The Saga of 223 Water Street


Usually, tenants don’t fight for the right to live in a building tainted with hazardous chemicals. Usually, environmentalists don’t get tickets for illegal dumping, developers don’t offer reporters $100,000 to take a building off their hands, and daughters don’t turn against their fathers.

But while the saga of 223 Water Street in Brooklyn has these unusual elements, the battle over the 100-year-old warehouse in the shadow of the Manhattan Bridge also has all the hallmarks of a classic New York City real-estate clash. Outlined by protracted landlord/tenant grief, accusations of political meddling, and cries of racism and class warfare, the skirmish is taking place in a long-ignored neighborhood now on the rise. Wedged between the landmarked community of Vinegar Hill and swank Brooklyn Heights, 223 Water is in the heart of DUMBO, an artist colony of brick warehouses along the East River, where century-old shop floors are reborn as huge living lofts with killer Manhattan views. Can Banana Republic be far behind?

Though years of bitter litigation, deal making, and tsuris have kept much unresolved about the future of 223 Water Street, one thing seems certain: that future won’t include the sole remaining manufacturing tenant, Horizon Steel, a metal-cabinet factory that employs 22 wage workers, most of whom are black or Latino. At press time, employees were under orders to vacate the premises.

“I believe that this area and this building are going to be a gold mine” where factory workers don’t fit in, says Juan Rodriquez, who has worked at the factory ever since Ted Mestel, who owns Horizon and who owned the building, hired him 15 years ago as a parolee; Horizon had an arrangement to give ex-cons jobs. Marsha Egeth, who is Mestel’s daughter and was his employee, is now allied with Rodriquez against her father. “What has happened here is New York City favoring one society over another: they’re pushing out minority workers for artists.”

Indeed, the warehouse is home not only to Horizon. It was also New York City’s largest artists’ loft building, where 27 sculptors, painters, and film producers once lived with their families; now, only five lofts are occupied. The building’s status as a loft dwelling adds to the rancor, making it a piece of real estate clad in extremes. Relationships between loftlords and their artist-tenants are arguably the most hostile in the city, and the desire of loftlords to dump their tenants, and of tenants to stake their claim, is powerful.

Mestel, like most loft building owners, never intended to be a landlord–he simply let artists illegally move into dormant commercial space before the 1982 loft law required compliance with the residential building code. Loft tenants, on the other hand, have some of the best living situations in the city: huge amounts of space for paltry sums. Deborah Masters, one of the first artists to move into 223 Water Street, pays $442.34 a month for about 6000 square feet (although she is now on rent strike). The 46-year-old sculptor says the low rent has allowed her to become a successful artist, with shows at the Whitney and a house in Umbria. Other loft rents in the building range from $226 to $643.

Ironically, it was Horizon that invited the artists in, and now it is their presence that will likely force the factory out. In January, Mestel sold the building to developer Josh Gutman. Rodriquez and other workers say they had an oral agreement with their old boss to buy the company and lease part of the building. Unbeknownst to them, they say, Mestel promised Gutman the factory would close. Gutman’s lawyer, Sheldon Eisenberger, explained it this way: “If Mr. Mestel wants to change his mind, why can’t he?” Today is to be the factory’s last day.

Mestel, president and sole shareholder of Horizon, commented through his attorney, Michael Hiller. In a written statement, Hiller said that although Mestel had fired Rodriquez and two other Horizon employees in late September, he “is currently in negotiations” to sell them a related cabinet-making firm. Mestel had nothing more to say, Hiller wrote, “despite his clear and fervent desire to provide further comment.”

Egeth, who calls herself as “a consultant to the minority workers,” says she worked for her father for 30 years before resigning in 1995. “Mr. Mestel is my father and I love him,” she says in Horizon’s office, an entirely unglamorous affair where half a dozen densely populated fly strips hang from the ceiling. “But I have a distinct disagreement with certain things he has done. My belief is that a lot of wrong has been done here.”

Even Masters, who has been at the center of every battle with Mestel, Egeth, and now Gutman, and who blames Egeth for many of the woes, says it would be a “pity” if workers lose their jobs. “I think it’s tragic,” says Masters. “But it’s not our fault.”

When 223 Water Street was built late last century, Egeth says, it was first a cork factory, and, later, a Borax plant–a ghost of a sign for the soap is visible on the brick facade. In 1962, Mestel started his cabinet company in a space he rented in the warehouse, which is actually six joined buildings. In 1975, he bought the compound. Two years later, he casually let a handful of artists move into the empty floors, glad for the rent they paid.

“In the early days, if push came to shove, I could always go to Ted’s office and cry, and he’d peel off five $100 bills and say, ‘Get some new windows; I know the fumes are bothering you,”‘ recalls Masters. Masters says Mestel gave her money when her marriage fell apart, and took her to ball games.

In 1982, the city passed the loft law, straining loftlord/tenant relations. By 1988, Mestel made a hardship application to the city’s loft board, arguing that the high-hazard chemicals his factory required made it economically impossible to safely use the building as both a factory and residence. It took the loft board eight years to deny his application.

Trouble on Water Street escalated on July 19, 1993, when the fire department vacated eight of the 24 lofts for poor fire egress. The origins of the order are in dispute. “Marsha started trying to get rid of us,” says Masters. “She and her brother were taking over the business, and decided that real estate was more lucrative” than making cabinets–if the rent-protected tenants were ousted.

Egeth calls the suggestion ludicrous: “You don’t go call city agencies in on yourself; it’s like asking the vampires in.” She says a fire department memo listing 223 Water as a “worst nightmare” fire scenario sparked the inspection. “The fire department came down here and got hysterical.” Egeth says her brother is no longer associated with the business. He could not be reached.

By the end of July, the tenants sued Mestel to force him to make repairs that would rescind the vacate order. They went on rent strike, and the uneasy relationship became unbearably acrimonious. In 1994, Horizon workers attended a loft board meeting carrying signs saying “Protect Minority Workers Not White Tenants.” Shortly after, a newsletter circulated among loft tenants citywide reported that the “stalwart minority workers have taken to harrassing the [loft] tenants by slashing their tires and assaulting them at knifepoint….” Things so devolved that Masters still believes Rodriquez pulled the knife–even though he denies it, says he was not in the neighborhood at the time, and was detained by police but never charged.

The ugliness continued into 1995, when Masters, then working as a neighborhood environmental watchkeeper, was ticketed for illegal dumping. Masters says after a street fair celebrating environmentalism, she put several bags of trash, including recycling brochures, on the curb. Horizon employees called the city’s sanitation department, and the ticket was issued. But at a hearing, the employee who lodged the complaint acknowledged that he had helped Masters deposit the trash, then called in the complaint. Masters was fined $200, and says Horizon faxed information about the incident to various news organizations, including Geraldo Rivera.

Masters got the watchkeeper job through previous work at the office of Brooklyn city councilman Ken Fisher; in fact, two other former Water Street loft tenants also worked for the councilman. Egeth and Rodriquez say Fisher intervened regularly on behalf of his employees. “One person in City Hall told us they think of this as the…building where Fisher’s workers live,” says Egeth. Indeed, a fire-department memo to then commissioner Howard Safir bothered to note that one tenant “works for Councilman Fisher’s office.” And Egeth says that after tenants were vacated, Fisher pulled together a meeting “with a long table full of enough politicians to get any loan or permit you’d need.”

Masters acknowledges that she used her former boss’s office to reach out to the top. “We got a meeting together with all these commissioners partly because we said, ‘We’re calling from Ken Fisher’s office.”‘

Fisher himself says he facilitated meetings about the building–which is in his district–but denies he did anything inappropriate. The fire department stopped vacating the lofts after the first eight were emptied, leaving people who worked for Fisher. Asked if he intervened, Fisher says, “I wish I had that kind of power. The fact is the fire department was very clear that they would not force people out of their homes unnecessarily. What’s happening here is that these people at the factory saw that the area would gentrify and they wanted to develop it. Now, they blame everyone except themselves.”

By October 1995, Brooklyn housing court judge Gustin Reichbach ordered Mestel to file plans with the city that would allow the vacated tenants to return. Mestel filed twice; he was twice rejected. In July 1996, however, the loft tenants submitted their own plans, and won approval. In the meanwhile, Mestel had begun negotiations to sell the warehouse to Gutman. In January 1997, Gutman bought it for $975,000. In April, Reichbach found Mestel in contempt for failing to follow his order to restore the vacated tenants.

With a new owner and city-approved plans to accommodate both residents and a factory, the problems of 223 Water would seem to be over. Not so.

“You ask me what my plans are, and I say, I don’t even know if I’m going to end up having that building,” Joshua Gutman told a reporter late last month. “I didn’t realize how bad the problems were. It’s a nightmare, this building. But I can tell you one thing: I’ll send you a $100,000 check to get rid of it. You take it.”

Gutman says deteriorated conditions, a huge tax bill, and endless litigation came as a surprise to him. But a lease rider Gutman signed shows that he was aware of the conditions and a tax bill of at least $300,000, later amended to $560,000. Gutman’s status as a major DUMBO landholder–residents say he controls more than a million square feet there, and records show he owns at least 18 other Brooklyn buildings–also casts doubt on his claims of ignorance.

And Gutman–who said he planned to have the factory leave, grudgingly allow the loft tenants to remain, and subdivide the remaining space for commercial use–was savvy enough to require Mestel to sign a lease rider on January 7, 1997 promising that Horizon would leave by June. After that follows a series of cat-and-mouselike documents: on January 10, representatives of Gutman and Horizon signed a letter saying the factory could stay. But just last month, Mestel and Gutman signed an agreement that Horizon would vacate by September 30. They later agreed to extend the deadline to October 15.

For the loft tenants, Gutman’s ownership is already mimicking Mestel’s: they are suing their landlord, and are on rent strike again. Earlier this year, Fisher held a meeting between tenants, a Gutman manager, and Rabbi David Neiderman, a leader of Williamsburg’s orthodox Jewish community, since both the manager and Gutman are orthodox, in hopes of staving off litigation. The effort failed, and tenants charged in court that heat has been spotty, electrical and sewer lines have been broken, and 11 unoccupied lofts were the target of “wanton destruction.” Gutman refuted the charges in an affidavit, saying he has promptly responded to a barrage of tenant complaints. The tenants, he added, “have not paid one cent…and raise new complaints to avoid paying rent.”

In September, Gutman and the tenants drew up a stipulation, as yet unsigned, that calls for repairs and relies on Horizon moving out. At press time, Rodriquez was still hoping for a way to keep the factory open.

“We had terms to buy the business, we had an agreement on a lease,” said Rodriquez, who rose from being a porter to vice president before he got a dismissal letter from Mestel last month. “Something went sour and now we all are getting punished.”

Egeth herself is beyond placing blame. “If they want to make the Taj Mahal upstairs, we really don’t care,” says Egeth. “We just want to work. This whole thing is such an ordeal. Is it the end of the world? No. But is it the end of our little piece of it? Yes.”