Ghosts of the Past Still Haunt NYC Development—It’s Time To Mimic the Boston Exorcists (Part 1)

Seneca Village, a 19th-century Manhattan community, and Robert Moses, a deceased 20th-century urban planner, have much in common for the history of NYC real estate development. They both are emblematic of the destruction of economic opportunity for the City’s populations of peoples of color. And those ghosts still haunt the practice of how the public and private sectors administer commercial real development in the 2020s.

Seneca Village, unlike Harlem or Hell’s Kitchen, is a neighborhood that no longer exists. It was a community of free Blacks that was established in the 1820s in what is now the Upper West Side of Manhattan—between W. 82nd and W. 89th Streets. Using its power of eminent domain, the City condemned property owned by that community to effectuate a totalitarian land grab—solely for the purpose of constructing Central Park for the enjoyment of Manhattan elites. As a result, the opportunity to pass on generational wealth and, perhaps, participate in the growth of NYC and the development of the Upper West Side was stripped from the hands of Black New Yorkers. It was less violent than Putin’s 2022 invasion of Ukraine, but the end result was even more definitive.

A century later, Robert Moses became the lauded visionary who refused to see the impact of his infrastructure developments on New York’s Black and brown communities. That’s actually me being kind. A March 2022 article in Britain’s prestigious magazine, The Spectator, had described him as a racist psychopath. So, Moses, an unelected public sector bureaucrat, carved roads through and bulldozed Black and Latinx neighborhoods with total disregard for the damage done to those communities and the destruction of BIPOC (Black, Indigenous & People of Color) wealth opportunities.

That was the past, but the past is still with us. And nothing is a more glaring failure of diversity in the commercial real estate (CRE) markets than the paucity of equity participation and ownership by BIPOC sponsors and investors in NYC CRE development projects: particularly those built in communities of color. Yes, there have been advances in the involvement of minority developers in the affordable housing markets. But there are still iron walls to be breached—in both the public and private sectors—for BIPOC involvement in the development and ownership of the City’s retail properties, office buildings, warehouses, life sciences facilities, and hotels.

Boston’s Omni Hotel Project—A Pioneering Diversity Model

Fortunately, Massachusetts and the city of Boston can show New York a feasible model of how that can be done. (It's worth noting that my alma mater's city could play the role of mentor here, notwithstanding it is less than one-tenth the size of NYC.)

In 2021, Boston celebrated the opening of a $550 million, 1,000-key Omni Hotel complex in its trendy Seaport District on Summer Street. An African-American development team is part of the ownership of that project, which has now become a model of diversity, equity and inclusion (DEI). A signature feature of this public-private partnership was the structure for administering the RFP process for a parcel owned by the public sector. A brief video clip on the development is featured below.

The Massachusetts Port Authority (Massport), which is NYC’s equivalent to the Port Authority of NY/NJ, made an affirmative decision to establish a DEI objective for the development of a key site, one that would accommodate 800,000 sq. ft. of development. That resulted in a four-factor decision matrix for selecting a development team to negotiate a ground lease deal. What elevated this process from the neolithic era of traditional DEI approaches to one reflective of modernity were five key program elements:

1. Making DEI comprehensive. Massport did not limit the diversity goal to first-generation DEI thinking—that is, with a simplistic and exclusive focus on the construction phase. Such approaches are content to establish MWBE goals solely for the contracting opportunities on the construction project. Instead, Massport urged a demonstration of diversity across all phases of the development process, inclusive of project ownership/development, project design, and equity investing and finance. In other words, it was an invitation to incorporate BIPOC developers and investors as significant members of the ownership team.
2. Establishing the selection criteria. Traditionally, Massport had looked exclusively at three factors in evaluating development proposals: (1) ability to execute, (2) financial capability including the viability of the ground rent proposal, and (3) architectural design and functionality. For the Seaport District RFP, the agency incorporated the DEI metric—and did so explicitly.
3. Establishing the selection committee. The agency appointed their diversity officer as a voting member of the selection committee, thereby reinforcing the significance of DEI as a decision criterion. Nonetheless, that individual was only one of 8 votes.
4. Weighting the DEI criteria. A key decision was the weighting of the DEI criteria against the other three criteria. If the DEI criteria were weighted too high, there was concern that they would “scare off” potential bidders. However, if they were weighted too low (e.g., 10%), it was predicted that the marketplace would not take the metric seriously. The decision was made to weight all four criteria equally—thereby establishing a weight of 25% of the score for a developer’s DEI program.
5. Replication. Massport was not looking to engineer the proverbial “one and done” diversity initiative. Their expectation was that the project, if successful, would be applicable to other Massport development projects and inspire other Massachusetts agencies to do the same. We may now see that happening under the administration of Boston Mayor Michelle Wu, that city’s first elected female and Asian-American mayor. (I will discuss the Wu administration’s recent signals on DEI in Part 2 of this article.)

Recognizing the Legitimacy of DEI

Evidently, for many in the public and private sectors, social justice is not necessarily a convincing rationale for advancing DEI initiatives—that is, beyond what they feel is the requisite performance theatrics for the public. Of course, one of the most powerful arguments is the intrinsic benefit of diversifying a talent pool, as well as the pool of potential investors and project partners. But it can also be argued the DEI paradigm at the Seaport project had a more fundamental rationale.?

The Omni Hotel was built with the State retaining ownership of the land under a ground lease—with that land remaining a public asset. Given the history of African-Americans in the Commonwealth and their economic contributions to Boston—from the blood of Crispus Attucks spilled to spark the American Revolution, to the decades of state income taxes paid by Black Bostonians, to the decades of property taxes paid directly and indirectly by Black and minority Bostonians as owners and renters—it made economic sense that BIPOC investors and businesses should have an opportunity for significant participation in all aspects of the project. That is just one of several premises for the notion of equity—a recognition that Bostonians of color are "shareholders" and part of the body politic.

So, indirectly, those minority residents of the Commonwealth are partial owners of the fee interest upon which that project was built. Arguably, it is only now with this new model of development that the state of Massachusetts has chosen to acknowledge those property rights. Thus, Massport has begun the exorcism of Boston’s ghosts of exclusionary barriers in CRE development—ghosts which also haunt other major American cities.

The Massport model demonstrates that creative thinking, whether internally done by diversity officers or with the assistance of consultants, can result in viable and impactful DEI initiatives. That, I believe, is something for the City of New York and New York State to consider—through both recovery and any recessionary conditions in 2023 and beyond.

One could say that NYC, and its development community, are in need of their own exorcists.

G. Lamont Blackstone is a commercial real estate consultant who has been engaged in the structuring and negotiation of public-private partnerships for urban redevelopment projects via tax increment financing, ground leases, and other structures in cities such as NYC, Los Angeles, Philadelphia, and San Diego. He is also chairman of the board of directors of Project REAP, the nation's leading diversity initiative serving the CRE industry.