Wednesday, November 11, 2009

On Coney deal, the government pays more than the 2005 value of land, but with the Vanderbilt Yard, the government accepts less

While New York City's plans for the Coney Island amusement area are not directly comparable with developer Forest City Ratner's plans for the Metropolitan Transportation Authority's Vanderbilt Yard, it's certainly intriguing to learn that the value of land for the former has gone up while the latter has (effectively) gone down.

Consider that, as reported today by the New York Times and Crain's New York Business, the city has agreed to buy 6.9 acres from investor/speculator Joe Sitt for $95.6 million. That's $13.86 million per acre, more on a per acre basis but less in total than the $140 million he sought for 10.5 acres ($13.33 million per acre).

Sitt apparently paid $93 million for about 10 acres, the Times reported in April.

So Sitt made a nice profit.

What about AY?

Meanwhile, Forest City Ratner in 2005 agreed to pay the MTA $100 million cash for the 8.5-acre (or 8.3-acre) Vanderbilt Yard. The developer said that the value of its bid was much greater, because it included, among other things, an upgraded railyard.

This year, FCR renegotiated the deal, agreeing to pay only $20 million for the first segment of the railyard, then pay $80 million for the rest over 22 years at a generous 6.5% interest rate. And the developer would build a smaller upgraded railyard and save $100 million.

In other words, though the public price tag didn't change, the value of the deal to the government went down.

Thus, in essence, the value of the land went down.

In Coney, the value of the land went up.

Something doesn't compute.

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