Saturday, May 10, 2008

Hudson Yards plan snagged by lowered revenues; new plan might involve multiple developers

When it comes to megadevelopments, it may be better for developers to lock in the deal, then declare (and even negotiate) a flexible timetable, as with Atlantic Yards.

The negotiations over the Hudson Yards project are a notable counterexample. In an article yesteday headlined Deal to Build at Railyards on West Side Collapses, the New York Times reported:
Six weeks after the Metropolitan Transportation Authority selected Tishman Speyer Properties to build a vast complex of office towers, apartment buildings and parks over the railyards on the West Side of Manhattan, the deal has fallen apart.

Gary Dellaverson, the authority’s chief financial officer, said the negotiations foundered Thursday afternoon after Tishman Speyer insisted on changing the terms of the $1 billion development, which both parties had agreed to on March 26.

The change would have substantially slowed the flow of millions of dollars in annual rent and fees to the authority and introduced a note of uncertainty about the pace of construction at the 26-acre site, which straddles 11th Avenue between 30th and 33rd Streets, he said.


Since Atlantic Yards is delayed, with the expected flow of new city, state, and MTA revenues thus delayed, there's a not dissimilar situation in Brooklyn. However, there are limits to the parallel; the revenues in Brooklyn would be from new taxes, not rent and fees.

Reopen negotiations?

The Times reported:
Mr. Dellaverson said he had agreed to a request from Tishman Speyer, which controls Rockefeller Center and has projects in India, China and Brazil, for a meeting on Monday, which seemed to leave open at least a faint possibility that the deal could be put back together. But he also said that the authority was considering whether to reopen negotiations with one or more of the four other developers who had bid nearly $1 billion each for the development rights.

But if the authority reopened negotiations with another bidder, it would almost certainly mean that it would get less money for the rights to the property, real estate executives said.


That at least recognizes that other bidders began from the same starting place; with Atlantic Yards, Forest City Ratner was the frontrunner, having been anointed by city and state officials 18 months before an RFP was issued.

Financing uncertain

The Times noted:
But critics of the deal said that it should never have been made, especially since the financing for a key element for West Side development, the extension of the No. 7 subway line, had not been resolved. At the same time, plans for the expansion of the nearby Javits Convention Center had collapsed. And given the sour real estate market, critics said the developer was getting an inexpensive development option.


The same might be said of Atlantic Yards, given that financing for affordable housing was and remains in doubt.

Note that Tishman Speyer also gave up designs by architect Helmut Jahn, another example of how flexible such projects can be. Also note how Bruce Ratner has been lowering our architectural expectations.

Mayor pushes project

The discussion continues. In an article today headlined West Side Railyards Project Gets New Push From Mayor, the Times reported that Mayor Mike Bloomberg would try to push the parties together to get the project done, and that the city would commit funds to help finish the No. 7 subway.

A new authority

The article ended with an intriguing tidbit:
In a related development, Assemblyman Richard L. Brodsky proposed that a new state authority be created to buy the railyards from the transportation authority for $1 billion and take charge of development in the area. It would come up with a master plan and find builders for individual parcels over time.


While the creation of new authorities can bring problems, if there's little oversight, the idea of a master plan, with multiple developers for multiple parcels, sounds like a way to get moving while avoiding the snags inherent in a one-developer deal.

It sounds, in fact, like proposals for the UNITY plan for the MTA's Vanderbilt Yard and like what City Comptroller Bill Thompson suggested might be the future of Atlantic Yards.

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