In Suit, Milstein Fights Seaport Rezoning by Ronald Drenger After a 20-year battle, Downtown community leaders declared victory last spring when the city changed zoning rules in the historic South Street Seaport area, blocking powerful Milstein Properties from erecting a large-scale development at 250 Water Street. But the fight is not over. Milstein is seeking to overturn the rezoning in a lawsuit filed in State Supreme Court. The developer claims that the rules change, which covered a 10-block area bounded by Fulton, Pearl, Dover and South streets, was unconstitutional because it specifically targeted the 250 Water Street site. Milstein says that under the new zoning it cannot earn a “reasonable return” by developing the 48,000-square-foot property, which is now a parking lot. The company’s most recent proposal for the site, a residential complex with 13- and 24-story towers, is too big under the new rules. The developer also asserts in court papers that the zoning change does not promote any public interest. “All Milstein Properties is asking for is fairness under the law,” said George Arzt, a company spokesman. The city says that the rezoning was needed to protect the scale and character of the Seaport area, where most buildings are four or five stories tall and many date to the 19th century. The city denies that the change was aimed specifically at 250 Water Street and says that Milstein can still make a healthy profit by building on the site. Community Board 1, Seaport residents and businesses, and numerous city civic groups had strongly advocated the rezoning, which underwent a lengthy public review before being approved by the City Council in April. “It’s clear Milstein won’t let go of its goal to build a high-rise building in what is a low-rise historic district,” said said Paul Goldstein, CB1’s district manager. Since acquiring the 250 Water Street site in 1979, Milstein has proposed half a dozen buildings, up to 43 stories tall, that were opposed by CB1 and rejected by the Landmarks Preservation Commission. The new zoning limits building heights to 120 feet and significantly reduces the overall size allowed for any development. For 250 Water Street, the biggest building the Milsteins can put up would be roughly 290,000 square feet, compared to 480,000 square feet under earlier rules. Milstein brought the suit last August. The city filed a motion for summary judgment, to which the developer responded last month.