Las Urbanistas

By ANDREW RICE; Published: March 18, 2007

Mario Procida — son of a construction boss, grandson of an immigrant stonemason — was stalking his natural habitat, a building site. As usual, he was doing several things at once, all of them distractedly. The 49-year-old developer had come down from his family firm’s office in the Bronx to show me around his latest project, On Prospect Park, a 15-story, 114-unit luxury apartment building at the eastern edge of Brooklyn ’s Grand Army Plaza. Being who he was, however, Procida couldn’t help turning our little tour of the unfinished eighth floor into an exacting inspection of the work in progress. Procida believes that his building, designed by the famed architect Richard Meier, will soon be recognized as one of the most aesthetically significant structures ever erected in the borough. At this point, however, On Prospect Park was still little more than a skeleton of round pillars and naked concrete slabs, bunted with orange netting and open to the stiff autumn breeze. Procida spotted a few imperfections, necessitating a series of gruff cellphone calls to subordinates. “I would venture to guess that this is the most complex residential building that I have ever seen,” he told me.

Procida’s BlackBerry buzzed. It was Sheldon Gordon, a multimillionaire shopping-mall developer who is one of Procida’s two partners in the project. “Hey, Sheldon, I’m out at the building,” Procida shouted. “What can I tell you? It’s spectacular.” After he hung up, Procida led me onto a creaky construction elevator that took us up to the penthouse level, where seven units — five of them duplexes — are selling for $2 million to $6 million. He darted up a concrete stairwell to the most expensive unit’s roof deck, where three people were waiting for him: a gray-bearded man in a tweed jacket; his companion, a demure woman wearing a Yankees cap; and Johanna Beiter, a real estate agent who was showing them the place. Procida — stocky, balding, wearing a lavender shirt, a blue sweater vest and casual white slacks — threw open his arms as he strode toward the roof’s rough edge. “It doesn’t get any better than this,” he said, “does it?”

Usually, the real estate agents marketing On Prospect Park don’t offer such tours to prospective buyers; a building’s birth, like the human kind, is a messy thing to witness. But the bearded man was a roofing contractor by profession, so he could presumably be trusted to look past the rusty nails and the stalks of protruding rebar and to focus on what was really important: the $6 million view. The rain had stopped momentarily, and the sun was streaming through the clouds as if in a Turner landscape. To the left was the rolling expanse of Prospect Park, where red and yellow leaves were still clinging to the trees. Straightaway were the greenish church steeples of Cobble Hill and Carroll Gardens, and the Statue of Liberty was somewhere out in the foggy harbor. To the right, in the distance, was the familiar Manhattan skyline. In the foreground stood Brooklyn’s landmark Williamsburgh Savings Bank tower, which was in the process of being converted into luxury condominiums itself.

In fact, almost any direction you looked, some once-scruffy corner of Brooklyn was under renovation. Next to the bank building lay the Atlantic Yards site, the proposed future location of a mammoth office, housing and sporting complex designed by Frank Gehry. Down on the borough’s East River waterfront, shiny glass residential buildings were sprouting like marsh grass. This decade’s real estate boom has favored Brooklyn, where overall property valuations rose 26.7 percent last year. In 2005, the last year for which complete data are available, more units of housing were constructed in Brooklyn than in Manhattan.

On Prospect Park represents the climax, at least for now, of this trend. For years, well-to-do artistic types — the actress Jennifer Connelly, for instance, and the novelist Jonathan Safran Foer — have come to Brooklyn for its handsome (and increasingly pricey) brownstones. But Procida is trying to sell the richest on a very different vision of Brooklyn life. His building is located on the edge of a gentrified zone, in a ZIP code where the median household income is less than $40,000 a year, at the edge of a neighborhood, Crown Heights, that is probably best known as the site of deadly race-related incidents 16 years ago. But Procida is marketing it like a little outpost of Manhattan, importing a voguish sales tool from across the river: the idea of packaging apartments as inhabitable art. In Manhattan, new residential buildings designed by famous architects like Meier, Charles Gwathmey, Jean Nouvel and the chic Swiss firm Herzog & de Meuron have been marketed, at enormous prices and with varying degrees of success, as the latest symbols of cosmopolitan wealth — the kinds of places Calvin Klein and Nicole Kidman choose to rest their stylish heads. But no one tried it in Brooklyn before. The working theory is that in an uncertain economy, at a moment when the real estate market seems to be cooling, it’s smartest to bet on those who worry about money the least, building for the rich and their high-end tastes. “That market’s pretty much immune” to market forces, said Louis V. Greco Jr., Procida’s third partner in On Prospect Park. “People are into Richard Meier, so they’ll go and buy in Richard Meier’s building, and they’ll pay a premium.”

On Prospect Park seems almost custom-designed to test the untried notion that the vaulting ambitions of great architecture are not subject to the dragging influence of supply and demand. Procida’s fellow developers are watching the project with keen interest and some skepticism. “I know Mario well, I knew his dad well and Mario and I have been partners on deals before,” said Carlton Brown, a developer who is building a 250-unit luxury condominium complex called the Kalahari in Harlem , another epicenter of new residential construction. “Mario is clearly a risk taker. I think the building is going to be a great building. But when Mario showed me the building, I said, ‘That’s a risky building to put up in Brooklyn.’ “

Procida likes to turn the implicit question “Who’d move to Brooklyn?” on its head. The revived borough is full of newly desirable locations, he says, but he owns the best one of all. “This is the most prominent site in the borough,” he said proudly the day I visited the building, after we were back on ground level. He gestured out toward Grand Army Plaza, which is dominated by a Parisian-style triumphal arch. “This is the crowning piece of Eastern Parkway. You’ve got the arch. You’ve got the entrance to the park. You’ve got the Brooklyn Museum.” Procida, who has a master’s degree in architecture from U.C.L.A., said that he hoped that Meier’s diaphanous glass-walled building would one day evoke comparisons to such Modernist masterpieces as Ludwig Mies van der Rohe’s Lake Shore Drive Apartments in Chicago. “This is a great building,” Procida said. “And there aren’t that many great buildings that are built.”

By the time we went down to the plaza, the bearded businessman and his companion had already driven away in their BMW. Procida quizzed Beiter, the real estate agent, who told him the couple seemed most impressed with Unit 8E, a three-bedroom with a large terrace that listed at $3.6 million, and Penthouse F, a larger version of the same. Though On Prospect Park’s sales office had opened only the week before and the building will not be completed until the summer of 2008, Procida told me that buyers had already signed contracts on four condominiums. That left just 110 to sell.

It wasn’t hard to pick the real estate guy out of the crowd loitering in front the Helmsley Building on Park Avenue a few days before Christmas. He was the puckish man in the pinstripe suit, puffing on the Davidoff cigarillo. Billy Procida — Mario’s younger brother, former partner, temperamental opposite and occasional tormentor — pushed open the door to Bobby Van’s Steakhouse and asked the maître d’hôtel for a table by the window.

“It’s a big bet,” the younger Procida told me when I asked him what he thought about his brother’s new building. He sounded proud and a little envious. He was used to being the adventurous one in the family. In 1985, New York magazine profiled Billy Procida in an article titled “The Boy Who Would Be Trump.” Billy was 23, and Mario was 28. The two of them posed for a photograph outside a riverside condominium complex they’d built together near the Throgs Neck Bridge in the Bronx. Mario, his ample head of hair slicked back, wore sunglasses and a bow tie. But Billy was the center of the article’s attention, as he showed off his gold Mercedes and boasted that he had never read a book, “except one on real estate,” and generally came off as an embodiment of the mid-1980s, when freewheeling developers used easy credit to throw up speculative buildings all over New York. Needless to say, the boom did not end happily.

The brothers dissolved their partnership in the mid-1990s, after 13 profitable and argumentative years, and Billy now runs Palisades Financial, a sizable real estate investment firm based in New Jersey. But he still gets sentimental when he talks about that first project he and Mario did, White Beach. He had just scraped through high school, and his father, an old-school type — “a 250-pound construction guy with two pinkie rings, the works,” Billy said — helped him acquire three and a half acres along the East River. One night, so the story goes, Billy was up late brainstorming with Mario, who was visiting home from U.C.L.A. The brothers came up with the concept of a condominium complex set on a marina, like something out of “Miami Vice.”

They ended up building it. Mario designed the doors to look like sails. Now, two decades later, his younger brother pulled out an aerial photograph of White Beach. “When we built this,” Billy said, running his finger along the image of the tiered white stucco buildings, “they said we would never break $100,000 a unit here. We sold that for over $200,000 a unit. Why? There was nothing like this. Nothing like it!” He told me the same principle held true for On Prospect Park. “In a city of 10 million people, there’s always 100 rich people who will pay for a piece of fine art,” he said. “As far as I know, Mario’s got the only piece of fine art in Brooklyn.”

Mario Procida is named for his paternal grandfather. The original Mario Procida came over from Sicily in 1928 and ran the family construction firm out of a tiny storefront on East Seventh Street in Manhattan. His son Joseph stayed in the business, though he eventually moved his family to the New Jersey suburbs and the offices of his construction company to the Bronx. Joseph made good money, building a lot of fast-food franchises. But his kids never felt rich. As a teenager, Mario spent his summers toiling on work sites. He saw enough of the construction business to know that when he got older, he wanted to do something different. In the real estate business, like most industries, the more power you have, the more you are paid. And from where Mario stood, no one had more power than the developer. That is what he set out to become.

Even within the developer class, however, there are stratifications. Manhattan office-building developers sit on the boards of museums and opera houses. The more visible Manhattan residential developers are flashy downtown types: the former nightclub owner Ian Schrager, for instance, or André Balazs, who is known for dating Uma Thurman. Beneath them there is a scurrying subculture of gamblers, big talkers and outright con men, who are regarded by the Establishment with disdain — not least because many of those in the Establishment were once hustlers themselves. Lower still in the caste system are the smaller players from the outer boroughs. Though many fortunes have been made by building outside Manhattan — just ask Donald Trump, whose father started out developing working-class apartments in Brooklyn and Queens, or the billionaire Lefrak family, for which Lefrak City, the mammoth Queens housing project, is named — there’s not supposed to be a lot of glory in it. Which may explain why so many developers are asking: Who is this Mario Procida?

Procida still works where his father did, in an industrial building in the Bathgate section of the Bronx, near the Metro-North tracks. One afternoon in early December, Procida drove me around the neighborhood in his S.U.V ., pointing out buildings that had once been abandoned and considered so beyond salvaging that the city administration had painted ersatz curtains on their windows just to maintain the illusion that they were inhabited. Now real people lived in them; the Bronx has rebounded, too.

New York’s real estate crash of the late 1980s left behind a bloody trail of bankruptcies, empty buildings and depressed prices and ruined nearly everyone in the business. Procida, however, found a way to survive, and even prosper, through the down times. He did it by building for poor people. In partnership with a community group called the Mid-Bronx Desperadoes, he won contracts to build a series of government-subsidized housing projects that were lauded for their innovative architecture.

Procida says his development operation is now a $500 million business, but it didn’t really take off until the beginning of the decade, when he formed a partnership with Louis Greco, whose family also went way back in the real estate business — his grandfather was a developer and Mayor Fiorello La Guardia’s buildings commissioner. Greco knew his home borough, Brooklyn, as well as Procida knew the Bronx. He also had experience in building luxury housing. In late 2001, at a time when banks were leery about making construction loans in Manhattan because of the threat of terrorism, Greco and Procida secured financing for their first big project, Boulevard East, an 11-story apartment building in downtown Brooklyn. “We were in a marketplace where the little guys couldn’t afford to get into it, because it was too big for them,” Greco told me when I visited him at his office, in a restored brownstone mansion in Brooklyn Heights. “And the big guys didn’t want to be bothered with it.”

But the big guys missed something: young professionals, priced out of Manhattan, were discovering the charms of neighborhoods a few subway stops across the river. Originally, Procida and Greco intended to make Boulevard East a rental building, but area housing prices rose so strikingly during the time they were constructing it that they decided to sell the units instead, at reasonable prices. The cover of a glossy sales brochure depicted five good-looking young people walking down Smith Street in a formation that evoked the Beatles’ “Abbey Road” album cover. The building sold out quickly.

“He had a few deals like that, where the timing was right,” said Procida’s business associate Carlton Brown. “He was a wizard. And for whatever reason, he decided he wanted to step it up a notch — or four.”

On Prospect Park, like many real estate developments, was not so much conceived as assembled by chance. The Union Temple of Brooklyn, the borough’s oldest Reform Jewish congregation, had a parking lot next to its building on Eastern Parkway. Since the lot faced Grand Army Plaza, the congregation’s leadership figured it could fetch a good price in Brooklyn’s booming real estate market. Several developers expressed interest, but no one could work out a sale, mostly because the owners of the Eastern Athletic Club, who have an outlet that occupies part of the temple building, had a lease that gave them the right of first refusal on the land. One of the owners of the athletic club, however, knew Louis Greco, having met him a few years before at a concert put on by Elton John and Billy Joel. Procida brought in a third partner, Sheldon Gordon, best known for building shopping malls in Las Vegas and Atlantic City. He’d met Gordon because their children went to school together at Greenwich Academy. After a protracted negotiation, they bought the land for $4.75 million, while promising millions more in additional improvements to the temple and the health club.

Originally, Greco and Procida imagined building a traditional brick apartment building on the property, but Gordon was friendly with Richard Meier, who had just built two new buildings in the West Village that were going for unheard-of prices. “Sheldon, as I remember, said, ‘I want to do a good building; I’m putting some money into it, and I don’t want to put up any old building,’ ” Meier told me. “This should be as good as the budget will allow.”

The budget for a Meier building, other developers say, is enormous. Not only are the architect’s fees in keeping with his stature, but he also lays out his designs in ways that, while daring from an artistic standpoint, are maddening to cost-conscious builders. “To get the star-quality architect with the cachet of Richard Meier, you’re paying a big premium,” said Thomas Elghanayan, a developer who is in the process of building seven luxury towers on the waterfront in Long Island City, Queens. “To do that on Grand Army Plaza — granted, a primo location, great views — it takes a lot of guts.”

“It’s not something I would have done,” Brown said, “but that’s also the way people make fortunes: by doing things others wouldn’t have done.”

Developers who lived through the last crash talk about it the way old Londoners recount the blitz. They’ll tell you there are a million reasons why this boom won’t end like that one. Banks are smarter with their lending. The city is growing. Its economy is strong. Goldman Sachs gave out a record $16.5 billion in year-end bonuses. Globalization and America’s growing income disparity — a positive development for builders of luxury housing — have created a jet-setting class of international plutocrats who think nothing of plunking down $10 million for a Manhattan pied-à-terre. At every juncture when disaster seemed inevitable — after Sept. 11, after interest rates started rising, after the Miami and Las Vegas markets tanked — buildings kept bubbling up in New York. In the last year, despite much doomsaying, apartment sale prices have remained roughly stable, prompting talk within the industry of a “soft landing.”

“The question is, is there too much product that will be coming on the market in the next year?” said Gregory Heym, chief economist at the real estate brokerage firm Brown Harris Stevens. If you press developers, you find that many of the more established ones are worried that the answer is yes. Just as in the late 1980s, a host of new players have come on to the scene, and it seems as if their calculators are programmed differently. “Everybody became a developer in the last five years, so there are a lot of crappy buildings going up,” said David Walentas, a major builder on the Brooklyn waterfront. For decades, a city program has offered huge tax breaks to developers who build outside the most desirable Manhattan neighborhoods, an incentive that is passed on to buyers. (The purchaser of On Prospect Park’s $6 million penthouse, for instance, who would normally be assessed $3,000 a month in real estate taxes, will initially pay only around $50 a month.) The City Council recently voted to revise the program, so that future buildings in certain fast-growing neighborhoods, like the one around Grand Army Plaza, will have to include units for low- and middle-income people in order to qualify for the tax break. Developers predict that the revision will prompt many in their industry to rush into new construction before the end of the year, when the costly new guidelines go into effect, increasing the potential for a ruinous glut.

“Listen, there’s a lot of product out there,” Mario Procida conceded. “But we don’t think that On Prospect Park is sitting in the mix with the majority of product in the market. It is definitely a unique proposition for living in a spectacular location. We feel people will pay a premium for it. We feel they will want to live there.”

Picking a home is always, in some measure, tied up with the question of “Who am I?” The developers of On Prospect Park are trying to sell condominiums by convincing prospective buyers that they are Richard Meier people. “This building is really about, ‘This is who I am, this is where I want to be, this building represents me,’ ” Cheryl Nielsen-Saaf, who is handling the marketing of On Prospect Park on behalf of the Corcoran Group real estate brokerage, told me on the phone one day. She invited me to drop by the project’s sales gallery to see what she meant.

The gallery had opened a month or so before, just in time for the flush Wall Street bonus season. Significantly, it wasn’t located in Brooklyn but in a storefront on Leonard Street, in the self-consciously hip Manhattan neighborhood of TriBeCa. “What we’re trying to do is educate the buyer about who Richard Meier really is,” Nielsen-Saaf said as she led me down a row of black-and-white photographs of the architect and some of his most famous buildings. We walked past an immense glass vase filled with dried fall flowers and into the rear room, where the marketers had constructed a model apartment. The walls were white, the kitchen countertop was white, the cabinets were white, the leather couch was white, the light was dazzling and the fixtures were all from Germany. You got the impression that living in an apartment designed by Richard Meier was a little like residing inside a very spacious, expensively appointed iPod.

Meier’s own office, located in an old loft building on a windswept stretch of 10th Avenue, is decorated according to a similarly cool and minimalist aesthetic. The architect, now 72, wears his hair — white, of course — fashionably long. Meier told me he was taking care to design every element of On Prospect Park, inside and out. He learned a hard lesson about the importance of enforcing his vision when he built his first two West Village buildings. They were a “disaster from the beginning,” he said, in terms of the construction process. Breathless stories about their glamorous occupants quickly gave way to gossip items about leaky windows.

Behind the scenes, Meier’s insistence on control has created some tension. “I’ve been on that side of the table,” said Procida, the former architecture student. “Did you read ‘The Fountainhead’? You know, it’s ‘What I’m designing is the way things should be and the way you should live.’ And oftentimes, and this is to a certain extent a generalization, the concept of cost and constructability is not at the top of their list of priorities.” Developers are accustomed to treating architects the way movie producers treat screenwriters, but Meier’s name is on the marquee, so to speak, so he can’t easily be pushed around. One person involved in the project related that the developers and the architect had spent “many, many months” arguing about baseboards. Meier didn’t want them, because they compromised his sleek look, but the developers had visions of maids gouging out chunks of Sheetrock with their vacuum cleaners. Eventually, a mutually agreeable design was worked out.

Greco, the member of the development partnership most involved with the marketing strategy, told me that he and Procida believe that applying Meier’s name to their condominiums adds roughly 25 percent to their potential sale price. “In the garment business, you can add a 20 to 30 percent premium for the right label,” Greco said. “So it’s the same thing here. It’s a label.”

The developers’ challenge is to keep Meier’s design from adding a similar premium to their construction costs. Although apartments are far cheaper in Brooklyn than in Manhattan — asking prices at On Prospect Park (which range from $790,000 to $6 million) are about half the cost of a unit in one of Meier’s Manhattan buildings — construction contractors offer no similar outer-borough discount. It’s as expensive to build next to Prospect Park as it is next to Central Park. To finance the building, Procida and his partners have had to take on an amount of debt that is unusually large for a Brooklyn project. Real estate people measure things by the square foot. The project’s construction loans alone amount to about $660 for every salable square foot in the building. That suggests that the bank expects that Procida will sell the units for at least $1,000 a square foot. He is asking for $1,212. But other developers told me that no one else has dared to charge much more than $850 a square foot for new luxury condominiums in Brooklyn. Procida wouldn’t disclose how much money he and his partners have invested in the project, but he did say his overall costs are “well above $700 a square foot.” If he manages to sell his apartments for something close to their asking price, he and his partners will walk away with tens of millions of dollars. But if Procida finds he can sell his apartments only at the $850 level, like everyone else in Brooklyn, he could have trouble breaking even.

In the end, the project’s success will depend on whether the marketability of Richard Meier overwhelms the power of that most potent of all real estate forces, location. When I asked Greco who was going to buy at On Prospect Park, he described a species of New Yorker that sounded a lot like a Manhattanite. Someone who had enough money to live anywhere and wanted to live someplace fashionable, with great views, a doorman and an adjacent health club. The sort of person who attended a recent Annie Leibovitz photography exhibition, which the developers partly sponsored. The sort of person, Greco said, who would return from the sales gallery with the clothbound On Prospect Park brochure, place it on his coffee table and proudly tell his friends, “I’m in a Richard Meier building.”

It struck me that our conversation was leaving the domain of economic calculation and was entering the far less predictable realm of taste. Greco could figure out how many New Yorkers could afford an apartment at On Prospect Park. Based on housing-market statistics, he could reasonably estimate how many of them might move to Brooklyn. What he couldn’t know, because it wasn’t quantifiable, was how many of them were Richard Meier people. Recently, there have been some signs that the number of wealthy New Yorkers who want to live inside avant-garde architecture is not limitless. In Manhattan, Meier’s third West Village building did not sell out as quickly as the first two, and an undulating blue-green glass tower by Charles Gwathmey, marketed as “Sculpture for Living,” has been greeted savagely by the press and indifferently by buyers, to the point that the building’s developer has put a few unsold units up for rent. There has been some grumbling among architecture critics — both the professional and the sidewalk variety — that all these modish glass buildings are rather uniform in their uniqueness. Some developers wonder if the style will make the transition to Brooklyn, a place where people tend to like bricks. “I think the Brooklyn buyer is a Brooklynite,” said Veronica Hackett, managing partner of the Clarett Group, which is building a 108-unit luxury development near the Williamsburgh Savings Bank building.

The thing is, Mario Procida and his partners don’t really know what lies beyond their beautiful edifice. “You run the numbers, you look to see some economic sense, but ultimately, at the end of the day, you rely on your gut,” Procida told me that afternoon at his office. A few weeks later, in mid-January, we were talking on the phone, and Procida returned to the subject of uncertainty — this time in the context of the Miami Beach-style condominiums he built next to the Throgs Neck Bridge, back when he was 27. “Looking back at it, it was highly out of the box,” he said. “It was out of the box stylistically, and it was out of the box for the market. There are a lot of things that everybody just said no to. In many respects it was just as out of the box as when we started a lot of our redevelopment work in what everyone would call the South Bronx. There’s a parallel there. People said, no, you can’t build houses there. Nobody would lend you the money.”

When I mentioned his friend Carlton Brown’s assessment that On Prospect Park was a “risky” proposition, Procida seemed genuinely taken aback. “We’re selling,” he said, adamantly. “We’ve sold in excess of 10 percent of the units. We’ve sold about 12 units, and we opened, realistically, during the holidays. So we’re real happy.” Since then, the number of apartments under contract has only continued to grow, according to the developers. At this early stage, however, deeds have not yet been filed with the city, so it is impossible to verify those claims or to confirm whether the apartments are selling for a price close to what Procida originally envisioned. He and his partners have already had to adjust their expectations somewhat: in October, according to public documents, they revised the asking prices for roughly half of On Prospect Park’s units, reducing them by about 3 percent, or $6.4 million, in aggregate. Several individual apartments were marked down $500,000 or more; one, on the 13th floor, fell in price by $1.35 million. One unit’s price tag stood untouched, however: that penthouse costs $6 million. It remains the steepest view in Brooklyn, and it is still available.

 

 

Andrew Rice, a writer living in Brooklyn, has covered New York real estate. He is now writing a book about Uganda.

 

SOHO’S boom is history now, its narrow streets long since filled with fancy shops and crowds of tourists.

If you want to experience the quality of the old SoHo these days, you have to venture south of Canal into TriBeCa, where blocks like White Street from Church Street to Broadway have that long-ago quiet.

Start a walk on this block of White Street at Church. In the 1820s, the street was filled with little brick houses like the one at the northeast corner, No. 34, which in 1829 was occupied by Walter Heyer, a baker.

Trade began arriving by the 1830s, and after the Civil War a building boom remade White, Walker and adjacent streets into a dry-goods center.

For instance, 39 White Street, a Greek Revival house, was occupied in the 1840s by Seth Grosvenor, a merchant who died in 1857. In 1861, his estate added two floors, keeping the narrow three-abreast windows. More typical were entirely new structures, like the one his heirs built eight years later at 64-66 White, its cornice emblazoned with the Grosvenor name.

An 1863 advertisement in The Brooklyn Daily Eagle by Stevens & Carples, a military goods supplier in the newly rebuilt Grosvenor house, was revealing of the Civil War-era White Street: “Operators wanted with their own machines — good operators can make from $7 to $10 per week.”

Although SoHo is known for its cast iron, builders on White Street used masonry more often than not — like the marble front of No. 40, which is Italianate in style with an unusual frieze of three swags at the top, surmounted by the simple carved year, “1866.”

The Italianate-style facade of No. 44 White, built in 1868, has lovely khaki-colored Nova Scotia stone, the kind used on the Dakota. It seems to have been cleaned recently and is now nearly luminous.

Across the street, an unusual marble structure, at 43-45, is being advertised as “Luxury Loft Rentals.” In 1868, when the craze for mansard roofs was white-hot, an unidentified architect went all out with an imposing colonnaded facade, leading to a frieze of swags at the top of the fifth floor, itself topped by a three-part mansard roof with a pair of oculi.

In 1872, a committee of the Board of Underwriters condemned the widespread use of these wood-framed roofs, specifically noting their concentration on White Street. The New York Times reported that there were at least 150 of these roofs downtown and quoted the Board of Underwriters as calling them “huge tinderboxes.”

Across the street are the ambitious Wood’s Mercantile Buildings, at 46 and 48-50. The first five floors are strictly ho-hum, but they are set off by a broad marble cornice all across the top proclaiming, in raised letters, “18 — Wood’s Mercantile Buildings — 65.”

Although these old lofts have a secondhand look now, the prominent label gives an idea of the importance — or at least the pretensions — of the building’s investors, Abraham and Samuel Wood.

Peaceful as it is now, when operating at full tilt White Street was an unforgiving machine. In 1904, The Times reported on a Children’s Court hearing involving Louis Deimstein, who was 14 and worked for an unidentified firm in the Wood’s Mercantile Buildings.

He did not know where his parents were and wanted only to be left alone so he could look after his 11-year-old brother, with whom he lived at the Newsboys’ Lodging House, a well-known charitable enterprise. “I earn $4 a week, and that is enough to keep my brother and myself,” he told the court.

Nevertheless, a guardian was assigned to look after the boys “until their parents can be found and compelled to support them,” The Times reported.

Little changed on the street until 1965, when the Civic Center Synagogue, at No. 47, was built for worshipers from local businesses still in the neighborhood. Designed by William Breger, with a giant, pillowy curve, its recessed facade cannot be seen from either end of the block, but it is astonishing when suddenly revealed.

The cast-iron loft at No. 55, with a second exposure on Franklin Place, a tiny alley, is the most architecturally imposing work on the block. It was designed by John Kellum and built in 1861 as an investment by John and Samuel Condict, two saddlers. The high arcades and intricate detail were cast by Daniel Badger, although much of the present ornamentation is replacement work.

As the industrial centers of Manhattan began to decline in the 1950s, residential tenants moved to White Street, along with some “downtown” type enterprises: Let There Be Neon, at 38; the Flea Theater, at 41; and the Manhattan Children’s Theater, at 52.

Among the conversion projects now under way is the western portion of the Wood’s Mercantile complex. Yet despite these, White Street has not followed SoHo’s lead. It can be empty on weekends.

Edward I. Mills, an architect who has worked in 48-50 White Street for 17 years, said that when he moved in, the residential invasion of the street’s upper floors was well under way, although most of the ground-floor spaces still held fabric warehouses.

Mr. Mills said that because retail rents had not risen as much as residential rents, most of the ground-floor spaces on White were now occupied by residential tenants. He put the value of residential lofts in TriBeCa at $1,000 to $1,500 per square foot.

Mr. Mills is working on a building renovation at 408 Broadway, near Walker Street, and he believes that SoHo retailers are poised to jump the Canal Street barrier. When that happens, he said, “everything south of Canal will start changing.”

 

E-mail: streetscapes@nytimes.com

IN many ways, commuter railroads are a victim of their own success.

Thanks to high gasoline prices, perpetually clogged highways and a strong economy, the three major commuter rail lines that serve the New York metropolitan area are handling more passengers than ever. Last year, ridership on New Jersey Transit trains jumped 6.8 percent, to 74 million, setting a record for the second consecutive year. Metro-North also hit a record last year, carrying 2.4 million additional riders. And the Long Island Rail Road, which saw a big decline in traffic after the attacks of Sept. 11, 2001, rose for the second straight year in 2006 after three years of decline.

So, with all the extra revenue these extra passengers bring in, why are the region’s commuter rails scrambling to come up with money to meet the increased demand for service? Why is New Jersey Transit looking to increase fares by 9.9 percent this year? And will fares rise on Metro-North and the L.I.R.R. next year?

Part of the answer to these questions rests on an overriding truth about mass transit: Revenue from fares typically covers about half a railroad’s operating costs, so the more ridership grows, the more money railroads must find from other sources to make ends meet. Yet with state and federal mass transportation budgets stretched thin, railroads are finding it harder to resist raising ticket prices.

“Fare increases are always an option of last resort,” said George D. Warrington, the departing executive director of New Jersey Transit, who has recommended the increase to cover a projected $60 million shortfall in next year’s $1.5 billion operating budget. But he insists the plan “still makes mass transit a very good bargain in this state.”

Mr. Warrington may be right. Even if fares rise by as much as proposed, which would be the third increase since 2002, rail passengers on New Jersey Transit would pay 18.3 cents a mile compared with 16.7 cents a mile now. That is less than the 20.3 cents a mile on Metro-North lines and 20.7 cents a mile that L.I.R.R. riders pay.

But averages are cold comfort to many commuters who shell out hundreds of dollars a month for train passes.

“What’s worrying me is where does it stop?” asked Anthony Cariglia, 38, a radio producer who rides on the North Jersey Coast Line into Manhattan from Little Silver. “I guess I’m going to have to cancel HBO or start drinking cheaper beer.”

As any commuter who has to stand on the 7:30 a.m. Metro-North train from Stamford, Conn., to Grand Central Terminal will tell you, the price of a ticket is just one way to assess the quality of one’s commute. Riders also weigh on-time performance, train frequency and travel time, as well as whether they can get a seat on the train, a parking spot at the station and an easy connection to subways, buses and light rail. The acid test, though, is how transit systems compete with driving. What does it say about the L.I.R.R. if more commuters choose to pay for gasoline, tolls and parking, while navigating jam-packed highways, bridges and tunnels, instead of jostling for a seat on the 8:03 a.m. from Babylon?

“Ultimately, you want to get from here to there as quickly as you can,” said Bruce Schaller, a transportation consultant. “Money always has some influence, but it’s certainly no greater than others. What makes the biggest difference is travel time, reliability and the sense of control and comfort you have, rather than incremental changes in the fares.”

Still, the proposed fare increase in New Jersey — and the growing odds that the Metropolitan Transportation Authority will raise fares on Metro-North and L.I.R.R. next year — highlights the trade-offs riders make when weighing whether to take the train or to travel another way.

 

The debate over fares, the level of service and financing is not new, of course, but it occurs as ridership at peak hours on New Jersey Transit, Metro-North and the L.I.R.R. is nearing capacity. More money is needed to expand service, but rail advocates question whether raising fares is the best way to bolster the network, let alone alleviate road congestion, reduce carbon emissions and contain sprawl.

“It’s not outrageous that fares go up, but in a day and age when we’re encouraging people to use mass transit, tolls don’t go up at the same time,” said Jeffrey M. Zupan, senior fellow for transportation at the Regional Plan Association. “Tolls and fares should go up in tandem.”

Ridership is expected to continue growing, increasing the strain on rail lines and stations. In New Jersey, the number of train riders grew 64 percent from 1997 to 2004, according to the Tri-State Transportation Campaign. Growth in trans-Hudson traffic into Manhattan outpaced similar trips from upstate New York, Connecticut and Long Island.

The number of commuters crossing the Hudson River to Manhattan is expected to rise 27 percent from 2005 to 2025, according to New Jersey Transit forecasts from 2006.

How to balance fares and service is an imprecise political calculation that reflects the priorities of lawmakers who cast votes on the budgets that finance railroads. In New Jersey’s case, lawmakers did not raise fares for a dozen years from 1990 to 2002, a big reason riders on the Long Island Rail Road and Metro-North now pay so much more — and why New Jersey Transit is playing catch-up.

To cover the shortfall in operating costs, New Jersey Transit borrowed from its capital budget. The decision was a conciliatory gesture to riders, but it weakened New Jersey Transit’s ability to pay for long-term projects like buying new cars and fixing stations.

The relatively low fares, as well as the growth in riders in central and northwestern New Jersey who trade longer commutes for bigger homes in more affordable communities, have driven up ridership, straining the system and making it more critical for New Jersey Transit to find fresh funds. But the series of fare increases is leading some New Jersey Transit commuters to question whether riding the rails is still worth it.

Antoinette Martino, who rides round trip from South Amboy every day with her husband, Frank, said a fare increase was not justified because the service wasn’t “all that reliable.”

“I don’t necessarily get a seat every day,” she said, “and the trains are often overcrowded.”

The couple, whose passes cost $254 a month each, are now considering driving. (Their passes would be $279 should fares increase as proposed.) “Even if it’s just the two of us driving, it’s still cheaper,” Mrs. Martino said.

New Jersey Transit has an average fleet age of 13 years, while L.I.R.R. trains have an average age of 9 years. Metro-North trains, at an average age of 16.9 years, are the oldest. That is mainly because Connecticut, which pays for two-thirds of the cost of the trains on the New Haven Line, has been slow to replace its cars. For example, of the New Haven Line’s electric fleet, the M2s (241 cars) have an average age of 32 years. By contrast, on Metro-North’s Harlem and Hudson Lines, a total of 336 new M7 trains were put into service from 2004 through 2006.

Debbie Simmons, an insurance executive from Wethersfield, Conn., who has been riding the New Haven line for 20 years, said she gave Metro-North a grade of B minus for service, explaining that the trains were generally on time, but that they had their share of faults. “The train itself is uncomfortable,” she said one recent morning, after getting off the 6:53 from New Haven. “It’s very rickety.”

Federal, state and local subsidies cover about 55 percent of the operating budgets at New Jersey Transit and at the L.I.R.R. Subsidies cover only 38.6 percent of costs at Metro-North, which also operates the Harlem and Hudson Lines in New York, as well as two lines west of the Hudson. Connecticut’s contribution has consequences. According to the Connecticut Metro-North New Haven Rail Commuter Council, a rider advocacy group created by the state legislature, on an average day, 17 percent of the rail cars serving Connecticut are out of service. And 33 refurbished cars that are on the way represent only a 10 percent increase in a fleet that is more than 20 percent underserved.

As a result of the shortage of seats, Connecticut riders have a 20 percent chance of standing for part of their commute to New York, according to Metro-North’s monthly operating figures. This more than irks Connecticut riders, who pay some of the highest commuter rail fares in the country.

“Metro-North gets high grades for being on time, but ridership continues to grow 5 percent a year and we haven’t had any new cars delivered in the past five years,” said Jim Cameron, the chairman of the New Haven rail council. “You can’t expect people to pay more when they are getting poor service.”

Since New York contributes more to its rail lines, fares on Metro-North’s Hudson and Harlem Lines, which run just in New York, are slightly less. A one-way ticket during peak hours from Rowayton in Connecticut on the New Haven Line to Grand Central Terminal costs $12.25 and a monthly pass, $264. By contrast, a similar 39-mile, 60-minute ride on the Harlem Line from Bedford Hills in Westchester County to Manhattan sets you back $11.50 for a one-way ticket and $251 for a monthly pass.

The gap could get even larger because Connecticut riders face a proposal to add a $1 per ride surcharge to help pay for more than 300 new cars, the first of which are expected to arrive in 2009. A monthly pass would most likely have $40 added ( for 40 rides, or 20 round trips); for instance, a monthly pass from Stamford to New York City that now costs $264, would increase in price by 15.2 percent. Although the cars have been ordered, Gov. M. Jodi Rell has asked State Senators Andrew McDonald and William H. Nickerson to look at possible alternatives to the surcharge. The surcharge is expected to bring in $150 million, according to the Connecticut Department of Transportation, and would end in 7.5 years.

Riders from Morristown, N.J., by contrast, pay $9.50 for a one-way ticket and $263 for a monthly pass. Commuters to Princeton Junction, which is also about an hour from Manhattan, pay $10.75 one way and $301 for a monthly pass. The difference in price is partly a result of how each line is configured. Some lines, like the Northeast Corridor, run for long distances with fewer stations and higher track speeds. Others, including the Morris & Essex Line, have more stops. So though Morristown is 16 miles closer to New York, it takes just as long to get to Pennsylvania Station.

A 60-minute ride to Massapequa Park on the L.I.R.R. costs $9.25 for a one-way ticket and $203 for a monthly pass. L.I.R.R. riders, however, have longer average commutes to Manhattan — 79 minutes — than commuters on New Jersey Transit and Metro-North east of the Hudson, who travel about 73 minutes. Also, every line on the L.I.R.R., except the Port Washington branch, passes through Jamaica, Queens, and many of these trains require a change there to get to Manhattan.

“I’ve been doing it for 15 years and it never changes,” said Rhonda Kay, a lawyer who commutes daily on the L.I.R.R. from Huntington to Manhattan. “The bathrooms are always a disaster. They don’t make announcements that explain delays. The double-deckers are like a refrigerator in the summer. On-time performance is pretty good, but when they’re late, they’re really late.”

While relatively more expensive per mile than New Jersey Transit, Metro-North has the best on-time performance of the three railroads. On average, 98 percent of its trains arrive within six minutes of its scheduled time. That’s three percentage points better than New Jersey Transit and nearly five percentage points more than the L.I.R.R.

One reason for the difference is that Metro-North is the only railroad at Grand Central Terminal, so managing tunnels and platforms is less complicated. Spare platforms abound, unlike at Penn Station, where Amtrak, New Jersey Transit and the L.I.R.R. share 21 platforms, half as many as at Grand Central.

Complicating matters, the two tunnels crossing the Hudson can handle only 23 trains crossing in each direction each hour. But Amtrak controls the tunnel, and its trains often take priority when there is a scheduling conflict, a problem during rush hour. Discussion is under way about building another Hudson River tunnel. It would cost about $7.5 billion and would not open until 2016 at the earliest.

The Metropolitan Transportation Authority has its own megaprojects, like building a direct link to Grand Central. It has also raised fares on the L.I.R.R. and Metro-North trains east of the Hudson in New York by 6 percent in 2005, 25 percent in 2003 and 9 percent in 1995. Connecticut raised fares by smaller amounts in the intervening years. Railroads, though, often raise fares for monthly passes and single tickets at different rates. One strategy the New Jersey Transit took in 2005 was to raise fares faster for single tickets so as not to penalize commuters, the railroad’s bread and butter. Metro-North and the L.I.R.R., on the other hand, have maintained a much larger discount for buying single tickets.

As a rule of thumb, for every 10 percent fare increase, railroads see a temporary 3 percent decline in ridership. After the last fare increase, ridership fell only 2 percent on New Jersey Transit trains. But ridership soon hit yet another record again last year.

Reporting was contributed by Ford Fessenden, Kevin Flynn and Vincent M. Mallozzi.

It has become common to refer to sharp escalations in asset prices as “bubbles,” and we know what bubbles do — they pop. There are people who think we have a bubble in real estate going, and no wonder. Prices have been going through the roof. Forget (for the moment) home prices. An office building in Allentown, Pa., just went for the kind of change you could formerly expect for Midtown Manhattan , and in Gotham itself, where $400 a square foot was until recently a kingly price, the $1,000 threshold has been broken. While this is interesting to anyone who owns an office building, I personally do not know any such people, although I am certain they must be very rich. I do, however, know a goodly number of homeowners, and every one of them seems to be wondering the same thing: Are we going over a cliff?

 

Since last year, when new home construction stopped in its tracks and the rate of home sales (in hot markets) dropped by a third, the experts, the real estate writers, the listing agents, have been listening very hard for that popping sound. Prices have eased — by a point or two in many markets, by as much as 5 percent in Boston. Prognosticators have forecast a recession, with banks up to their eyeballs in foreclosed mortgages and ordinary folk bailing out of their center-hall colonials.

Such alarmist sentiment is at odds with the conventional, and comforting, view: that real estate is “different” from other, purely financial markets, and that a house, in particular, is a more reliable investment than a dot-com stock. But is it?

The notion that we are on the cusp of a crash in housing in fact has its roots in the Nasdaq bust. Early in 2001, as the tech slide deepened, Alan Greenspan began to furiously lower short-term interest rates, eventually taking them to 1 percent. Presumably, that helped ease the recession. But housing prices began to surge. Robert Shiller, a Yale economist and critical observer of the housing market, says that home prices doubled between 2000 and 2006. On the coasts and in certain ostensibly desirable places to live (like Las Vegas), they did much better. Cheap money, courtesy of the Fed, was deemed responsible — even culpable. In many quarters, Greenspan was essentially accused of cheating the country out of the depression we deserved: instead of allowing the swooning Nasdaq to bring down the United States economy and punish us for our sins, he had rolled the tech bubble into a housing bubble and allowed the party to go on.

The causality is by no means proven (mortgage rates, after all, are influenced mostly by long-term interest rates, over which the Fed has no control). But we are getting ahead of ourselves. Just which factors determine housing prices — interest rates or psychology or maybe the price of aluminum siding — is a matter for debate. What is certain is that in 2006, housing prices topped and began heading south.

Many experts believe that prices will continue to fall but not “too much.” This is no reason for relief: economists generally do not predict crashes until they have happened.

On the other side, the most forceful proponent of the bubble analogy is Shiller, who made his name by predicting that the stock market would crack. Shiller has been writing and speechifying that housing prices are due for a “huge” fall, possibly on the order of 50 percent. He and Karl Case, an economist at Wellesley College, have constructed indices of housing in 20 United States markets for the purpose of letting people bet on housing futures just as they do on soybeans or, as he put it, to “protect” themselves — presumably against the approaching apocalypse. (These housing futures began trading last May on the Chicago Mercantile Exchange .)

Shiller’s gloominess has been widely noted. He thinks we are under the spell of that familiar goblin, mass psychology. Lemming-like, people are buying homes merely because they expect that prices will rise. This certainly holds for speculators, like the manager of a rental-car agency at the Tampa airport who confessed to a customer (an economist) that he owned no fewer than 20 condominiums. And it explains some of the impulse to buy second homes, which are closer to being tradable assets than a primary residence is.

Shiller has been surveying ordinary homeowners, however, and he says that they, too, have fallen victim to irrationality, much as Internet investors did. He suggests that once reality sets in, prices could drop in a hurry, instead of slowly unwinding.

There is no doubt that most homeowners think they are living in an appreciating asset. The fact that people buy homes even though rentals are relatively cheap (in Boston, for example, rents have scarcely risen at all in the last decade) implies that buyers willingly pay for the privilege of ownership. But does this mean they are behaving irrationally?

Home prices do go up, although most people would be surprised at how slow the appreciation has been. According to the National Association of Realtors, housing prices traditionally rise two points faster than inflation, a relatively modest rate. And even in the past two decades, a period that includes the recent boom, anyone who owned a diversified portfolio of stocks handily outperformed American housing, even in markets like New York.

So how have so many Americans been able to convert their nests into (sizable) nest eggs? Most people who buy homes would not be able to tell you — but they have profited from it all the same.

The dirty little secret of home ownership is that it lets you play with other people’s money. Say you want to purchase the median home (in California the cost would be about $565,000, but let’s take the United States median, which would run you $220,000). Typically, you would take perhaps $50,000 from savings as a down payment, borrow the balance and pay the monthly mortgage from your income.

But wait! Just before you close, a friendly real estate bear points out that you could rent the same house, or a similar one. Your monthly payment would go to the landlord, not the bank. And you could invest the $50,000 in stocks, which, with dividends, might appreciate at close to 10 percent a year, rather than the 5 percent or so you could expect from your house.

That would be a very dumb move. Suppose the stock market did rise 10 percent; after a year you would be up $5,000. Whereas the gain on your home would be 5 percent over the entire purchase price — or $11,000. Over 10 years the gap becomes huge — not to mention over 20 or 30 years. This is the little guy’s (and also Donald Trump’s) trick for accumulating equity: leverage.

In theory, there is no reason why you couldn’t also borrow to invest in stocks. The Federal Reserve puts limits on this sort of thing, however, and so do brokerages. If you borrow up to the max on your stock portfolio, you have to pay back losses as they occur, day by day. That makes leverage in stocks rather risky, as some folks discovered in 1929. Indeed, imagine what would happen if similar rules applied to mortgage holders: on any day that housing prices fell you would have to ante up more capital or forfeit your home. I would still be paying rent and so would you. But the home market evolved with fixed long-term financing (mortgages), and not ill-advisedly. Real estate, for most people, is a long-term asset. Banks can lend you the money, within reasonable limits, and not have to sweat the nightly news.

This is the problem I have with the real-estate-equals-dot-com argument. Most homeowners buy to have a place to live. If prices fall, they react precisely unlike stock traders; rather than bail out, they stay put longer. Every share of Cisco may be for sale every day, but every house is not. Case, Shiller’s partner, tracked 628 home listings in the Boston area during 2006, as prices began to fall. After four months, the majority remained unsold, but the sellers lowered their asking prices by only 3 to 4 percent. While Case says this demonstrates that real estate is “stickier” than financial assets, Shiller says it proves that owners are delusional — unwilling to admit that real estate goes down as well as up.

And for sure, it does. The declines can be protracted, though usually not as steep as in financial markets. In the ’90s, for instance, the United States suffered a rolling housing recession from California to New England to the Mid-Atlantic. Los Angeles, which was hit the hardest, slumped for four years running, during which prices fell 25 percent.

Those serial recessions were caused by a string of economic problems, like defense industry closures, layoffs in the oil patch, a slump on Wall Street. The pullback that began in 2006 is different, and rather unusual. High prices stimulated a spree of home building and, ultimately, too much supply. That put pressure on prices.

A potentially alarming feature of this cycle is that more people stretched the the limits of what they could afford by taking out mortgages with adjustable rates. If interest rates were to rise, they could be in trouble. Even with rates having stayed, thus far, mercifully low, the rate of foreclosures is up slightly. And there is particular concern about the mortgages held by distressed buyers, so-called subprime loans.

But here’s an interesting fact: Foreclosures (and delinquencies) are lower in expensive markets, like Washington, D.C., and San Francisco, than they are elsewhere. Foreclosures are higher in Ohio and Michigan, where housing is cheaper but the economy has been hurting.

By and large, people forfeit their homes not because they paid too much for them, but because they lost a job or suffered a similar setback, such as an illness. The bursting of the housing bubble thus seems less painful than would a good old-fashioned recession.

And how much of a bubble has it been?

It is hard to give a precise answer because, unlike the intrinsic value of a stock, or even an apartment building, that of a house is somewhat obscure. For a commercial property, the guiding metric is the income (rent) the property produces. So we can know whether the market for office buildings is zany. Equity Office Properties, the biggest publicly held office landlord in the United States, just agreed to a $39 billion buyout in which, tellingly, the buyer immediately (that day) resold $7 billion of its new trophies to a third party. This buy-and-flip has the whiff of speculation. And sure enough, over the last few years the price of prime office space has vaulted from roughly 12 times underlying rental incomes to 20 times.

Actually, the same sort of math holds for home markets. If you buy in Chevy Chase, Md., to rent out at a profit, forget it. Rental rates have not kept up. So if home prices were driven simply by their potential for income, everyone would sell right now.

But most people think of their house as living space, not rental property. As to what does drive home prices, the evidence is mixed. One answer is interest rates, and the drop in rates explains a lot of the recent boom. Another idea is incomes — what people can afford. Shiller’s theory is that, in a rational world, the price of a house would reflect the cost of replacing it — the cost of the raw materials and the labor. This was undoubtedly true when people lived in log cabins. But as choice developable land becomes scarcer, people become willing to pay more.

Anyway, you would think that home markets, being disconnected from fundamentals like rent, would be riskier than investment markets. And maybe they are. But the average public real estate investment trust (the stocks that own office buildings and such) has nearly tripled in five years. Among residential markets, not even Las Vegas has grown that fast.

In fact, people are always bolder in a market that is liquid — they figure they can get out — than with an asset for which selling requires a listing, a broker, a title search. Which is why the new Web sites like Zillow.com, on which people can check their home values as often as the price of Yahoo!, and even Shiller’s dream of an active futures market, may not be the welcome innovations they might seem. The stickiness of home markets, the lack of continuous liquidity and information, makes them different from stocks. Come the day when they are broadcasting your home value on CNBC, look out.

 

 

Roger Lowenstein, a contributing writer to The New York Times Magazine, is writing a book about the pension crisis.

For much of the past century, the hills and valleys around Los Angeles have been a kind of developers’ paradise, a patchwork of expansive ranches, many dating to the 1840s and 1850s, that supplied builders with a seemingly endless stock of raw acreage. As the region boomed, subdivisions and office parks spread steadily over these former ranch lands, until Los Angeles County encompassed not only Los Angeles but also nearly a hundred other smaller cities. How much bigger the area can get may be a matter of geography. West and south is the Pacific Ocean. East is desert. And the Angeles National Forest and San Gabriel Mountains bound the northeast. It may not be the case that the Southern California dream has run its course here. But the dream may be running out of room.

About 60 miles north of the city, though, beyond the San Gabriels, you can still find some open space untouched by the backhoes of big developers. This is the future site of the city of Centennial, population about 70,000, just off Interstate 5, but today it is still fields of rolling grassland that cattle have grazed for more than 100 years. Seen from afar, the Centennial site looks like a swatch of green-and-gold fabric, rumpled here and there in small pleats and gathers, spread over an area six miles long and three miles deep. Behind it rise the Tehachapi Mountains, and if you look closely you can see a glint of silver running through the landscape: the water of the California Aqueduct flowing south. It’s a landscape that’s empty and attractive and remote — but not a place, as one developer confided to me, that’s so attractive or remote as to make it off limits to a builder.

The 11,700 acres allocated for Centennial are part of Tejon Ranch, one of the last great California ranches. Comprising more than 270,000 acres, or 426 square miles, the ranch is roughly one-third the size of Rhode Island. It is so large that many things that need to get from Northern California to Southern California — natural gas, drinking water, electricity, fiber-optic cables, the cars on I-5 — pass through it. The ranch is home to about 14,000 head of cattle, and its agricultural fields yield almonds, pistachios and wine grapes. “All these other huge properties from the 19th century have been broken up long ago,” says Jan de Leeuw, the chairman of the statistics department at U.C.L.A., who lives near the ranch and opposes the plans to develop Centennial. “But Tejon has never been broken up. It exists as a dinosaur.”

Los Angeles County is already home to more than 10 million inhabitants, making it by far the most populous in the United States. And yet the population is still growing, thanks largely to the steady influx of immigrants. How to accommodate this growth is an exceedingly difficult question. One popular solution is to build within the city. Robert Lang, the director of the Metropolitan Institute at Virginia Tech, says that “the great challenge of the 21st century will be remaking the postwar landscape” — in other words, transforming the parking lots and dead malls of our sprawling urban spaces into denser “infill” housing and commercial centers. “Los Angeles is really the nation’s largest infill project,” Lang told me, noting that the era of ambitious master-planned communities in Southern California is largely over, except for Centennial, whose plan has just begun to move through the Los Angeles County environmental-review process. Nevada and Arizona may still build one new city after another. Los Angeles will thicken more than it will spread.

To Greg Hise, a professor of urban history and planning at the University of Southern California who has written several books on California’s development, deciding whether to promote infill or to push outward may not be “an either/or question.” The region may need both. Centennial’s developers make that argument. “Infill alone isn’t going to accommodate all of the need for housing in the state of California,” Robert Stine, the C.E.O. of Tejon Ranch, told me when we met there in January. Infill wouldn’t even be enough, he says, to ease the intense regional pressure on home prices. To talk to Stine and his partners in the Centennial project is to encounter a vision for a place that isn’t the last of its kind but rather the first great American community of the 21st century, incorporating the most sophisticated ideas of what makes a city healthy and sustainable. It may not be possible to build another Centennial in Los Angeles County, but the experiment could be repeated elsewhere. “For us on the team,” says Randall Lewis, an executive at the Lewis Group of Companies, one of the three developers in partnership with Tejon Ranch, “it’s not only the largest community we’ve ever done; it’s also the most significant. Centennial will be like a laboratory that others study for the next 100 years. They’ll see the things we got right. And they’ll see if there are things we could have done better.” Building a city of this size will take at least 20 years, the partners agree, perhaps 30. Many of the people working on Centennial, as well as some of its opponents, told me they realize they may not be around, or even alive, by the time it is finished.

Tejon Ranch was created in the mid-1800s by Edward Fitzgerald Beale, the superintendent for Indian Affairs in Nevada and California, who spent about $90,000 to purchase four Mexican ranchos. Beale’s son later sold the ranch to a consortium of wealthy Angelenos, and in 1936 the new owners converted Tejon Ranch into a public company. A large chunk of the company’s stock was controlled, from the beginning, by the Chandler family, which also owned The Los Angeles Times and the Times Mirror Company.

Compared with most modern public corporations, Tejon has long been a peculiar, cash-poor business. In 2005, half of its $26 million in revenue came from its agricultural business (mostly from the sale of nuts and fruit). Other income came from agreements with ranchers, who graze cattle on the ranch; leases to outside companies, which pay Tejon to mine minerals and mix concrete on its premises and rent space; and payments from the state of California, which runs gas and power lines through the ranch. A few dollars also trickle in from hunting and fishing programs — it costs $20,000 to bag an elk on the property, for example. Mainly, though, Tejon has been a kind of land bank in the truest sense of the word, with its immense value (its market capitalization is about $850 million) a reflection of its development potential. Harry Chandler, the Los Angeles Times publisher and real estate magnate whose family controlled the ranch for the better part of a century, realized this long ago: “Never let the Tejon board sell any of the land in Grapevine Canyon,” he told a colleague in 1916 or so, referring to a specific part of the ranch now near I-5. “That will be valuable property one of these days.”

In the late 1990s, once Robert Stine was running Tejon, the board became increasingly restless to move ahead with development. Partly that was due to the growth of Los Angeles and the extraordinary demand for homes during those years. What might have been inconceivable once — living or working a least an hour away from the city by car, at the rustic edge of Los Angeles County — had become entirely acceptable. At the same time, Tejon’s shareholders owned a company with enormous promise locked up in its land and very little to show for it. One shareholder, Third Avenue Management, a New York-based investment group, purchased 3.2 million shares of Tejon from Times Mirror in the late ’90s. When I spoke with Michael Winer, the portfolio manager of the Third Avenue Real Estate Value Fund and a board member at Tejon, he explained that the only other property like Tejon Ranch is perhaps one in Florida owned by the St. Joe Company, a former paper business that recently became a real estate developer. “I wish there were more opportunities like this, but St. Joe and Tejon Ranch are the two,” Winer told me. “To have 270,000 acres that are all essentially contiguous within 70 miles of downtown Los Angeles? I don’t think there’s anything like that near a major metropolitan area with that kind of potential.” The fact that Centennial would take decades to create didn’t bother Winer. “Look, we’ve been in the stock for 10 years already,” he said, noting that Third Avenue now owns a total of 4.4 million Tejon shares, or about 26 percent of the company. “We’re very patient investors.”

No one has ever expected Tejon to develop all of its land. Because of to its size and rugged areas, that would be practically impossible, as well as environmentally unconscionable. But when the board asked Stine to find a few sites for development, he went through the ranch records to see what had been considered before. “About every 10 years or so for the last 40 or 50 years, if you go back into the Tejon archives, there have been some sort of master plans that have been laid out,” Stine told me. “If you synthesize all of those — and actually we’ve put all those plans on top of each other, with new G.P.S. technology — you can see that there are certain areas of the ranch that are more conducive to development and certain very sizable areas that are more conducive to remaining a natural preserve.” Eventually Stine and the board agreed that three parcels were worth developing. One was Centennial, as a master-planned city of 23,000 homes, half of which would be stand-alone houses (the rest condominiums and apartments). Another was a smaller parcel near the Interstate — near Grapevine Canyon — that could become a large industrial park. The third was a big, picturesque tract north of Centennial that seemed well suited for vacation homes. Unlike Centennial, which would be a fairly affordable, dense mixture of housing and businesses, Tejon Mountain Village, as it came to be called, would be a retreat for the affluent. It would comprise about 28,000 acres and include spas and hotels, as well as about 3,500 houses, situated on plots ranging from one-quarter of an acre to 40 acres.

Those plans left well over 200,000 acres of the ranch undeveloped. Recently Tejon declared its willingness to transfer about 100,000 acres into a land conservancy, which would preclude their development. The offer was meant to demonstrate that Tejon is not in the business of turning wilderness into rows of McMansions. It was a kind of gambit, too, the first move in what are likely to be involved negotiations. A natural preserve of 100,000 acres would not be insignificant; Zion National Park in Utah, for instance, is about 147,000 acres. In response to Tejon’s move, though, a coalition of environmental groups began calling for a larger conservation effort. Its suggestion is to preserve 245,000 acres.

One day in January at Tejon Ranch, in a low-slung building that houses the corporation’s offices, I sat with Randy Jackson, the planner whose firm, the Planning Center, created the initial master plan for Centennial, as he showed me slides of the city-to-be. When I asked him what city Centennial would most closely resemble, Jackson told me that he often fields that question. “I say, well, it’s like a piece of this and a piece of that,” he said. Irvine, Calif., has influenced the conception of Centennial’s parkland and open space, for instance. As another example, Jackson cited Stapleton, an ongoing infill project at a defunct Denver airport, whose schools and pedestrian-friendly paths have inspired him. Still, he added, Centennial has its own unique location and possibilities. “This is a blank palette,” he said. “How would you do it if you were going to do it from scratch? There’s nothing there but five or six trees and the flatland.”

Unlike most of this country’s largest cities, which were founded because proximity to rivers or trade routes made them ideal places to settle and work, many of our ambitious master-planned cities — Irvine, for instance, or Columbia, Md. — began as social ideas, carefully thought-out solutions to the messy march of postwar suburbia. “These towns were planned specifically as alternatives to sprawl,” says Ann Forsyth, a professor of urban design at the University of Minnesota , who has written extensively about the history and evolution of master-planned cities. Forsyth points out that both Irvine (begun in 1960 and now 30,000 acres in size) and Columbia (1962, 14,000 acres) are larger than Centennial, but that Centennial, at 11,700 acres, is probably big enough to achieve the most crucial aspect of a new-town plan: enough room for housing and jobs so that city residents can live, work and shop there. Whether the blueprint for a self-sustaining town actually becomes reality is another matter, however. Irvine succeeded — indeed, businesses there have done so well that workers now commute into the city rather than out of it. But the question of whether (or when) Centennial will be autonomous is among the most contentious issues surrounding the plan. Opponents see the specter of a bedroom community where residents clog the highways at rush hour in a mad dash to and from Los Angeles. Centennial’s planners dismiss such a prospect; they have built into the city’s design hundreds of thousands of square feet of commercial and industrial space and have begun making overtures to local businesses that might want to move into a Centennial office park.

Centennial’s four development partners — Tejon Ranch, the Lewis Group, Pardee Homes and Standard Pacific Homes — have committed about $35 million to pay for the city’s plan and shepherd it through the Los Angeles County approval process. Representatives of all four parties have also spent a great deal of time sitting around the oak table at Tejon hashing out how Centennial should look, how much it should cost and who should live there; it has mostly fallen to Randy Jackson to harmonize the partners’ visions.

Jackson began the design process six years ago by drawing a boundary. Because Centennial has mountains behind it, highways on two sides and an aqueduct on another side, its geographical shape was almost a given. The question then was where to put the roads and neighborhoods. “The big difference between the way we used to plan and the way we plan now is that we look at the natural systems,” Jackson told me. In years past, a site was plowed flat before builders created greenbelts and ditches to carry the water. The philosophy now, as he put it, is to let the landscape and natural drainage determine where development should occur. “We read the land,” he said, “and out of it comes the plan.”

Jackson acknowledges that no one knows how to plan the perfect community. And his belief that master-planning is still an evolving science is one reason he and the Centennial partners are eager to borrow what they consider the best ideas from cities around the country. When I asked Jackson how they settled on Centennial’s size, he explained that the first goal was a population large enough to achieve the critical mass needed for a self-sustaining community. Planners like Jackson use an array of sophisticated software programs, based on demographic and market research, that enable them to calculate the population and density required to animate new neighborhoods. Such programs also help them figure out how many schools and police stations they may need. To see their work as a real-life version of the computer game SimCity isn’t far off. “To have a grocery store you need 5,000 to 7,000 homes,” Jackson says. The 23,000 housing units planned for Centennial — a number that is likely to go down in the environmental review process — reflects the need to have enough residents for shopping centers, restaurants, movie theaters and business development, without making Centennial too congested. A city of 50,000 might also be large enough for a new branch of a university. Ultimately, Jackson’s plan envisioned Centennial as eight communities, each with a village center and multiple neighborhoods of about 50 homes each. In all, there would be about 1,000 acres of commercial and industrial property. The city would have a network of paseos and greenways to encourage biking and walking, and a variety of designs to conserve water and energy. Fifty percent of the town would be open space.

The much trickier part comes next: engineering a balanced society, mainly through the use of real estate prices. Centennial’s most notable difference compared with existing master-planned communities is that much of its housing, the developers are promising, will be within reach of working- and middle-class Californians. Whether it continues to be over time is a more unsettled matter; if Irvine and Columbia have diverged significantly from their original utopian impulses, it’s because they have skewed toward affluence as their populations and vitality have increased. “If you look at land values, Irvine is a great success,” says Michael H. Ebner, an urban historian at Lake Forest College in Illinois, who is writing a book about suburban America. Yet Irvine, as it has grown, has not been able to preserve the broad level of affordability its planners initially hoped for, Ebner says. In fact, its median household income — $83,000 — is well above the California median of $54,000.

Jackson and his colleagues created a model of what the ideal Centennial city population would be. They wanted diversity: old people and young families and singles; rich folks and working-class people, too. The Centennial partners envisioned a community that would include rental apartments and housing prices that would start at around $250,000. This is in large part a matter of practicality. Police officers, teachers and other essential building blocks of a community need to be able to afford to live where they work, especially if it’s in a remote city; new residents may also need financial incentives to be pioneers in a place where the concrete is barely dry. Moreover, in the Los Angeles region, where three-bedroom houses often start at $500,000, low prices could be a big draw. (The planners calculate that the lower-cost housing in Centennial would be affordable to more than 70 percent of California’s households.) So the initial phases of construction would focus on less-expensive housing and rentals, because those buyers and renters are the people Centennial needs to give it life. In a few years, after things have “snowballed,” as Jackson put it, those who arrived early would find opportunities to move up. In other words, by the time initial buyers and renters became higher earners, more-expensive neighborhoods would be going up in Centennial, some with million-dollar homes. Meanwhile, as older residents aged, there would be options for downsizing — into those original rental apartments, for instance, as well as small upscale homes or senior housing.

“It’s a very complex model between your needs of who you want to bring into the community and how that community matures over time,” Jackson said. “We’ll go back and revisit this every year for the next 25 years, and we’ll tweak it, because you never quite get it right.” Jackson mentioned that many things about the plan have already been tweaked, including the name. At first the proposed city was called Rolling Meadows, because that suited the site’s geography. Then the planners wanted a name that suggested a community that was both old and new. One day Robert Stine, a fan of the writer James A. Michener, suggested the title of Michener’s book “Centennial,” and everyone agreed. That sounded just about right.

To Stine, developing Centennial is not just a matter of flipping a chunk of Tejon for a quick profit. “We’ve been here for 150 years, and the ranch is going to be here 150 years from now,” he says, “so I think anything we want to put our thumbprints on we want to be of a quality that’s going to enhance the value of the surrounding land and in no way detract from it.” Of course, none of these intentions preclude the future possibility, when Centennial is not just grasslands but a real city, that Tejon will in turn slice off and develop other pieces of land from its immense holdings. Then Centennial won’t be just a stand-alone city. It may be the hub of a new region. Stine does not necessarily rule this out.

Opponents of Centennial and Tejon Mountain Village have demanded that the ranch forswear just such a future, however. “Instead of piecemeal development, we’re looking for a ranch-wide plan, so that everyone acknowledges the larger picture,” says Ileene Anderson, a Los Angeles-based staff biologist for the Center for Biological Diversity, one of a dozen environmental groups that have formed a coalition to oppose the Tejon developments. “In the future,” Anderson told me, “are we going to be fighting multiple development issues in sensitive areas, well past my lifetime? The notion would be that since the developments are starting to roll out, let’s figure out where the best places for development are, as well as the best places for conservation. We’d like to see a comprehensive plan so that all of the cards are on the table.”

In my conversations with Anderson and some of her allies in the environmental coalition, several issues stood out. One is that Tejon Mountain Village — the low-density vacation development planned for a more rustic and perhaps more biodiverse area of the ranch — is far more problematic than Centennial, at least environmentally. Among other things, the village would be situated in what appears to be a crucial habitat for the endangered California condor, which was only recently brought back from the brink of extinction and reintroduced to the wild. “I think the location is a big problem,” Joel Reynolds, an attorney for the Natural Resources Defense Council, told me. “I just can’t imagine why they think that putting a development in that habitat of the condor can work.”

It is, in fact, entirely possible that Tejon Mountain Village will be blocked in the environmental-review process, even as Centennial moves ahead. The two projects are independent — indeed, they would be located in different counties: Centennial in Los Angeles County and Tejon Mountain Village in Kern County. Still, Reynolds and Anderson point out that Centennial also raises significant issues: above all, a worry about the strain 23,000 new homes, as well as a large number of new businesses, will put on the region’s public services. The new city may be a beacon of progressive planning, but that can’t mitigate the fact that it will be among the largest housing tracts in California history. “We generally agree that Centennial should not happen in this form, and it should not be as big as it is,” says Jan de Leeuw, the U.C.L.A. professor and local resident, who characterizes its location as “the middle of nowhere.” Paul Novak, a planning deputy for Los Angeles County, told me that Centennial’s location, in a sparsely populated area, presents a number of infrastructure questions. “I think roads come to mind for most people,” he says. “But roads are less complicated than water or sewage disposal. Or police and fire service. You’re trying to provide law-enforcement protection to a community of 70,000 people.” Novak adds that for a community to have a hospital, it generally has to have more than 50,000 people. The residents of Centennial could conceivably put pressure on the existing medical services for at least a decade, until it achieves the right size and density.

Novak notes that his boss, Michael D. Antonovich — a county supervisor who has one of five votes on the county board that will determine the city’s fate — will not take a position on Centennial until its application has wended its way through the county’s environmental-review process, which will take at least a year. The Centennial partners, who believe they have taken great care to figure out the new city’s water sources, hope to begin construction in 2009. But the plan could easily be tied up in litigation. Novak says that a comparable development nearby known as Newhall Ranch, which is supposed to consist of nearly 21,000 housing units, will have taken about 15 years to advance from proposal to groundbreaking, if that occurs as expected in 2009. That isn’t necessarily a bad thing — Greg Hise at U.S.C. believes that the input from state officials, neighbors and environmental actors over a period of years ultimately benefits many planned communities. “Some people bemoan the process,” Hise says. “I see it as a positive.” Still, what may especially complicate things in Centennial’s case is that any transfer from Tejon Ranch to a land conservancy, in order to move things forward — whether it’s 100,000 acres or the 245,000 acres sought by the environmental coalition, or more likely, something in between — would probably involve some kind of compensation to Tejon. Whether the state and private organizations could raise the money to pay for such a large tract makes the conservation process far less simple than it might appear. A promise by Tejon to set aside a large tract in perpetuity would ultimately require more than just a verbal commitment. It would require serious political, legal and financial resources too.

Tejon Ranch’s grand size and location have already transformed the prospect for its development into a passionate, once-in-a-lifetime battle for housing or conservation. After this ranch is carved up, there will not be any others like it again. Perhaps that’s why both parties repeatedly asked me which side’s argument I found most persuasive. But if anything seemed clear, it was that Tejon’s projects have brought about a collision of reasonable people. Each side cares deeply about the value of the land. The irreconcilable problem is that they value it for entirely different reasons. Robert Stine of Tejon put it to me this way: “You’re never going to please all the people all the time. We know that. So we’ve got to do what we think is the right thing for the land, for the communities that we want to build and for our shareholders.” Meanwhile, the environmental coalition isn’t naïve; its members know that there’s a fortune at stake — one Tejon investor, the money manager James Roumell, told me the value of Centennial’s development to the ranch corporation is $500 million.

“We recognize the fact that it is private land; it is a publicly owned company with shareholders,” Ileene Anderson says. “They need to make a return on their investments. Certainly California is not losing population, and people have to live somewhere.” But in Anderson’s view, it comes down to the benefits of the ranch and its stockholders or the benefits of all Californians. You could simplify that further and say it comes down to money or to nature. For better and for worse, the land holds both.

 

 

Jon Gertner is a contributing writer for The New York Times Magazine.

Benicia project had been rentals since the 1980s

Judy Richter, Special to The Chronicle

Sunday, March 18, 2007

Benicia has long been popular for its shops along First Street, historic sites like the Benicia Capitol State Park, restaurants and waterfront views along the Carquinez Strait.

It also has long been known as a community with handsome restored Victorian homes in the older areas below Interstate 780. In recent decades, however, development has spread to the hills above the freeway, most notably with single-family homes in the sprawling Southampton development.

Eventually apartments and condos were added to the hillside mix. In 1983, for example, a condo project opened along Cambridge Drive not far from Benicia State Recreation Area. However, it was a time of high interest rates and the market was in a down cycle, so the 188 units were rented out as apartments rather than being sold as condos.

Now those units are on the market as the Highlands condos. The 38 one-bedroom and 150 two-bedroom units are being refurbished and sold by Lennar Corp. of Miami and Emerald Fund Inc. of San Francisco. Lennar also is developing the former Mare Island Naval Shipyard in nearby Vallejo.

 

One-bedroom units are selling for $264,900 to $290,000. Two-bedroom units cost $309,000 to $355,000. All have only one bathroom. All come with one parking space in a carport. The parking lot has another 240 spaces for residents and guests.

Monthly homeowner dues are $263.77 for one bedroom and $306.04 for two. The project includes a swimming pool, a tot lot playground and guest parking.

There’s no air conditioning, but Benicia usually enjoys cooling breezes off the Carquinez Strait during the summer. Mature landscaping provides shade and esthetic appeal. The 936-square-foot two-bedroom plan has a small entryway opening to the living room. The entryway includes a coat closet.

Downstairs units have both a patio and a yard (landscaping not included), while upstairs units have a deck. Both have a storage closet off the patio or deck.

The dining area overlooks the yard in the model. It’s next to the galley kitchen with its granite countertops, General Electric stainless steel appliances (refrigerator not included) and a laundry closet with a stacked Bosch washer and dryer (included).

A hall between the kitchen and living room goes past the small bathroom (which has a tub/shower), a closet, then the two bedrooms. The master bedroom has a roomy walk-in closet. The second bedroom has a wide closet with mirrored sliding doors and two windows, giving it lots of light.

Even though the unit is 24 years old, it looks new because it has been so thoroughly updated. One major difference is that newer two-bedroom condos usually have two bathrooms.

Tenants have had the first chance to buy the units. Investors are allowed, but there will be a cutoff, according to a sales agent.

Commuting from Benicia Highlands is relatively easy because it’s only a couple of minutes from I-780, which connects to I-680 and Contra Costa County via the Benicia Bridge.

Going the other direction, I-680 skirts the Suisun Marsh to Fairfield and beyond. I-780 to the west leads to I-80 or the Vallejo ferry terminal, which has service to San Francisco.

E-mail Judy Richter at jarichter@earthlink.net.

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This article appeared on page L - 1 of the San Francisco Chronicle

Executives say their firm retaliated against them for questioning construction dust

Lance Williams, Robert Selna, Chronicle Staff Writers

Sunday, March 18, 2007

A development firm building 1,600 new homes at the old Hunters Point Naval Shipyard has allowed clouds of toxic construction dust to escape from the site, exposing neighbors and schoolchildren to potentially harmful, airborne asbestos, two company executives say.

 

Lennar Corp., which is Mayor Gavin Newsom’s choice to take over the environmental cleanup of the entire former San Francisco naval base as part of a plan to build a new 49ers football stadium, imposed a “code of silence” last year to prevent workers from reporting violations of state and city clean-air rules, contended Gary McIntyre, Lennar’s project manager, and Clementine Clarke, the company’s community liaison.

McIntyre, Clarke and Ceola Richardson, an administrative assistant for the company, filed a lawsuit in San Francisco Superior Court on Friday claiming Lennar violated state law by retaliating against them for raising questions about the dust problems at the construction site. They also claim that they were victims of racial discrimination in the workplace. They are seeking unspecified financial damages.

McIntyre said Lennar demoted him because he complained about the company’s failure to control dust during earth-moving at a 40-acre base site. Clarke, a San Francisco fire commissioner, said that when she expressed concern about asbestos dust, Lennar retaliated by giving her a poor job-performance review.

Lennar spokesman Sam Singer called the allegations in the lawsuit untrue, saying the company has gone to “great lengths” to protect public health. An official with the city health department said construction dust at Hunters Point doesn’t pose a risk to nearby residents because proper safeguards are in place.

Miami-based Lennar is a Fortune 500 company that has won public contracts to redevelop shuttered military bases at Hunters Point, Treasure Island in San Francisco and Mare Island in Vallejo. In February, the mayor proposed putting Lennar in charge of the multimillion dollar cleanup of the whole shipyard to expedite building a new football stadium there.

The former shipyard is prime real estate, but is listed as a Superfund site because of massive toxic contamination, a legacy of its long history as a Navy base. Asbestos is an additional concern because veins of the fibrous mineral are naturally present in the bedrock at the site. Inhaling dust-borne asbestos fibers can cause lung cancer and other medical problems.

In their lawsuit, the executives said that after heavy grading of the site began in the spring of 2006, Lennar refused to shut down work, even when monitoring devices showed the asbestos content of construction dust was more than triple the state allowance.

At other times, monitoring equipment wasn’t functioning properly, and the company had no idea whether it was in compliance or not, the lawsuit said.

Often the dust descended upon nearby homes and a small private school, the Muhammad University of Islam, operated by the Nation of Islam, the lawsuit said.

The executives’ lawyer, Angela Alioto, a former president of the Board of Supervisors, accused Lennar of “environmental racism,” saying the firm thought it would escape responsibility for pollution problems because the neighbors included poor people and members of racial minorities.

McIntyre is a veteran construction executive who says he was hired in 2004 to supervise Lennar’s Hunters Point project. Clarke is a public relations specialist and political fundraiser whom Newsom appointed to the Fire Commission in 2004. She went to work as Lennar’s community benefits manager at Hunters Point last year.

Racial insensitivity alleged

McIntyre, Clarke and Richardson are African American, and they also accused Lennar officials of insensitivity in their dealings with black employees, subcontractors and community residents.

In November, when Nation of Islam minister Christopher Muhammad complained to the Redevelopment Agency about dust problems at the school, Lennar Vice President Paul Menaker privately dismissed the concerns, calling Muhammad a “shakedown artist,” the lawsuit says.

The following month, the suit says, Menaker sought to fire several African American workers assigned to monitor dust levels.

Amy Brownell, an environmental engineer with the city health department, said Lennar was cited three times by the city in 2006 for dust problems. The Bay Area Air Quality Management District cited Lennar last year because of a breakdown of the site’s asbestos monitoring equipment, city records show.

Neighbors, including the school, have repeatedly complained to the city about dust and asbestos, Brownell said, but the city does not believe there is a health risk.

Lennar’s “asbestos dust mitigation plans are adequate, and do protect the health of everyone, including the students, even given the problem they have with their dust control,” she said.

The Navy closed Hunters Point shipyard in 1974. Converting the base to civilian use was delayed because the land was contaminated with everything from lead paint to radioactive material. In 1999, Lennar won a contract from the Redevelopment Agency to build on the 500-acre base once the environmental cleanup was complete.

Although the Navy has spent more than $500 million on the effort, so far only one parcel — the 40-acre site where the 1,600 homes are under construction — has been certified as clean enough to build on. The Navy said the cleanup is likely to take another 10 years and cost $500 million more.

Stadium proposed

In December, in an effort to dissuade the 49ers from moving from Monster Park to a proposed new stadium in Santa Clara, Newsom and Lennar invited the team to build a stadium at the shipyard instead.

Last month the mayor’s office told the Navy that it wanted to speed the cleanup of the shipyard by turning the job over to Lennar, partly in hopes of expediting the football stadium plan.

Before homebuilding began in 2005, Lennar hired a subcontractor, Gordon N. Ball Inc., to grade the hillside site, and the environmental firm CH2M Hill to monitor asbestos levels in the dust. Lennar is supposed to spray the site with water to cut dust. If asbestos reached unsafe levels, Lennar was supposed to shut down excavation until dust subsided.

According to the lawsuit, dust problems — and community complaints — began when heavy grading work got under way last spring. Lennar failed to water the construction site adequately or sweep the roads to cut down on dust, the suit says.

On at least 15 occasions, the company halted work because of dust, the suit says, but there were many other days when work continued despite serious dust problems, the suit says.

At a meeting in August, Menaker, the Lennar vice president, told McIntyre and Clarke that the project’s asbestos monitoring equipment had been malfunctioning for months, the suit says. When McIntyre and Clarke expressed concern about the risk of asbestos contamination, Menaker allegedly admonished them to maintain a “code of silence” about the issue.

E-mail the writers at lmwilliams@sfchronicle.com and rselna@sfchronicle.com.

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This article appeared on page B - 1 of the San Francisco Chronicle

Carolyn Said, Chronicle Staff Writer

Sunday, March 18, 2007

“No credit, no savings — no problem!”

That could be the motto for the subprime lending industry. And that simple slogan might just end up knocking the props out from under the U.S. economy.

Until a few months ago, someone with tarnished credit and meager assets could find dozens of lenders offering a no-money-down, interest-only mortgage for several hundred thousand dollars. To sweeten the pot, many such loans were “no doc” — meaning potential borrowers could simply state their income instead of producing documents such as pay stubs to verify it. In the trade, they call these “liar loans.”

Subprime loans to people with poor credit have ballooned to $1.3 trillion, accounting for a fifth of all new mortgages last year.

And that’s turning into a major threat to the economy.

The subprime industry has begun to implode as many credit-challenged borrowers fall behind. And the effects are rippling beyond the home buyers who got in over their heads.

Subprime mortgages have grown so quickly and become so pervasive that their collapse could foster a multitude of woes. Subprime defaults could wallop Wall Street institutions with huge losses, further undermine the already-soft housing market and drag down consumer spending.

In a worst-case scenario, the turmoil could trigger a recession the way the savings-and-loan scandal did nearly two decades ago.

Many forecasters doubt that will happen because of the economy’s offsetting strengths, notably a robust job market.

Still, anxiety over subprime loans is mounting among economists, Wall Street traders, banking regulators and government officials.

Congress is looking at ways to shore up the industry. Fear about subprime loans was a major catalyst for the stock market swoon this month.

Here is a rundown on who could get hurt if subprime problems spread:

– Subprime borrowers. First up are the folks who took out mortgages they couldn’t afford, seduced by a hot housing market. While prices were rising, many borrowers saw their homes increase in value. That masked the problem because they could refinance based on that increased equity. Or they could sell their homes for a profit or at least enough to pay off the mortgage.

But now that housing prices are stagnating, the options of refinancing or selling have slammed shut. People who bought homes they couldn’t afford face the prospect of losing them through foreclosure, forfeiting their down payments and having their credit ruined. The Center for Responsible Lending, a consumer advocacy group, predicts that 2.2 million subprime borrowers will wind up in foreclosure in the next few years.

– Speculators. Real-estate buyers who rushed into markets such as Las Vegas and Phoenix to snap up homes, hoping to “flip” them for quick profits, could lose big.

– Subprime lenders. Companies that make subprime loans are already disintegrating because of delinquent and defaulting borrowers. In the past three months, 35 subprime mortgage companies have gone out of business. Of the 25 biggest, about half are out of business or so severely impaired that they are not making any new loans, according to Chris Low, chief economist at FTN Financial in New York, a capital markets arm of prime mortgage lender First Horizon National Bank.

Subprime lenders are in the business of originating loans, not holding them for the long term.

Typically, they “securitize” the mortgages, that is, bundle them up and sell them to investors. That brings in new cash so they can make more loans.

But most securitization deals include a clause saying if the loan goes bad in the first three months, the originating mortgage company has to buy it back, Low noted. So many loans have gone bad that subprime lenders have been unable to keep up.

The lenders rely on lines of credit from investors who buy mortgages to finance their operations. But those buyers have stopped buying and subprime lenders are seeing their credit dry up.

– Wall Street firms and other big institutions that bought the loans. Subprime mortgages get packaged, sliced and diced to create a range of products with different levels of risk. Such mortgage-backed securities have become popular investment vehicles in recent years. Subprime loans carry interest rates two to five percentage points higher than those to borrowers with good credit, so theoretically they offer a high enough return to offset the risks.

“They are bought broadly,” said Steve Cochrane, senior economist at Moody’s Economy.com, a forecasting service in Pennsylvania. “Many are held by investment banks, hedge funds, international investors of many sorts.”

The big question is exactly who holds them.

“Part of the panic the other day when the stock market was tumbling was trying to figure out who’s on the hook for these bonds,” Low said.

In the coming weeks, some victims of spending sprees in subprime mortgage securities will be revealed as Wall Street firms report financial results.

If major Wall Street firms have to write off billions of dollars in investments, that could further chill the stock market and have repercussions throughout the financial sector.

– Other borrowers. Financial institutions might react to the subprime implosion by clamping down on other kinds of borrowing. If money is harder to get, the economy suffers because it’s harder for businesses to expand and consumers to spend.

“It could create a fair amount of uncertainty in investment markets, so that all investors would become overly cautious and freeze up, stop trading,” Cochrane said. “That could limit the flow of capital in the U.S. economy and the global economy, and create a credit crunch.”

Cochrane says he thinks there is about a 25 percent chance that could happen. The results would be far-reaching.

“Right now you might say there’s a bit of a credit squeeze, largely focused on subprime holders. If the lending industry stopped lending or became increasingly tight on prime mortgages, commercial loans, industrial loans, revolving credit, it could very quickly work to slow the economy down and push it into recession,” he said.

– The housing market. The subprime collapse threatens to turn the real estate slowdown into a meltdown. Lenders have started to tighten their standards, meaning that fewer buyers — both prime and subprime — qualify for loans. That lessens demand and increases inventory.

With subprime buyers no longer in the picture, “There are a lot fewer people out there competing to buy homes, on top of which, because foreclosures are so high, there is a steady stream of houses hitting the market,” Low said.

“It means the supply-demand imbalance remains for another couple of years, putting downward pressure on prices.”

– Consumer spending. The stimulus from rising real estate prices has been one of the main engines of the economy in the past few years, as people bought and furnished new homes, and borrowed against existing homes for big-ticket purchases such as remodels and cars.

If homes are worth less, people find it harder to sell them and harder to borrow against them. That means consumers will tighten theirs belt and the whole economy will take a hit.

E-mail Carolyn Said at csaid@sfchronicle.com.

http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/03/18/BUG9AOMAJH66.DTL

This article appeared on page D - 1 of the San Francisco Chronicle

Inspiration was flowing like the Verdugo Wash after a five-day rainstorm for Alex Dann.

“Where’s the zoo?” he asked, sizing up the table-size tableau in front of him. “Over there? Cool.”

The 7-year-old Tarzana boy was at a downtown Los Angeles art gallery Saturday, poring over an exhibit called “Five Models Afloat.” A moment later, he was participating in it.

He carefully studied the 4-foot foam-board square, which was divided into thirds by a bright blue plastic slash that depicted the Los Angeles River where it is joined by the Verdugo Wash at the Glendale-Los Angeles border.

One part of the square was covered by a miniature “mountain” molded out of window screen material to represent the Hollywood Hills. The other two, depicting flatland areas, were grids marked with a series of green swatches.

Dotting the areas around the swatches were tiny movable structures formed from small blocks of wood, Lego pieces, parts of toys and objects such as toothpaste caps.

Alex moved a wood-block figurine resembling a high-rise apartment house away from the edge of the river. He was asked if he had ever seen the real Los Angeles River and what it was like.

“Yeah, I’ve seen it. It’s a sewer,” he replied as his mother, Holly Dann, blanched.

“Well, it is,” Alex said, standing his ground.

The pair, along with father David Dann and 11-year-old sister Abby, had stopped at the gallery while shopping downtown.

The three-dimensional scene Alex was working on is a representation of one of five points along a 32-mile stretch of river for which officials have launched long-range plans to beautify the waterway and make it appear more natural.

Los Angeles officials, consultants and the Army Corps of Engineers spent two years conducting formal public workshops seeking ideas for the rehabilitation of what is now a mostly concrete-lined flood channel. Last month, they issued a draft report suggesting that a $2-billion makeover over the next 50 years could replace industrial land along the banks with park space. The steep concrete walls could be landscaped and rebuilt with step-like channelization.

There are professionally drawn maps and computergenerated renderings of what the future river could resemble. But it took transportation planner James Rojas to give it a threedimensional look.

Rojas, 47, works for the Metropolitan Transportation Authority. He is also co-owner of Gallery 727 in a storefront at 727 S. Spring St., where “Five Models Afloat” will end its monthlong run today with a final showing from noon to 4 p.m.

“As a planner, I go to a lot of meetings, and they’re always very boring because they’re flat and one-dimensional,” Rojas said. “A lot of people can’t read maps. By showing them three-dimensional models, it becomes a lot more engaging. You can figure out how the topography works. You can lean down and look at it and see how things relate to each other.”

The tiny blocks, figurines and other objects that gallery visitors use to create bridges, park plazas, town houses and shops are things that Rojas has collected since childhood.

Rojas said he planned the installation with children in mind, because the actual river renovation “will come in their lifetime, not ours.”

About 700 people have visited the exhibit, including design consultants working on the river plan and city officials. One of them was Councilman Ed Reyes, who heads the river master-planning committee.

“When I first heard about it, I thought it was unconventional, kind of strange. But when I got there, I saw people doing some creative things,” he said. “What struck me was how elaborate the little block and figurine structures were. People were really thinking about what they were doing.”

After watching awhile, Reyes tried some hands-on planning of his own.

“I felt kind of silly at first. But then I got to thinking: Where does the bridge go? Then I thought about decorating it with an angel, since the bridge was going to be near where the birthplace of the city was.

“Toward the end of my stay,” he said, “I saw a 6-year-old take over the whole board. And he did his own thing, and it didn’t look much different from what others were doing. He was laying down his vision as a young person.”

Reyes said professional planners welcome such creativity. Rojas agrees. So he has photographed various versions of the five river model boards as a permanent record of what visitors have suggested.

Some of the ideas are novel. One person used an acrylic toy lighthouse to mark the start of the river, where the Arroyo Calabasas and Bell Creek come together behind Canoga Park High School. Small plastic half-spheres illustrate “floating sticky balls” that another visitor placed at the juncture of the river and the Verdugo Wash “so people who fall in can stick to the balls and be saved.”

That’s the same area where Alex Dann installed his floating filter — made up of several rubber gaskets and what appeared to be a silver-colored tube connector he found in one of Rojas’ supply boxes.

“This is a machine that sucks up the trash and stuff from the water,” the boy explained, dropping bits of paper onto the faux river to illustrate how it would work.

Gallery 727 co-owner Adrian Rivas nodded knowingly.

“You’re an urban planner now,” he told Alex.