What the "Urban Wealth Fund" idea would do is essentially have that property put into a pool of property with ... for instance ... the State's property. And then give out shares based on the value of the property the city put in.
I can understand why someone holding real estate would not want to do that. Especially if the city is putting in something in Flatiron... that may not be very valuable in price, but can be leased for FAR more than any of the property that the state might put in. (Even though the state's property may be more valuable in price, as some of it includes Beaux Arts buildings, but can't be leased for as much.)
It's far smarter for the city to just go it alone in that instance. (Well, I guess "smarter" is too loaded of a word, so maybe I should just say that the city would derive far more profit from just leasing the space on its own.)
And that's just the single instance you mention. It gets even more complex when you talk about the city kicking in an asset like... say ... Central Park.
One day, over brunch with a friend in real estate, we did some back-of-the-envelope math on one of the neighbourhood's housing projects. If the city (or, in the case of Penn South, the coöperative) simply sold the ground floor of housing to retailers, they'd generate enough cash to build an entirely new structure somewhere uptown.
This never happens because nobody is politically incentivised to do it.
[1] https://en.m.wikipedia.org/wiki/Flatiron_District
[2] https://en.m.wikipedia.org/wiki/Chelsea,_Manhattan