Friday, March 20, 2009

If FCR's Beekman Tower faces 50% cut, what does that say about Atlantic Yards promises (and designs)?

News that Forest City Ratner may downsize the planned (and, purportedly, funded) Frank Gehry-designed 867-foot Beekman Tower in Lower Manhattan by 50 percent raises serious questions about the developer's promises regarding the Atlantic Yards project.

(Photo from Curbed)

After all, as DDDB points out, Forest City Ratner has no lawsuits to blame for the potential downsizing, as with Atlantic Yards. And that raises serious questions about the state's steadfast support for a project whose cost is now a secret.

Second half on hold

After WNYC broke the story, Crain's New York Business reported that FCR would continue work on the lower 38 stories but would put the second half on hold.

Crain's reported: “Given the current economy, we are conducting a study to assess costs, risks and overall timing,” said a spokesperson for the company, in a statement. “Work is continuing on the building including on the school and we should have some conclusive answers shortly.”

The Tribeca Trib reported that, though WNYC reported that a work permit issued by the Department of Buildings treated the top of the current structure as a roof, FCR said that was just a setback already part of Gehry's design.

However, the developer hedged when asked if the building would reach 76 stories and 904 apartments.

Beekman gyrations

The Gehry Tower, to be the city's tallest apartment building, was once to become condos but was switched to rentals. As FCR executive MaryAnne Gilmartin said last October, “we just simply do not know how to give up.”

She also said "every deal dies three times." The Beekman Tower project may have many more lives.

Though a 38-story Beekman Tower would surely represent an enormous compromise for Gehry's vision, it still could find a place in the market. "We're selling views," Gilmartin said last October. "From the moment you step into the apartment, you see sky.” Each apartment has three vistas, “which is extraordinary… When you clear the 11th floor, there’s not much to compete with it.”

Tax-exempt Liberty Bonds

The $680 million in financing for the project—the largest construction loan in the company’s history (according to the Trib)--was announced a year ago.

The bonds issued by the New York City Housing Development Corporation (NYC HDC) are a combination of $190 million in tax-exempt Liberty Bonds, aimed to revive Lower Manhattan, and $476.1 million in taxable bonds. The New York State Housing Finance Agency contributed $13.9 million from its Liberty Bond allocation.

("That’s the beauty of the Liberty Bonds, tax-exempt rates and all market-rate units," an executive from parent Forest City Enterprises, told investment analysts last April. Atlantic Yards, by contrast, would get housing bonds for rental buildings that include affordable units.)

Do they have to give bonds back?

I asked NYC HDC spokesperson Catie Marshall yesterday how much the developer would be allowed to spend. "The funding for a project such as the Beekman is generally done in tranches, thus it is phased (sort of pay-as-you-go)," she responded. "In the case of the Beekman, the bonds are variable rate and only the first two tranches have been issued. In general terms, if a project is altered and does not need all of the funding, the remaining tranche(s) will not close. It’s pretty straight forward."

"Variable rate bonds can be called at any time – there is no exposure to bond holders or to HDC as they are backed by a letter of credit from a bank or consortium of banks," she added.

Marshall said she didn't have any specific numbers regarding the cost of the project or the amount spent. "For that you would have to contact the developer," she said.

Could AY be cut 50 percent?

The downsizing of Beekman may open up an opportunity for whimsical artist Bruce McCall to revisit Atlantic Yards.

In September 2006, taking off from a way overhyped New York Times article about a proposed six to eight percent cut in the Atlantic Yards project, McCall produced a piece of Op-Art in the Times that I called "more questionable than funny."

Now, however, there's a real opportunity to show how the Atlantic Yards project might look if chopped completely in half. FCR can't quite do that with an arena, unless, as NLG points out, the hoopsters start playing half-court.

Otherwise, a 50 percent downsizing isn't out of the question; under the City Funding Agreement, the developer faces no penalties as long as, within 12+ years, 1.5 million square feet are built in Phase 1--some 44% smaller than promised in the General Project Plan approved in December 2006.

There's no timetable for Phase 2, but, should AY be abandoned, a City Purpose Covenant cited in the State Funding Agreement requires 1845 units of housing, less than 29 percent of the 6430 units approved.

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