Monday, August 10, 2009

Business as usual: Times notes Ratner's seeking more housing subsidies, but ignores lack of a cost-benefit analysis (and omits disclosure)

There are a couple of notable things about the New York Times article today headlined Atlantic Yards’ Developer Races a Court Hearing, a Bond Deadline and Opponents.

First, it portrays the project through the perspective of the developer, while not acknowledging that Forest City Ratner never testified at the public hearing last month (which the Times didn't cover in print, only on The Local, the blog aimed at Fort Greene and Clinton Hill). Second, it states that new renderings of the arena will be released, likely before Labor Day, but--it goes unmentioned--that likely would be after the opportunity for public comment ends on August 31.

Third, it reveals that Forest City Ratner has sought additional housing subsidies from the city, despite the careful statement by FCR executive MaryAnne Gilmartin last month that “Forest City does not expect to ask for more subsidy.”

The reason that's news: while Forest City is now framing Atlantic Yards as an affordable housing project, the developer won't build the affordable housing without sufficient city subsidies. And we still don't know--though serious doubts have been raised by experts like Michelle de la Uz of the Fifth Avenue Committee--how the cost-per-unit compares to alternatives.

Business as usual

The article begins:
As the usual tumult greeted the final public hearings on the Atlantic Yards development last month, it was business as usual for the developer Bruce C. Ratner.

He visited three rating agencies in preparation for selling bonds this fall to finance the first project in the 22-acre development near Downtown Brooklyn: an $800 million, 18,000-seat arena for the New Jersey Nets.

He flew to Moscow to meet with the billionaire Mikhail D. Prokhorov about investing in the money-losing Nets.

He went to and from City Hall and the state’s economic development offices on Third Avenue to complete the paperwork for the Atlantic Yards development and to start work on the arena.


Unmentioned: FCR officials did not participate in the final public hearings, but they--at least Gilmartin--did appear on July 22, and offered several answers that strained credulity.

Project "more important"

The article continues:
“We are racing to the finish line,” Mr. Ratner said in an interview as the public hearing drew to a close. “Our sense is that while this project was important five years ago, it has become even more important given the economy and the job situation in the city.”

Aside from the rebuilding of the World Trade Center, Atlantic Yards is the largest project in the city moving forward. The redevelopment of the 26-acre Hudson Yards in Manhattan and dozens of other projects have been slowed or stopped by a flagging economy and a lack of real estate financing.


Even more important to whom? Certainly to the developer. But the importance to the city and state depend on the costs and benefits and--as it was noted on July 22, but unmentioned in this article--the state has not revealed a fiscal analysis it is "constantly" updating.

(That fiscal analysis is not even a full cost-benefit analysis. The closest thing we have is testimony by the Independent Budget Office that the arena would be a money-loser for the city, but that news has not appeared in the Times, only mentioned in a blog comment.)

This might have been the right time for the Times to insert the disclaimer that the newspaper's parent company partnered with FCR in building the new Times Tower. Such disclosure, typical for most AY-related stories for a while, is absent. (In June 2005, then Public Editor Byron Calame wrote, in regard to an interview with Ratner, "The New York Times, I believe, has an obligation to alert readers when they are reading substantive articles about a company or individual with whom the newspaper has some business or professional relationship.")

Hurdles facing FCR

The article notes challenges facing the developer:
But Mr. Ratner must clear a number of important hurdles before starting construction of the arena and the first four residential towers.

There is an Oct. 14 hearing before the state’s highest court, where opponents hope to scuttle Atlantic Yards by challenging the state’s use of eminent domain. Beyond that, there is a looming deadline: he must get the financing done and start work by Dec. 31 in order to qualify for a much needed tax-exempt bond status and hold on to a $400 million naming-rights deal with Barclays Bank for the arena.

Mr. Ratner acknowledged that he was also seeking additional investors for the Nets, but he said he and his company would retain a substantial stake in the team, which he hopes to move to Brooklyn during the 2011-12 season.

...Officials have given him more time to build eight acres of publicly accessible open space and as many as 16 buildings and 6,400 apartments, while allowing him to replace the railyard with a smaller, less expensive yard than originally planned. About 40 percent of the housing would be built for low-, moderate- and middle-income families.

(Emphasis added)

The article does not point out that even the Empire State Development Corporation acknowledges the potential for a delayed buildout, in which only an arena and one tower would be constructed.

So even if hurdles are cleared, there's a good chance that FCR wouldn't construct four residential towers soon. And that's important, because the developer and state still say the project would be done in a decade, even though that seems increasingly unlikely--after all, former ESDC CEO Marisa Lago acknowledged it would take "decades"--and such delay diminishes the expected public benefits.

As for moving the team during the 2011-12 season, does that mean that the arena would be open for the beginning of the season? If not, would the team move across state lines during the season?

Actually, the state has not officially given the developer more time--the state still claims that the buildout would take ten years, though it could take longer. Ratner gained more time in the September 2007 City and State Funding Agreements.

New challenges

The article notes October 14 hearing date in the state eminent domain appeal, which should be resolved in late November, and quotes Develop Don't Destroy Brooklyn spokesman Daniel Goldstein:
“We plan on bringing at least two more significant lawsuits against the phantom project,” a reference to the developer’s failure to release new images of his buildings after scrapping the original designs.

Mr. Ratner said he expected to release new images of the arena before Labor Day. “I think the final architecture will be really beautiful,” he said.


Well, one of those DDDB-funded/organized lawsuits would be over the failure to issue a Supplementary Environmental Impact Statement (SEIS), while the other, I suspect, would be against the Metropolitan Transportation Authority.

Need for affordable housing

The article closes:
The developer disputed critics who claim that he may never build the parks and affordable housing that he once promised, now that the expected completion date has been pushed out to 2019, from 2016. Mr. Ratner said there was a continuing need for affordable housing for the city’s teachers, nurses, firefighters and hotel workers.

“There is a stable and steady group of takers for work-force housing in the city,” Mr. Ratner said. “The goal is not just to create the required amount but possibly more than that.”

In recent weeks, the developer has sought additional housing subsidies from city officials, who have so far declined to go beyond the standard incentives for developers.


Of course there's a need for "work-force housing," which is not the same thing as "low-income housing," which followers of ACORN, the housing advocacy group that signed the Atlantic Yards Housing Memorandum of Understanding, seek. 

Only 900 of the planned 2250 subsidized units (out of 4500 total rentals, plus 1930 condos) would go to low-income families, while numerous "affordable" units would be near or above current market rates.

Forest City Ratner needs to make its profit. The city and state want more affordable housing. But they can't prove that Atlantic Yards would deliver the latter until we see the numbers.

Getting the bonds

The article closes:
The project’s underwriters, led by Goldman Sachs, are also preparing to sell about $700 million in bonds for the arena in October.

Some real estate executives and critics said it would be hard to sell the bonds for such an uncertain project. But Jay Abrams, a bond analyst at FMS Bonds, said there “is definitely an appetite for tax-exempt bonds in New York, and elsewhere.” The lawsuit, he added, “is not necessarily a game-killer. At the right price, there’s always a buyer for bonds.”


So how do you sell bonds for a project that's still under litigation? Apparently by offering some kind of guarantee, or premium. It makes it a bit more costly for the sellers, since the buyer must insure against the risk of the deal going south.

The question is whether the bond sale would begin before the October 14 hearing date, or whether the sellers would wait--just to be careful--to see how that court argument goes. My prediction is the latter.

(Update: See Gari N. Corp for some skepticism about the bond sales.)

2 comments:

  1. Once again, the New York Times comes up far short of where "the paper of record" should be on what it acknowledges is one of the largest and most important development projects in New York City.

    Why do they even bother "reporting" on Atlantic Yards? Maybe they like to keep you busy dissecting their schlock?

    Too bad I could only cancel my subscription once.

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  2. Bagli also neglects to mention that The MTA gave Ratner a huge break by allowing him to substantially reduce his previous commitment to pay $100 million for the air rights over the Vanderbilt Yards.

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