Building Renovation Project

September 26, 2001

Report to the National Board

If you have been to 235 W. 23rd Street on any given day, you may have noticed
old desks and file cabinets being hauled out, or teams of architects, engineers
and real estate agents pouring over the property. What’s going on?

Our building
is a wonderful asset, a real treasure for our Party and the working class
movement of which we are all immensely proud. It’s situated in a prime
location, midtown Manhattan, worth million in today’s market. The fact
that we own it is a real tribute to the hard work and foresight of Gus
and that generation of veterans of our party; it was bought and maintained
at great sacrifice by so many members of our party. The workers in the
party have done an incredible job over the years in preserving and maintaining

But the fact
is we spend 0,000 per year on operating expenses on the building. This
puts a tremendous burden on Party finances, money that could instead be
used to meet many of the other pressing needs of the Party.

You often
hear that the building has a shabby appearance. Unfortunately we would
have to admit this is all too true. The reality is we can’t keep on top
of it. The building has been under capitalized for years; we have skimped
on necessary upkeep and so it has deteriorated steadily.

The style
and habits that developed during the period of cold war anti-communism
created a very protective attitude toward the building. No one doubts
we had to and still have to be alert to the enemy. But I think it also
resulted in some understandably negative by-products, not considering
renting it commercially and ignoring some safety and legal issues.

Times have
changed, though. The decline in anti-communism has created new opportunities
to utilize our building in a new way.

Given the
current strength of our Party, the building is not fully used. A tremendous
amount of space and money is being wasted. And we can no longer continue
pouring money into the building without getting something more in return.

It’s also
a waste of cadre to maintain and manage it. For example, Eddie Davis,
our dedicated building manager, is also a wonderful community activist.
Yet he spends many hours here keeping the building functioning.
We must admit we don’t have that same base of cadre we had in years past,
especially skilled workers and younger retirees. It would be irresponsible
of our leadership to allow this to continue.

In the spirit
of taking a critical look at all our work of updating our approach to
things, we have to include our building. After a great deal of discussion
and thought we are determined to move ahead with what some might call
radical changes.

We have considered
three options for the building:
1. Sell it and lease space. But here we throw ourselves to the mercy (there
is no mercy under capitalism) of market forces without a secure home.
And we would throw away millions on capital gains taxes.
2. Sell and buy or swap the building for another property. It’s unlikely
we will ever find a comparable property in a similar location (or in all
of Manhattan for that matter). The market is extremely tight. Were we
ever to we would most likely still require substantial renovation. We
would probably end up on route 80 somewhere near the Delaware Water Gap.
3. Stay and renovate. This is a two-year project that will likely cost
between two and four million dollars to bring the building fully up to
legal occupancy code and ready for commercial leasing. But it is an option
that we believe is best and carries the least amount of risk.

On a typical
floor on this building we could be get per square foot (and probably
more) or 1,500 of gross income per year/floor and per square foot
on the ground floor for a gross income of ,000 per year (but with escalator
clauses included in all leases). It’s hard to justify using that space
for things like old filing cabinets and bazaar item storage space when
it could bring in that kind of income. The Party could live on these premises
essentially rent-free.

As an aside,
I think we should be very cautious about selling any of our assets around
the country. Those familiar with real estate says it’s far better to own
your own place than rent. And in any case a decision should be made only
after careful collective discussions.

As part of
the rationalization and more efficient use of Party resources and assets,
we would turn the building into an income generator rather than revenue
burner. We would put the burden of the operating costs of the building
on the commercial tenants and use the savings for other political purposes.

We propose
to consolidate our operation into three floors, through rational use of
space by all Party institutions. It requires an objective appraisal of
the needs of each staff member. It will require a revolution in work habits
and how we use the building.

It requires
a scientific assessment of the cost per square foot and what it is used
for. This is how the real estate industry does it. For example, this is
not a personal storage space; it’s a professional political office. And
it may be more cost effective to store things, including Party resources
at a storage warehouse.

We would
then renovate and rent our remaining space to commercial outfits; they
would be individual self-contained units that they would assume the costs
for designing and building in. The renters would assume the costs of utilities
and taxes. This is the way it is done.

Then we would
create a modern workspace that corresponds to the steps being taken to
modernize our Party, an office that can be the showcase of our movement.
It goes with the idea of transparency. No more shabby digs but a sparkling
beautiful office to which we are proud to bring mass leaders, trade unionists,
and elected officials.

This is part
of acting like a mass public party, and having a mass public mentality.
It corresponds to the new period we are in. I think it would be a shot
in the arm for the Party and the whole movement. It reflects that ours
is a movement with a future and we are very optimistic.

Aren’t we
taking a big risk to begin a project just when the economy is going into
a slowdown of uncertain depth and length? Are we taking a risk that the
office development boom has led to overbuilding?

Yes, whatever
option we choose contains risk. The goal is to follow the path of minimal
risk. It’s true the real estate market has been very hot and is now slowing
and we can’t ignore the impact it will have on our ability to rent the
space at a higher price.

Many of the
dot coms are failing. This is opening up space for subleasing.
But much of the space is being taken up. There has been so much pressure
for space that businesses are relocating in Brooklyn, Queens, Connecticut
and New Jersey.

All of the
new properties being built already have long term leases locked up for
high paying tenants. (Because of the disastrous effects on the real estate
and financial industries during the last downturn, nothing is built unless
it is fully pre-leased.)

Most real
estate experts project a temporary leveling off and slight decline of
rental income. This area is still a prime location for any business and
under most circumstances would have a low vacancy rate, especially for
a reasonable price. The 23rd Street corridor and Chelsea is one of the
hottest real estates areas in the city and will be for the long run.

This construction
project requires taking out a loan which will be paid back with the income
from the commercial renters. We believe it will not require us to draw
money from our funds or to liquidate any other Party resource.

We have set
up a Building Renovation committee of Walt Tillow, Eddie Davis,
Israel Smith (a licensed architect), our long time Party accountant Bill
Brody, our project manager George Poli, Carolyn Rummell and John Bachtell.
In addition our committee will be assisted by another licensed architect
and a structural engineer, who both work for state agencies. Bill and
George have renovated dozens of properties and have tremendous experience
in this field. The National Board will approve the project at each step.

We have completed
one round of interviews with architects and engineers; the second round
is almost complete. We have already confronted the problem of architects
trying to control the project from beginning to end – a nifty way to run
up the costs.

We are asking
them to produce architectural plans that are legally acceptable to the
city planning department and with a cost estimate for the construction.
Then we will develop options for financing the project, hire a general
contractor and open bidding on the project. The project manager and accountant
will exercise strict cost control during every phase.

We have begun
the process of consolidation; all offices on the 8th and 6th floors have
been moved onto the 7th floor. These two floors will be cleared. We have
filled two dumpsters and have a third one planned for the end of January.
We will probably need at least one dumpster per floor.

We will commence
a space plan study. Every institution will be interviewed. The idea is
to commercially rent out the top three floors and move the Party operations
onto 3, 4 and 5. We would maintain the 2nd floor auditorium but try to
increase the rental income by using it more.

Some questions
remain; for example, will we hire a professional company to manage the
property? What will happen to the Reference Center? Will it remain in
its current location or be moved upstairs? And what about the ground floor?
Will we maintain Unity Book Center in its current location or will we
move that to an upper floor? In any case we are not considering a retreat
in our public presence. On the contrary, we are putting ourselves in a
position to step up our activity.

It’s an exciting
challenge. We need to involve more comrades collectively in process. But
in the end we will emerge stronger, both financially and politically.


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