Tuesday, September 30, 2014

Atlantic Yards, Pacific Park, and the Culture of Cheating (links)

I offer a framework to analyze and evaluate Atlantic Yards (in August 2014 rebranded as Pacific Park) and the Barclays Center: Atlantic Yards, Pacific Park, and the Culture of Cheating.

Note: this post is post-dated to remain at the top of the page. Please send tips to the email address above, rather than posting a comment here.


Monday, September 01, 2014

Despite Vermont's model EB-5 program, investors outraged by behind-the-scenes changes

The nonprofit news site Vermont Digger has done a good job investigating the EB-5 program in that state, one that has gotten lots of publicity and support from elected officials.

Until recently, the Vermont EB-5 Regional Center--the investment pool authorized to process $500,000 each from immigrant investors seeking green cards--was the only one run by a government agency rather than a private business, presumably adding accountability.

Well, according to Vermont Digger, it hasn't added enough accountability, since some immigrant investors "are incensed that Bill Stenger, president and CEO of Jay Peak Resort, seized ownership of the Tram Haus Lodge and turned their half-million dollar equity stakes in the property into IOUs"--a process they didn't learn about until five months later.

The role of the government regional center at least has added some transparency to the process, though the investors do not think it has been responsive enough.

And what about AY?

It makes me wonder what's been going on behind the scenes with the $228 million investment, via the New York City Regional Center, into Atlantic Yards, as well as the recently announced $249 million investment via the U.S. Immigration Fund, both involving mostly (if not exclusively) investors from China and both involving deceptive marketing, at the least.

Sunday, August 31, 2014

As Barclays Center prepares for next show, errant trucks fill no-standing zones, cause traffic jam on Flatbush after wrong turn attempt

It's been a slow summer at the Barclays Center, but now that there's another major event--a one-off that apparently requires many specialized deliveries--(apparently) inexperienced and/or poorly managed truckers are violating the law and/or protocols while making deliveries.

As posted yesterday on Atlantic Yards Watch, several 18-wheel trucks making deliveries to the Barclays Center--apparently for the 9/9/14 Fashion Rocks show, a "television special celebrating the powerful relationship between fashion and music"--were parking and idling yesterday in no-standing zones on Dean Street and Sixth Avenue.

Missing the easy turn off Flatbush onto Dean

Below is one example: trucks should traveling south along Flatbush Avenue to make a left onto Dean Street to enter the arena loading dock, which is located on Dean Street between Flatbush and Sixth Avenues,

Dean Street is already relatively narrow, not built for trucks, and it's been further narrowed by scaffolding and barriers set up for the construction of the B2 modular tower. So it's a tight fit even to make the left turn, which offers a driver lots of latitude.

In the video below, the northbound truck is trying to make a right onto Dean, a very difficult challenge. The result is a brief traffic jam on Flatbush, a major avenue, at about 4 pm. The driver ultimately decided to abort the turn.


For the full post, see Atlantic Yards Watch.

Saturday, August 30, 2014

Looking at the very variable prices for Brooklyn Nets single-game tickets

Remember how the Brooklyn Nets this past March claimed that upcoming "Season ticket prices remain the same from the 2013-14 season and start at $45 per seat"?

That's not so. For the first season, they started at $15, part of a longstanding--if short-lived--plan to offer 2,000 seats at $15, and in the second, season tickets started at $25.

Now that single-game Brooklyn Nets tickets are on sale, it's interesting to see how dramatic the price differences are depending on the opponent. Some games cost well more than $45, starting at $110, while some cost far less, starting at $20.

This is not unusual, apparently. The Chicago Bulls, for example, say that "single game ticket prices, depending on the game date and the amount of ticket availability, are subject to change without notice." 

Below, some selected screen shots showing current ticket prices. In Brooklyn, prices likely will change as the season develops and the number of available seats fluctuates.

Note that not only do the cheap seats fluctuate in price, so too do the moderate-priced and more expensive seats.

For now, it's not surprising that games against the Cleveland Cavaliers and New York Knicks command the highest prices. It is surprising how cheap, relatively speaking, some seats are to see the defending champion San Antonio Spurs.


From more expensive to less expensive

The Cleveland Cavaliers have LeBron James, Kevin Love, and Kyrie Irving: $110.

The New York Knicks may not be very good, but they have a strong local fan base: $79.



The Chicago Bulls are a solid team: $75.

The Oklahoma City Thunder are one of the top teams in the league: $69.


The Indiana Pacers may be as good as last year, but likely not: $50.


The Miami Heat still have Dwayne Wade and Chris Bosh: $45.


The San Antonio Spurs won the NBA championship last year, but seats are only $35? A bargain.

The Milwaukee Bucks will be terrible, but they will have former Nets coach Jason Kidd: $35.


The Philadelphia 76ers will be lousy: $25.


The Minnesota Timberwolves are rebuilding: $20.


Friday, August 29, 2014

Barclays Center releases September 2014 event calendar: six concerts, two free events, one hockey game (plus construction constraints)

According to the recently released Barclays Center event calendar for September 2014, there will be six ticketed concerts, with a maximum expected attendance at 14,000, two free afternoon community events, and an Islanders-Devils exhibition hockey game.

The  Back to School Bash--an educational resource fair with live music, games, prizes, food trucks, and more--will be 0/13/14 on the arena plaza from 11am-3pm.

The Brooklyn Beat Festival, from 4-5 pm 9/15/14 on the plaza features Dancewave with contemporary choreography, then Bed Stuy Veterans demonstrating NYC Bruk-Up, a style of movement based on a dance form that originated in Jamaica.


September 2013

The September 2013 calendar had eight concerts scheduled, plus boxing, pro wrestling, and a hockey game.


Impact on arena access

According to an arena construction update:
Starting in July 2014, you will notice construction on Atlantic Ave. for a brand new Long Island Rail Road tunnel. Please be aware of the following temporary traffic pattern changes:
  • Minimal space for pick up/drop offs near the Calvin Klein VIP
  • Atlantic Ave. median is now a travel lane for eastbound traffic
  • Pacific St. between Carlton and 6th Aves. is one-way going westbound
  • Pedestrian walkways are not expected to be effected until September
  • Other areas for pick up/drop off (adjacent to Barclays Center) are on Flatbush Ave. northbound between 5th Ave and Atlantic Ave.
Our operations team is working closely with city agencies to mitigate traffic. However, we advise Barclays Center guests to allow for additional travel time when driving to the arena. As always, we encourage our guests to use mass transit to Barclays Center, which is located adjacent to one of the largest transportation hubs in New York City.
The Long Island Rail Road tunnel, to be located under Atlantic Ave. by the arena, is a key component of the new rail yards for the Pacific Park development, and will greatly improve efficiency and provide necessary progress for the LIRR system.
We will continue to provide you with extensive communication during the construction period and are committed to ensuring the best possible experience for all of our guests.
(Emphasis added)

Those traffic pattern changes are indeed "temporary," but some--including parking prohibition on Atlantic Avenue--will last 24 months.


Thursday, August 28, 2014

Bitter dispute between Forest City and Skanska over cost overruns stalls work at B2 modular tower; raises questions about pre-fab future

Updated with a few details from New York Times coverage and the Wall Street Journal update.

Forest City Ratner has had very high hopes for its modular construction plan, at one point calling it their "iPhone moment" and claiming to have "Cracked the Code" for high-rise modular, expecting to build towers faster than conventional construction, steadily supplied by modules fabricated at a new factory in the Brooklyn Navy Yard.

But the first tower, the 32-story, 363-unit (half market, half subsidized) B2, which broke ground in December 2012, faced steady delays. It was originally said to take 20 months (though Forest City in one earlier interview hoped for 14 months!), but the delivery date then became December 2014. As of April 2014, it was slated to open in the fourth quarter of 2015.

Even that may be too optimistic, now that Forest City and its general contractor, Skanska USA, are in a bitter dispute regarding cost overruns (worth tens of millions of dollars, according to a source quoted by the Wall Street Journal), which has caused the jointly owned factory at the Brooklyn Navy Yard to furlough workers.

That dispute is such that Forest City's spokesman blamed Skanska for "failures and missteps as the construction manager" and claimed the firm is trying "to to weasel out" of its obligations.

It's a reminder of the prescient warning, as I wrote in a 10/31/11 analysis of the secret history of Forest City's prefab plans, from Brooklyn architect Jim Garrison: "The American modular industry typically builds up to four stories. It has not yet built a 30-plus-story modular tower or anything nearly that tall. The challenges are those of engineering, assembly, and production. "

“Having designed several modular buildings I can say that they are intricate and if they are to be cost effective require development totally outside of normal building practice," he stated. "They are more like product or automobile design where assembly and detail may be considered together.

And it's a reminder of the verb in the headline in a 7/26/12 Engineering News-Record article, Developer Gambles on Modular High-Rise for Atlantic Yards Sports Village.

What next?

Forest City's charges sounds like bridge-burning, a prelude not to mediation but rather to a lawsuit. That would be a significant snag, since the tower, located at Flatbush Avenue and Dean Street, is only ten stories complete, less than one-third of the total.

And even if by chance they wanted to open a truncated building, they can't: the tax-exempt bonds and subsidies are premised on a completed building, of course, and a full rent roll would be necessary to recoup costs.

“This is not a referendum on modular,” Forest City CEO MaryAnne Gilmartin told the Times, “it’s a monetary dispute. We’re confident we’ll get the building built. But we’re doing what we have to do to protect the company, the project and the business.”

Then again, as the Journal observed:
However the dispute is resolved, the struggles with costs undermine the tower's role as a pioneering project. The "code," said Mr. Kennedy of Skanska, "hasn't quite been cracked."
Note that, unlike the rest of the towers, which will be owned 70% by Forest City's new partner/overseer, the Greenland Group, and developed by Greenland Forest City Partners, B2 is co-owned by the Arizona State Retirement System, which likely is not happy its expected investment return has been jeopardized.

(The ASRS is actually the majority owner, since funding for the venture "will be 75 percent from ASRS and 25 percent from Forest City," the developer said in a 12/21/12 press release, which noted that "Forest City will serve as fund manager" for the $400 million fund, which invests in multiple buildings.)

Greenland has announced that the next set of towers will be built conventionally, but Forest City's Ashley Cotton said 6/27/14 that "as soon we can, we'll move forward with more modular buildings." It's an understandable wish to want to recoup their investment in both the factory and in research and development, and to perfect a process they hoped to sell to other developers. That plan is in question.

As noted in the latest Atlantic Yards/Pacific Park Construction Alert, issued 8/18/14, no more modules were delivered to the B2 tower in the previous two weeks, leaving a total of 297 (of 930), with the tenth floor complete. Erection of 11th floor modules was begin in September 2014.

The dispute emerges

According to an Aug. 26 letter (obtained by Capital New York), an attorney representing FCRC Modular told Skanska that its threat to unilaterally furlough workers at the factory violated the joint agreement since such "such decisions may not be made by any officer of FC+Skanska without approval of the Board of Directors," but the board did not approve it.

(Note that Forest City and Greenland also have an agreement which requires mutual assent on major decisions.)

Thus, wrote attorney Harold Weinberger, Skanska was was breaching the agreement, which would make it "responsible for the significant damage these actions will cause."

Richard Kennedy, chief operating officer of Skanska USA, told Capital New York, Work stops at Atlantic Yards as partners fight over cost, “It finally got to the point where we said, ‘OK, this project is requiring from us an investment that is much more significant than anything we ever anticipated or agreed to."

In the Wall Street Journal, Eliot Brown, who had the scoop, wrote that Kennedy blamed "'technological issues' that made it difficult to fabricate the modules, which he said were the fault of the design." The Times noted that the contract to provide the modules is $117 million.

Forest City responded with a blistering statement blaming Skanska's "own failures and missteps” and violation of a fixed-price agreement. “Now faced with over-runs, they are employing a typical strategy to try to weasel out of that obligation,” said Jonathan Rosen.

“We are extremely disappointed that Skanska has unilaterally and wrongfully stopped work at our factory—unnecessarily putting the livelihoods of hundreds of employees at risk and causing unneeded delays in a critical project for New York City’s future,” he said. “Forest City remains deeply committed to completing B2 and meeting our commitments to the people of Brooklyn … We intend to pursue all of our rights and remedies under the law to enforce our agreement and resume work at the factory.”

The furlough notice

According to the notice below, obtained by Crain's New York Business, FCS Modular told workers that "a significant commercial dispute exists between the Atlantic Yards B2 Owner, the project Owner, and Skanska USA Building, the project Contractor, in connection with the B2 project. FCS is not a party to that dispute, but our factory operation here at the Brooklyn Navy Yard depends directly on the continuation of production of the B2 modules...at this time we do not know if, or when, the dispute will be resolved."






Previous optimism

From Skanska blog, 12/23/13, Construction history in the making: Skanska raises the first modules at B2 Atlantic Yards, the world’s tallest modular building
Construction history was changed December 12 in New York City when the Skanska team raised the first modules into place at B2, the 32-story residential tower that will be the world’s tallest modular building.
Nine hundred thirty modules – weighing between 10,000 lbs. and 40,000 lbs. – will go into this tower, with the units being assembled by the Forest City Ratner /Skanska team at the Brooklyn Navy Yard. But the focus that chilly Thursday morning was on that first module. It was just after 2 am when a tractor-trailer pulled that oversize load away from the Navy Yard for a one-and-a-half mile trip to the Atlantic Yards project site. At 9:30 a.m., the crane hoisted the module into place. Union ironworkers took 15 minutes to make the structural connections.
“There was a certain sense of excitement and a little bit of nervousness, just like on any jobsite when you’re moving and lifting something new,” said Susan Jenkins, Skanska vice president and operations head of the modular assembly plant. “And definitely a sense of pride for Skanska, and for myself being part of Skanska.”
Jenkins added: “It was a tremendous moment. A lot of people – from both Skanska and our partner and client Forest City Ratner – have worked very hard to develop and make modular construction possible on this project.”
When the modules leave the 100,000-square-foot Navy Yard assembly plant – operated by a joint venture of Forest City and Skanska – they are fully assembled, including kitchens, bathrooms and appliances. This isn’t how a building normally goes up, not even for Skanska, which has done much with off-site construction of mechanical, electrical and plumbing (MEP) systems on many projects (especially in the healthcare sector). Fully modular construction was needed on this project to ensure efficient, safe and sustainable construction.
Now that lifting modules into place has begun, it won’t be a daily activity, Jenkins said. Some days will be dedicated to setting into place the steel brace framing that rises the height of the 348,000-square-foot tower, and also surveying. However, the assembly plant will continue to send module units to the site. Our team plans to have at least two floors of modules – of which there are six types – ready and waiting at the Navy Yard to be sent to the site for the duration of the project, designed by SHoP architects and Arup engineers,

Wednesday, August 27, 2014

As state is poised to give Fresh Direct subsidies, project relies on funds from immigrant investors under dubious EB-5 program; pitch in China was misleading

This isn't about Atlantic Yards/Pacific Park, or even a similar megaproject, but the EB-5 angle is too glaring to ignore.

Update: the subsidies were approved unanimously. Nearly everyone making public comment offered support of the project, while one representative of South Bronx Unite asked the board to take more time and acknowledge the health impacts. No one mentioned EB-5, though it's obviously crucial to the project.

---

At a board meeting (webcast) this morning starting at 9:30, Empire State Development, the state economic development agency, is set to approve what the agenda describes as:
A. Bronx (New York City Region – Bronx County) – Fresh Direct Capital – Urban and Community Development Program – Urban and Community Project Development Assistance (Capital Grant) – and Metropolitan Economic Revitalization Fund (Capital Loan) – Findings and Determinations Pursuant to Sections 5(4), 16-d and 10(g) of the Act; Authorization to Adopt the Proposed General Project Plan; Authorization to Make a Loan and a Grant and to Take Related Actions; Determination on No Significant Effect on the Environment
From ESD Board Materials; go to p. 51
In other words, ESD is about to give Fresh Direct a $9 million grant and a $1 million loan to move/expand from Long Island City to the South Bronx.

That's on top of $10.5 million from the New York City Industrial Development Authority and $1 million from the New York State Department of Transportation and $5 million in New Markets Tax Credit Equity.

Add $15 million from the investment fund Brightwood Capital, $40 million in the company itself, and a whopping $84,168,000 in an EB-5 loan.

Unmentioned are previous promises (which may have been adjusted) of $18.9 million in state Excelsior tax credits; $4 million in state energy grants and incentives; up to $1 million in vouchers for the purchase of electric vehicles; about $74 million in city sales tax exemptions, mortgage recording tax deferral, and real estate tax exemptions; $4.9 million in city energy benefits; $1 million capital grant from Bronx Overall Economic Development Corporation; and a $3 million loan and $500,000 capital grant from the Borough President

Pitching Fresh Direct to Chinese investors
Let's put aside the strangeness of the city and state subsidizing a cross-borough move based on a perceived threat from New Jersey, an unlikely base for a delivery service that needs quick access to Manhattan.

Or that Fresh Direct is moving after having gotten subsidies to stay in Queens through 2025.

Or that neighbors (see South Bronx Unite) pose some heavy concerns about the project's environmental impacts, and that if the promised job total is not reached, there's no "clawback provision" to recover subsidies. (See Good Jobs New York timeline.)

Looking at EB-5: total funding

The really strange thing is the reliance, according to ESD Board Materials (p, 51ff.), on the EB-5 immigrant investor program, in which foreign millionaires, mostly from China, park $500,000 in a purportedly job-creating investment, get green cards for themselves and their families, and later get their money back. (In this case, they're getting a relatively high--for EB-5--rate of 4.5%.)

The pitch in China, translated
The developer gets cheap capital. The public is supposed to get 10 jobs for each investor.

According to promotional material supplied almost surely by the New York City Regional Center, the private investment pool set up to market EB-5 investments (and reap fees), the project would not be $166 million in total, but $208 million.

Looking at EB-5: percentage of funding

That's not the only misleading part. EB-5 funding is said to make up just 40% of the project, rather than more than 50%.

And Fresh Direct is said to be providing the rest of the funds, which is clearly not true.

In fact, the "government support" is key in reassuring potential investors that the project is solid.

Looking at EB-5: projected funding doubled in less than a year

Also particularly strange is, as of last December, when the project was up for Bronx Economic Development Corporation funding via the New York Empowerment Zone Corporation, the EB-5 funding was only supposed to be $40 million. See graphic below.

That's a huge jump in eight months or so.

Looking at EB-5: the jobs

As noted in the graphic above, 170 investors contributing $85 million--or, apparently, 168 contributing $84 million--must create about 1,700 jobs.  And the EB-5 project, according to an economist's report--not a head count--is said to create 2,145 jobs.

However, the New York City Economic Development Corporation has said the new project would retain nearly 2,000 existing jobs, create almost 1,000 new jobs, and create about 684 construction jobs.

Pitching Fresh Direct to Chinese investors
So, even under this optimistic scenario, there would be less than 1,700 new jobs.

However, we must consider an extraordinarily generous feature of the EB-5 program (see overall analysis in Fortune), one which makes the program especially attractive to developers and entrepreneurs, since, as long as they go through the hoops of the EB-5 project, they can profit by selling public property (visas) they should not own.

No wonder, according to the Wall Street Journal, the annual quota for visas is subscribed. (No, despite the caption in the article, EB-5 funds did not help build the Barclays Center.)

Job creation for the immigrant investors is calculated based on the value of the entire project, not their investment. So the job calculations should be based on the entire $166 million project. (Or, if they're based on the purported $208 million project, they're completely bogus.)

Another twist: different state programs have different job requirements. In order to retain state tax credits, Fresh Direct must create 946 new jobs. But ESD's grant and loan merely require retention of 1,949 jobs through 2025, according to the graphic below, from board materials.