September 9, 2014
Late last year, the Postal Service announced that it would not proceed with its controversial plan to sell the Old Chelsea post office at 217 West 18th Street in Manhattan. Now the Postal Service has decided it wants to sell the air rights above the historic building.
According to a letter to the New York State Office of Parks, Recreations and Historic Preservation dated August 14, the Postal Service says it is initiating a Section 106 consultation process under the National Historic Preservation Act. The letter says that “the air rights above the Property are slated for sale, which will transfer the air rights out of federal ownership.”
The Postal Service has already determined that there will “no adverse effect” from the sale because as part of the disposition of air rights there will be a protective covenant safeguarding the post office. According to the letter, “The covenant requires the future owner to submit rehabilitation, alteration, or modification plans for the interior and exterior historic character defining features of the Property to the NY SHPO for review to avoid potential adverse effects by ensuring consistency with the Secretary's Standards for the Treatment of Historic Properties and applicable guidelines.”
The Postal Service used a company called Tetra Tech to evaluate the potential impacts. That is itself of some interest. Tetra Tech is the same company the Postal Service and its real estate broker, CBRE, chose to do the historic structure report on the Berkeley post office. As discussed previously on Save the Post Office, Tetra Tech has a long relationship with Richard Blum, until recently the chairman of the board of CBRE (and husband of California Senator Dianne Feinstein). It’s not exactly the company you would turn to if you wanted to avoid the appearance of a conflict of interest.
Selling the air rights is clearly preferable to selling the historic post office itself, and in fact, back in May 2013, Manhattan Community Board 4 suggested that the Postal Service consider selling the air rights for transfer to another location as an alternative to selling the building. But even if MCB 4 gets behind the plan, it could turn out to be controversial. It wouldn't be the first time selling air rights over a post office caused problems.
In 2005, the Postal Service sold the air rights over the Cooper Station in the East Village and the Times Square Station on West 42nd Street. In these cases, the air rights were transferred to developers of adjacent properties, permitting them to erect larger buildings than would otherwise have been permitted.
At the time, the Advisory Council on Historic Preservation and community organizations criticized the Postal Service for selling the rights without first studying the impacts on nearby historic buildings and going through the Section 106 process. The Postal Service responded that the air rights transfers would not in themselves have any impact on historic properties and that impacts would occur only when the developer who bought the rights put them to use. That, of course, is exactly what happened.
The air rights over the Times Square Station were sold to Intell Management and Investment, which ended up building a 61-story condominium that obscured the view from the west of the McGraw Hill building, a 1930 New York City landmark adjacent to the post office.
The rights over the Cooper Station post office were sold to a developer who built a 26-story dorm for New York University, angering many in the community because it was far taller than anything else in the East Greenwich Village neighborhood. (There's more on the story here, with helpful links to official letters, etc.)
In March 2006, Manhattan Community Board 4 sent the Postal Service a letter expressing concern about how the Postal Service had sold the air rights without going through a Section 106 process. The Board encouraged the Postal Service not to do this again, and it recommended that the Postal Service establish guidelines requiring potential buyers of development rights to disclose exactly how the rights would be used.
This time around, it appears that the Postal Service did decide to initiate the Section 106 process before selling the air rights to Old Chelsea, and the protective covenant at least acknowledges that the Postal Service takes some responsibility for how the rights will be used.
But the proposed covenant is brief — just two pages — and it restricts itself to the interior and front façade of the post office. It doesn’t get into other potential impacts of a large new structure adjacent or even above the post office. The Postal Service probably doesn’t want to have to encumber the sale with a more detailed covenant putting a lot of restrictions on what the developer can or cannot do.
For this and other reasons, the finding of “no adverse effect” may be questioned by one or more of the agencies participating in the Section 106 process for Old Chelsea. That includes the National Trust for Historic Preservation, the New York City Landmarks Commission, the New York Landmarks Conservancy, and the community organization Save Chelsea.
Save Chelsea is already engaged in a fight over the sale of air rights from Hudson River Park piers for development along the waterfront in the neighborhood. It may soon find itself in a similar fight over the air rights over the Old Chelsea post office.
September 6, 2014
The USPS Office of Inspector General has released a long-awaited audit report on the post office relocation process. The report faults the Postal Service on a number of counts — lack of transparency, not following postal regulations, the conflicting roles of the Vice President of Facilities — and it has already led management to promise to make some changes. The full report can be found here.
According to the OIG, “The process for relocating facilities was not always transparent. Further, the vice president, Facilities, has conflicting responsibilities for approving funding and adjudicating relocation appeals…. Further, there were no requirements to track all relocations and officials did not always know the specific guidelines and processes. Consequently, the public and local officials may not have had the information they needed to make informed comments and determine the impact of a relocation, potentially harming the Postal Service’s relationship with the public.”
The Vice President of Facilities, Mr. Tom Samra, responded to the report by rejecting the OIG’s finding that he had conflicting roles. “Management disagrees with the OIG’s statement that the responsibilities are conflicting,” wrote Mr. Samra, “and Management notes that nothing in the report demonstrates that the roles are, in fact, conflicting. Further, because the report provides no support for concluding the responsibilities conflict and because the OIG found no improprieties in the process, the report’s statement that ‘the public may see this official as lacking objectivity,’ therefore appears unfounded.”
Mr. Samra has apparently not been listening very closely to what people have been saying. Communities across the country have criticized the Postal Service for giving him this dual authority. It has made the appeals process appear meaningless, and it has engendered quite a bit of ill will toward Mr. Samra. In response to Mr. Samra’s comment, the OIG simply observes that while it may not have identified specific improprieties, “this is not evident to the public.”
In any case, the Postal Service has agreed to revise its procedures, and it will remove Mr. Samra’s dual responsibilities for approving funding and adjudicating appeals.
Another recurring complaint about the relocation process is that in most cases the Postal Service does not identify the new location until after a final decision to relocate has been made. Management holds a public meeting, invites comments, makes a decision, permits appeals, and rejects the appeals — all without having selected a new location.
The OIG reviewed 33 of the 114 relocations that have taken place during fiscal years 2011 through 2013, and it found that in 25 cases the new location was not announced until after the public comment and appeal periods ended.
The OIG acknowledges that postal regulations do not require the Postal Service to notify the public of the site selection before the public comment and appeal periods end. “On the other hand,” notes the OIG, “we recognize that without knowing the final location the public cannot adequately comment on or fully assess the impact of a relocation.”
In response to this criticism, Mr. Samra told the OIG that current regulations “preclude” the Postal Service from identifying the new location until it has made a decision to relocate. “Therefore,” writes Mr. Samra, “Management requests that the report make clear the Postal Service is not arbitrarily withholding site information, but following the existing regulation.”
There’s actually nothing in the current relocation regulations (39 CFR 241.4) saying that the Postal Service must finalize a decision to relocate before identifying the proposed new location. In fact, in six of the 33 cases reviewed by the OIG, the Postal Service announced the new location during the public meeting.
If anyone objects to a relocation decision, an appeal can be filed, but it’s not likely to be successful. Of the 114 relocations reviewed by the OIG, 25 were appealed to Mr. Samra. In 17 cases, he affirmed the final decision to relocate; a half dozen others are pending.
There was only one case where the Postal Service decided not to proceed with relocating — the Southmore Station in Houston. In this case, the community protested vigorously to the relocation because the post office was next to the site of Houston's first sit-in, a 1960 demonstration of Texas Southern University students challenging segregated lunch counters at what was then Weingarten's supermarket. It took U.S. Rep. Sheila Jackson and several other elected officials to stop this relocation.
September 4, 2014
The New York Daily News is reporting that the Postal Service has sold the Bronx General Post Office to Youngwoo & Associates. Back in February, The Real Deal had reported that Youngwoo was proposing to use the site to build a marketplace in the vein of the company’s unsuccessful plan for the Kingsbridge Armory in the Bronx.
The founder and principal of Youngwoo & Associates (YWA) is Young Woo, a Korean immigrant with connections to the Korean-American community. According to the YWA website, Mr. Woo is an active philanthropist, a regular lecturer on real estate, and an alumnus and former trustee of the Pratt School of Architecture.
There's a good profile of Mr. Woo by Adam Piore in The Real Deal. Piore notes that Mr. Woo has gotten into some controversies, including a $100 million lawsuit filed against him by Robert De Niro’s Tribeca Film Festival and a legal battle with a South Korean bank with which he had partnered on a deal to buy a Wall Street building.
Such controversies may be par for the course in the world of New York City real estate, but the choice of Youngwoo as the winning bidder for the Bronx GPO raises yet more questions about how CBRE, the Postal Service's exclusive real estate broker, is going about the sales of post offices. One of the main allegations raised by investigative reporter Peter Byrne is that CBRE has been selling postal facilities to its own clients and to other businesses with which it has done deals, often at prices that were below market value.
According to Byrne’s Going Postal: U.S. Senator Dianne Feinstein's husband sells post offices to his friends, cheap, by selling postal facilities at low prices in this way, CBRE and its partners may be profiting at the expense of the Postal Service.
That’s a matter of particular concern because, at least until recently, the chairman of the board of CBRE was Richard Blum, Senator Feinstein’s husband. Blum stepped down as chairman in May, but he continues to be a major stockholder.
While the Bronx GPO was estimated to be worth $14 million, the Daily News doesn’t say what the sales price turned out to be, and the Postal Service has not made any formal announcement about the deal. Whatever the price, though, there’s no doubt that Youngwoo and CBRE have a prior relationship.
On the CBRE website, Youngwoo is listed as a client of CBRE Vice President Rima Soroka. The two companies have also done several deals together.
In 2009, in one of the biggest deals of the year, Youngwoo & Associates partnered with Kumho, a South Korean investment bank, to buy AIG’s NYC headquarters and the adjacent building, 70 Pine Street and 72 Wall Street. According to Crain’s, the properties represented a total of 1.4 million square feet of commercial space, worth about $140 million. CBRE brokers Darcy Stacom and William Shanahan represented AIG in the sale. That deal ended up in court when Youngwoo accused a former employee of seeking to oust the company as development manager for the site.
In 2010, an IT outsourcing company named Compucom leased 16,000 square feet of office space at the Southwest Corporate Center in Houston. Jon Lee of CB Richard Ellis represented Compucom in the transaction. Bonnie Kelley, also of CB Richard Ellis, represented the landlord, Woo Westwood, LP, an affiliate of Youngwoo & Associates.
In January 2012, the New York Post reported that Youngwoo, along with the San Francisco-based Bristol Group, selected CBRE (Stacom and Shanahan again) to market a 10-story, 240,000-square-foot property at 325 Hudson Street in New York City.
The Postal Service’s contract with CBRE has been the subject of several audit investigations by the USPS Office of Inspector General, concerning conflicts of interest, dual agency, and related issues. The OIG is currently working on an audit about whether or not the sales have sometimes been below market value, as documented in Byrne’s book. That audit may be out soon. (There’s more on these OIG’s audits in this previous post and this one.)
A related issue is that CBRE CEO Robert Sulentic also serves on the board of directors of Staples, where a pilot program has been underway to see if the Postal Service could cut costs by outsourcing retail services to big box stores.
It’s also of note that Youngwoo & Associates has lobbied several New York City elected officials, as indicated on the NYC.gov's Lobbyist Search site.
In a statement on his website, Congressman Jose Serrano, who has been fighting the sale of historic post offices, said the following: “The United States Postal Service has sold one of the Bronx’s most important community and historic treasures in a completely irresponsible manner — ignoring historic preservation law, without considering other options, and without properly consulting the community and listening to its concerns. The USPS has disregarded the voices of the Bronx community, elected officials, historic preservationists, and their own employees — all of whom opposed this process and this sale. Moreover, they have failed to formally announce the sale and provide details to the community.”
Over the coming days and weeks, we’ll be hearing more about the sale, Youngwoo’s plans for the building, and the Postal Service’s plans to relocate retail services. But unless the OIG looks into the matter, we’re not likely to hear much more about the new owner’s relationship with CBRE and how it may have helped shape the deal.
(Photo credit: Bronx GPO, Evan Kalish)
August 29, 2014
The Bronx General Post Office has been sold. There’s no word yet on who the buyer is or what the plans for the building are, but the post office was definitely sold two weeks ago. On the USPS-CBRE website, the listing says simply, "Sold."
The Postal Service has not made an official announcement about the sale, and it is apparently not ready to release any information. When an attorney working on behalf of the Bronx GPO asked for basic details, the Postal Service’s lawyer suggested filing a request under the Freedom of Information Act. That usually takes weeks, even months.
The fate of the Bronx GPO is obviously a matter of public concern in the Bronx, and it’s not clear why the Postal Service is so reluctant to share information about who bought the building, how much it sold for, what the plans are, where the postal retail operation is relocating, and so on. Hopefully, the Postal Service will be more forthcoming about providing answers to these questions soon.
The listing for the Bronx GPO on the CBRE-USPS Properties for Sale website includes several documents related to the property. One of them is a lease agreement saying that the Postal Service “will require a temporary lease-back period of up to 12 months while its replacement facility is prepared. During this temporary lease-back period the USPS will pay rent of $1.00.” Presumably, then, the Postal Service has been looking for a new space in the neighborhood, or it’s going to start looking for one now that the building has been sold.
As for the Bronx GPO itself, the Postal Service has not seemed very interested in sharing information about prospective buyers or consulting with the community about what its needs and preferences might be, but perhaps there have been behind-the-scene discussions with elected officials in the Bronx.
The Postal Service has also not been very influenced by criticisms of how it has been handling the disposal of its historic properties. In April, the Advisory Council on Historic Preservation recommended that the Postal Service refrain from selling historic post offices until it improved its program and procedures.
Mr. Tom Samra, Vice President of Facilities at the Postal Service, responded with a detailed letter dismissing the ACHP report as “very one-sided and distorted.” Now, despite the ACHP’s recommendations, Mr. Samra has approved the sale of the Bronx GPO.
The Postal Service’s decision to close and relocate the Bronx GPO was controversial from the moment the plan was announced back in January 2013. Last year Bronx activist Julio Pabon and yours truly, Steve Hutkins, challenged the decision in an appeal to the Postal Regulatory Commission, but the PRC dismissed the case as a “relocation” decision and outside its jurisdiction. That ruling is currently being contested in the D.C. Circuit Court by attorney Elaine Mittleman on behalf of Pabon and Hutkins. Even with the Bronx GPO sold, this appeal may go forward in order to address several important issues raised by the case.
Many organizations and elected officials have come out in opposition to the sale. Letters were submitted by the Bronx River Art Center, the East Bronx History Forum, the National Post Office Collaborate, the National Trust for Historic Preservation, and the Office of the Bronx Borough President. In addition, nine New York City Council members, ten New York State Assembly members, six New York State Senate members, and three members of the U.S. House of Representatives all signed a letter opposing the sale.
In April of this year, a coalition of elected officials that included New York Mayor Bill De Blasio and Senators Kristen Gillibrand and Charles Schumer urged that the sale be put on hold. Congressman José Serrano also introduced legislation halting the sales until the Postal Service implements the ACHP recommendations, just as he had worked to get the Postal Service to stop the sales while the USPS OIG wrote its own report on the matter.
In spite of all the public opposition, legislative efforts, the OIG report, and the ACHP recommendations, the Postal Service went ahead and sold the Bronx General Post Office. We’ll have to wait a bit longer to learn what’s going to happen to the building and to the priceless Ben Shahn murals on its walls.
(Image credit: Lobby of Bronx GPO)
For more on the Bronx GPO: