Back in the fateful year of 2020, multifamily investor and developer Slate Property Group was looking to pivot.
David Schwartz, the firm’s principal and co-founder, told The Real Deal that summer that Slate wanted to focus on affordable housing, including temporary apartments for homeless people, given New York City’s growing need.
Nearly two and a half years later, property records show the firm has quietly executed that plan.
Slate has spent roughly $320 million acquiring and developing at least 10 homeless shelters or supportive housing since mid 2020. The properties are in every borough but Staten Island. Slate also signed on this year as the contractor for a shelter project in Briarwood, Queens.
Schwartz said in a statement, “New Yorkers deserve access to high-quality, permanent housing, and Slate is committed to meeting that need — especially for our low-income residents and those who have struggled with housing security.” A spokesperson for Slate said Schwartz would be available in the new year to discuss the strategy.
Public records and city data reveal how lucrative a bet on the space can be. Take Slate’s most recent reported acquisition, 62 Hanson Place in Fort Greene.
The firm paid $42.3 million for the 13-story addiction rehab center and shelter in late September. It took out a $126 million loan to cover the Brooklyn acquisition and refinance debt on two other shelters it owns: 427-429 West 52nd Street in Midtown and 399 Third Avenue in Gowanus.
Avison Young had marketed 62-68 Hanson as a 53,400-square-foot building with about 64,000 square feet of unused air rights in a bustling neighborhood with abundant dining and shopping and an influx of new apartment buildings.
But rather than raze the shelter to build high-end residential, Slate will likely keep at least part of the building as is, city records show.
On Nov. 30, the firm filed plans to alter the use of its top two floors from Class A apartments to dormitory rooms for a congregate-living homeless shelter.
The firm also filed to rezone the property last month, effectively slicing off its vacant lot. Avison Young had marketed the property as eligible for 421a, a tax break for rental projects, so Slate may be planning one on the empty parcel.
By maintaining the shelter, Slate could receive a steady stream of rent, as the city awarded social services provider Westhab a $55 million contract at 62 Hanson Place in October. The deal appears to be for four years with a four-year renewal. Westhab did not respond to a request for comment.
Two days after the award, Hanson cut the property’s collateral mortgage — a type of loan that allows the borrower to take out more money in the future — down to $66.2 million from nearly $126 million.
City contracts are a source of reliable rent, which is especially valuable with 421a having expired in June and office tenants cutting back on space. But, even in purportedly progressive neighborhoods, they can be a major headache when they involve addicts or homeless people.
Slate got a first-hand reminder of that in 2019 when it leased a Park Slope development to the city for use as a homeless shelter.
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Five years earlier, Slate, in a joint venture with Adam America, had signed a long-term ground lease for a development site at 535 Fourth Avenue. The firms planned a $100 million, mixed-use project with 141 apartments that Schwartz expected would start at $2,000 a month.
Five years later, that project had become two shelters, one built by each firm. The Department of Homeless Services agreed to lease Slate’s development at 555 Fourth Avenue for nine years at $4.6 million per annum.
That would guarantee Slate $3,666 per unit per month, according to a Gothamist analysis, exceeding the borough’s median rent of $3,000 at the time.
Hundreds of residents of the South Slope, the home base of ultra-progressive politicians including then-Mayor Bill de Blasio and then-Council member Brad Lander, reacted with fury to the idea of a homeless shelter on its Gowanus border. They called it a “sweetheart deal” for Slate, but it went through. A Slate spokesperson said rents start at $2,000 and average about $3,500.
Though shelter investment may be a battleground for private developers, the appeal from a business standpoint is clear.
Homelessness in the city has reached the highest level since the Great Depression in recent years. More than 65,000 people, including over 20,000 children, slept in shelters on any given night in October, according to the Coalition for the Homeless. Several thousand more sleep on the streets. A consent decree unique among U.S. cities requires New York to provide shelter to those who need it.
The cost of sheltering a single person has risen 10 percent in the past three years to an average of $138 per day, the Independent Budget Office found. Mayor Eric Adams added $171 million to his first city budget to create 900 more shelter beds.
Permanent housing costs less and is more stabilizing for residents, but the city for years has struggled to get ahead of the problem and to find reputable, reasonably priced housing providers. In 2019 the de Blasio administration paid the Podolsky brothers $173 million for 17 decrepit buildings — $30 million more than their appraised value — to house the homeless.
Slate’s most recently completed development, Tremont Residence, opened at 1973 Daly Avenue in the West Farms section of the Bronx in October. Working with Camber Property Group, Slate spent $50.6 million on the development, which offers affordable housing with homeless services.
The state kicked in $48 million and will also subsidize rents.
Correction: An earlier version of this article stated that Slate was the contractor on a project in Yonkers. That project is actually in Briarwood, Queens. The article has also been updated with a statement from Slate and to better describe the rents at 535 Fourth Avenue in Brooklyn.