Howard Hughes Corp. Talks Possible Dealmaking to Win Variance Support

250 Water Street, now a a parking lot bounded by Pearl, Peck Slip and Beekman. Current zoning would allow a building that is about the height of the Peck Slip School, at right. Photo: Carl Glassman/Tribeca Trib

Some dealmaking may be on the horizon between the Howard Hughes Corp. and community leaders over development of the company’s latest Seaport investment, 250 Water Street.

In June, Hughes Corp. bought the full-square-block parcel from Milstein Properties for $180 million. The company says it has yet to come up with plans for the site, now a parking lot bordered by Pearl, Peck Slip and Beekman. But limited by zoning to a 120-foot-tall, 290,000 square foot building, the developer is talking about possible trade-offs with the community and the city that might win them support for a taller structure.

In a battle led by Community Board 1, the Seaport Historic District was downzoned in 2003, halting any Milstein project that opponents would see as unsuitable for the low-rise, historic neighborhood. Now that Hughes Corp. has inherited the site, it is yet to be seen how the company will deal with the same restriction.

The developer says it has about 450,000 square feet of air rights from two properties it leases from the city: Pier 17 and the nearby Tin Building. In theory those air rights could be transferred to 250 Water Street, but it would not be easy, starting with the arduous land use review required for a zoning variance. Further, the Pier 17 and Tin Building sites cannot “grant” air rights, and 250 Water Street cannot receive them, according to a City Planning document that details the rules and restrictions for transferring development rights in the Seaport.

So any deal that wins community and city blessings, if there is to be one, would almost certainly have to come with some hefty incentives from the developer.

Community Board 1 and the Hughes Corp. have clashed in the past, especially over a proposal—later scrapped—for a 600-foot-tall tower [1] on the site of the New Market Building. Both sides now appear intent on forging a cooperative relationship in discussions over 250 Water Street.

“The future of that site and what Howard Hughes may plan on doing will impact our community and our community board on many levels,” said CB1 chair Anthony Notaro, who invited Hughes executive Saul Scherl to talk about 250 Water Street at the board’s Executive Committee last month. “The best thing to do is to build a relationship up front.”

Speaking to the committee, Scherl mentioned a laundry list of Seaport-area needs for potential dealmaking. The Peck Slip School lacks an auditorium. Pier 16 is in bad shape. The city would like the esplanade completed between Pier 17 and the Brooklyn Bridge, and it also wants more affordable housing.

(Howard Hughes is in a dispute with the city over its options for the site of the soon to be demolished New Market Building. As the location of a possible future amenity, such as a park or community center, it could also serve as a bargaining chip for future negotiations.)

Scherl singled out the chronically struggling South Street Seaport Museum as particularly worthy of help, and said he has been in talks with its executive director, Jonathan Boulware, about the institution’s needs. “There’s a whole bunch of stuff that we’ve been working with him on,” Scherl said.

Boulware, through a spokeswoman, declined to comment on discussions with the developer.

Emily Hellstrom, president of the Peck Slip School PTA, said in an email that there is “no doubt” that any building across the street from the school would be of “utmost concern” to the school’s parents and will be “at the forefront of our minds as we reconvene in September.” Hellstrom noted the developer’s “stalwart support” of the school and its arts programming and its “sincere interest in giving back to the neighborhood.”

“We would hope that whatever they have in mind for the space,” she wrote, “they would continue with their approach of taking on board the concerns of the community as well as keeping the development within the historic nature of the district.”

Scherl said the company has begun interviewing architects but “we don’t have plans to file next week, next month, for that matter probably even this year.” Proposals, he noted, will first be presented to the Seaport Advisory Group, an amalgam of community leaders, and elected and other city officials. (Previous discussions with Hughes Corp. about Seaport development took place behind closed doors with a similar body, the Seaport Working Group. It is unclear whether the public and press will be barred from observing these future talks.)

In the meantime, Scherl said, “we will continue to have dialogue with all the constituents, whether it’s the city’s Economic Development Corp., the South Street Seaport Museum, the community board, members of the community, residents who live right nearby, the schools. And I hope we’re going to have a dialogue that’s constructive.”

Looking ahead to those talks, Scherl predicted, “There will be some who say, you know what, I don’t want a tall building there no matter what. I don’t care if you give the city a trillion dollars. And that’s a fair comment.”

Paul Goldstein, the former longtime CB1 district manager and now board member, recalled the struggle to downzone the site and prevent Milstein from erecting a tower at 250 Water Street. While the board in the past has wrung concessions from developers in exchange for community amenities, such as schools, the future of this site may be different, Goldstein argued at the meeting. “We’re going to have to think very long and hard about taking one of our greatest victories probably by this community board and cashing it in,” he said.

The east side of the district lacks amenities, such as parks, ball fields and community centers, that are abundant on the district’s west side, countered the board’s co-chair, Paul Hovitz. “We said we want the museum and the museum is on the verge of bankruptcy if something isn’t done for it,” he added.

Whatever is decided for 250 Water Street, Scherl noted, there will be people who are not happy.

“A good deal,” he said, “is one that no one really likes.”