Skip to main content

AY a boondoggle or house of cards? Some (preliminary) responses

On the New York Observer's blog The Real Estate, Matthew Schuerman wonders, given the seemingly contradictory announcements regarding Atlantic Yards, So, Is Atlantic Yards a Rip-Off or Not?

I haven't spent enough time with the documents unearthed via Assemblyman Jim Brennan's lawsuit to come to any overall conclusions about them. But I do think the questions of whether the project is a boondoggle or a house of cards may be disaggregated.

And all this suggests that a responsible entity like the Independent Budget Office or an academic research institute should crunch the numbers themselves.

Schuerman writes:
It’s been an odd week in the history of Atlantic Yards project. Last Friday, the Mayor said that $300 million worth of tax breaks that Forest City Ratner wrangled out of state legislators are going to “a developer who doesn’t need them.” A couple of days later, Assembly Member James Brennan unveiled internal documents that show, according to his analysis, that the 22-acre apartment-and-arena complex is “financially risky” with a “meager annual profit of 3-6%” for the rental units, “enormous” construction costs and unrealistically high rents.

So, is Atlantic Yards a boondoggle or a house of cards? It could, perhaps, be both, but it is notable that we have arrived at the point in history when the Mayor, who is responsible for awarding much of the $1 billion-$2 billion in subsidies to the project, wants to turn off the spigot, while a Brooklyn politician who thinks the project is too big is warning that it might fail.


Indeed, as I suggested on Sunday, the New York Times's account of the documents Brennan uncovered left the impression that Forest City Ratner needed flexibility, a long leash, to make the project work.

Boondoggle?

First, I don't think we have a solid account of Forest City Ratner's profit. A developer's fee of $200 million, 5% of the total project cost, sounds like not so much if the developer is putting up $4 billion.

But FCR would put up only a fraction, which means the fee--larger than the 3% fee sought by Extell, rival bidder for the MTA's Vanderbilt Yard--could represent a substantial return.

Second, some of the math in the documents Brennan uncovered certainly raises questions. If the Atlantic Yards office space would be more lucrative than housing, then why did the developer trade office space for condos?

Third, the boondoggle depends on how much the public is investing, in terms of direct subsidies, public costs, and foregone opportunities (such as for affordable housing elsewhere, which could be delivered more rapidly).

We don't have a solid account of that, even as Forest City Ratner has gained some benefits unavailable to most developers: the state's use of eminent domain, as well as a zoning override, or private rezoning. And the request for proposals (RFP) for the MTA's Vanderbilt Yard (but not the project site), unlike with other projects, was issued 18 months after the city and state backed the Atlantic Yards plan.

Fourth, and unmentioned in any of these documents: what's the benefit to Forest City Ratner beyond Atlantic Yards? Surely the public infrastructure investment improves the market for offices and housing planned over the developer's Atlantic Center mall. And the new population and visitors improves business at the Atlantic Center and Atlantic Terminal malls.

House of cards?

I don't think Brennan indicated that the entire project was a house of cards, but pointed mainly the rental buildings that would include affordable housing. The Times focused on the condos; I pointed out that the increased in expected sale price for the condos didn't seem out of line, even if there were questions about the developer low-balling construction costs.

If it's a house of cards, it's more a house of cards for the rentals, which means affordable housing would arrive more slowly than promised and interim surface parking lots would persist.

So one important question, yet unanswered, is how the city and state plan to enforce the developer's plan to build affordable housing, and on what schedule. As affordable housing analyst David A. Smith commented, "what happens in what order, and who decides what changes are made to the development plan?"

Solution?

Brennan stated in a press release:
“The Empire State Development Corporation should reconfigure of the project with input from the community,” Brennan said. “A smaller project could reduce overall risk, while maintaining a rational balance with the environment. The State, the City and Ratner could restructure the project to guarantee the affordable housing at the same time,” he added.

Unmentioned was part of his previous solution to hasten a smaller project: increased subsidies from the state. (That sweetener for the developer could fulfill, at least in some people's eyes, the boondoggle scenario.)

Whose fault?

It's expensive to develop over railyards, but one factor in increased project costs is simply delay, caused by multiple factors, including, significantly, public opposition to the project.

Could development over the Vanderbilt Yard (and even some surrounding areas) gotten more public buy-in and proceeded faster had it involved an RFP and multiple developers, and been evaluated via the city's slower-track ULURP, or Uniform Land Use Review Procedure?

Comments

Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

Barclays Center event June 11 to protest plans to expand Israeli draft; questions about logistics

At right is a photo of a poster spotted in Hasidic Williamsburg right. Clearly there's an event scheduled at the Barclays Center aimed at the Haredi Jewish community (strict Orthodox Jews who reject secular culture), but the lack of English text makes it cryptic.

The website Matzav.com explains, Protest Against Israeli Draft of Bnei Yeshiva Rescheduled for Barclays Center:
A large asifa to protest the drafting of bnei yeshiva in Eretz Yisroel into the Israeli army that had been set to take place this month will instead be held on Sunday, 17 Sivan/June 11, at the Barclays Center in Downtown Brooklyn, NY. So attendees at a big gathering will protest an apparent change of policy that will make it much more difficult for traditional Orthodox Jewish students--both Hasidic (who follow a rebbe) and non-Hasidic (who don't)--to get deferments from the draft. Comments on the Yeshiva World website explain some of the debate.

The logistical questions

What's unclear is how large the ev…

Atlanta's Atlantic Yards moves ahead

First mentioned in April, the Atlantic Yards project in Atlanta is moving ahead--and has the potential to nudge Atlantic Yards in Brooklyn further down in Google searches.

According to a 5/30/17 press release, Hines and Invesco Real Estate Announce T3 West Midtown and Atlantic Yards:
Hines, the international real estate firm, and Invesco Real Estate, a global real estate investment manager, today announced a joint venture on behalf of one of Invesco Real Estate’s institutional clients to develop two progressive office projects in Atlanta totalling 700,000 square feet. T3 West Midtown will be a 200,000-square-foot heavy timber office development and Atlantic Yards will consist of 500,000 square feet of progressive office space in two buildings. Both projects are located on sites within Atlantic Station in the flourishing Midtown submarket.
Hines will work with Hartshorne Plunkard Architecture (HPA) as the design architect for both T3 West Midtown and Atlantic Yards. DLR Group will be t…

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official…

So, Forest City has some property subject to the future Gowanus rezoning

Writing yesterday, MAP: Who Owns All the Property Along the Gowanus Canal, DNAinfo's Leslie Albrecht lays out the positioning of various real estate players along the Gowanus Canal, a Superfund site:
As the city considers whether to rezone Gowanus and, perhaps, morph the gritty low-rise industrial area into a hot new neighborhood of residential towers (albeit at a fraction of the height of Manhattan's supertall buildings), DNAinfo reviewed property records along the canal to find out who stands to benefit most from the changes.
Investors have poured at least $440 million into buying land on the polluted waterway and more than a third of the properties have changed hands in the past decade, according to an examination of records for the nearly 130 properties along the 1.8-mile canal. While the single largest landowner is developer Property Markets Group, other landowners include Kushner Companies, Alloy Development, Two Trees, and Forest City New York.

Forest City's plans unc…