space for community services, a grocery store and a public school.

The plan that failed
In 1967, New York City demolished six acres of the Lower East Side to make way for an urban renewal project. The people who had lived on the site were promised the right to return to the planned new buildings. But decades passed as various community groups and city officials argued over what the new buildings should look like.

“The sites were vacant for more than 40 years because the community and the City couldn’t come together,” says Isaac Henderson, a director at L+M Development Partners and Essex Crossing project manager for Delancey Street Associates.

Parking lots covered most of the vacant land in the Seward Park Extension Urban Renewal Area, lining busy, famous Delancey Street and providing a vivid illustration of urban dysfunction to drivers arriving from Long Island over the Williamsburg Bridge.

Finally in 2013, the City reached an agreement with community groups on the outlines of a giant, new development.

Half of the 1,000 units of housing planned for Essex Crossing will be priced to be affordable to low- and moderate-income households, including:

  • 200 units affordable to households earning up to 60 percent of the area median income (AMI)
  • 100 affordable up to 110 percent AMI
  • 100 affordable up to 150 percent AMI
  • 100 reserved for seniors

People who lived on the site between 1967-1973 have a “preference” to live in the new homes, however, each will still need to apply and qualify based on their respective income, or age for the senior housing. The community benefits agreements also promise to provide space for community organizations and substantial retail space.

Construction starts with affordable housing
Delancey Street Associates, a joint venture of L+M, BFC Partners and Taconic Investment Partners, started construction in 2015 on four buildings at Essex Crossing.

That first phase will include 311 affordable rental apartments and condos, completing more than half of the promised affordable housing, as well as community space.

Promptly fulfilling a significant part of its community benefits agreement makes Essex Crossing somewhat unusual for New York City.

“Oftentimes the community benefits come later – if they come at all,” says Henderson. “Because of that, it was really important for us to go all-in for the community benefits early.”

Site Six, known as 175 Delancey Street, will include 100 apartments for seniors, including 89 affordable to low-income seniors. When it opens in 2017, the 14-story building will have 46,000 square feet of space for community facilities. Roughly half of that space will be given for $1 to Grant Street Settlement, a nonprofit with a 100-year history on the Lower East Side. The service provider will run a seniors center from the space.

Tax credits make the difference
Housing Tax Credits and New Markets Tax Credits (NMTCs) helped the developers make good on their promises at Site Six. The building includes many of the kinds of uses that community development entities (CDEs) are eager to support, like affordable housing, community space and medical space.

The developers are currently negotiating with a second nonprofit to take the rest of the community space. And there is a 55,000-square-foot space in Site Six for a branch of New York University Langone Medical Center.

The ground floor will also be lined with 6,000 square-feet of retail.

It will cost a total $79.5 million to develop Site Six, though the commercial spaces subsidized by NMTCs are split into a separate ownership structure with a development cost of $34.5 million.

“The project would not be financially feasible without NMTCs,” says Henderson. “Because of the tax credits, we are able to give away a significant amount of space or rent that space for significantly less than its market value.”

Allocations of NMTCs are not easy to get. “The tax credits are highly sought-after resources,” says Henderson.

“Getting the allocations of NMTCs was the biggest challenge of financing Site Six.”

“Site Six was such a natural for NMTCs,” says Henderson.

The building won a total of $34.5 million in NMTC allocation, including $15 million from the Low-Income Investment Fund, $12 million from Enterprise Community Partners and $7.5 million from Wells Fargo.

To use that NMTC allocation, Delancey Associates raised $34.5 million in qualified equity investments, including a package of loans and $9.85 million from the developers and equity partner Goldman Sachs. Wells Fargo also paid $11.7 million for all of the NMTCs generated from the qualified equity investments in Site Six.

The seniors apartments at Site Six had a separate package of financing totaling $31.3 million, including large reservations of State and Federal Housing Tax Credits.

“Fortunately our applications scored well,” says Henderson. New York City’s Department of Housing Preservation and Development awarded Site Six a reservation of 9 percent Low-Income Housing Tax Credits (LIHTCs).

New York State’s Division of Housing and CommunityRenewal also reserved New York State Housing Tax Credits for Site Six. Wells Fargo paid $25.8 million for the package of state and federal tax credits. The developers and equity partner Goldman Sachs also contributed another $3 million.

More services and amenities planned
The other buildings at Essex Crossing will also add to the promised community benefits.

A Trader’s Joe’s grocery store will open in 2018. “Throughout the planning process, the community made clear that a quality, affordable supermarket was a top priority for the neighborhood,” said S. Andrew Katz, a principal at the Prusik Group, the partner on the development team in charge of Essex Crossing’s retail space. “We made a commitment to deliver that.”

There’s also a new, 40,000-square-foot home for the Essex Street Market, which has operated on the site for decades. Another indoor marketplace, called the Market Line, will stretch through several buildings and be one of the five largest markets in the U.S., with 150,000 square feet of space.

The developers promised to leave space at Essex Crossing for a new public school, along with a planned bowling alley called Splitsville Luxury Lanes, and a new 14-screen Regal Cinemas movie theater.

Essex Crossing will also include luxury housing. In October, the developers began selling 44 new condominiums at unrestricted market-rate prices at Site One, known as 242 Broome Street. One-bedrooms start at $1.3 million and rise to $7 million for larger apartments.

But even this luxury building fulfills another piece of the agreement: 11 of the units at Site One will be priced to be affordable to homebuyers earning up to 110 percent of AMI.