REAL ESTATE DEVELOPER

DONALD CAPOCCIA’S

LOWER EAST SIDE LANDGRAB!

Squatters Make Deal With The Devil

By A. Kronstadt

From SHADOW #61: Summer 2018

During the 1970s and 1980s, a wave of

landlord abandonment, arson for profit

and city tax foreclosures led to a large

number of empty buildings being taken by

the city and managed by the Department

of Housing Preservation and Development

[HPD]. Over time, most of these buildings

fell into decay and often served as venues

for drug dealing and drug use, including

‘shooting galleries’ and crack houses.

By the late 1980s, numerous abandoned

city owned buildings on the Lower

East Side had been taken over by squatters

who reclaimed them via sweat equity,

removing rubble, rebuilding walls, floors

and staircases, and restoring plumbing

and electrical services. Many squatters

were motivated by political opposition to

the cycle of abandonment and gentrification

that the neighborhood was experiencing

under Mayor Ed Koch, who was

preparing to sell the city out to real estate

developers. Squats also became centers of

political organizing—street actions mobilizing

not only squatters but also politically

conscious tenants and homeless people

repelled repeated attempts by the city to

evict squatter occupied buildings.

In the 1990s, during the administration

of right wing Republican Mayor Rudy

Giuliani, many squats were seized

by the city, including five contiguous

buildings on East 13th Street. The remaining

squats lived under constant threat

of forced eviction. There was enormous

pressure to find a legal solution that would

enable squatters to keep their buildings.

In 2001, in a deal brokered by then

city council member Margarita Lopez,

eleven buildings occupied by squatters

entered into agreements with the Urban

Homestead Assistance Board [UHAB],

giving them the prospect of owning their

apartments as low income co-ops. In 2002,

the buildings were transferred from HPD

to UHAB, which became the de facto

transitional landlord. According to the

program into which the buildings entered,

UHAB was contracted to complete renovations

within 2 years, whereupon individual

apartments would then be sold to building

residents for $250 each. This arrangement

was similar to co-oping, except that the

amount for which residents could re sell

their apartments was limited and there

were income restrictions for those wanting

to buy in, so that the apartments would

remain as low income housing.

Many squatters were skeptical of this

plan. Lawyers for the squatters had been

fighting city eviction notices based on

the legal principle of “adverse possession”,

a.k.a. squatters rights. Squatter activists

argued that legalization would turn their

buildings into real estate, ending the

political squatter movement which had

been a bulwark against gentrification and

displacement in the neighborhood. A way

of life based on collective ownership and

decision making, offered as an alternative

to individualistic money grubbing would

disappear from the Lower East Side and

the squatters would become property

owners. Some opponents of the UHAB

agreements doubted that bohemian artists,

activists, and former homeless people

who were living in the squats could meet

the financial demands of co-op ownership

and that UHAB would effectively foreclose

at some point and turn the buildings over

to developers.

UHAB: AN IDEALISTIC

MISSION CORRUPTED BY

THE REAL ESTATE BOOM

According to UHAB’s web site, their

mission is based on the following high

minded principles: “Self Help, Democratic

Residential Control, Shared Equity (or

Limited Equity) Co-op Ownership, Cost

Effective Sustainability and Continual

Learning.” UHAB describes itself as “...a not

for profit organization that contracts with

HPD to provide services and assistance to

tenants...”

Earlier in its history, UHAB’s mission

had been to make urban homesteading a

viable solution to the problem of building

abandonment in a city where urban shrinkage

and depopulation of the inner city

were the order of the day. The real estate

boom that began in the 1990s, which

continues to the present day, has stood

the entire situation on its head: properties

that no investor would have touched in the

1980s are now the objects of a feeding

frenzy in a hyper inflated market.

UHAB is a corporation exempt from

government agency transparency requirements.

UHAB hires contractors to carry

out building renovations—residents have

only limited control over who does the

work and how and where the work is to

be done. UHAB has the authority to take

out loans without the consent of building

residents, who will then be responsible for

servicing the debt. And, UHAB can share

as much or as little information as it wishes

regarding whom it brings in to do work

on its buildings, thus driving the transformation

of reclaimed urban spaces into

real estate that makes money for the big

players.

DONALD CAPOCCIA:

A KINDER, GENTLER DONALD

(WHO IS OUT TO

DEVOUR OUR CITY)

When Giuliani sent his blue and white

NYPD tank rumbling down Avenue B back

in 1995 to back up the NYPD eviction

of five squats on East 13th Street [535

537 539 541+545 East 13th Street–Ed],

the justification was that squatters were

preventing the city from providing poor

people in the neighborhood with affordable

housing. However, every time a squat

was successfully emptied out—sometimes

by way of suspicious fires as well as by

cops—the property inevitably fell into the

hands of a real estate developer.

Poverty pimps--like future city councilman

Antonio Pagán, the head of “housing”

organization Lower East Side Coalition

Housing Development [LESCHD]--fought

with squatters for years for site control

over squatted buildings, particularly

on East Eighth Street, east of Tompkins

Square Park, where many squats were concentrated

in the 1980s. Pagán teamed up

with real estate developers in what were

called “cross subsidy” programs, whereby

a developer would be given site control

over a property and renovate or rebuild

it with a stipulation from HPD that the

project would include some “affordable”

units which would revert after a number of

years to “market rate” with the developer

as landlord. The “affordable” units were

usually too expensive for the genuinely

low income people HPD was supposedly

committed to serving. Because these

developers were supposedly building low

income housing, they did not have to pay

for anything or service very much debt.

One developer who stepped right up

to this honey pot was Donald Capoccia, a

personal friend of both then city councilman

Antonio Pagán and Mayor Giuliani.

Capoccia’s first buildings on the Lower

East Side, located at 72-76 East 3rd Street,

between First and Second Avenues, were

acquired from the city for $1.00 under the

City’s “Dollar Building Program” in 1982—

they are now expensive condos. Capoccia

still occupies a large unit in one of these

buildings, with a well hidden swimming

pool in his backyard. (Although Capoccia

presents himself as a progressive when he

is addressing the downtown community,

his partner Joseph Ferrara was a major

NYC backer of Donald Trump’s presidential

campaign. Capoccia is also a member

of the Log Cabin Republicans, an LGBT

caucus within the Republican party.)

Capoccia “developed” a block of

squatted buildings evicted on East Eighth

Street. Capoccia later got an insider deal

on the 13th Street squats, which were

integrated into his “Del Este Village”

project, a condominium development on

six scattered sites, running from East 10th

to East 13th Streets, consisting of properties

that were all once owned by the city,

including iconic community gardens that

were bulldozed.

The 13th Street squats were given

to Capoccia’s company BFC Partners–a

real estate developer founded in 1985

by Donald Capoccia, Joseph Ferrara, and

Brandon Baron–by HPD in 1997. The sponsor

of the “affordable” housing scheme

that qualified Capoccia for massive tax and

interest breaks was none other than

Antonio Pagan’s LESCHD. Although

“affordable” units were sold in 1999 to

2000 at $150,000 for a one bedroom

(below market but still expensive for the

area in those days), the price per square

foot at Del Este Village V hit $1,160 in

2014. A two bedroom apartment there

has recently been sold for over a million

dollars.

On the Lower East Side, BFC’s portfolio

includes the recently-constructed 12

story Jupiter “luxury” apartment project

on Second Avenue, between First and

Second Streets. The Jupiter was the first

building in the city’s Inclusionary Zoning

program to include as participants BFC

and a former squat in the UHAB program

located at 9 Second Avenue. Inclusionary

Zoning allows developers to exceed the

height or scope of what existing zoning

allows for at a particular site. Credits that

are created by renovation or construction

of new “affordable” housing can used by

those developers at any nearby location or

sold or traded to other developers.

In 2014, BFC and L&M Development

Partners acquired half the ownership

of Campos Plaza, a low-income public

housing complex between 12th and

14th Streets and Avenues B and C. BFC’s

biggest lower Manhattan plum now is the

massive Essex Crossing project south of

Delancey Street, built on the city owned

site of the Seward Park Urban Renewal

Area, which had been slated for development

of low income housing for decades

before being turned over to BFC for

development into luxury housing and a

complex of high end shopping malls that

will utterly change the character of the

Lower East Side south of Houston Street

[See SHADOW #59 for full coverage of

Essex Crossing -Ed]. Capoccia has also

made inroads into Brooklyn, concentrating

on hip neighborhoods, such as South

Williamsburg.

544 EAST 13TH STREET:

CAPOCCIA GETS HIS FOOT

IN THE DOOR

Giuliani’s raid on the 13th Street

squats did not completely clear that street

of squatted buildings. 544 East 13th

Street became one of the 11 buildings

that signed contracts with UHAB whereby

building renovations would be done within

two years. Fifteen years later, those renovations

were still not completed. The case

of 544 East 13th illustrates the top down

management style of UHAB and how

little democratic power the residents of

buildings in a UHAB program really have.

Since UHAB receives 5% of all construction

costs as a fee, paid out of each building’s

renovation funds, it has a negative incentive

to keep costs down or to carry out

repairs in a timely fashion. Though UHAB

is still the owner, UHAB has released all

“beneficial and equitable interests” to BFC

Partners, which will become the de facto

sub landlord.

According to a former building

resident, Capoccia’s relationship with the

Dawson family, members of which occupy

seven spaces of the six story tenement, has

helped him to gain a foothold there. Isabel

Dawson (a long time supporter of Antonio

Pagàn), along with her husband Greg,

were voted into one unit in 1986, while

the building was still a squat governed

by open meetings of the residents. The

resident told The SHADOW that, in subsequent

years, additional units were taken

by members of Dawson’s clan, some of

whom were actually living in Texas. In one

case, a resident found that his space had

been split in two by a wall that had been

built while he was working at his night job.

The extra apartment created was claimed

by Isabel Dawson’s daughter Rosario, who

was soon to become a prominent actress.

Rosario Dawson spent half her childhood

at 544 East 13th Street–she claims to have

been “discovered” while sitting on steps in

front of the building as a movie was being

filmed on the street.

Capoccia is a governing trustee of the

American Foundation for AIDS Research

[AmFAR], which hosted a black tie gala at

swank restaurant Cipriani’s on February 11,

2015, at which he served as event chair.

The honoree at the event was Rosario

Dawson. The New York Post reported on

May 14, 2017 that four Dawson family

members, plus a family friend, are each

slated to become owners of apartments

in the now 14 unit building at 544 East

13th. Although there are income limits on

buyers and limits on the amount for which

the apartments can be resold, there is a

concern among building residents that

Capoccia’s relationship with the Dawsons

and the fact that the Dawsons will form

a power bloc in the co-op that UHAB is

setting up there puts Capoccia in a favorable

position to take over the building

and make millions more by turning it into

luxury housing, or at least to exercise inordinate

influence over who returns to the

building after the renovations are done.

377 EAST 10TH STREET:

UHAB CANNOT [OR WILL NOT]

GET THE JOB DONE—

CAPOCCIA PROFITS

377 East 10th Street is another case

of a challenged former squat in the UHAB

program, where renovations have dragged

on for more than a decade, “rescued” by

Donald Capoccia in exchange for 12 more

credits under the Inclusionary Zoning

scheme. The situation at 377 East 10th

is similar to that at 544 East 13th, minus

the celebrity factor: UHAB once again

exercised its rights as landlord to withhold

information from building residents

that was essential to their ability to make

informed decisions. Construction costs

spiraled out of control, reaching $500,000

for a single apartment in some cases.

One building resident, part of the 1980s

squatter scene, told The SHADOW that the

residents themselves could have brought

the whole building up to code for about

$500,000.

As with 544 East 13th, after a fire at

377 East 10th, an insurance payout was

collected by UHAB, but the money was

never applied to repairing damage from

the fire. On top of this, HPD had deferred

real estate taxes for about 10 years, but

the Bloomberg administration, in an effort

to appear solvent as it transitioned out of

office, started foreclosure proceedings

against a number of UHAB buildings that

were in tax arrears.

MORE PROFIT

FOR CAPOCCIA AND COMPANY

In October, 2015, gut renovation and

construction work began at 544 East 13th

Street and at 377 East 10th Street by BFC

subsidiary “B&N Contractors”, which was

contracted by UHAB. By taking on the

project of rehabilitating low income housing

at these buildings, Capoccia earned

“off site” credits under the “Inclusionary

Zoning” program, which were applied to

a new building on East Houston Street

and another at Avenue A and East 11th

Street, the former site of the Mary Help of

Christians Church, now called “Steiner East

Village” being marketed as: “One to four

bedroom condominiums and penthouses

enhanced by over 16,000 square feet

of amenities including a 24 hour lobby

concierge, 50’ long pool, spa, gym, library,

playroom, parking, and lush courtyard

and rooftop gardens, all ensconced in

New York’s most eclectic, intriguing, and

authentic neighborhood.” Apartments

there run from $1.6 to over $5 million.

It is difficult to estimate how many

millions Capoccia will profit from Inclusionary

Zoning credits, low-income housing

tax credits, grants and from work done by

“B&N Contractors”.

TWILIGHT OF THE SQUATS:

MONEY CHANGES EVERYTHING

As required by HPD, Capoccia has

provided for the relocation of residents

during the renovations of 377 East 10th

Street and 544 East 13th Street. Residents

were either relocated to rentals in Stuyvesant

Town, Brooklyn and elsewhere, paid

for by BFC subsidiary “B and N Housing”,

or were given $3,000 per month each.

Some veteran squatters interviewed by

The SHADOW consider this a civilized

arrangement. They are confident that, by

end of summer of 2017, they will be moving

back into up to code buildings and

become owners of new co-op apartments.

Originally, squatters who entered

into the UHAB program simply wanted a

$500,000 loan from HPD in order to help

complete their sweat equity mission and

bring their buildings up to code. Capoccia

is likely to spend $500,000 per apartment,

which is more than enough to construct a

new building from the ground up.

While some long time squatters at

544 East 13th are taking a dark view of

Capoccia’s involvement in their building,

fearing that he will ultimately determine

who will return and have a stake when

renovations are complete, there is more

confidence among those waiting for their

renovated spaces at 377 East 10th, who

have indicated a softer attitude toward the

real estate magnate.

However, residents of both squats are

rankled by a perceived denial of equity

rights by UHAB, HPD and BFC. At 377 East

10th and 544 East 13th, UHAB took out

HPD loans with restrictions on residents,

such as disallowing subletting for more

than 3 months out of the year. Residents

are also limited in their resale rights

to about $6,000 per unit, and are only

allowed to sell after being in the co-op

for 3 years. Other former squats in the

UHAB program allow residents to sell their

units for up to $150,000. These property

ownership concerns are in contrast to the

collectivist ideals of the squatting movement

in the 1980s and 1990s, but former

squatters argue that they have invested

money and are as entitled to their equity

as anyone else.

I

t is the ruling class of New York City

that has arranged for things to work out

this way. They have corrupted the originally

well intentioned UHAB into acting

as a vacuum cleaner by which developers

suck affordable housing into Manhattan’s

overheated real estate market.

What are we giving up in exchange for

favors to developers who would be building

anyway, with or without tax breaks or

zoning variances? Not only are we giving

up our air and light and uniqueness of our

neighborhoods when the city sells “credits”

to developers wishing to build higher

than zoning permits, but we are allowing

the very people who should be paying the

most taxes to do business for free.