City’s Most Successful Industries Describe Future Plans

Citywide access to broadband, a live fashion museum in the Garment District, more industrial parks like the Brooklyn Navy Yard, lab space and incentives for biotech companies – these are just a few of the ventures that the city’s most prosperous industries want the de Blasio administration to support.

At Crain’s “City in Transition” conference, representatives from each successful industry – the arts, education, fashion, film and movie production, manufacturing, and technology – told the business community that they need city support in order to stay flourishing.

The founder of Shutterstock, Jon Oringer, said that the city must give every person access to low-cost, high-speed broadband Internet. “How many ideas aren’t being built because someone doesn’t have Internet access?” he said.

The city also needs to focus on tech education, he said. “Learning computer language is as important as learning a foreign language,” said Oringer, noting that at age seven, he learned how to program a computer.

William L. McComb, the CEO of Fifth and Pacific Companies, said the New York fashion industry has the unique opportunity to connect with the city’s tech industry – something that could put it ahead of competitor countries like France and Italy.

“We may not compete with Milan or Paris for luxury goods, but we can merge with technology, creating apps to help the consumer connect with brands,” said McComb.

McComb also proposed a live museum in the Garment District that could show off the industry to tourists and have featured talks with designers. “A lot of people come to New York to see the fashion industry, but you can’t really see it,” said McComb.

Safety is also a top priority, said McComb, to ensure that fashion companies feel comfortable signing long and expensive leases. And, the progressive immigration program must be supported, said McComb, because design talent comes to New York from all over the world.

As for the manufacturing industry, Andrew Kimball of Jamestown Properties dismissed the popular notion that manufacturing has been in steep decline.

“Manufacturing isn’t declining, it’s been redefined,” said Kimball. “This isn’t the manufacturing of the 1950’s.” Kimball expressed excitement that big factories are no longer needed, and that small companies with innovative ideas such as 3-D printing are coming to fruition.

“I’m excited that this new kind of manufacturing is focused on sustainability and local sourcing, which consumers are demanding,” said Kimball.

These manufacturing jobs pay more than service jobs and allow workers to move up the economic ladder more quickly, said Kimball.

But there are problems, said Kimball, mainly lack of space. “People are talking about lack of affordable housing, but not about affordable space for industrial jobs,” said Kimball. He suggested converting the large self-storage units along the B.Q.E. into industrial parks, which would create more jobs. The industry needs city support through zoning and building codes.

Representing the education industry, Marc Tessier-Lavigne of Rockefeller University lamented how Boston has surpassed New York in the biotech industry, even though “we have more college students in New York than the population of Boston.”

“We have a real opportunity in the next five to seven years to push New York to what the Bay Area was in the early 90’s, and what Boston was just ten years ago,” said Tessier-Lavigne.

The city needs to bring biotech companies here with financial incentives and cheaper lab space in order to prevent the talent from going to Boston or San Diego, he said.

“There are a lot of willing victims,” said Tessier-Lavigne. “Many CEO’s in Boston would rather live in New York.”

The film industry is booming in New York, thanks to tax credit and studios like Steiner Studios, Silvercup Studios, and Kaufman Astoria. Alan Suna of Silvercup Studios said the industry does great things for tourism, thanks to promotion by TV shows like “Sex and the City” and “Girls.”

He called on the next mayor to work with communities. “Filming in communities can cause NIMBY reaction, but we need to accept these minor inconveniences,” said Suna.

Thelma Golden, director of the Studio Museum of Harlem, stressed that the arts should not be overlooked – it has the ability to revitalize a community and turn it into a destination, like the Studio museum and the Apollo Theater have done for Harlem.

“The city needs to think about artists as key citizens,” said Golden, “and how creatives help us imagine the city in different ways.”

Business Leaders Recommend Tax Credits and Tech Investment to New Mayor


From L to R: Thomas Glover, Angelic Ventures, LP; Jeff Bewkes, Time Warner; Charles E. Phillips, Infor; Ala D. Schwartz, Guggenheim partners, LLC; Mary Ann Tighe, CBRE, Inc., speaking during a panel discussion at Crain’s New York’s conference on the future of New York City on Nov. 20, 2013, in Midtown Manhattan.

Leadings members of the business community said New York City’s economic future depended heavily on whether or not Bill de Blasio would continue Bloomberg’s support for the tech industry and tax credits at a panel discussion on the future of New York today.

The annual Crain’s and Partnership for New York City conference on the future of New York City kicked off with Thomas H. Glocer of Angelic Ventures moderating a panel discussion between Jeff Bewkes of Time Warner, Mary Ann Tighe of CBRE, Inc., Charles E Phillips, CEO of Infor and Alan D. Schwartz of Guggenheim Partners, Inc.

All five panelists expressed some of the collective anxiety felt by the business community as they prepare for a new mayor who ran on a populist message and has vowed to tax wealthy New Yorkers. So it is no surprise that the business leaders’ recommendations to Bill de Blasio focused on the continuation of some of Bloomberg’s pro-business policy initiatives.

Tax credits for the film and television industry was particularly important to Jeff Bewkes, chairman and CEO of Time Warner.

“If you want to target an industry [like film and TV] that is so important to the image attractiveness of New York, it’s really important that we keep this [tax credit],” Bewkes said. Bewkes also said that the number of jobs created by the film and television industry justified the tax credits, and hoped that Bill de Blasio would continue them during his administration.

Panelists also expressed concern about De Blasio’s proposal to tax wealthy New Yorkers. Real estate mogul Mary Ann Tighe pointed out that the real estate industry provides more than one-third of the tax revenue collected from the city.

“Unless we keep that tax base strong, we all know the fall out from that,” Tighe said, implying that real estate businesses could potentially take their business elseshere if the city’s tax policy became unacceptable.

Still, panelists remained optimistic that the new mayor would make the future of the city a priority by supporting the businesss community, particularly the tech industry.

“It’s a vibrant era for technology. There’s a lot happening, we just need space to put more people and we need more engineers here,” said Charles Phillips, CEO of software company Infor.

Phillips and other panelists insisted that the city’s chances of remaining a center of culture and commerce in a rapidly globalizing society depended on its ability to grow and attract more tech talent. The new Cornell-Technion campus on Roosevelt Island was a good start, Phillips said, but he hopes the new mayor will make the work move faster.

“Cornell Technion is great for the city. We just need the people a lot more quickly,” Phillips said.

Business leaders did not express real pessimism about the new administration, despite their concerns about the policies De Blasio ran on during the campaign trail, and instead seemed content to adopt a wait-and-see mentality.

But as the new administration takes their first policy steps, the business community will be evaluating what those policies will mean for maintaining a healthy economic climate.

“During times of change, it’s all about finding common ground so that we stay aligned … all of us who have a vested interest in this city,” Thomas Glocer said.

NY journalists admit dropping the ball in mayor’s race

A panel of New York political journalists gave what amounted to a collective mea culpa Tuesday night for nearly ignoring mayor-elect Bill de Blasio until he had all but won the Democratic primary.

Speaking at a forum held by the CUNY Graduate School of Journalism, journalists from the New York Daily News, WNYC, New York 1 and Politico all lamented that de Blasio’s sudden ascendance took them by surprise while they were still focusing on other candidates. The result, they said, is an incoming mayor who has received very little vetting from the press.

“We all sort of, I believe, misread how serious a contender de Blasio was from the very beginning,” said Joel Siegel, politics editor of the Daily News. “I don’t think he got the scrutiny in the beginning that Chris Quinn got or Bill Thompson got.”

Before de Blasio surged in the polls in late August, shortly before the primary, the press had largely focused on three other candidates—Christine Quinn, the initial frontrunner; Anthony Weiner, whose sexting travails entertained the country; and Bill Thompson, who some thought had an inherent advantage by being the sole black candidate.

But while Quinn lost her lead, Thompson failed to gain traction and Weiner imploded under the weight of his scandals, de Blasio was quietly delivering a left-wing message that appealed to more voters than the press generally recognized.

“I think collectively New York saw twenty years of Republican and independent rule and thought that was the norm,” Siegel said. The reality, he argued, is that New York is a very liberal city that was ready for a change—and de Blasio realized it first.

“We did not get the whole de Blasio phenomenon until de Blasio was basically mayor-elect,” he said.

As a result, at least three of the journalists agreed, de Blasio escaped much of the scrutiny that his opponents had faced from the press.

Maggie Haberman, who covered the mayoral race for Politico, said she considers de Blasio “pretty under-covered” for an incoming mayor.

“I do think that he’s coming in as one of the least scrutinized mayors in recent memory,” she said.

Brian Lehrer, of WNYC, admitted that his own show had not spent enough time examining de Blasio’s resume.

“We definitely failed to scrutinize his record in terms of management experience,” he said.

Before de Blasio entered the spotlight, the New York Times ran a devastating story on Christine Quinn’s aggressive tactics as City Council speaker, and nearly every media outlet paid more attention—too much attention, most journalists on the panel said—to Anthony Weiner.

“The whole Anthony Weiner thing was a distraction,” Lehrer said, lamenting that the sex scandals drove attention away from important issues. “It took the air out of the room.”

Even Bill Thompson, for most of the summer, received more attention from the press than de Blasio.

Errol Louis, host of New York 1’s “Road to City Hall,” said he had “privately” predicted that New York’s ethnic voting patterns would play out as usual in the election—pointing, perhaps, to a Thompson victory. According to the CUNY J-School’s incoming dean, Sarah Bartlett, Louis had predicted that Thompson would win.

But Thompson failed to gain a major advantage with black voters throughout the summer, trailing both Weiner and Quinn at one point in the polls. In the end, de Blasio’s own biracial family—prominently featured in a popular TV ad narrated by his son—may have given him the advantage Louis expected for Thompson.

“Turned out he was a black candidate,” Louis said of de Blasio. “Who could have known?”

Businesses in Willets Point will have to relocate after a plan to redevelop the area into a mixed-use residential and commercial space was approved by the City Council. Photo by Candace Sheppard

Willets Point Manufacturer Gets Off The Hook

Businesses in Willets Point will have to relocate after a plan to redevelop the area into a mixed-use residential and commercial space was approved by the City Council. Photo by Candace Sheppard

Businesses in Willets Point will have to relocate after a plan to redevelop the area into a mixed-use residential and commercial space was approved by the City Council.  Photo by Candace Sheppard

More than 260 auto repair shops, junkyards and construction companies will have to move from the blighted Willets Point neighborhood now that the City Council has given final approval to the $3 billion plan to turn the 62-acre industrial space into a mega retail, hotel, and housing complex. But not everyone is being forced out.

One business, the family-owned Indian food wholesaler House of Spices, was excluded from the Willets Point redevelopment plan and will be allowed to stay. But the question is for how long? The company’s vice president Amrapali Soni says that’s up to the city to decide.

“We will remain in New York City as long as New York City helps us and wants us to stay here,” says Soni. “For now we plan on staying at Willets Point as long as possible, until we outgrow our space or until there is a reason to move.”

House of Spices, which specializes in a variety of Indian foods and operates eight other facilities in the country, has headquartered its operations in New York since 1989, employing more than 100 people in Queens.

It initially received tax benefits from the city’s Industrial Development Agency (IDA) when it first came to Willets Point and continued to receive the city’s support. But Soni says that in spite of its seemingly strong ties with the city, its future of doing and expanding business in New York is still uncertain.

“It’s questionable for us in terms of where we plan on being in 10 years,” says Soni. “After this development [comes] to fruition, there are going to be parts of Willets Point [where] commercial businesses will be misfits in the area.”

According to the city’s Economic Development Corporation, phase one of the project includes the construction of 2,500 housing units, over six acres of public space, a public school, parking lots, and a hotel. When the project was first introduced in 2008 and the city tried to use eminent domain to displace businesses, the Soni family searched for spaces within the five boroughs and in New Jersey to relocate because the redevelopment meant limited space for expansion.

“The Indian grocery business is changing,” says Soni. “A lot of our business is in Queens [but] now the majority of that has moved to New Jersey.”

Rob MacKay, director of public relations, marketing and tourism for the Queens Economic Development Corporation, says that for a company like House of Spices, New Jersey has its advantages. The cost to operate a factory is cheaper in New Jersey than in Queens and a commercial and residential Indian community is thriving there.

MacKay admits that New York City’s heavy tax burden diminishes its competitive edge with other states. But he says that Queens also has a burgeoning Indian community and other viable industrial spaces like the College Point Corporate Park in Flushing could satisfy the growing business demands for House of Spices.

“I would hope that people at the state level and citywide level would make sure that they get whatever tax breaks or whatever’s necessary to keep them in the borough,” says MacKay. “It’s jobs in Queens. It’s that simple.”

For now, Willets Point is still an ideal spot for House of Spices. The location provides easy access to highways, bridges, and tunnels for moving its product. Soni, however, says the company will keep its options open. She is still concerned that the city can use the threat of eminent domain again once the redevelopment is in motion.

“Nothing is ever off the table,” says Soni. “We are open to exploring all opportunities at all times.”

ULURP Hearing, City Hall

Read Property Presents Rheingold Plan to Skeptical Audience at City Council

ULURP Hearing, City Hall

Councilwoman Diana Reyna asks questions to representatives from Churches United for Fair Housing, the Rheingold Homeowners and Make the Road New York, all of whom currently oppose the Rheingold proposal, during the hearing Tuesday morning. (photo by Tobias Salinger)

A proposal for a 977-unit residential project in fast-changing Bushwick faces opposition over the number of affordable housing units and whether those apartments will be affordable enough for longtime Bushwick residents.

The voices of protest are rising despite the fact the developer plans to set aside 24 percent of the apartments for families with incomes lower than sixty percent of the city’s area median income, an offer more generous than required under the subsidies that allow developers to build higher in exchange for the affordable units.

Representatives for Read Property made their pitch for the 10-building, 1-million-square-foot residential and retail project during a City Council hearing Tuesday morning at City Hall. But several testifying community members, as well as Councilwoman Diana Reyna, the representative for the area, demonstrated why this proposal for the old site of the Rheingold brewery still has high hurdles to clear before the full Council votes on it by mid-December.

The mid-rise structures would feature 242 affordable apartments, space for new ground floor retail stores to be filled by local businesses and a new public park. Concerned neighbors and Reyna, who represents the district, dispute whether there are enough affordable units and whether the project’s current definition of “affordable” fits into the income levels of longtime Bushwick residents.

“That’s part of the balancing act we’re trying to achieve here,” said Reyna at the hearing. “The issue of displacement is real.”

But only additional subsidies will convince developer Robert Wolf to increase the number of affordable units above their current levels of 24 percent of the new units available to people with incomes lower than 60 percent of the city’s area median wealth, according to the three lobbyists representing Wolf at the hearing.

The City Planning Commission approved the proposal on Oct. 23, which triggered the Council’s 50-day review period two days later under the Uniform Land Use Review Procedure. While Read Property began lobbying the city on this proposal in 2005, according to city records, the final jockeying period in which other Council members usually look to the representative of the particular district to signal whether they’ll vote up or down often brings concessions from developers.

At this point, Wolf has reached agreement with two area nonprofits—one will market the low-rent units and the other will train community members for construction jobs building the site. He’s also pledged a $350,000 grant to the city Department of Parks and Recreation for improvements at nearby Green Central Knoll Park.

The proposed six and eight-story complex contrasts with the 40-story towers proposed for the Greenpoint waterfront and the massive complex slated for the old Domino sugar factory in Williamsburg, and Read representatives Ed Wallace, Mitch Korbey and Jennifer Dickson made the case that the plan to build Bushwick’s first large-scale residential development is feasible for the surrounding community.

“Taken together, our rezoning is not a traditional manufacturing-to-residential rezoning,” said Korbey.

Many community members who testified did not agree. Sixty percent of the city’s median wealth–$51,544 for a family of four—is out of step with Bushwick, where families of four have median incomes of around $34,000, according to Reyna. Representatives from Churches United for Fair Housing, Los Sures and Make the Road New York said they oppose the plan in its current form.

“Basically what the proposal is offering is that zero percent of Bushwick residents will access this housing,” said Jose Lopez, a lead organizer with Make the Road.

Lopez said the apartments should be affordable to residents with incomes under 30 percent of the city’s median wealth, and both he and speakers from a new neighborhood coalition support raising the number of affordable units to 35 percent of the new apartments.

“We understand the business model of the developer and we see room for an increase in affordable units and real community needs to be met,” said Brigette Blood, a Bushwick resident who helped form the North West Bushwick Community Group.

Reyna acknowledged their concerns and said she’s in negotiations with Read Property on those fronts. Her staff put together a community advisory committee composed of Blood and multiple nonprofits to meet regularly at Reyna’s office ahead of the vote that must take place before Dec. 13.

Reyna, who outlined affordability and a new grocery store for the area as two of her priorities for the proposal, said she’s trying to make sure developers live up to their agreement.

“We have seen a lot of lessons learned in Greenpoint and Williamsburg, and we don’t want to repeat them in Bushwick,” said Reyna, who is term-limited out of office in January.

But others testified in favor of the proposal, including members of the SEIU 32BJ union and Williamsburg’s St. Nicks Alliance workforce development program. Carolann Johns of St. Nicks announced Wolf agreed to pay the nonprofit $75,000 to train and staff 60 construction positions on the site—jobs with “comparable” wages and benefits to other employees in similar roles.

“Our target would be individuals in the community who are unemployed or under-employed,” said Johns, the managing director of workforce development at St. Nicks.

The other nonprofit that would provide services on the site, Churches United for Fair Housing, has yet to sign on. Executive director Rob Solano and director Daniel Bruno said they are looking for at least 30 percent of the new units to be affordable before they’ll think of supporting it.

“We’re not that far away,” said Solano after the hearing. “But some serious conversations need to happen. If it’s not going to benefit our community, then we’re willing to say no.”


For Roosevelt Island Businesses,Tech Campus Stirs Mixed Emotions

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For the tech world, Cornell NYC Tech’s launch on Roosevelt Island in 2017 will mean an influx of tech experts, with approximately 280 faculty members and 2,750 graduate students. But many Roosevelt Island natives hope the tech campus will bring something else to the island: new business.

The Island may seem miniscule compared to surrounding landmasses, with only one major street—appropriately named “Main Street.” But the narrow island on the East River boasts a population of about 12,000. While many residents are there primarily for the short commute into Manhattan, a significant group of residents are part of the long time community on the island.

Alfonso DiCiocco hopes the campus’ arrival will lead to an increase in customers for his two businesses. DiCiocco has operated Nonno’s Foccaceria and the River Walk Bar and Grill near the F train stop since 2007, when he retired from the NYPD. He watched the island grow as an F train transit officer and says the island is “the best kept secret in the city.”

“It’s a positive,” he said of the tech campus. While he said some long time residents are concerned a population increase will lead to an increase in traffic and commute times, DiCiocco believes it will only benefit his businesses. “That’s a great problem,” he laughed. “Change is going to happen, and it’s going to affect everything in a positive way.”

Main Street Sweets employee Erin Jones echoed DiCiocco’s positive outlook. She has lived on the island for 18 years, and says despite some community doubts, the campus will benefit the island.

“With some of the residents, it may be a negative – we’re kind of a small town here so we’re used to knowing everybody,” said Jones, who works at Coach Scot’s Main Street Sweets. “But it will be positive, business-wise…. The hospitals are very segregated, but college students will roam.”

The new campus, which will be built on space previously occupied by the Goldwater Specialty Hospital, will take up over two million square feet at the south end of the island. It will be comprised of academic, corporate, and residential buildings, and will offer 2.5 acres of green space that will be open to the public, not just Tech Campus students and faculty.

Since the tech campus’ inception, Cornell has emphasized its desire to keep the campus open to the Island community. During a presentation to residents in October 2012, Skidmore Owings associate director Colin Koop assured residents the campus would open up the island.

“The goal is to create an open and inviting environment that beckons you inwards and encourages interactivity,” said Koop.

And Cornell officials have emphasized that those who utilize the campus will also be encouraged to engage themselves in the existing Island community.

“We are very excited for the Cornell Tech campus to take shape on Roosevelt Island,” said Cornell Tech Vice President Cathy Dove. “We’re working closely with our future neighbors and we fully expect the campus community and visitors to dine in local eateries and shop at local businesses.”

But some residents are skeptical the campus, expected to exceed $2 billion in operating costs over the 30 years it will take to complete the entire project, will benefit the community in the way Cornell officials promise. Frank Farance believes the campus will have a neutral, if not negative, effect on the island’s small businesses. For Farance, planning committee chair for the Roosevelt Island Residents Association, the greater issue will be the increase in rents many business owners and residents may see.

“The people on the campus really are not going to be strolling literally a half mile to a mile north to go get a slice of pizza,” said Farance. He believes students and faculty will utilize the tech campus’ services rather than contributing to local businesses.

“I think they think it’s going to be a goldmine here when Cornell gets here,” said Farance. Many landlords, he says, have already raised their rents.

For longtime resident Erin Jones, 2017 is a year she can look forward to. She sees the campus bringing positive growth to a community that is often resistant to change.

“I like to see new things come into the neighborhood,” said Jones. “We’ve been forgotten about for so long.”

Rockaways chocolate factory reopens, but recovery is slow

Business is ramping up slowly for Madelaine Chocolate, the Rockaways chocolatier that reopened two weeks ago after Superstorm Sandy shuttered operations last year. The Queens company is among the many small businesses that has had to decide whether the cost of rebuilding in a flood zone is better than relocating outside city limits altogether.

Areas beyond the city have dangled incentives in front of Jorge Farber, Madelaine Chocolate’s CEO, but right now there are too many reasons to stay, he said. Farber and most of his employees live within miles of the facility, making a move to New Jersey or north of the city less attractive. Plus, local relationships can tip the scale: the company has been planting roots and reinforcing its network in the Rockaways for generations.

When the next storm hits, though, it all comes down to money. Last year, before the storm, Madelaine made about $50 million in annual sales. They expect to make half of that this year. While business is indeed growing, the damage that future flooding and wind could inflict might prove too costly to rebuilt altogether, no regardless of where.

“Another storm like this would probably just do us in totally,” said Farber.

Roughly 23,400 businesses had some level of flooding as a result of Superstorm Sandy, 650 of which received more than $20 million in loans and grants from the NYC Small Business Services, according to an SBS spokesperson.
Madelaine Chocolate’s 200,000-square-foot chocolate factory flooded with more than four feet of water, destroying tons of wrapped chocolate ready to sell. More importantly, and certainly more costly, the hurricane damaged mechanical and electrical equipment. As part of the rebuilding effort, the factory raised its electrical panels higher to protect against future flooding, but the machines themselves cannot be elevated much higher than they were before the storm, leaving operations vulnerable.

With help from Gerber Finance, and a loan from the Small Business Administration that came “just in the nick of time,” Madelaine has been slowly but steadily adding major equipment to expand back to what it was before. As they work towards a full-capacity facility, the company is focused on meeting short-term seasonal goals. Halloween production targets were mostly met, aside from a delay that forced the cancellation of an order, and chocolates have almost been completed for Thanksgiving and Christmas. Still, production is less than half of what it was pre-storm despite the factory starting operation in July of this year.

While Madelaine has a long way to go, they have the help of loans to fuel their re-growth. Other businesses have not been so lucky. The federal and local governments have been slow to award disaster loans and many businesses are still waiting to see the money that will help them move forward. Now that Madelaine is reopened, though, they are working on recovering their old contracts.

The chocolatier was out of the game for so long that other retailers filled in the hole left when they were forced to close. But the company has benefited from long-standing relationships with both customers and vendors and has mostly gotten its customers back.

Despite these strong relationships, Farber said that the decision to leave or stay is a continuous conversation. For now, though, the company has decided to dig in their heels and stay.

“Once you make a decision, you don’t look back,” he said.

Map Data Source:
Photo source: Madelaine Chocolate

South Korean Startups Come to New York to Secure U.S. Funding

David Yoo is a co-founder at South Korea-based startup KnowRe, which developed a math learning game for kids. Yoo is working to raise funding from venture capital firms in the United States.

David Yoo is a co-founder at South Korea-based startup KnowRe, which developed a math learning game for kids. Yoo is working to raise funding from venture capital firms in the United States.

In a tiny office space at a WeWork building in the financial district, David Yoo and Dino Ha look just like the hundreds of other startups operating in the popular coworking space. But unlike the startups at WeWork, both Yoo and Ha work for South Korea-based startups and are in New York City to fulfill one purpose: secure funding.

Yoo and Ha are part of South Korea’s fledgling startup community that is sending founders to New York City to raise money from the city’s growing venture capital community. If this partnership between South Korea and New York City proves mutually beneficial, New York City’s tech community could soon benefit from yet another bump in jobs creation and economic expansion as another group of foreign companies make New York City their second home.

Both David Yoo and Dino Ha’s startups received funding to expand into the U.S. market from the South Korean government and SparkLabs, a tech accelerator that aims to grow South Korea’s startup industry. Yoo is a cofounder of KnowRe, a math learning game for middle school students, and Ha is a cofounder of MemeBox, a monthly subscription-based Korean cosmetics retailer.

The South Korean government and SparkLabs supported KnowRe and MemeBox by giving them seed funding because both startups demonstrated potential for expanding into the U.S. market.

“The government is now recognizing this industry and putting money into it,” Yoo said.

South Korean government announced in last August that it will invest $2.97 billion into the tech industry, and is also offering tax incentives for angel investors to encourage a generally risk-averse business community to invest in startups. The government’s aggressive promotion and support for its tech industry are being felt in New York City as successful startups from South Korea expand their business to the U.S.

One such startup is KnowRe. When KnowRe (pronounced NO-REE) developed their interactive math learning game, they quickly realized that their market was not in South Korea.

“Korean moms don’t view the computer as an educational tool so there are real cultural issues that prohibit us from puncturing the Korean market,” said Yoo.

After winning funding from the South Korean government and SparkLabs, KnowRe decided to launch their game at conferences for teachers in the U.S.—where parents are more open to video games as learning devices.

“We had a basic demo, but the teacher’s response was crazy. They loved our product,” Yoo said.

Today, KnowRe has run a successful pilot launch of their game at more than 30 schools across the United States and is raising funds to continue marketing and distributing their game to more schools.

Similarly, MemeBox (pronounced MEE-MEE-BOX) realized it had a winning startup idea when Korean cosmetics quickly became a favorite category for U.S. cosmetics retailers. Even though most of MemeBox’s operations and distribution center are based in South Korea, they have already launched their e-commerce site and are shipping to the United States, Ha said. If Ha secures funding from U.S. venture capital firms, he believes MemeBox could be selling more products to customers stateside.

“We are looking for funding but it totally depends on the investors – if they are willing to fund a company from Korea,” Ha said. If MemeBox grows in the U.S., Ha said that could mean jobs and perhaps even a distribution center in the metro area.

Still, these startups face the challenge of convincing venture capital firms to fund foreign companies – something experts say firms are unwilling to do because it is difficult to feel connected to a startup on a different continent.

“For a typical venture capital firm, the face to face aspect is very important. Venture capitalists like to be within a two-hour drive or flight from the startups they fund,” said John Taylor, head of research at the National Venture Capital Association.

Firms are also unwilling to fund foreign startups because it is too much trouble to learn another country’s tax and business laws.

“There are limitations on a VC sending money overseas. They have to be cognizant of the jurisdictions governing other countries and it just gets very complicated,” Yoo said. “They have to know where the assets live and all the legal aspects of that are very difficult.”

As a result, Yoo and Ha understand that they must establish a strong presence in the U.S. for their startups so they can secure increased funding. If they pull enough funding to open major offices here, it could mean more jobs, talent and benefits for New York City

Yoo began fundraising for KnowRe in August and has raised 60 percent of KnowRe’s fundraising goal. If he secures the funding, Yoo is convinced that KnowRe could revolutionize math education in the New York City public schools.

“New York is the largest public school system in the country, and so a lot of education technology companies believe that if I can penetrate this market, then I can get anywhere,” Yoo said.

MemeBox is also eager to grow jobs for New York City. The startup already employs more than 50 people in South Korea, and two more staff are moving to join Ha in New York City. As New York City’s tech community continues to expand, welcoming eager new players like KnowRe and MemeBox into the field will be a crucial step in the city’s growth.

“Our cofounders have been to the U.S. and they believe there is big potential to do something here,” Ha said.


At odds again

All data from NYC OpenData | Highlighted properties are effecetd by the Midtown East Rezoning. Grand Central Station and One Grand Central Place are in red.

Anthony Malkin and Andrew Penson are tied together by two of the city’s most iconic pieces of real estate — The Empire State Building and Grand Central Station.

When Malkin Holdings rolled the Empire State Building into a REIT earlier this year, Penson and a few of the other 3,000 shareholders tried to holdout. Their lawsuit was evenutually dismissed, and the transition went through with the approval of 80 percent of the building’s ownership.

The two are at odds again, this time over the city’s East Midtown rezoning plan. Both want it to happen, but both want it under their own terms.

Penson’s company, Midtown Trackage, controls Grand Central Station and the 1.3 million square feet of air rights above it. His foil, Malkin, owns the building across the street — One Grand Central Place, a 55-story building constructed in 1929.

Malkin wants to redevelop and will soon be in the market for air rights. He’s exactly the type of builder the city hopes to help with its planned rezoning, which aims to rejuvenate the area’s aging office stock.

“It will never be redeveloped under current zoning law,” said Malkin at a City Council land use hearing Oct. 22. His building exceeds current zoning limitations, meaning even a renovation would have to be approved through ULURP. “Its design will not satisfy larger, higher density tenants which otherwise would be attracted to its superb location,” Malkin said.

He supports Midtown East as it’s currently proposed, which includes an option for developers to purchase air rights directly from the city at a set cost of $250 per square foot. The money raised by these sales would be used to help improve the transportation infrastructure of the area.

Penson says this price is far too low.

“The city is leaving a tremendous amount of money on the table for the benefit of a couple of developers,” Penson said to the City Council. He’s in a unique position since his company isn’t looking to build. All he wants to do is unload the air rights he’s sitting on.

“Penson is an anomaly,” said Lawrence Longua, a professor at NYU’s Schack Institute of Real Estate. “Most of the interests involved are developers.”

Penson suggests that air rights in the district could be valued at a rate higher than the land value. “Air rights create the top of the building,” he said. “The most valuable part of the building.” At the hearing, he didn’t mention that his company will be competing with the city to sell the Grand Central air rights. The higher the city valuation, the more Penson’s company stands to make.

“Whether he’s being altruistic or not, I don’t know,” said Longua. “But it happens to benefit him.”

The city derived its rate from a study by Landauer Valuation, a subsidiary of Newmark Grubb Knight Frank. Malkin Holdings is a client of that realtor. The study concludes that air rights in the Midtown East district should be set at about 60 percent of the average land value, or $250 per square foot.

Midtown Trackage commissioned studies by two different real estate consultants, Jerome Haims Realty and HR&A Advisors. Both are longstanding reputable firms, the latter is run by Carl Weisbrod, the former president of the city’s EDC and a member of de Blasio’s new transition team. Neither study recommends specific prices, but both suggest the value should be at or near that of the underlying land — more than $400 per square foot in most cases.

Other observers agree that the city valuation is too low, but think the price shouldn’t be set at all. The market should dictate it.

“Why would you put a cap on it?” Longua asked. “If I’m selling, I’m going to try and get the highest possible price.”

Penson needs East Midtown to go through. His company hasn’t sold any of its air right stash, because development in the neighborhood has been too onerous, and zoning restrictions prohibit the transfer of rights beyond immediate lots. These are some of the same reasons the area has seen so little development in recent years, and are among the issues the city’s planned rezoning tries to fix.

But the city-sold zoning credits create competition for Penson, pushing down the price he hopes to charge builders like Malkin.

At the moment, it looks like the City Council may suspend the dispute until next year, with Councilman Garodnick raising a number of objections to the current plan, including the $250 valuation rate. The Council must vote on the proposal before Nov. 19. If it is shot down, the process will likely begin over again next year, after de Blasio and the new Council take office.

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Airbnb’s Fight for NYC

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For New Yorkers, it’s a way to help pay the bills, and for tourists, it’s a way to save some money. But to the city and its hotel industry, Airbnb is a staggering threat.

Airbnb, the wildly popular website that allows people to rent out their homes for short periods of time, is now in trouble in one of its most successful cities. New York City officials say the company is taking away millions in hotel taxes that could have gone to the city, but the company has countered with the opposite, claiming it brings unmatched benefit to the city, the tourism industry and city residents.

Airbnb, founded in August 2008 in San Francisco, is now in 192 countries and 34,000 cities around the world. It has served 9 million guests and is rapidly becoming the go-to choice for tourists looking for a more authentic experience or for something cheaper than a hotel room. In New York City, some 15,000 hosts offer rooms for as low as $25 a night—a tantalizing deal for budget-conscious tourists when compared to the average hotel rate of $275.

Despite the popularity among both hosts and guests, many of these New Yorkers are in fact breaking the law. A law passed in 2010, meant to stop slumlords from taking advantage of people, states that people cannot rent out apartments or rooms in them for less than 30 days unless they’re living in the home at the same time.

“The city must continue to crack down on the growth of illegal hotels and online apartment booking sites,” states NYC & Company’s report “New York City Tourism: A Model for Success.” “This illegal practice takes away much-needed hotel tax revenue from city coffers with no consumer protection against fire and health code violations.”

While Airbnb hosts do pay income tax on the earnings they make, the city wants more. Last month, the New York state attorney general Eric T. Schneiderman served Airbnb with a subpoena to turn over data on 15,000 New Yorkers who rent their apartments on the site, blaming them for the loss of millions of hotel tax dollars.

Airbnb wasn’t going down without a fight. “We always want to work with governments to make the Airbnb community stronger, but at this point, this demand is unreasonably broad and we will fight it with everything we’ve got,” said David Hantman, head of public policy for Airbnb.

For hosts like Richard Rabinowitz, who lives in a co-op apartment near Union Square and rented out his daughter’s bedroom while she was away at college, staying with a host offers a better tourist experience.

“You get the benefits of someone who lives there and not just someone looking to get money out of your pocket,” said Rabinowitz. “I think that if the hotels have a strong lobby against Airbnb, it’s not based on the needs of the travelers. It’s based on their commitment to profit for themselves.”

Rabinowitz, who rented the bedroom out for a year until his co-op board told him to stop, said that he had guests from places as varied as Russia, China and India, and his $150 per night room was consistently booked up. He said he offered a one-of-a-kind experience – he gave them suggestions and subway maps, he often cooked meals with his guests, and they got a glimpse of the city’s thriving art scene through the artwork of his wife, who is a notable photographer.

The payoff wasn’t bad, either: Rabinowitz said he made about $20,000 in less than one year, which he used to support his family. “It was wonderful,” he said. “We got to meet people from around the world. And we also got the money.”

Airbnb released a report on October 22 asserting that Airbnb actually aids the tourism industry. According to the report, done by HR&A Advisors, the company generated $632 million in economic activity to New York in one year. Airbnb tourists stay 2.5 days longer and $190 more per trip than the average tourist.

“With cheaper room rates, they have more money to spend on other items besides lodging,” said Rabinowitz. “And with cheaper lodging, people come here who ordinarily wouldn’t.”

The study also showed that Airbnb tourists often stay in apartments outside of Manhattan, benefiting neighborhoods that traditionally wouldn’t be touched by tourism. According to the study, 82 percent of listings are outside of midtown Manhattan, and $104 million was generated outside of Manhattan in one year. Indeed, Flatbush currently has over 300 listings, Bedford-Stuyvesant has over 1,000 listings, and Harlem has almost 2,000. The average guest spends $740 in the neighborhood they stay in.

But Airbnb’s biggest argument is that they’re helping out middle-class New York by allowing them to pay their bills with the extra cash flow. Of the $632 million spent by the tourists, $195 million went directly to the hosts.

“Airbnb is helping regular New Yorkers in all five boroughs pay their bills by sharing the home they live in and the city they love with travelers from around the world,” said Airbnb CEO Brian Chesky.

But despite its popularity among New Yorkers, the next mayor isn’t too keen on Airbnb.

“While I appreciate the potential of the sharing economy, and I do think there’s some historical precedent,” wrote De Blasio in a Reddit discussion on October 8, “the challenges posed by Airbnb today are real, in terms of safety, public tax revenue, etc.”

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