Terminal Solution

About two years ago, Daniel Doctoroff, the millionaire private investment whiz who now serves as the city’s $1-a-year deputy mayor for economic development, decided to ask a real estate development company run by a longtime friend for recommendations about a thorny city problem called the Bronx Terminal Market.

The market is that ragtag jumble of buildings just south of Yankee Stadium, sprawled along 31 acres of city-owned waterfront property. It is where many of the city’s Hispanic bodegas buy their wholesale produce and, as such, it is an important business site for the city. But since 1972, when the administration of then-Mayor John Lindsay signed a remarkable low-rent, 99-year lease on the site, the market has been in the hands of David Buntzman, an aging but wily businessman whose stewardship of the market has been deplored by generations of city officials. “The place has been an economic cesspool,” said former Bronx borough president Fernando Ferrer, who tried for years to figure out a way to get Buntzman out and a new manager in.

This month, the city quietly announced that it had succeeded in doing just that. Related Companies, the developer of the shimmering new Time Warner Center on Columbus Circle and several other city projects, has bought out the remainder of Buntzman’s lease for $42.5 million. Related will develop a million-plus-square-foot retail shopping facility on the site, officials said. There had been no open bidding, or the usual request for proposals, because Buntzman held control of the lease and the transaction between him and Related was a private one, officials said.

As it happens, city officials acknowledged this week, Related is the same firm that Doctoroff originally asked, back in 2002, for advice on what to do there. “The deputy mayor sought Related’s input on the economics of what was possible at the Bronx Terminal Market site,” said City Hall spokesperson Jennifer Falk. “Related reviewed the site at his request,” she added. “This was unpaid work, with no fees. They concluded there was potential for development.”

That initial look-see by Related may well have been what prompted the firm’s interest in taking over the market, Falk said. “But even if the idea was sparked by [Related’s] discussion with the deputy mayor,” she added, “in the end, the deputy mayor had no ability to influence the decision the Buntzmans made.”

And when Buntzman and Related informed City Hall that they were trying to reach a deal, Falk added, Doctoroff promptly stepped aside. “He did not participate in the negotiations after that,” she said.

As well he might. As Newsday and The New York Sun have pointed out, Doctoroff has long-standing ties to Related’s chairman and chief executive officer, Stephen Ross. The two men both owned shares at one point in the New York Islanders hockey club. They were also top directors of NYC2012, the nonprofit organization founded by Doctoroff to bring the summer Olympic Games to the city. The two are so close that just days before Doctoroff became deputy mayor, Ross personally guaranteed a $3.2 million loan to the Olympics group so that Doctoroff could get back the start-up money he had personally loaned the committee.

Doctoroff’s relationship with Ross and Related was of sufficient concern that, in February 2002, a month after taking office, he asked the city’s Conflicts of Interest Board how he should handle matters involving them. A preliminary ruling was provided that April, Falk said, followed by a formal response in June 2002. In its letter, the board ruled that there was no conflict of interest for the simple reason that Doctoroff’s transaction with Ross predated his city service. It did, by four days.

As the board’s letter laid out the chronology, on December 27, 2001, M&T Bank agreed to assume the new $3.2 million loan for NYC2012. That same day Doctoroff was repaid with an equal amount from the committee (he forgave about $800,000 more he had originally loaned the group, the letter stated). The next day, December 28, the bank asked for someone to guarantee its new loan. Ross—described by the board as “one of the most active board members and fundraisers for NYC2012″—stepped forward.

On January 1, 2002, Doctoroff was sworn in as deputy mayor. At some point that spring, Doctoroff was presented with a laundry list of outstanding economic development issues, including the nettlesome problem of how to deal with the market. According to several current and former city officials familiar with the matter, the city was then debating its strategies: whether it should continue slugging it out with Buntzman in court, where it was trying to condemn his lease; try to convince Buntzman to take on a joint venture partner; or get an outside party to simply buy out Buntzman’s interest in the property. The last two options had long been on the table, but Buntzman was so viscerally disliked by city officials in the Dinkins and Giuliani administrations that no one during those years wanted him to gain yet another windfall. Doctoroff’s response was to call his friends at Related Companies to see what they thought.

“Deputy Mayor Doctoroff did indeed reach out to Related in 2002 for their development thoughts on the market,” confirmed Jesse Masyr, a lawyer for Related.

Richard Ravitch, the former chairman of the MTA, said he was working on a similar track. Ravitch was invited to serve as a mediator between Buntzman and the city by the judge overseeing the long-stalled court case. Ravitch said that he tried to convince Buntzman to “take on a partner and make a development proposal to the city.” The problem, Ravitch said, was that the Buntzman family didn’t trust the city. In an effort to convince them that a settlement could be reached, Ravitch said that he brought Michael Lehrman, one of Buntzman’s grandsons, to City Hall to meet with Doctoroff. At that point, Ravitch said, Related hadn’t entered the picture.

Shortly thereafter, however, the development firm commenced talks with Buntzman, and, according to Ravitch, “Dan absented himself then because of his relationship with Steve Ross.”

There was yet another happy coincidence. It turned out that Buntzman’s grandson Lehrman went to the University of Michigan with Related president Jeff Blau. What’s more, the Buntzman family will remain a partner in the Bronx site even after Related’s mega-shopping center is built. That’s because grandson Lehrman is a limited partner in the new Related entity, Related lawyers confirmed.