photo by Ben Fractenberg
This story ran on Oct. 11, 2019 in THE CITY.
A worn-down factory building on Bruckner Boulevard in the South Bronx may not look like much — but its owners are banking on a government-backed gold rush.
The Benedetto family, giants in the recycling industry, put a 99-year lease on the property up for bid this summer, with the pot sweetened by a federal program known as Opportunity Zones.
The winner of that contest, to be announced by the end of the month, will get the opportunity to construct a much larger building at the site — including apartments, if they choose. They also will reap a lucrative tax credit worth potentially hundreds of thousands of dollars.
With its Port Morris neighborhood already booming with new apartment developments, the Benedettos were going to lease out the 250,000-square-foot plot anyway, said the property’s broker, Randy Modell.
Four businesses operate in the building, and their leases are ending soon.
The Opportunity Zone credit means the Benedettos will likely make much more money on the deal at 40 Bruckner Blvd. than they would have just three years ago.
“It’s just a happy coincidence,” said Modell, who wouldn’t reveal how much bidders have offered.
Bad for Businesses
While the owners and investors reap a pumped-up financial reward, a pet store, print shop, plumbing contractor and tire dealer all will have to find new homes.
The pet shop owner, who uses his space as both a storefront and to make custom dog treats, knows it’s likely he won’t be welcomed back after his lease expires next year.
“I knew what I was getting into — business is a risk,” Ford said. “But none of us really know what’s going to happen. We’re all in limbo.”
Joanna Santos, vice president of 48Print Corp., said the company pays $3,000 a month for a 3,100-square-foot printing office it has occupied for eight years. Finding a similar space for that price is unlikely, she noted.
“Once we get wiped out of here and all the new buildings come in, rent is going to skyrocket,” Santos said.
Opportunity Zones emerged as part of the sweeping 2017 tax bill passed by Congress, incorporating a measure co-sponsored by Sen. Cory Booker (D-N.J.), who’s now running for president, and Sen. Tim Scott (R-S.C.).
Under the program, a governor may designate up to one-quarter of their state’s high-poverty Census tracts as eligible for a generous tax credit. Gov. Andrew Cuomo chose 514 tracts — just over 300 in New York City and 75 of them in The Bronx.
Map of Opportunity Zones by the Empire State Development Corp.
Firms with investments in any Opportunity Zone are entitled to put profits earned into a designated fund, shielding them from taxes for up to 10 years.
The chance to supercharge profits coincided with a transformation already well underway in Port Morris and surrounding areas of the South Bronx, still one of the city’s poorest areas.
A 2005 rezoning sponsored by the Department of City Planning opened up new opportunities to build housing in the largely industrial area. Previously, only manufacturing businesses had been allowed at the Benedetto site.
Now, an apartment tower is permitted, along with food or retail. City planners projected 85 new apartments.
The Benedetto property is just one block away from Harlem River Yards, set to house the city’s first soccer stadium, a condo tower and a large affordable housing complex. It sits at the corner of Alexander Avenue, already lined with trendy new restaurants, including Beatstro and Hudson Smokehouse.
The arrival of Opportunity Zone dollars in already gentrifying areas has led some analysts to raise doubts about Booker’s contention that the zones encourage growth in areas lacking resources — such as in Newark, the city where he once served as mayor.
Samantha Jacoby, a tax analyst for the Center on Budget and Policy Priorities, questions whether investments into projects like the one on Bruckner Boulevard ultimately benefit the poorest pockets of a zone — or even anyone other than parties to the transaction.
“You certainly don’t want to be publicly subsidizing projects that would happen one way or another,” Jacoby said. “That’s kind of the worst-case scenario.”
Other Opportunity Zone deals already have flowed in the South Bronx. Last May, Starwood Capital announced the area’s first project, which is set to include a charter school, nonprofit office space and retail development.
Modell, the broker, said he’s seen an uptick of investors looking for real estate in the South Bronx, thanks to the Opportunity Zone tax credit.
As for why the Benedettos are leasing, rather than selling the property, Modell said the family — famous for challenging the mob in the waste industry in the 1990s — wants to hold on to the real estate.
“They’re not sellers.” Modell said. “They believe in generational wealth.”
(Rachel Rippetoe is a reporter with the NYCity News Service.)