Wednesday, July 11, 2007

"Projects change, markets change"? Actually, Ratner planned condos from the start

It's Orwellian, almost (to quote former Forest City Ratner executive Jim Stuckey), the way the developer played the public and the press, pretending it only belatedly decided to add lucrative condominiums to its Atlantic Yards plan.

For nearly 18 months, the developer promised publicly--though not always explicitly--that the residential component of Atlantic Yards, 4500 apartments, would be mixed-income rental units. See, for example, the October 2004 flier at right.

In May 2005, FCR scored a public relations coup, signing a 50/50 affordable housing Memorandum of Understanding (MOU) with the community group ACORN. The fine print, however, designated the agreement as applying only to rental units.

Less than two weeks later, Forest City announced that the project could add 1500 to 2800 condos, because of a tradeoff with office space and the addition of another building, at Site V. The latter location, between Flatbush, Fourth, and Atlantic avenues, and Pacific Street, is now occupied by P.C. Richard/Modell's. (Now the projected condo count stands at 1930.)

Stuckey's explanation, in the 11/6/05 New York Times, was that "Projects change, markets change." That statement was dubious then, given an escape clause in the housing MOU that raised the possibility that "the projected number of residential units [could] increase for any reason that the Developer determines to be economically necessary..."

It's a lie

Now it's clearly a falsehood. Yes, the project changed, but documents show that Forest City planned a significant number of condos, more profitable than the rentals, from the start.

According to p. 17 of a presentation (3.2 MB PDF) to the Empire State Development Corporation (ESDC) on 9/29/03, some ten weeks before the project was unveiled, the developer planned nearly 1 million square feet of condos, or about 1000 units at 1000 square feet per apartment.

The document was unearthed as part of Assemblyman Jim Brennan's lawsuit to get the various business plans for Atlantic Yards.

That condo plan persisted, as shown in the excerpt of a 2/18/04 business plan at right. (In that case, the developer was considering adding more residential space, including condos, via the addition of a site on Vanderbilt Avenue, apparently 470 Vanderbilt, the Atlantic Technology Center, in response to a cuts proposed by the Department of City Planning.)

Misleading the public

But what was Forest City Ratner telling the public? According to that 11/6/05 Times article, a brochure handed out at the 12/10/03 project launch promised "more than 4,000 units of rental housing, half of it set aside for low- and middle-income families." The article also cited "the 4,500 rental units envisioned in the original plan."

The 12/10/03 press release (3.65MB), however, more vaguely promised 4500 units of residential housing. A May 2004 flier (right) was less vague, promising mixed-income housing.

However, at a 5/5/04 City Council hearing, FCR executive Stuckey made it clear, asserting that half the units would be affordable and stating (p. 157 of PDF), "We are talking about rental apartments."

One clue

There was at least one hint at the time, coming in a 5/1/04 report for Forest City Ratner by economist Andrew Zimbalist that estimated the project's net fiscal impact.

Zimbalist did state that "the project will add at least 4500 net new residential units (with 20 percent for low-income and 30 percent for middle-income families)," thus suggesting the 50/50 plan for rentals.

But Zimbalist offered a tantalizing clue, in retrospect, referring to "the mixed-income specifications of the project and the combination of low income (20 percent of the rental units), middle income (30 percent of the units) and market (50 percent of the rental units) and condominiums...."

Keeping it confidential

Shortly afterward, in a 6/28/04 document (right) presented to the ESDC, Forest City Ratner privately repeated its intention to add condos, again citing the recommendation from the Department of City Planning that apparently about 128,000 square feet of condo space would be cut.

To the public, however, the condo plan remained under wraps. The 2/18/05 Memorandum of Understanding between Forest City Ratner, the city, the New York City Economic Development Corporation, and the ESDC didn't specify whether the residential units would be rentals or condos.

However, the condo plan was not just alive, but growing. A 4/28/05 presentation (below) to the ESDC, in which Forest City sketched its version of the General Project Plan that the state agency itself would issue.

It contemplated that four of 16 towers would include condos, encompassing some 1.5 million square feet. (An alternate plan would have had condos in six buildings.) Interestingly, none of the buildings in the project's first phase would have included affordable housing.

Some three weeks later, Forest City and ACORN signed the 50/50 plan to great fanfare, with no public inkling that the project would include any residential component other than rentals.

A week after that Housing MOU press conference, with ACORN on board, Stuckey told City Council that the project plan had changed, and could contain an additional 2800 condos.

The Times got played

The Times's 11/6/05 article, headlined Routine Changes, or 'Bait and Switch'?, seems more obtuse than even my initial criticisms suggested. It stated:
In an interview, Mr. Stuckey, the executive of Forest City Ratner, suggested that Forest City Ratner was paying a price for being forthcoming about its plans....

"It's Orwellian, almost," Mr. Stuckey added.


The Times also neglected to challenge some developer spin:
At the time [when the MOU was signed in May 2005], officials of Forest City Ratner said they were already contemplating adding 1,500 condominium units, in part because community leaders had pushed Mr. Ratner to include more housing in the project.

As I noted in my critique , community leaders certainly weren't pushing for market-rate condominiums.

Plans change

Forest City Ratner has not stuck to the original plan for condos but nearly doubled the planned total. At the same time, the developer, in the Housing MOU, and ACORN agreed to "work on a program to develop" 600 to 1000 affordable for-sale units, on- or off-site. Last December, Forest City promised to build 200 on-site.

But that promise of 600 to 1000 units was not part of any government approval, nor does it appear in any government document as of now. In the best case scenario, the total units would fulfill the 50/50 plan as pledged, given at least 1730 market-rate condos.

Bottom line

Atlantic Yards, the developer learned to stress in its promotional efforts, is about affordable housing. That may be one component--and one jeopardized by the limited pool of government-authorized tax-exempt bonds, which means Atlantic Yards could crowd out worthy projects.

But Atlantic Yards has always been about luxury condos, as the developer knew and as the Empire State Development Corporation--and perhaps other government agencies--knew. Only now, three-and-a-half years later, do we finally know.

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