Skip to main content

The reality behind FCR's 80 DeKalb deal (and the implication for AY)

Forest City Ratner's press release about getting a final $30 million (not that much) in financing for its residential project at 80 DeKalb Avenue is getting a lot of coverage (here and here), with one story line, according to the Brooklyn Paper, that "critics pointed out that the state subsidy means that the public will be spending $1.5 million for each affordable unit."

No actual critics were quoted in the article, though a couple appear in the comments section. While the state Housing Finance Agency's 80/20 financing plan is surely vulnerable to criticism, the 80 DeKalb project, as I wrote in April, may be a relative bargain for taxpayers.

$1.5 million per unit is low

The FCR project, along with three others, was selected among 14 projects for the state agency's bonds, because "we view [the 80 DeKalb project] as an efficient use of a scarce resource," said Priscilla Almodovar, President and Chief Executive Officer of HFA. "[T]he developer agreed to limit its allocation to $1.5 million per low-income unit--lower than our $1.7 million ceiling--and agreed to permanent affordability for its low-income units rather than for just 30 years.

(The subsidy does not mean $1.5 million per unit; rather, $1.5 million is the amount of tax-exempt bonds allowed. A fraction of that figure--a 25% difference in interest rate between taxable and tax-exempt bonds--represents the subsidy, with most of that absorbed by federal taxpayers. Hence the federal limit, aka "volume cap," on the capacity of states and cities to authorize tax-exempt bonds.)

The three other projects moving ahead, all in Manhattan, requested $1.65 million, $1.7 million, and $1.9 million per unit, though two will be permanently affordable to low-income tenants, while the Brooklyn project will offer a different version of permanent affordability, to somewhat higher-income tenants.

The real questions

As I wrote, Forest City Ratner, part of a publicly-traded company based in Cleveland, is likely not sacrificing profits on 80 DeKalb. Rather, its relatively low bonding request per unit likely reflects a smart decision acquiring the property inexpensively in 1989 and seeing (likely, helping) it get rezoned a dozen years later to accommodate residential development, thus boosting the value of the land.

So the first unanswered question is how the land was rezoned. [Update: While this was previous to the Downtown Brooklyn rezoning, it was part of a Special Downtown District in 2001 and thus a fairly thorough rezoning.]

The larger question is whether a similar fate awaits Atlantic Yards. Though the financing of Atlantic Yards remains murky, it's reasonable to speculate that, given the significant amount of subsidies and tax breaks for Atlantic Yards, plus the advantage of eminent domain, Forest City Ratner may be able to successfully compete for the scarce pool of tax exempt bonds offered by the city Housing Development Corporation by asking for somewhat less per unit than other 50/30/20 projects that include 50% market-rate units, 30% middle-income units, and 20% low-income units.

And that's an argument for a full accounting of subsidies and public costs for AY, before such a decision is made.

Comments

  1. Allocation of federal tax-exempt bonds should not be handed out as a reward for eminent domain abuse. That should be made clear at any and all hearings required for tax-exempt bonds to be issued and there should be provisions included in federal law, the same kind of provisions Forest City Ratner is spending heavily to lobby against, making it illegal to use federal tax-exempt bonds to be so used to incentivize eminent domain abuse.

    Michael D. D. White
    Noticing New York
    http://noticingnewyork.blogspot.com/

    ReplyDelete
  2. The $1.5m per affordable unit is a tad misleading - the public subsidy is only the tax forgone on the interest paid on the bonds, a much lower figure than the headline financing amount. But a subsidy's a subsidy, and the ratio of affordable to market strikes me as rather thin.

    Note also the use of credit enhancement from Wachovia and Helaba, both of which have a fairly strong presence in the NY real estate finance market. I'm not sure whether FCR would persuade these banks to do something similar for the Arena project.

    I probably should have blogged this meself, but I'm on ho-ho-holiday, and you've teased out most of the interesting angles.

    ReplyDelete
  3. Allocation of federal tax-exempt bonds should not be squandered on projects that are not awarded to developers through legitimate competitive bids. That si something else that should be made clear at any and all hearings required for tax-exempt bonds to be issued and there should be provisions included in federal law making it illegal to award federal volume cap for tax exempt bonds for states that squander the volume cap on projects that were not competitively bid.

    Michael D. D. White
    Noticing New York
    http://noticingnewyork.blogspot.com

    ReplyDelete
  4. Bottom Line, which people want to avoid: Ratner and FCE have been able to get huge amounts of credit for residential housing in New York City when others cannot.

    DeKalb and Beekman are huge projects that are RISING.

    The propaganda that the credit crunch will cripple Atlantic Yards is starting to fall apart...sort of like the lawsuits.

    ReplyDelete
  5. Bobbo, how much tax exempt financing did ratner get for Beekman and 80 DeKalb combined?

    Good. now compare that to the 2.2 billion, minimum, he'll be seeking for AY, 800 million of that for an arena, which , as you know, is not residential.

    big differences.

    ReplyDelete
  6. Bobbo should sign his name Bob Windrem.

    ReplyDelete

Post a Comment

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…