Monday, February 14, 2011
Unions Squeeze Walmart Partners - by Daniel Massey Crain's New York Business
Opponents of Walmart plan to ratchet up the pressure on heavyweight developer The Related Companies this week, in a concerted campaign to show the city's real estate community that there's a potential cost to doing business with the nation's biggest retailer.
Related has had contact with Walmart about leasing a site at its 650,000-square-foot Gateway II shopping center in East New York, Brooklyn, that already received the City Council's approval, enraging those unions, small storeowners and council members that oppose the retailer's entry into the city. Opponents hope to persuade Walmart's local partners—with threats of pickets outside their headquarters or homes and other actions—that doing business with the retailer will damage their future council dealings.
“The Walmarts of the world may think they can ignore us, but the Relateds of the world can't,” state Sen. Diane Savino, D-Staten Island, told Crain's last month. “These are guys who want to develop in other places in the city. They could find that their relationship with Walmart may permanently damage their relationship with the city.”
Opponents believe they have leverage over Related in part because it is one of 29 firms that have expressed interest in redeveloping Willets Point, a run-down section of northeast Queens slated to be remade with retail outlets, housing, a hotel and office space. The city will issue a request for proposals for the redevelopment in April.
On Monday, three elected officials who represent the Willets Point area—Councilwoman Julissa Ferreras, state Sen. José Peralta and Assemblyman Francisco Moya—will send a letter to Related Chief Executive Stephen Ross, pressuring him to shun Walmart.
“We have a long working relationship together, creating new economic opportunities for New Yorkers and building more vibrant neighborhoods, and we hope to continue that strong partnership moving forward, perhaps at Willets Point,” reads the letter, a copy of which was provided to Crain's by the Walmart Free NYC coalition. “That's why we're urging you not to do business with Walmart at Gateway II or any other New York City location.”
Mr. Ross said Walmart has expressed interest in the Gateway II site, but the two sides are not yet negotiating a lease. Related officials were so upset that labor engineered the defeat of its Kingsbridge Armory mall in late 2009 that it is believed to be willing to buck the council this time. “We're not going to back down, and we're going to do what's good for the city of New York in the long term,” Mr. Ross said.
Other industry leaders denounced the opponents' strategy, saying it could send an anti-business message to companies that are considering locating or expanding in the city.
Robert Knakal, chairman of Massey Knakal Realty Services, says he has several as-of-right sites that he's trying to market to Walmart. “It gets very dangerous when politicians start saying who you can rent space to and who you can't,” he said.
Mr. Knakal added that some developers and landlords might be concerned about backlash over dealing with Walmart, but that “ultimately if you believe something is best for the city, you do it.”
While the council does not have a say in which developer the city chooses for Willets Point, its Queens members will have to approve the sale of land to the winning firm. Those members won't weigh in until the developer is chosen, but the council could presumably use the vote as a pressure point.
A majority of council members oppose Walmart's entry into the city, arguing that it would drive down wages of unionized workers and hurt small businesses. As many as 20 council members are expected to sign a similar anti-Walmart letter to Mr. Ross. Plans are in the works to bring a group of former Walmart workers to Mr. Ross to talk about their experiences with the retailer. Other actions against Related are also being planned, including demonstrations outside board members' homes and the firm's Columbus Circle headquarters.
“They need to feel like, 'You know what, we don't need to be the people who bring in Walmart, it's just not worth it,' ” said Jon Kest, director of New York Communities for Change and a member of Walmart Free NYC. “We want to drive them to that point.”
By pressuring the firm on Willets Point, opponents hope to send a message to other developers, landlords and brokers that dealing with Walmart isn't worth the risk, especially when unionized companies like ShopRite are waiting in the wings, willing to open stores.
Vornado, the landlord of Walmart's North Bergen, N.J., store, tried to team up with the retailer in 2005 in Rego Park, Queens, but the deal fell apart amid heavy opposition. The developer would also become a target if it started talking to Walmart about New York City again.
Related's flirtation with Walmart didn't hurt it last week, when it was selected by the city as part of a team to build nearly 1,000 affordable-housing units at Hunters Point in Queens. Some took that decision as a sign that Related's connection to Walmart would not hurt its chances to win big city projects. But the council didn't have a say in the pick.
Walmart is looking at sites controlled not just by major developers, but also by smaller landlords that may not have other business before the council, said Director of Community Affairs Steven Restivo.
Kenneth Fisher, a partner at Cozen O'Connor who deals with land-use issues and a former councilman, said that the council should ideally base decisions on the land-use impacts of projects.
“Is it some form of extortion, saying, 'I won't give you my government approval if you are doing business with a third party?' ” he asked. “If I were Speaker [Christine] Quinn, I'd ask my lawyers to look at it pretty carefully before encouraging members to go down that road. I think there's potentially some exposure there, though any prosecutor would be reluctant to stick their nose in.”
Jeremy Smerd contributed to this story.