The Craft Brewery Boom Is Over

Originally published in the Commercial Observer.

It’s safe to say breweries had a bad 2023.

The craft beer boom of the mid- to late aughts has started to wane and, after being weakened by a global pandemic that kept taprooms empty for months, the situation’s looking bleak for many brewers. 

Trade organization the Brewers Association found that more than 385 breweries closed around the country in 2023, a record number that surpassed even the pandemic year of 2020.

“That’s a shock for the industry where we had extremely low closure rates,” Bart Watson, the chief economist for the Brewers Association, said during a recent webinar. 

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Aside from offering drinkers an alternative to mass-produced lagers like Budweiser and Coors, these smaller, independent breweries were seen as a major shot in the arm to urban areas. They brought a hipness factor to an up-and-coming neighborhood — Brooklyn Brewery set up shop in Williamsburg, Brooklyn, long before do-it-yourself warehouse venues were replaced by multibillion-dollar media companies — and researchers have found breweries a key component in the revitalization of any downbeat downtown. That has led many deep-pocketed landlords to specifically seek out breweries as tenants for office or residential developments.

Now, many of these same breweries struggle to keep the mash tuns running as they face a myriad of issues, from the rising costs of ingredients to the changing habits of American drinkers. What’s more, some got saddled with onerous triple-net leases that put them on the hook for rising real estate taxes.

“There’s a variety of market forces happening all at once, but almost in slow motion,” said Laura Dierks, the co-founder and CEO of Interboro Spirits & Ales. “The patterns that might have played out from 2019 into 2021 were delayed by the impact of the pandemic.”

Interboro has been going since 2016, but it barely held on during the pandemic and eventually decided to close its East Williamsburg, Brooklyn, taproom and production facility at the end of December. And it wasn’t alone.

Big aLICe Brewing shuttered its taproom in its namesake neighborhood of Long Island City, Queens, in October. That same month in Rochester, N.Y., Roc Brewing completely went out of business after 12 years in operation. (Big aLICe and Roc did not respond to requests for comment.)

Even some of the biggest players in New York City were impacted. Coney Island Brewery, owned by the Boston Beer Company of Samuel Adams fame, closed its 1904 Surf Avenue taproom on Nov. 9 after nearly a decade in business.

“Given the seasonality of the area and the high costs associated with running a taproom, we have been unable to turn a profit at the Coney Island taproom for several years and we don’t see a path to profitability in the future,” a Boston Beer spokesperson said in a statement.

Similar tales have played out across the country — mainly in cities with an abundance of breweries — with stories in 2023 lamenting the loss of Pontoon Brewing in Atlanta; Tattered Flag Brewery & Still Works in Middletown, Pa.; and Dangerous Man in Minneapolis.

“The difference between the setting today and the setting pre-pandemic was that when a brewery closed in the pre-pandemic era, beer geeks usually assumed there was something fundamentally wrong with their product and their business model,” said Jim Vorel, a beer and spirits writer for the website Paste. “Now when one closes you cannot make that assumption. There are places closing that are making excellent beer. They don’t deserve to close.”

Perhaps the biggest shock to the industry was in July when the historic Anchor Brewing Company closed after 127 years in operation. The San Francisco brewery was the oldest craft beer maker in the country and a pioneer in the industry, but its Japanese owner eventually pulled the plug, citing the pandemic, inflation and the extremely competitive beer market.

“The bottom line is that Anchor ran out of money, and it ran out of time,” Anchor spokesperson Sam Singer told The New York Times in July. 

While Anchor’s closing was a blow to the city of San Francisco, its troubles weren’t all that different than the ones brewing in the rest of the industry.

“They’re not unique. There’s a lot of breweries in America that went through the pandemic and came out not very healthy,” Ken Grossman, co-founder of Sierra Nevada, another California brewery pioneer, said on a recent podcast. “The handwriting was on the wall.”

Many agreed, too, that the challenges confronting craft beer started to ferment before the pandemic but really kicked into high gear afterward. One of those challenges was craft beer’s stratospheric growth in recent years.

“The biggest challenge, candidly, has been overexpansion, and all of a sudden the market got saturated,” said John Coleman, the CEO of Artisanal Brewing Ventures, which owns brands like Sixpoint Brewery, Southern Tier Brewing Company and Victory Brewing. “The barriers to entry to be a craft brewer are pretty low. If you want to start, you can do it with a couple of hundred thousand dollars and you can set up a pretty good system.”

That complaint wouldn’t be one made in the late 1980s and early ’90s. After smaller, regional breweries around the country shuttered in the 1920s thanks to Prohibition, most beer that survived was churned out by giants such as Anheuser-Busch, Miller Brewing and Coors Brewing.

The craft beer revolution began in spurts with Anchor’s repositioning in 1965, followed by the openings of operations such as Sierra Nevada in 1978, Samuel Adams’ Boston Beer in 1984 and Brooklyn Brewery in 1988. The industry started to really grow in the 1990s before blowing up in the 2000s.

In 2006, the United States had just 1,460 breweries to its name, but that number jumped to 8,530 in 2019, according to the Brewers Association. Even after the brutal 2023, the country still boasts 9,500 beer makers.

For a spell, that number of breweries didn’t impact the industry much. There were still plenty of beer drinkers to go around, new customers picking up pints, and innovative styles of beers being discovered or rediscovered to keep longtime drinkers interested. However, with the industry’s growth stagnating, the motto of drinking local became a curse.

“A brewery that opened five to 10 years ago was a beneficiary of an attitude that they had stressed to their clientele to drink small, drink local,” Vorel said. “That benefits you for a time until one day there’s half a dozen smaller and more local breweries that are closer to your regular client than you are.”

The Brewers Association’s Watson said during the December webinar that the double-digit growth of 2014 and 2015 has ended. 

“The new normal is one — at least in volume sales — that craft has moved into a negative growth category,” Watson said.

Dwindling sales led to the production of craft beer falling for the first time starting in 2022, according to the Brewers Association. And shipments of all beer fell 5 percent in the first nine months of 2023 and were estimated to hit their lowest level in a quarter century by the end of the year, according to the Wall Street Journal. Some of that is due to an oversupply of suds sitting in warehouses, since brewers jump-started production in 2021 after choked supply chains hampered them in 2020.

A lot of it, too, has to do with the shifting habits of Americans. Fewer younger adults now appear to be regular drinkers, a shift from previous decades when they made up the majority of regular drinkers, according to a Gallup poll. And many of them aren’t reaching for more traditional beer styles such as German pilsners to quench their thirst.

“There’s not a lot of people coming to beer for the first time,” Vorel said. “The breweries that are trying to reach new customers are usually trying to do so with hazy IPAs, fruited sours, pastry stuff. They’re trying to reach people that think they don’t like beer.”

The breweries that have been able to survive in this have pivoted a bit. They no longer simply sling pints of their brews in taprooms but now offer wine, ciders and spirits, along with more food, to turn their taprooms into destinations. Call it experiential retail with a kick.

“It’s not enough anymore to just make great beer. The younger consumer is looking for other options,” said Paul Leone, executive director of the New York State Brewers Association (NYSBA). “Breweries need to adjust that in their taprooms.”

For craft beer drinkers, Vorel has seen many — including himself — start to expand out to other beverages. What attracted them to craft beer in the first place was the plethora of new styles to try. But as most breweries just rely on the hits, their customers have increasingly turned with an open mind to a burgeoning craft spirits industry, especially whiskey. Hard seltzer, too, barely existed as a beverage category 10 years ago. It’s a $6.5 billion market in the U.S. now, and is expected to nearly quadruple in the next several years, according to consultancy Precedence Research. 

“The core craft beer constituency that presumably still drinks beers also has slowly splintered off into wine, into spirits, into cocktails,” Vorel said. “I spend more time as a spirits writer today than I do as a beer writer.”

[caption id="attachment_465946" align="alignnone" width="615"][media-credit name="Photo: Courtesy Sixpoint Brewery" align="alignnone" width="615"][/media-credit] Sixpoint Brewery's taproom at Brookfield Place.[/caption]

Aside from the stagnation of beer, Vorel also said it was an economic decision since the price divide between a four-pack of India pale ale and a bottle of bourbon has shrunk recently.

Part of that is simply the rising costs of doing business, Interboro’s Dierks said. Prices of ingredients and labor have shot up since the pandemic, and smaller breweries can’t buy grains and hops in enough bulk to get discounts. Another problem, Dierks said, is that many people who still regularly reach for beer started to shift away from high-alcohol, high-calorie beers like double IPAs, which also tend to have a better margin for brewers than other styles.

“We had a good margin on things like double IPAs and the market started to shift a little bit,” Dierks said. “People are drinking Skinnygirl Seltzer, they’re drinking different things with less calories.”

From the start, Interboro has produced canned cocktails, gin, amaro and whiskey. Even jumping into that growing market has been a challenge since the spirits industry has been dominated by massive players, with shelf space in liquor stores at a premium, and state and federal rules making it difficult to distribute around the country, Dierks said.

Then there’s the green elephant in the room. More and more cities and states have decriminalized cannabis in recent years and set up a legal way for people to buy weed without a medical marijuana card.

New York’s first legal dispensary opened in 2022 and the state closed out 2023 with $150 million of marijuana sold, Crain’s New York Business reported.

There’s been plenty of fear in the brewing industry that people will drink less alcohol as they smoke pot more — with some larger brands eyeing getting into the cannabis market themselves — but the Brewers Association has maintained the drug is not a bigger threat than wine or spirits.

The NYSBA’s Leone agreed with the Brewers Association and said New York breweries haven’t noticed cannabis sales cutting into their profits.

“The folks that choose to consume cannabis aren’t going to say, ‘I’m not going to have a drink,’ ” Leone said. “They tend to go hand in hand. And, in other states I’ve spoken to where it’s been legal for a long time, they’ve not seen it affect the industry.”

What has been an undeniable threat to the industry is real estate and debt.

With the average retail lease spanning 4.5 years and many ranging from five to 10 years, a number of breweries that signed deals during the boom times have been facing renewals for the first time in their history. For some, that has been the final nail in the coffin.

“Rent has gone up a lot in the past five to 10 years,” Watson said, who added that many of the breweries in his organization that closed blamed a lease renewal as the final straw. “Basically, the numbers work, and then they didn’t when the lease came due.”

Plus, plenty of breweries got saddled with expensive triple-net leases that made it even harder to stay afloat once times got tough, Dierks argued. A triple-net lease means the tenant has to foot the bill for real estate taxes as well as property maintenance and insurance.

Dierks had one for her 942 Grand Street location, but it became an albatross as the industry began to show signs of problems, with Interboro having to shell out more than $50,000 a year in real estate taxes on top of its rent and other business costs.

“That was manageable in 2018 and 2019,” Dierks said. “It got a little tighter in 2020 and 2021. Then you’re at 2023, and it’s just not feasible anymore.”

Also, ironically enough, the very urban renewal that breweries helped bring to their neighborhoods sometimes contributed to them later closing by making their areas that much more desirable, Leone said.

“If you look at certain neighborhoods in Brooklyn where breweries opened several years ago, nothing was happening and now all of a sudden there was a booming economy,” Leone said. “It becomes more difficult for them to pay a higher rent cost.”

The craft brewery boom coincided with a time when money was fairly easy to borrow, too, due to historically low interest rates, and there were plenty of private equity firms and bigger investors who wanted in on the growing industry.

That has shifted with interest rates rising and the beer industry cooling. Artisanal Brewing’s Coleman said his company often gets approached by smaller breweries looking to be acquired by his own, yet the deals quickly fall apart once he starts looking under their fermentors.

“You have a lot of folks that are in the marketplace and they’re not making a profit,” Coleman said. “They also have a lot of expenses, and you look at what’s going on with interest rates, they have to spend more of their free cash flow in dealing with their debt.”

While Coleman said it’s relatively inexpensive to start a small brewery, scaling up gets pricey fast. From hiring more staff and buying larger capacity brewing equipment to getting canning and packaging lines up and running, the costs add up.

“You have some folks out there that make really, really good beer, but that’s only part of it,” Coleman said. “You got to make great beer if you want to have a chance. There’s also the business of beer that can be very, very challenging.”

Dierks agreed. She said breweries where the owner basically does everything and pulls in about $1 million in revenue annually can be pretty sustainable for the entrepreneur to live on. However, once you get into the $1 million to $5 million revenue range, you need to hire staff to distribute more product, and that becomes an uphill battle.

“You’re sort of in this gulf where you need more than you have and you have to grow past and you have to get bigger,” Dierks said. “I think the growth opportunities are largely gone because scaling is hard.”

But plenty of people are still hanging on or getting into the industry.

Dierks’ Interboro won’t completely disappear from tap handles as it will move production to a shared facility upstate and eventually try to reopen a taproom in the city. Big aLICe still has locations in Brooklyn and Geneva, N.Y. 

The Brewers Association found that openings still outpace closures in the country, with more than 420 breweries debuting in 2023. In New York specifically, the numbers have remained relatively flat, despite a few well-known closures, Leone said.

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“What we’re seeing now is not some sort of collapse or bubble bursting, but part of the overall development of our industry,” Watson, the Brewers Association chief economist, said. “[We’re] starting to see an evening out in the spike of breweries around the country.”

He also pointed out that visits to taprooms — where breweries can directly interact with customers and pull in the most profit — are still on the rise, although the number of return visits is down.

That’s one reason why Artisanal Brewing decided to expand Sixpoint’s retail reach. The brewery was founded out of a tiny spot in Red Hook, Brooklyn, in 2004 and Artisanal Brewing acquired it in 2018 for an undisclosed amount.

Since then, Sixpoint opened a small taproom inside the City Point BKLYN food hall in 2022 and ended 2023 by debuting a new, 7,500-square-foot taproom inside the Financial District’s Brookfield Place complex.

“We look at the opportunity to open these taprooms as building the brand in metro New York,” Coleman said. “From a foot traffic standpoint, there’s a tremendous amount of exposure [at Brookfield Place]. The folks that are living in the city have an opportunity to sample the beer, and then they go out and go home and go into Key Food or a local bodega and they decide to pick up our beer to share.”

Leone said more New York brewers have been following similar tactics. They’ve opened multiple taprooms and have focused heavily on offering more experiences inside, including events and games. Plus, the spaces are designed to draw passersby who might not even want a beer. “That’s really where they make their most revenues,” Leone said. “Distribution and retail are not growing at all, so breweries are looking to really focus on what they can control in their own taproom.”

Even with all the bitterness, and the acknowledgment that the United States might not reach past 10,000 breweries any time soon, Leone said that what’s happening now could be read as craft brewing getting in better shape.

“We’re seeing a stabilization of the industry,” he said. “It was never sustainable for an industry to grow 10, 8 or 5 percent every single year. At some point it’s going to stabilize, and I think that’s what’s happening.”

Nicholas Rizzi can be reached at nrizzi@commercialobserver.com.

Draft Picks: A Growing Number of Breweries Now Call Brooklyn Home

Originally published in the Commercial Observer.

For the first time in 40 years, Brooklyn is brewing.

After beer production dried up around the borough in the 1970s, Brooklyn-produced suds are staging a comeback. A growing number of local breweries have opened in recent years, churning out pints quite different than the standard Budweiser and Coors lagers.

Just in the last year, Grimm Artisanal Ales opened a brewery in a former truck repair shop at 990 Metropolitan Avenue in East Williamsburg, and Braven Brewing took over a former Bushwick beer bar at 52 Harrison Place and turned it into a brewery, producing brews like hoppy triple IPAs and guava- and raspberry-flavored sour beers.

As recently as last week, the owners of bars Jimbo Slim and Northern Bell announced they were opening a new brewery at 300 Richardson Street in East Williamsburg called 18th Ward Brewing, while developer Two Trees Management Company said it will bring popular Carroll Gardens-based Other Half Brewing Company to its Domino Sugar Complex in Williamsburg at 1 South 1st Street.

“New York before 2012 was a great beer destination, but for beer that came from all around the world,” said Lauren Grimm, a co-owner of Grimm Artisanal Ales, which recently opened a 7,500-square-foot brewery and taproom at 990 Metropolitan Avenue. “We’re pushing out those out-of-state, out-of-country breweries and people are more interested in local beers.”

Before 2012, after prohibition, de-industrialization and giants like Budweiser killed beer production in the county, Brooklyn was only home to three breweries: the famous Brooklyn Brewery in Williamsburg (which, while having a highly touted spot at 79 North 11th Street that offered great tours and tastes of the hooch, produced most of its beer out of the city), Sixpoint Brewery in Red Hook (which also contracted out most of its brews) and the now-shuttered commercial brewery Greenpoint Beer Works in Clinton Hill.

Since then the number has grown to 20 with more on the way, according to the Brewers Association trade group. Breweries have popped up as far south as Sunset Park with Five Boroughs Brewing and up to Greenpoint Beer & Ale Co. in the eponymous neighborhood. Owners tend to focus on industrial neighborhoods with plenty of warehouses in manufacturing zones that still have foot traffic, making Williamsburg and Bushwick popular options.

“You’re looking for both low-cost manufacturing space that also has ability to do retail,” said Max Lu, who leased space for Braven Brewing Company last year and Kings County Brewers Collective in Bushwick in 2015.

The high cost of business in the city has pushed out many industrial businesses, leaving plenty of empty space for breweries to pick up. And some don’t need much. Staten Island’s Kills Boro Brewing Company pumps out kegs from a 700-square-foot brewery in the back of a Stapleton barbeque joint.

“Businesses are moving out because it’s getting expensive,” said Jordan Beldner, a co-owner of 18th Ward. “You’re seeing a lot of vacancies.”

Even with the growing number of breweries opening around the city, some brewery owners aren’t too worried about oversaturation and welcome their new neighbors.

“The more breweries that open the better it is for all of us,” said Matt Monahan, a co-founder of Other Half Brewing, which first opened in 2014 at 195 Centre Street. “People see New York City as a beer destination now. I really don’t think that was true a decade ago.”

“We all can’t possibly make enough beer to service everybody that lives here to drink,” he added.

Companies like Other Half regularly collaborate and brew kegs with other local beer makers. Other Half has made beers with KCBC and Queens’ LIC Beer Project, which opened in 2015.

“It’s a huge benefit to have friends,” Monahan said. “We all share info and resources. It’s just a nicer day to day world to live in when you’re friends with everybody instead of trying to chip away at them.”

And beer can be big business. Beer sales around the country reached $111.4 billion in 2017 with independently owned breweries, (a.k.a., craft beer), accounting for more than 23 percent of the market with $26 billion, according to the Brewers Association’s most recent data.

While the total sales were up in 2018 compared with 2015 and 2016, the percentage growth for craft beer started to slow in 2017 with a 5 percent increase compared with a 10 percent increase in 2016.

“Independent U.S. craft breweries continue to thrive but at a slower pace than recent years,” Julia Herz, the director of the Brewers Association’s craft beer program, said in prepared remarks. “Many competitive factors including challenges with access to market, big beer companies purchasing formerly independent breweries and consolidation at the distributor level are making it more difficult for craft breweries who want to increase their sales.”

However, Herz added sales grew by 5 percent in the first half of 2018. The Brewers Association’s sales data doesn’t get down to the state or county level, but other data found that nearly 350 breweries across New York State produced almost 1.5 million barrels of beer and contributed $4.1 billion to the local economy in 2017.

And even with the sluggish growth, brewery openings don’t seem to be slowing down in the borough. The Brewers Association shows at least seven breweries in the planning stages in Brooklyn. Nomadic brewer Stillwater Artisanal is currently searching for permanent digs in the borough and 18th Ward plans to open next month.

“It was a now or never kind of thing,” Beldner said. “I wasn’t expecting it so soon after we built up the last bar, but I saw the space and it was right. If there was a time to stress myself out it was now, so we pulled the trigger.”

The 18th Ward owners—Beldner, his father Jim Beldner and Michael O’Brien—always planned on opening a brewery in the next couple of years but moved up the timeline when they found a perfect space across from popular music venue Brooklyn Steel, a former carpet cleaning factory at 300 Richardson Street.

“It’s not saturated with bars,” said Jordan Beldner about why the spot was a perfect fit.

Beldner said 18th Ward plans to brew beer “to appeal to the masses” because of its proximity to Brooklyn Steel, but head brewer Dailey Crafton will also focus on the farmhouse-ale style saison.

Brewing in Brooklyn is not a new phenomenon. Its history began when the original Dutch settlers came to the city but really kicked off in the mid-19th century when German immigrants moved here and started opening small breweries, The New York Times reported.

The number peaked at 45 breweries at the turn of the century with one 12-block stretch in Williamsburg being home to 11 itself, according to The Times. But by 1976, every brewery either moved or shut down and the borough was dry until Brooklyn Brewery started in 1988 and opened its production facility in 1996.

“When I first got into the business, nobody wanted to hear the word Brooklyn if you were outside the State of New York,” said Ed Raven, one of the owners of Greenpoint Beer & Ale Co. who has worked in the beer world for more than 25 years. “I think over the years the name and the attitude has definitely changed.”

Brewers also credit the recent massive growth of Brooklyn-made brews to the Craft New York Act passed by Gov. Andrew Cuomo in 2014, which eased restrictions for operating breweries and distilleries around the state.

“Craft breweries are hubs of activity and opportunity for local economies, and by rolling back red tape and modernizing the craft brewery industry, we are supporting farmers and small businesses, boosting tourism and driving robust economic growth in Brooklyn and in every corner of this great state,” Cuomo said in a statement, adding he later passed other laws to help breweries.

“That kind of opened the floodgates for people to say, ‘Oh, I can now afford to rent a building in New York City and sell beer,’ ” Grimm said.

One of the most significant changes in the law was lifting the ban on selling cans and glasses of beer inside the brewery itself. Previously, it was illegal for breweries to directly sell to customers, leaving some to come up with workarounds like Brooklyn Brewery’s old system of selling wooden tokens that could be traded into a bartender for a beer.

“That sort of turned our world upside down in terms of possibilities,” said Monahan, who opened Other Half before the law passed. “We can now really interact directly with our customers. That’s the world to us now and that means everything.”

Since the law was enacted, breweries have also opened in Queens, the Bronx and Staten Island, but Brooklyn has a quicker pace because of its reputation for locally made, artisanal products and, simply, because the brewers mostly live in the borough.

For Grimm, the new law meant her and her husband, Joe Grimm, were finally able to give up the nomadic brewing life and put down roots.

[caption id="attachment_351146" align="aligncenter" width="615"] Grimm Artisanal Ales.[/caption]

“When we thought ‘Let’s open a brick-and-mortar brewery in New York City,’ the hold back was the law surrounding brewery sales,” Lauren Grimm said. “If the law had been different in 2012, and we had been able to get loans, we would’ve opened immediately.”

The couple started home brewing out of their Gowanus apartment more than a decade ago and decided to go pro in 2012. It was too restrictive and expensive to open under the old laws, so they decided to become “gypsy” brewers and rent unused tanks in breweries in Massachusetts, Washington, D.C., and across the Verrazano at Staten Island’s Flagship Brewery to make their brews.

They would then package the beer on the site and worked with distributors to sell it to bars and beer stores around the city.

“We would just brew a batch of beer and then sell it and wait until we got the money to brew our second batch of beer,” Grimm said. “We never had this grand plan for how this was going to work.”

Eventually, Grimm secured small business loans and found an East Williamsburg warehouse. After negotiating with the owner, the couple was able to buy the building for $4 million in 2016 and started a $2 million buildout installing tanks and fermenters. Grimm eventually opened its doors last June.

While Grimm said finding the space was the least of their troubles, for other brewery proprietors it can be a struggle to find a landlord willing to take a chance on a new brewery. Unlike other warehouse users, breweries tend to need more concessions in order to open.

“Landlords have to be willing to work with them,” said Lu. “[Breweries] need longer leases, free rent and more help with the construction.”

Getting a landlord on board coupled with the high cost to buy brewing equipment can make opening a long process. Braven and KCBC each needed about five years to nail down their locations, Lu said.

And brewers are still subject to the problems retail stores face around the city. Raven, who opened the 6,500-square-foot brewpub Greenpoint Beer at 7 North 15th Street in 2014, was forced to move after his landlord sold the industrial building to Simon Baron Development last year. The new owner plans to raze it and erect an office building.

Raven said he had plenty of time to find a new location and signed a lease for a slightly smaller space at 1150 Manhattan Avenue 10 months ago, which should open its doors soon.

“We wanted to be in Greenpoint, obviously, and we wanted to find space that had some foot traffic,” he said. “We found both of those things in our new location.”

The space is about 15 percent smaller at 5,000 square feet, but it has a 1,000-square-foot roof deck to help offset the loss. Raven also dedicated a lot more space to brewing equipment in the new digs and it will allow Greenpoint Beer to produce four times the number of barrels.

“I think we went a little bit crazy on the capacity compared to the amount of space,” he said. “It is really tight.”

For Other Half, it has instead been fielding offers from developers looking to get it in their project. The founders—Monahan, Andrew Burman and Sam Richardson—randomly found their 195 Centre Street space through a residential broker on Craigslist and later expanded to take over a former brewery in Rochester, N.Y.

Earlier this month, Other Half announced the 3,600-square-foot outpost—with a small brewing system inside—on the ground floor of the Two Tree’s residential development at the former Domino Sugar Factory site in Williamsburg.

“We just wanted to be able to serve a different section of the community,” Monahan said. “It was a no-brainer.”

Two Trees, which also recently announced that Bushwick pizzeria Roberta’s will be opening an outpost at the development, reached out directly to Other Half to entice the proprietors to head to Williamsburg.

“As big fans of the product and overall vibe of the brewery, we felt it was a natural fit for Other Half to expand into Domino,” Two Trees managing director Dave Lombino said in a statement. “So, we reached out and it just worked.”

Nearly 150 Construction Workers Sued Hudson Yards for Injuries on the Job

Originally published in the Commercial Observer.

Just three months ago, on the morning of Nov. 11, 2019, scaffolding on the 18th floor of a still-under-construction portion of the $25 billion Hudson Yards mega-development collapsed with two construction workers on it.

The workers, along with two others, were rushed to Bellevue and Mount Sinai West hospitals where one faced serious, but non-life threatening, injuries, according to the New York Daily News. The Department of Buildings hit the site, 50 Hudson Yards, with a stop-work order.

“The accident,” the Daily News wrote, “appears to be the first at the construction site, according to city Buildings Department records.”

It was not the first injury there. Not even close.

Court records show that the four workers were part of more than a hundred others who claimed they were injured building Related Companies and Oxford Property Group’s 28-acre development.

From 2013 until this year, nearly 150 workers at the site filed personal injury lawsuits against Related, various limited liability corporations tied to the developer and the general contractors like Tishman Construction (named in 63 of the suits), a Commercial Observer review of court records shows. And, it should be noted, the injuries only represent those who filed lawsuits in the city’s Supreme Courts.

It started with a single suit in 2013, when construction of the first tower commenced, but the bulk of the claims started hitting in 2016, when work ramped up on the site.

The workers’ claims range from simply falling on a wet beam or tripping on a piece of debris at the construction site to more severe incidents where they were hit by broken pieces of equipment falling on them, court records show. At least a dozen mentioned the project’s scaffolding, from pieces of scaffold falling onto workers to other complaints of the workers themselves falling or claiming they were not given proper safety equipment. Many of the workers appear to have settled their cases, while others remain ongoing.

Claims have continued to come in against the project, including one filed on January 8 on behalf of Justin Hartley. Hartley was working at 50 Hudson Yards on Dec. 21, 2019, when he was hit by a falling beam and “sustained permanent traumatic injuries to his head, neck, back, fractured [his] left leg, right shoulder, right arm and right bicep,” according to court records. Hartley’s lawyer, Joseph Kazmierczuk, did not respond to a request for comment.

A spokesman for Related declined to comment. A spokesman for contractor Tutor Perini, named in numerous suits, did not respond to a request for comment.

“While we do not comment on pending claims, we worked closely with the building trade unions and our partner contractors to implement a robust safety program on all of the projects at this site,” John Gallagher, a spokesman for Tishman Construction, said in a statement. “Anyone pushing a different narrative is intentionally distorting the facts to serve some other purpose.”

Experts told CO that the number of lawsuits Hudson Yards racked up looked unusually high for one project — even one the size of Hudson Yards — and could point to issues of construction safety at the site.

“To have 150 cases out of just one spot, that’s certainly alarming,” said personal injury lawyer Glenn Faegenburg, who is not involved in any of the Hudson Yards cases but recently won a record-setting $36 million settlement with the city on behalf of a worker. “I think that developers, contractors and owners are cutting corners … They want to, obviously, get [buildings] up as quick as possible so they can start making money. Sacrificed at that cost is worker safety.”

Charlene Obernauer, the executive director of the union-backed workers’ rights organization the New York Committee for Occupational Safety and Health (NYCOSH), said while she wasn’t familiar with Hudson Yards specifically, anytime NYCOSH sees a plethora of injuries coming from one job site that usually stems from a lack of safety training early on.

“From our perspective the high number of injuries and fatalities, in this case injuries, that you see directly correlate with enforcement training for workers on the job,” Obernauer said. “When we’re seeing issues for job sites in the city, you really have to think about why are we having these issues.”

Others said that given the size and scope of Hudson Yards — which employed about 25,000 construction workers during its years-long development — it didn’t seem out of the ordinary for it to be hit with that many lawsuits.

“Over the course of six years, 25,000 workers contributed to the project — 0.005 percent of which were injured,” said a spokesman for Building and Construction Trades Council (BCTC) — which had a public battle with Related accusing the developer of union-busting at the site that was scrapped last year. “The reality is that construction is a dangerous industry. We recognize that, our members recognize that, and the developers of Hudson Yards recognize that as well. We take every injury that occurs on the work site very seriously and ensured that the highest standards of safety were met throughout the entirety of this project.”

Many pointed the blame to a 135-year-old piece of legislation, New York State Labor Law 240, which they feel makes it too easy for workers to sue developers regardless of who’s at fault.

“To me, that is the singular cause of that many claims,” said Louis Coletti, the president and chief executive officer of the Building Trades Employers’ Association of New York City. “It’s the trial attorney’s Christmas gift every day.”

Labor Law 240, commonly known as the Scaffold Law, assigns “absolute liability” to developers and contractors at construction sites for workers’ injuries if they fall from an elevated height or are hit with a falling piece of material. New York is the only state in the country with a law like it.

Illinois repealed its version of the bill in 1995 — with many arguing it drained taxpayers’ dollars by driving up insurance rates for state-built projects — and later attempts to bring it back have failed.

“There are surely legitimate claims from the Hudson Yards site, that said there is equally assuredly claims that are driven by the scaffold law,” said Tom Stebbins, executive director of the Lawsuit Reform Alliance of New York which is pushing to make changes to the law. “It drives a massive amount of our litigation.”

Opponents argue the law created a “cottage industry” of personal injury lawyers who sniff around job sites looking for cases because they are easy to win and can be lucrative. Critics said it doesn’t take into account if the worker decides not to use safety equipment provided for them or if they’re intoxicated on the job.

“Neither the owner or the contractor has the ability to present any evidence in court that perhaps the worker contributed in any way to the negligence,” Coletti said. “The only decision is how large the judgment will be.”

In Hudson Yards’ case, Financial District-based firm Sacks and Sacks filed more than 50 of the cases, including three of the four workers injured in the November 2019 scaffold collapse. Kenneth Sacks, a senior partner at Sacks and Sacks and the lawyer on many of the suits, did not respond to repeated requests for comment.

Even with the law’s liability provisions, Faegenburg argued it doesn’t mean all cases covered by it are slam-dunks to win and developers fight tooth-and-nail against each one, dragging them out for years.

“These are very, very hotly contested cases, they go on for years,” Faegenburg said, adding that his recent victory took three years, which was a short amount of time for these cases. “The fight is so strong and there are a lot of ways to defend against [the Scaffold Law].”

In the ongoing case of ironworker Thomas Brielmeier — who said he was hurt working at the Shops and Restaurants at Hudson Yards in 2015 after he fell while climbing down the ladder of a scaffold when the structure “jumped” — Related’s lawyers asked if Brielmeier had previously received drug or alcohol counseling, brought up a 2012 car accident linked to his name (it was actually his father), how much he bench presses and slight discrepancies in his injury claims, such as the fact he didn’t label it a fall at first because “a fall is like a major accident from a really high point,” according to court records.

“This is a personal injury action,” Related’s lawyer Brian McLaughlin said when questioned by Brielmeier’s lawyer about the relevance of the drug addiction questions in a deposition. “This is a personal injury action. His health is at issue.”

Despite numerous calls to repeal the Scaffold Law over the years, Obernauer said it needs to remain on the books because it’s a vital tool in increasing construction workers’ safety.

“The Scaffold Law is essential so that workers can be safe on the job and that workers cannot be exploited if a worker falls on the job,” she said. “It has been found to be an important tool that protects workers through and through.”

Lawyers who’ve worked on Scaffold Law cases said the accidents were often linked to lapses of job safety protocols at the site by contractors in an effort to get the project up quicker.

“On the cases I’ve worked on, it just seems like they’re just in a huge rush to get it done and that’s more important than worker safety,” said Matthew Haicken of Haicken Law, who was not involved in any of the Hudson Yards cases and noted he didn’t have knowledge of work conditions at the site. “They put profits over people and I’ve seen it at many different construction sites.”

Haicken added the workers hurt on the job often have no control of the safety of a site and often put themselves in dangerous positions at the behest of their foreman.

“[Workers] don’t bring their own scaffolding with them, they don’t bring their own harness, they’re completely reliant on the general contractor and the building owner to provide a safe workplace,” he said. “Blaming the workers is really just not fair.”

Construction worker injuries and fatalities have been on the rise the past several years in New York City and it is the deadliest industry, outranking manufacturing and transportation, in the Big Apple. In 2018, 22 construction workers died on the job, a slight increase from the 20 who died in 2017, according to recently released numbers by the U.S. Bureau of Labor Statistics.

While the number of construction-related injuries rose by 14 percent from 2018 to 2017, there was a slight downtick in 2019, city data shows. As of November 30, 2019, the most recent numbers available, the New York City Department of Buildings found 551 construction workers were hurt on the job in 2019, a 21 percent decrease from the same time last year.

The bulk of the categorized injuries in the DOB’s statistics in 2018 and 2019 came from workers who fell; the second most frequent injury was workers having materials falling on them, a common theme in many of the Hudson Yards lawsuits like the case of Sylvan Bridgemohan.

Bridgemohan was working on the construction of the office tower 10 Hudson Yards on May 18, 2015, on an unknown floor when he walked to one side of an “improperly constructed” scaffold that then tipped over causing him to fall and become pinned under it, according to a complaint filed by Sacks and Sacks. The case dragged on until 2018 when a judge ruled in favor of Bridgemohan for an unknown sum, though Related’s lawyers quickly filed an appeal that is still ongoing.

In the November scaffolding collapse, Hrant Roubian, Anthony Auletta and Slyvester Fearon have all filed claims against Hudson Yards over the injuries. Looking at the incident, Faegenburg said it was a simple fix to add some cross-bracketing to the scaffold to make it safer. “It’s not rocket science to prevent a lot of these accidents,” he said.

Stebbins of the Lawsuit Reform Alliance of New York argued that any of these cases that fall under the purview of the Scaffold Law make them an easy one to win for lawyers, with the only real question in court how much the payout will be.

“They never have to prove negligence in order to win massive judgments,” Stebbins said. “We’re talking damages, we’re no longer talking about any sort of provable facts.”

The settlements can reach in the millions of dollars — with the amount won generally not listed in court documents. Lawyers in the Hudson Yards cases just asked for damages in court documents with no listed dollar amounts. Only one ongoing case listed $127,500 in lost wages as the amount it was seeking.

There have been numerous efforts to repeal or amend the Scaffold Law — which was put in place after the Brooklyn Bridge was built — but have failed because of lobbying efforts by the personal injury lawsuits, both Stebbins and Coletti said.

Stebbins’ recent push calls to add comparative negligence to the Scaffold Law which would allow the courts to see if the worker was at all at fault for the injury, something Stebbins thinks will be necessary if marijuana is legalized in the state.

“They specifically cite that marijuana use is not a defense, if we have more people high on marijuana or intoxicated we’re going to have less safe job sites,” he said. “We want to keep the safety provision in the law change the liability provision in the law to match to liability provisions in any other state.”

Stebbins added that the law makes it harder and more expensive to get insurance for construction projects in the city. Fewer insurance companies want to underwrite projects because they can’t easily gauge risk and on average projects in the city spend eight to 10 percent of their budget on getting policies, compared to the two to three percent in other states.

BTEA’s Coletti wants the law completely scrapped from the books or at the very least set up an alternative dispute process with medical professionals after an injury that could potentially defer lawsuits in the future.

“It’s not in [the workers] interest, it’s not in the owner’s interest, it’s not in the general contractors’ interest,” Coletti said. “It’s only in the interest of the trial attorneys.”

Faegenburg warned that if the laws get repealed developers will start skirting safety procedures at sites around the city and instead wants the Scaffold Law to be stronger to prevent the current batch of injuries.

“It will be a free-for-all if they know they can get away without having to be on the hook,” he said. “Greed will overcome safety. They need to know that they’ll be held financially accountable.”

NYCOSH’s Obernauer argues one way to make construction safer is for more developers to use union labor. NYCOSH and Coletti have found the vast majority of injuries and fatalities come from non-union job sites.

Related was locked in a public battle with the BCTC after Related refused to sign a labor agreement with the union for the second phase of the project. Last year, the pair reached an agreement that would let Related negotiate contracts directly with individual unions, instead of just the BCTC.

Hudson Yards has been an “open-shop” site for much of its construction, meaning non-union workers can be hired to work on the site and can still drive down safety at sites, Obernauer said.

“The non-union laborers — they’re being exploited to work harder and faster — those laborers can make a mistake on the job that can impact the [union workers],” Obernauer said. “Unsafe work conditions that happen on one area on the work site can contaminate the work site for other workers that may be unionized.”

But even with the constant talk of changing or getting rid of the Scaffold Law, Haicken said it’s an easy fix for developers to not be inundated with personal injury lawsuits even currently.

“If they just made the construction sites safe there would be no problem,” he said.

After 16 Years of Construction, American Dream Mall Will Finally Open. Will It Work?

Originally published in the Commercial Observer.

The American Dream Mall—once given a deadline to open in 2014 when the Super Bowl was played in New Jersey—has become the butt of many Northern New Jersey residents’ jokes. It’s been empty for years, little more than a garish, multi-colored eyesore to the drivers on the New Jersey Turnpike.

But finally, after 16 years of starts and stops, missed deadlines, three developers, five governors and a major retail contraction, current developer Triple Five claims the $5 billion American Dream Mall in East Rutherford, N.J., will open its 3.1-million-square-foot center in April. That includes 1.5 million square feet of retail, the largest indoor amusement park in the Western Hemisphere, an indoor ski lift, a DreamWorks-branded indoor waterpark, a Cirque du Soleil venue and a National Hockey League-sized ice rink. Subsequent phases call for two hotels and a convention center.

“There’s a lot that you can see with your eye to let you know this thing is coming soon,” said David Townes, a senior director of retail at Cushman & Wakefield whose office is next to the American Dream site in the Meadowlands Complex.

But even as it nears the finish line, not everybody’s convinced the American Dream Mall will really come to fruition. (At least not on the April timetable.)

“We’ve been told this story a gazillion times,” Jersey City Mayor Steven Fulop, who recently criticized the project on Twitter, told Commercial Observer. “I gloss over these dates on when they’re projected to open.”

Whether or not American Dream does open its doors this year, it’s already far from where it began its life as Xanadu in 2003, owing in part to the changing retail landscape. Traditional mall anchors like Macy’s, J.C. Penney and Sears have shuttered locations, with Sears declaring bankruptcy last year, while brick-and-mortar retailers across the country have been flailing. Enclosed malls have been closing across the country, leading many experts to posit they may be going extinct.

“There haven’t been many new enclosed malls to open in the country over the last 10 years,” said Thomas Dobrowski, who handles regional mall investment sales at Newmark Knight Frank. “The consensus is there’s not a need for more enclosed malls.”

But don’t tell that to Triple Five. The developer is owned by the Ghermezian family and Don Ghermezian, the CEO, has said in multiple interviews that he doesn’t consider American Dream a mall at all. Unlike at its other developments, Mall of America and West Edmonton Mall, Triple Five dedicated the majority of American Dream Mall—55 percent—to entertainment.

“With American Dream, we’ve taken that model and kind of put it on its head a little bit,” said Dimitri Lalagos, the senior vice president for leasing at American Dream. “We are building a destination that contains significantly more than just shopping.”

That tactic seems to be the best bet for success. Malls around the world have started to add amenities like coworking, waterslides, movie theaters and more to draw shoppers through the door, which Dobrowski said has been working.

Plus, Class A malls around Northern New Jersey haven’t faced quite as much distress as other areas in the country, and a complex like American Dream is nowhere to be found in the New York and New Jersey market.

“People are waiting for something like this,” said Richard Latella, an executive managing director on C&W’s valuation and advisory retail team. “I know it’s going to do tremendously well right out of the block.”

And even though American Dream is asking for rents higher than at nearby malls like Garden State Plaza, it has already secured leases from brands like Saks Fifth Avenue, Hermès and Barneys New York. C&W’s Townes has plenty of retailer clients looking to lease space in the area and currently has several deals in the works at American Dream.

“There’s a lot of excitement and anticipation [about American Dream],” he said. “There’s a lot of tenant interest and a lot of tenant commitments.”

Triple Five’s optimism hasn’t stopped some critics (including one former Triple Five employee) from questioning the viability of the project, former New Jersey Gov. Chris Christie’s decision to give millions of dollars in tax breaks to the developer, and the state giving $800 million in redevelopment bonds.

“I think it’s a ridiculous idea that we’re subsidizing and bonding for this American Dream project,” Fulop said. “Retail and malls are struggling nationally with technology and the internet. The fact that Jersey is going so deep in building a new mall to me makes very little sense.”

Fulop argued that though “retail is dying at a less-fast pace” in New Jersey than it is in the rest of the country, that doesn’t make it completely immune. As evidence he points to retail store closures nearby at Jersey City’s Newport Centre like Teavana.

“All these malls have difficulties,” he said. “Sometimes you gotta be a realist and say it doesn’t make sense to throw good money at bad money and that decision needs to be made at some point.”

(A spokeswoman for New Jersey Gov. Phil Murphy did not respond to a request for comment.)

Other things that could hold the American Dream back are infrastructure issues and Bergen County’s blue law, which requires retailers to close on Sundays.

“You have to generate sales in six days that many others have seven days to do,” C&W’s Latella said. “It will make it tougher.” (However, the law doesn’t apply to the entertainment at American Dream Mall, which means it would be unaffected.)

Latella estimated American Dream would need to pull similar numbers to Triple Five’s Mall of America—40 to 50 million visitors a year—to be a success. To be in that ballpark it will need to draw residents from New Jersey and New York as well as tourists.

Lalagos pointed to the “tremendous amount of traffic” around American Dream. “It’s about 100 million cars per year,” he noted.

Triple Five pitches itself as being only five miles away from Times Square, but Fulop said the distance is “one of the most densely populated five miles in the country” that’s already marred by poor public transportation and traffic jams.

“It still could take you an hour to get there,” he said. “New Jersey Transit struggles daily; it’s not going to be an effective alternative for people.”

Still, brokers in the area and a former aide to Christie are confident that the project will succeed and be a boon to the area. Triple Five has estimated it will create 23,000 construction jobs, 16,000 permanent jobs and bring in $183 million in annual taxes, Bloomberg reported.

“I think it will be a success for both the project as well as the surrounding area,” said real estate developer and investor Jon Hanson, who was in charge of the project during the Christie administration. “More and more development will result.”

After two developers couldn’t finish the mall, Christie tasked Hanson to get it back on track in 2009. But when Hanson’s team estimated it would cost $50 million to $100 million to demolish, Christie looked to restart the project that year.

Hanson got pitches from several other candidates that mostly focused on retail but chose Triple Five because of its history of adding entertainment aspects to its projects.

“In hindsight, I think we made the right decision,” Hanson said, referring to retail’s recent struggles. “The success of the American Dream would be the heavy emphasis on the entertainment.”

Not everybody is as sure as Hanson that Triple Five—founded in 1972 in Canada by Iranian immigrant Jacob Ghermezian—was the right choice. The company made its name with the 5.5-million-square-foot West Edmonton Mall in Alberta, which opened in 1981, and the 4.5-million-square-foot Mall of America in Minnesota. Both projects had features unique to malls at the time like rollercoasters, indoor wave pools and miniature golf courses.

Despite those projects’ successes, former American Dream employee Norman Krone said he wrote a letter to Christie in 2011 urging him not to pick Triple Five for Xanadu.

“My opinion was that they would never complete the work,” said Krone, currently a lawyer in Florida. “The other key thing that I suggested to the governor was they would be asking for substantial sums of money from the state and I urged him not to do it; it was not in the best interest of New Jersey.”

Krone worked for Triple Five for four years in China trying to get malls built, but they all fell through. Most faltered because Triple Five didn’t want to foot the entire bill and the Chinese government would not give them any money, Krone said. He subsequently left the company in frustration in 2012.

And it wasn’t just in China that Triple Five failed to finish projects. In early 2009, the developer killed plans to build an $800 million complex in Las Vegas called the Great Mall of Las Vegas, blaming decreased demand and the recession, the Las Vegas Review-Journal reported. Triple Five later lost the land in foreclosure.

Triple Five also failed to build a mall in Niagara Falls, N.Y., called Fantasyland, in the 1980s and its first American Dream project in Silver Springs, Md., in the 1990s, according to public radio station WHYY.

“We are very, very selective in the projects we do and where we go,” Ghermezian told online news publication NJ Spotlight in 2016. “The other markets that we didn’t end up ultimately exercising and moving forward [with were because] market conditions that at the time warranted that we pull back or not move forward.”

Christie did not heed Krone’s warning and later announced he would give Triple Five up to $390 million in tax breaks, the Associated Press reported.

“They’ve gotten a lot more money than I ever expected them to get,” Krone said.

Hanson did not want to answer CO’s questions about the tax breaks New Jersey gave Triple Five. Spokespeople for American Dream and Christie did not respond to requests for comment about Krone’s criticisms.

Triple Five’s involvement in the project is just the latest in a 16-year journey that started in 2003 when the New Jersey Sports and Exposition Authority (NJSEA) put out a request for proposals to redevelop a 162-acre plot of land in the Meadowlands Sports Complex.

Triple Five was among the first developers to submit proposals, but the state picked Mills Corporation, which had been trying, unsuccessfully, to build a mall on a nearby wetland site since 1993, NJ.com reported.

Mills teamed up with Mack-Cali Realty Corp. and agreed to pay NJSEA $160 million for the development rights to build a 2.4-million-square-foot mall and entertainment complex that seemed to include every idea the developers had.

The project, called Xanadu, would have a Formula One-style racetrack, indoor surfing, a minor league baseball stadium, an indoor ski slope, a movie theater, a concert hall, office space, a 520-room hotel, restaurants, a “child-scale city,” and 500,000 square feet of retail, The Baltimore Sun reported.

Construction started in 2005 with Mills expecting the first section of the project to open in 2007. But Mills’ budget quickly exceeded its initial estimate and the company encountered financial troubles, The Bergen Record reported.

Xanadu was given a lifeline in 2006 when private equity firm Colony Capital agreed to buy it for $500 million, but things didn’t go much better. The financial crisis hit and work stopped in 2009 after a then-recently bankrupt Lehman Brothers cut off the financing, The New York Times reported.

“Xanadu fell victim to the recession, as a lot of other projects did, and we were courted, so to speak, by New Jersey to get involved in the project because of our history of doing large entertainment retail destinations,” Lalagos said.

In taking over Xanadu, one of the first things Triple Five promised to get rid of was the multi-colored mess outside the building, which Christie once called the “ugliest damn building in New Jersey.”

The old exterior, which was recently removed, “didn’t do anything justice; it looked like stacked cartons,” Lalagos said. It has been entirely replaced with white paint.

Triple Five officially took over the development in April 2011, renaming it American Dream Mall, and planned to fund half of the $1.8 billion construction costs with a bond offering related to the tax breaks and a payment-in-lieu-of-taxes partnership with East Rutherford, The Record reported. Private financing and $200 million from Triple Five would cover the rest.

Construction restarted in 2014, with the goal of finishing it in time for Super Bowl XLVII, which would be played in the adjacent MetLife Stadium, but that deadline was abandoned when Triple Five had trouble nailing down the financing and closing the bond sale.

Eventually, NJSEA approved Triple Five’s bond sale in 2016 and Triple Five completed it the next year. It also closed on $1.6 billion of construction financing in 2017 led by J.P. Morgan with Starwood Property Trust participating in the deal. J.P. Morgan and Starwood declined to comment.

Work kicked off in full swing then and American Dream started announcing retail deals for the site, including experiential learning center KidZania and a licensing agreement with Vice to use its food vertical Munchies for a food hall. And last year, Triple Five announced the doors would finally open for its first phase—including the retail and amusement parks—in April.

Despite the long history of the project, which many believed would never open, and questions over the national retail climate, many experts think, because of Triple Five’s track record and the area’s demographics, it’d be hard for American Dream to fail.

“They’ve introduced concepts there that are ground-breaking,” said NKF’s Dobrowski. “It’s very hard to bet against a scaled project like this, in an area like the New York metro region which has, arguably, the most amount of disposable income out of anywhere in the country. It’s just hard to not believe that this can work.”

With additional reporting provided by Lauren Elkies Schram.

Keeping It Private: Homeowners Struggle With Life on NYC’s Private Streets

Originally published in the Commercial Observer.

Twice a week, 71-year-old Douglaston, Queens, resident Peggy Kalesis packs her trash-filled garbage cans into the back of her SUV and drives half a block from her home.

She and her dozen Stuart Lane neighbors drop their trash in front of an understanding Depew Avenue resident’s home because Stuart Lane is one of the nearly 1,000 private streets across the five boroughs that doesn’t get its garbage picked up by the city.

“It’s horrible,” Kalesis said. “We do pay taxes. We feel like we’re not getting city services.”

Private streets are owned, and tended to, by residents, homeowners associations (HOAs) or co-op boards. While they show up on Google Maps, they aren’t on the official city map so agencies won’t collect trash, remove snow, pave roads, repair street lights, fix sewer lines and more. Some have even caused issues for 911 dispatchers.

Stuart Lane was owned by a family when Kalesis first bought her home 41 years ago, but after failing to pay taxes the city took it over from them and sold it along with an undeveloped lot at the end to Long Island architect Charles D’Alessio in 2000.

D’Alessio has let the 600-foot block deteriorate since he bought it, residents allege. It has large potholes and no street lights, forcing homeowners to buy SUVs and carry flashlights when walking home at night.

“He’s refusing to do anything,” said Kalesis, adding that D’Alessio joked he would install a toll booth to enter Stuart Lane when he first bought it. “We don’t know what to do anymore.”

D’Alessio did not respond to requests for comment.

The city’s Department of Transportation did not respond after nearly a month to a Freedom of Information Law request about the number of private streets around the city. A 2010 New York Daily News report found there were more than 900 across the five boroughs, with WNYC reporting Staten Island had the most in the city that year with 638. Today, there are 236 of them in Queens and 36 in Manhattan, according to the Manhattan and Queens borough presidents’ office.

The Staten Island, Brooklyn and Bronx borough presidents’ office would not provide how many private streets are in their boroughs.

State law requires all new homes in the city to be built fronting a street on the official map and it can take nearly seven years for a new block to be added. However, developers can get an exemption to build a private street leading to the homes, allowing them to fit more houses on a lot and cut down on the time.

“It’s a nightmare,” said Councilman Joe Borelli, whose represents the South Shore of Staten Island and previously owned a home on a private street himself.

“We deal with the problem initially with developers being able to build more houses then they normally could and then after 10 years we deal with it again when inevitably the HOA fails and they need to be repaved and catch basins that need to be dug and there’s simply no money.”

While some residents describe an idyllic life on a private street, others don’t know the maintenance required when they buy a home on one and later flood local officials with complaints.

“They see a house or an attached house and they can afford it. It’s a nice little private thing and it looks really good,” said Charlene Wagner, the district manager of Staten Island’s Community Board 3 who estimates she fields a call once a day from residents on private streets. “It looks great until you open the package and then you find out—that’s not what I signed up for.”

The streets include ones built in newer, sometimes gated, developments in more suburban neighborhoods run by either HOAs or co-op boards. Homeowners pay monthly fees and the HOA uses the funds to fix the streets and remove snow, when the association functions properly.

Others are small sections of a city-owned street that were inexplicably left off the official map when the city became the five boroughs in 1898, according to Brooklyn Councilman Alan Maisel.

“In some cases, [homeowners] don’t even know they own the street,” said Maisel, who has been fighting to get the city to take over some in areas like Canarsie. “If something happens like a sewer line breaks, theoretically, the people who own the street are responsible.”

City agencies point to a lack of insurance coverage for not picking up trash or removing snow in case workers get injured while on these streets.

New York City Department of Sanitation, or DSNY, “will not collect trash or recycling from private streets in the City of New York unless we have secured an insurance waiver from the residents of that street,” Vito Turso, a spokesman for DSNY, said in a statement.

“We also would need to establish that there were no safety concerns to our crews and equipment in potentially navigating those private streets,” he added. “There have been emergencies, like [Superstorm] Sandy, where we have provided emergency assistance on private streets for the safety of local residents.”

However, residents argue the city picks and chooses when to enforce these regulations. Kalesis said DSNY only stopped picking up trash on Stuart Lane a few years ago when the potholes got so bad it made driving down the block difficult. Homeowners on four private streets in Bay Ridge, Brooklyn—Barwell Terrace, Wogan Terrace, Hamilton Walk and Lafayette Walk—sued DSNY last year when garbage collection suddenly stopped after decades.

“You’ve got old people that are now bringing their trash the length of a football field and Sanitation are now concerned about the potential injury to workers,” said Bill Larney, who’s lived on Barwell Terrace for 22 years and is part of the suit. “We have a full tax burden like every other resident and now they’re taking away one of our city services.”

Larney added that DSNY told them about the possibility of getting an insurance waiver, but his Barwell Terrace neighbors would need to form an HOA first.

A judge is currently deliberating the residents’ suit and a DSNY spokesman declined to comment, citing pending legislation.

These issues have sparked action from several local lawmakers to get the city to take over existing private streets and tweak the process for ones being built for new developments. It’s unclear how many new ones get built a year.

Staten Island Borough President James Oddo has been railing against these private street projects for years claiming developers are exploiting a state law to maximize profits, build projects too dense for the neighborhoods and avoid the long Uniform Land Use Review Procedure needed to get a street on the city map. Oddo has used Staten Island builders and developers Savo Brothers’ controversial Mount Manresa development—which will have 20 townhouses on the site of a former Jesuit retreat house in Fort Wadsworth—as the poster child for the issue.

“Staten Islanders drive past a project and they say, ‘How the hell did that happen? Who allowed that to happen?’” Oddo previously told DNAinfo. “We would be making the same mistake with the Manresa site if we didn’t compel it to go through what [city law] really was intended for.”

Oddo and the Savo Brothers declined to comment.

The borough president’s office has the final power to approve the names of newly built private streets. In Mount Manresa, Staten Island, Oddo shot down the Savo Brothers’ original suggestions and stuck the development with Cupidity Drive, meaning an inordinate desire of wealth according to Merriam-Webster, Fourberie Lane, French for trickery and deception, and Avidita Place, derived from the Italian word avdità, meaning greed.

In a less petty move, Oddo also called on the Board of Standards and Appeals (BSA) to reject the Savo Brothers’ application to build the private roads for the project and avoid General City Law 36. The state law requires new homes be built fronting mapped streets before getting a certificate of occupancy, but builders can apply for a waiver from the BSA if they prove following it would be a hardship to developers, according to BSA Deputy Director Toni Matias.

“The board reviews applications on a case by case basis,” said Matias, adding the agency has talked about amending the process following Oddo’s complaints.

A waiver from the law helps developers cut down on the project’s costs and the timeline while letting them maximize the number of homes they can build on a parcel of land, according to a source who’s worked on several projects with private streets around the city.

“The reason people don’t put city roads in is the process to get city roads approved on a final map is seven years,” said the source, who did not want to be named because he’s currently involved in some of these developments. “Who the hell has the finances to wait seven years? [Creating private streets are a] quicker process and it’s not a burden on the city.”

While Oddo has been fighting new ones getting built, Maisel has been trying to help the residents who currently live on them. He authored a law last year forcing the city’s Department of Transportation to compile a list of all of them not owned by an HOA of co-op board—about 200—to consider taking control of them.

“DOT has received information provided by the Department of City Planning as well as a number of borough presidents,” Alana Morales, a spokeswoman for the DOT, said in a statement. “As required by law, DOT has also reviewed factors that may be generally considered and/or necessary for acquisition, but there is no immediate plan to take over these streets.”

Despite the agency’s disinterest, Maisel is still pushing for some in his district—especially Church Lane in Canarsie—to be taken over by the city. Only a small section of Church Lane wasn’t added to the city map, for reasons Maisel could never ascertain, and has no sidewalks and giant potholes, causing a near constant pool of water on the block.

“The city has parking regulation signs on it,” said Maisel, who posed for photos fishing in the pit earlier this year to show how deep the waters are. “If you assume that responsibility it should be your street.”

Residents were dealt a blow when the city repaved the seven-block Church Lane last year but didn’t touch the private section between East 88th and East 89th Streets.

“They make the roads right in front of the water and in the back of the water,” said David Amrusi, who’s lived on the block for 26 years. “They leave the problem. They look and they never come back.”

Life on a private street isn’t always hell and some in the city are highly sought after. The gated Bayside Gardens in Bayside, Queens has some of the priciest homes in the neighborhood while homes in Forest Hills Gardens in Forest Hills, Queens, remain in high-demand, according to Queens residential agent Parvaneh Rifino of brokerage Daniel Gale Sotheby’s International.

Homeowners also can have access to shared amenities—like a pool and a playground—and don’t have the deal with the struggle of finding a parking spot. Most of these streets don’t have alternate-side parking regulations and some even ban visitors from parking without a pass only available to residents and their guests.

Residents of the dozens of ones hidden away in Manhattan describe life on them as a quiet oasis in the concrete jungle.

“It felt very safe and we had wonderful, wonderful neighbors,” Natalie Weiss, a broker for the Corcoran Group who spent most of her life on the Upper West Side’s tiny and private Pomander Walk, said. “Everybody kind of looked out for each other.”

When Weiss’ parents first wanted to move onto Pomander Walk in the 1960s they had to enter a waitlist to rent one of the nearly 61 apartments in 27 buildings. The whole block was converted to co-ops in the 1980s and a unit only hits the market every year or two, if buyers are lucky.

“Ordinarily when I put things on the market during my first open house I usually get two or three offers,” said Weiss, who last sold a three-bedroom, 1,500-square-foot apartment on the block in 2016 for more than $2 million. “You get all the feeling of owning a home [in the suburbs] without the responsibility of owning a home.”

For some in Staten Island, another benefit can be price. Homes in newer developments on private streets around the South Shore of Staten Island can cost about $100,000 less than homes on city streets.

“It’s nicer for children; you can let them play outside without having to be in fear,” said Melissa Cosentino, a broker with Triolo Realty Group that sells homes on Staten Island. “They’re perfect starter homes and they’re great ending homes.”

A lot of issues depend on the HOA, Cosentino said. Good associations are prompt with repairs and snow removal while others keep homeowners waiting for months. The poor reputation of some has even put the kibosh on some deals for Cosentino.

Woodbrooke Estates Homeowners Association manages a group of homes in Rossville, Staten Island, but made headlines in 2016 when its former president, Danny Juliano, was indicted for embezzling nearly $400,000 for nearly four years from the HOA.

Juliano pleaded guilty to grand larceny charges in January. He was sentenced to five years probation and ordered to pay back $300,000 in restitution, a spokesman for the Staten Island District Attorney’s office said.

Soon after his arrest, a client of Cosentino couldn’t get a mortgage for a home in the community because Juliano’s crime made the bank uneasy.

Staten Island Community Board 3’s Wagner said the biggest problem with HOAs is there’s little involvement from the city or state after they’re formed—which is required by the attorney general’s office—leading to a wide discrepancy in their effectiveness to make repairs or clean up snow in the community.

The source who worked on the developments agreed but added that private streets shouldn’t be banned altogether; developers just should be held more accountable after construction finishes.

“Many times you get these developers and the standard of care is not what it should be. That’s the real issue,” he said. “It should be more of a penalty if you’re not maintaining them.”