Thursday, January 22, 2009

A telling non-answer? When asked about AY concessions, MTA chief Sander says only that agency is "flexible and thoughtful"

So, would the Metropolitan Transportation Authority accede to Forest City Ratner's reported request to restructure and thus delay payment of the $100 million it owes for development rights at the MTA's Vanderbilt Yard?

And would the MTA accede to the developer's reported effort to build a less-expensive interim railyard as a replacement?

The person who might know, MTA executive director Lee Sander, gave no solid answer yesterday, but did acknowledge that the agency is "flexible and thoughtful" in all its negotiations.

The Hudson Yards in the balance

The big story from Sander's appearance at a breakfast yesterday sponsored by Crain's New York Business was the shaky fate of an even more ambitious deal: the $15 billion Hudson Yards project.

The Hudson Yards developer, the Related Cos., according to the Observer, has had trouble getting financing, stopped paying its architects (sounds familiar?), and even cut its lobbying expenditures in half.

As Crain's reported, Should the MTA and Related not reach a deal by January 31, the project could be postponed indefinitely or killed, thus jeopardizing the $1 billion the MTA might gain.

Yesterday, Crain's Editorial Director Greg David brought up Hudson Yards, asking Sander, "But do you still think a billion-dollar payment is realistic in the current environment and, as you approach this deadline, is MTA prepared to take into account the changed circumstances?"

"Really good question, Greg, but we are involved in those sensitive negotiations with Related, basically as we speak," Sander replied. "We certainly known what's going on in the real estate market, and some of the pressures that all the real estate companies have encountered. At the same time, we feel very good about what we achieved with Related, so we are having a conversation with them, and we'll see where that leads."

"Would you agree that, if Related were to walk away from this project, there wouldn't be someone as eager to step in as occurred the last time MTA decided to play hardball?" David asked.

"I think that's a very fair assessment on your part," Sander said.

(Given the open bidding process, it's fair to say that the 2008 Hudson Yards project differed significantly from the 2005 sale of rights to the MTA's Vanderbilt Yard, which attracted only one other bidder, given that the RFP was issued 18 months after Forest City Ratner was anointed the city and state's favored developer.)

"If the deal at Hudson Yards does crater and Related walks away from the project," David asked, "what will the implications be for the MTA and its capital budget?"

"Again, I'm loathe to engage in hypotheticals," Sander replied. "Again, I suspect that we would be able to deal with it, but it would not be pleasant, but again, that's not an outcome we're looking forward to. We're involved in sensitive discussions with Related. I wouldn't make conclusions as to how those would end up."

The MTA needs the revenue, so there's an argument for flexibility. Assemblyman Richard Gottfried, told Crain's, “On the other hand, I would not want the current market conditions to induce the MTA to give the developer even more leeway than they already have.”

The contract deadline, which has been pushed back once, could conceivably be pushed back again, Crain's noted.

What about AY?

Meanwhile, there's never been a firm deadline regarding the $100 million owed for the Vanderbilt Yard, a sum about which Sander last April expressed concern.

(Note this sentence from p. 14 of Part 1 of the Empire State Development Corporation's Modified General Project Plan: FCRC shall be required to consummate such purchase prior to or contemporaneously with the first acquisition by ESDC of a parcel within the Project Site not owned by the MTA.)

Yesterday, David asked Sander, "The Atlantic Yards project clearly hangs in the balance, even if the court cases go in favor of Forest City Ratner. Has the MTA recognized that it will also need to be flexible at Atlantic Yards if Forest City Ratner wins the court cases and tries to go out and finance the arena?"

(Actually, the defendant in pending lawsuits is the Empire State Development Corporation.)

"I think that we have been flexible and thoughtful in all these negotiations," Sander responded, speaking carefully. "I think if you had spoken to [developers] Jerry Speyer, Gary Barnett, Brookfield... I don't think you'll have [REBNY's] Steve Spinola or any of these people we interact with saying we were rigid, or unrealistic, and so forth."

"So, whether it's with Forest Ratner--with Forest City Ratner, with Bruce Rater, we will apply, as we have, intelligence, thoughtfulness, to the exercise," Sander said, proceeding to offer examples that were not quite related to AY. "We also have open lines of communication with the city. We worked unbelievably closely with Dan Doctoroff and Mayor [Mike] Bloomberg in the Hudson Yards transaction. We have extraordinary partnerships across the board, whether it's with [city officials] Ray Kelly, whether it's with Janette Sadik-Khan, whether it's with Ed Skyler. We do these things collaboratively."

Later, Sander was asked by WNYC's Matthew Schuerman if the MTA would accept a replacement yard with less value.

"I'm not sure I really want to engage in negotiations with you about Atlantic Yards," Sander replied. "The MTA has a good track record of being thoughtful and prudent."

(The New York Post has a story summarizing the issue, but with no comment from the MTA.)

Stock leaps

The stock of Forest City Enterpises, which on Tuesday went down 21.42%, yesterday leaped 24.3%. It must be a white-knuckle ride for day-traders.

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