Friday, April 20, 2007

FCR's Beekman tower, AY face same problem: scarce tax-exempt financing

Forest City Ratner's annual report acknowledged "the potential for increased costs and delays" to Atlantic Yards as a result of, among other things, "our inability to obtain tax exempt financing or the availability of financing generally."

That looks to be an increasing concern. Take the example of the developer's other Frank Gehry-designed tower, on Beekman Street in Lower Manhattan.

In this week's New York Observer, in an article headlined Ratner Scrambles for Funding for Gehry-Designed Tower, Matthew Schuerman reports:
One portion—presumably the top—would be entirely market-rate rentals and could be financed with Liberty Bonds, which continue to be reserved for the project. The middle portion would consist of mixed-income rentals, 20 percent of which would be priced for low-income households. The school would occupy the lowest five floors, along with retail and possibly a medical facility.

In a request filed last year with the H.D.C., Forest City said it was planning to apply for up to $450 million in tax-free bonds that would cover up to 750 of the units in the middle portion of the building. But the developer will have to wait in line for these bonds because the city largely depends on the state for tax-exempt bonding authority. The state has received billions of dollars in requests that it cannot accommodate this year.

“By the end of June this year, the H.D.C. is completely out of volume cap,” said Emily Youssouf, the president of the H.D.C. “[The developers] are trying to figure out their financing.”


Scarce resource

The amount of bonding required for Atlantic Yards would be considerably more. Perhaps pressure from developers seeking this scarce resource will prompt the relevant government agencies, with the assistance of the federal government, to expand the availability of bonding authority. (Here's Schuerman's exposition of this complicated issue.)

For now, however, there are too many subsidized housing projects competing for limited funds.

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