Wednesday, October 15, 2008

The AY inevitability meme turns; will a "plagued" project "eventually succeed"?

An AP story yesterday, distributed nationally (heck, to Canada, even), was headlined Economy, uncertain financing plague Brooklyn arena.

It's perhaps turnabout to see a major press outlet cite reasons for skepticism--legal delays, rising costs, and the difficulty of raising capital--about developer Bruce Ratner's sunny statements:
Ratner, who has fended off years of community resistance to his plans, remains optimistic. "Let me be clear," he said last month, "that the project will go forward."

But financial experts and state and city officials who have heard the developer's private pleas for more government aid say the failing economy has created a far bleaker picture for Atlantic Yards.


But we simply don't know if the Internal Revenue Service will approve tax-exempt bonds to finance the $950 million arena. And, while the credit market may make it tougher to attract investors, would it "make it impossible," as the AP suggested? As I note below, we need to evaluate more than one scenario.

Eventual success?

In the closing paragraph, in fact, the article quotes Marc Ganis, a sports finance expert in Chicago, as saying the project is seriously challenged, though he and others think Ratner will eventually succeed.

So it's a bit presumptuous for the project's leading opponent, Daniel Goldstein of Develop Don't Destroy Brooklyn, to say "This is just merely a fantasy that they're going to build this project. Yet they're moving forward as if everything's fine."

Sure, it's a fantasy that FCR would build the project at the timing and scale as announced. But, as I've written, the project--at least the arena--is very much in play. (I'm assuming that Ganis was talking about the arena.) Yes, the Barclays Center naming rights deal was tied to gaining financing by November, but Barclays has said it's still committed to the project.

And, while the AP cites "penalties" attached to delays in the project, the article doesn't mention that those penalties are hardly punitive.

A clearer timetable

Maybe, as with the Port Authority's recent analysis of the rebuilding plans at Ground Zero, we could use both a target date and a “probabilistic” date for Atlantic Yards.

In fact, yesterday, the New York Building Congress released a report on the construction downturn (Times coverage was headlined End Seen to New York Building Boom ), offering two scenarios:
It is difficult to predict the duration and depth of the current economic downturn, particularly in light of recent federal intervention. Consequently, two possible scenarios must be considered. In the first, any downturn in the construction industry would be short-lived and relatively shallow. With government steps to ease the credit crunch, thousands of jobs could be preserved; companies could begin adding more jobs; and foreign buyers, attracted by declining prices, could increase their investments in the Manhattan housing market—all of which would drive demand for office space and housing.

Thanks to recent actions by government, particularly the Bloomberg administration, there are numerous opportunities to build as demand dictates. This is the result of a series of enlightened rezonings affecting nearly one-sixth of New York City. In addition, approvals are in place and developers selected for massive undertakings such as the World Trade Center, Atlantic Yards, Hudson Yards, and the former Con Edison Waterside plant site.

Furthermore, major institutions, such as Columbia University, Saint Vincent’s Hospital, and the United Nations, are eager to embark on major expansion and redevelopment plans. In this scenario, government continues making critical investments in major infrastructure systems and, quite possibly, construction spending and employment would quickly return to record-setting levels.

The second scenario, also realistic, is a prolonged economic downturn that finds government slashing funding for mass transit, education, and other infrastructure projects, and the City’s next leaders adopting a more anti-development stance, making it harder for the private sector and major educational, health and cultural institutions to realize their expansion plans. This would likely signal an end to New York’s construction boom and potentially usher in a period of slow growth for New York City’s economy and the building industry.

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