When the Queen Mary 2, said by the Cunard Line to be the grandest cruise ship ever built, enters New York Harbor on Saturday, she will have sailed by some of the most contentiously disputed real estate in the world – the South Brooklyn waterfront.

Entering through the Narrows, gliding beneath the Verrazano Bridge into Upper New York Bay, she will pass the piers of Sunset Park, dominated by the huge Brooklyn Army Terminal; Erie Basin, which houses the barges that deliver everything from grain to concrete and soon to host New York’s first Ikea; and restored Civil War warehouses that provide space to artists and manufacturers – and whose owner is building a new Fairway supermarket and 45 units of luxury housing next door. In early morning she will slip into the Brooklyn Cruise Terminal, marking the port’s official opening and the ship’s first of 11 visits scheduled for this year. The $52 million terminal was built by the city in Buttermilk Channel to berth the QM2 and 40 or so other ships expected to call each year.

And when the first of the 2,600 passengers disembark from the world’s biggest passenger ship, they will walk past a few freshly painted, nondescript white buildings before confronting the neighborhood’s most conspicuous landmarks: two immense, vacant, six-story warehouses, with the name of the original owner – New York Dock Company – chiseled high into the pale concrete. Today they are the target of a dispute between Douglas Durst, scion of one of New York’s best-known real estate families, and Bruce Batkin, a principal in the partnership that bought the buildings in 2000. Mr. Durst, who has made an offer to buy one building, believes both buildings should house light manufacturing. Mr. Batkin, who owns them, wants to convert one building to residential on the upper floors, with mixed retail and commercial below, and use the second building as a hotel and restaurant.

The building closest to the terminal, at 160 Imlay St., shrouded in black construction netting, looks “like a building in mourning,” says Mr. Batkin, who began rehabilitation work in June 2004, having received a zoning variance to permit residential construction in December 2003. But it was the zoning variance that brought him all the trouble, triggering a lawsuit by a group of businesses organized as the Red Hook-Gowanus Chamber of Commerce – unlisted in the phone book – that argued that the variance by the Board of Standards and Appeals was “arbitrary and capricious.” A Brooklyn judge, Yvonne Lewis, halted construction in December 2004.

Two years of litigation followed, as the building stood empty and open to the elements until, after various appeals, the decision got kicked back down to Judge Lewis. A zoning lawyer, Howard Goldman, says the suit is purely procedural, yet “these shenanigans have taken a couple of years, even though substantively no challenge to the variance has been sustained.”

Meanwhile, Mr. Batkin says, since his building was bleeding money, he looked at various ostensible opponents in the community, and concluded that much of the opposition made little economic sense. A new ferry service, for example, called New York Water Taxi, which was headquartered in Red Hook, sent its little yellow boats empty into Manhattan every morning. They needed customers, and Mr. Batkin’s building would help supply them – or so he thought. New York Water Taxi, owned by Mr. Durst, was one of the 85 businesses fighting the conversion of 160 Imlay St. “I called Douglas up, and said that it made no sense that his company, New York Water Taxi, was fighting the project. But I never got a straight answer, just the party line: We think your buildings should be industrial. But since when is Douglas Durst interested in preserving industrial jobs in Brooklyn?”

Mr. Durst says that Mr. Batkin proposed selling the second building to him if he withdrew the suit. Mr. Batkin adamantly denies this, saying he never contemplated for one minute selling either building, much less at the price offered by Mr. Durst, which he says is well below his mortgage, and “a fraction of even what industrial properties are worth.” A longtime community activist, John McGettrick, who wants to see more residential development in Red Hook, calls the Durst offer a “holdup.” Mr. Batkin says, “I’m the David; he’s the Goliath.”

The real Goliath in Red Hook may be someone else – Mr. Durst’s partner, Greg O’Connell, who’s often said to be the largest property owner in the neighborhood. (Mr. O’Connell declined to comment.) Certainly as the owner of the Beard Street warehouses, Pier 41, and the developer of the mixed-use Fairway project – as well as being the chairman of Community Board 6’s waterfront committee – he is the most conspicuous. “Let’s count it up,” Mr. McGettrick says. “O’Connell owns the 6-7 acres on Pier 41 as well as 28 acres he got for $500,000 from the Port Authority, about half upland, and half under water. He bought his Fairway site from the city, and paid about $7 a square foot for some 240,000 square feet of what’s a Civil War-era warehouse. He also owns dozens of addition al buildings scattered throughout Red Hook and a number of large vacant lots. We have vacant lots all over the neighborhood in part because O’Connell and his partners are land-banking big-time out here.”

Mr. O’Connell also opposes a new residential development proposed by Thor Equities in Erie Basin, the inlet of water protected by the boomerang shaped spit of land that is the outermost section of Red Hook. Erie Basin is the epicenter of the real estate storms both because of the extraordi nary views it affords of the harbor, the Statue of Liberty, and downtown Manhattan, and because since 1992 it has been home to the Erie Basin Bargeport, the city’s most important barge operation, owed jointly by the Hughes and Reinhauer families. Robert J. Hughes, for one, is opposed to residential development, saying that the first thing luxury condo owners will do is “sue us.” The Bargeport is a noisy, dirty, 24-hour-a-day operation that Mr. Hughes feels is compatible with commercial and retail development – the Ikea being built on old piers in Erie Basin is fine with him – but incompatible with residential. And indeed, the sole, narrow entrance for barges into Erie Basin from Upper New York Bay is not only treacherous in bad weather, mandating loud warning horns, but directly opposite Thor’s property, the old Revere Sugar plant.

Mr. McGettrick scoffs at Mr. Hughes’s concerns. “Go to Baltimore,” Mr. McGettrick says, “and you will see exactly this situation – ships and barges unloading within close proximity of high-end office and residential space.”

This is the crux of the matter: Can maritime industrial uses live side by side with residential? Mr. Goldman, the zoning lawyer, argues that “the art of locating housing adjacent to working ports like they do all over Europe is something that we haven’t grappled with yet, but that we should. This is New York. It’s limited in area. Plus, we’re accustomed to noise and crowded conditions. When you build residential next to a highway, you’re required to put in double-glazed windows. So put in triple-glazed windows in Red Hook.”

But the other issue is that the residential market can pay far more than industrial users can afford. Mr. Hughes tried to buy the old New York Shipyard property where the Ikea will be built, but “it was just far more than we could pay.” Partly in response to this issue, the Bloomberg administration has set up industrial business zones around the city, but particularly on the waterfront, to try to maintain manufacturing. The city’s Southwest Brooklyn Industrial Area boundaries show the waterfront entirely colored in yellow – restricted to industrial except for two parcels, Mr. O’Connell’s Fairway site and Thor Equities’s Revere Sugar refinery site in Erie Basin.

Mr. McGettrick argues these boundaries excluding residential and commercial development violate Red Hook’s heritage. “For several hundred years, Red Hook was a vibrant, mixed-use community,” he says. “You look at the Census, you go back 50 years, and you see that Red Hook had twice as many people and thousands more jobs. Jobs and housing are not in conflict. They’re complementary. The record proves this.”