Saturday, May 16, 2009

Reading the dailies on the eminent domain case: questions about groundbreaking, appeal timing, Gehry's role

OK, so when does Bruce Ratner promise a groundbreaking for the Atlantic Yards arena? This summer, according to the New York Daily News; in September (which could be this summer), according to the New York Post; or in October, according to the New York Times. This year, according to an official statement (available on the Barclays Center site but not yet the Atlantic Yards site).

Why does it matter? First, it suggests that Ratner can't get his story straight. Second, it assumes a certain time frame for a decision regarding an appeal of the eminent domain case announced yesterday.

Perhaps most importantly, it allows Ratner, at least for now, to continue to promise that the arena would open for the 2011-2012 season. I think that's highly unlikely, because Ratner already suggested the arena would take 30 months to build, and the environmental review said 32 months, but it's remotely possible that a stripped-down design could be completed faster.

The timing of an appeal

Plaintiffs' attorney Matt Brinckerhoff left open the possibility that current legal cases could be cleared by the fall: "At a minimum, if we lose every single thing imaginable, it's still going to take them four to six months," he told the Daily News. That would then lead to the effort to exercise eminent domain by the Empire State Development Corporation.

But if the eminent domain case appeal is heard, it could slow things down for another two years. That's important, because Forest City Ratner has until the end of the year to see tax-exempt bonds issued to fund arena construction, a savings of well over $100 million.

Appeal in EIS case

What about the pending request for an appeal in the case challenging the AY environmental review? The Post reports:
There is also a suit pending challenging whether the state conducted a proper environmental review before approving Atlantic Yards, but Ratner's staff said it feels construction could still begin while that case remains under appeal. Opponents, however, said they disagree.

Perhaps construction work might be able to go forward, but would bonds be approved (via a local development corporation set up by the Empire State Development Corporation) before that case was cleared? If that case goes forward and is successful, a revised environmental impact statement might be required, so the ESDC might want to wait until the case is resolved.

Forest City Ratner's role

"This is really the last hurdle that we have and now we can do what our company does best and build an arena and houses," Ratner told the Daily News.

The company has no track record building an arena and little track record building houses. Rather, as the company web site states, it "currently owns and operates, 11 million square feet of commercial property in the New York metropolitan area, including office, retail and residential."

Gehry: in or out

So, is Frank Gehry still on the project? According to the Post:
Ratner said a revised arena plan would be released at a later date and promised it would still be a Gehry-design that's top-notch.

According to the Times:
He has also said he wants to pare the projected $1 billion cost of the arena by about $200 million. He said he would decide within 60 days whether to keep the original design, by the architect Frank Gehry, or use another.

Gehry's participation is important, because the arena has been sold to sponsors as a Frank Gehry arena. Should Gehry no longer be involved, presumably they would be able to renegotiate their level of support. I predict that some hybrid will emerge, with Gehry's name--if not his and his firm's ongoing participation--attached to the arena.

Cost of arena going down?

The price tag had previously been stated at $950 million. Trimming $200 million would bring it to $750 million. Previously, the Times had reported that Ratner wanted to cut the price tag in half, and in February I expressed skepticism, pointing out that an arena in Orlando, where construction costs are much lower, has a $480 million price tag.

The cost is important because, the higher the price tag, the larger the amount of PILOTs (payments in lieu of taxes) and the larger amount of foregone property taxes. And that means that the arena site would have to be assessed--in echoes of the Yankee Stadium controversy--so the value is high enough to generate those PILOTs. Stay tuned for that controversy to emerge.

Misunderstanding eminent domain

The Times reported:
In its unanimous decision, the Appellate Division of State Supreme Court, Second Judicial Department, upheld a lower court ruling rejecting a challenge to the state’s use of eminent domain to obtain properties for the developer from owners unwilling to sell.

No, eminent domain cases begin in the Appellate Division, because New York State law tilts strongly in favor of agencies pursuing condemnation and no trials and fact-finding are allowed. That information was both in my report yesterday and in the Develop Don't Destroy Brooklyn press release.

It's dismaying that the Times, whose commercial real estate reporter Charles Bagli is generally quite able, can't accurately inform its readers about a basic tenet of New York's much-criticized eminent domain law.

Missing warnings

None of the dailies mentioned new warnings from Forest City Enterprises about additional real estate development risks faced by the project. Such warnings may seem to be boilerplate required by the Securities and Exchange Commission, but they're different from warnings filed just six weeks earlier.

One-building Phase 1?

The Forest City ratner press release stated:
FCRC expects to start at least one residential building during the first phase of construction. 

Only one? There initially were supposed to be four buildings around the arena, and another building at Site 5. The City Funding Agreement suggests that the developer can meet obligations without penalty by building three towers within 12 years after the exercise of eminent domain.

Job claims

According to the press release:
Ratner explained as well that the arena and larger development are expected to create 16,924 direct jobs and over 30,000 indirect jobs.

Well, that's construction jobs, and job-years, not jobs. And it refers to the entire once-planned build-out, while there's no indication that Forest City Ratner would build the project as approved. (The jobs figure was reproduced without skepticism by Crain's.)

The statement comes from the Final Environmental Impact Statement, Chapter 4: Socioeconomic Conditions (PDF):
As a result of the direct expenditures, the direct employment for constructing the entire Residential Mixed-Use Variation is estimated at 16,924 person-years of employment.


23rd decision?

Ratner called the decision "the 23rd in a row in favor of the development,” without citing examples. What about the Weinstein case? Or the rejected motion to dismiss the eminent domain case?

4 comments:

  1. so how bad is this? what about the state senate hearings, can they hae any impact at this point? (i'd think not.) i'm very unhappy about this.

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  2. As noted yesterday, there remain challenges in financing the arena even if legal cases are cleared. And if Gehry does not participate, that has an impact on sponsorships.

    As for the impact of the state Senate hearings, that's unclear, but I'll be writing more about it shortly.

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  3. sarah, don't despair. fight.

    i predict the state senate hearing will have an impact, perhaps legally and certainly public perception.

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  4. Bruce Ratner has run forest city into the ground and the company is now in pure survival mode.

    That's why forest city bailed out of it's fresno project, stopped beekman tower construction at the midway point, sold off key properties, laid off hundreds of employees and issued 45 million new shares of stock.

    Desperate times call for desperate measures, and forest city is as desperate as they come.

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