Skip to main content

Noticing New York on the Goldstein settlement: the bargain the state enabled Ratner, bad public policy on free speech, and the ongoing battle

Michael D.D. White has written a must-read on his Noticing New York blog, arguing that Forest City Ratner received a huge bargain (given the enormous development rights enabled by the state) when it settled with Daniel Goldstein for $3 million, that the developer will seek continuing advantage in the Atlantic Yards fight, that the state inappropriately assited Forest City Ratner in trying to muzzle Goldstein, and that the reporting on the settlement disserved the public.

I mostly agree, with a few amendments. As I wrote 4/30/08, regarding Ratner's purchases of other apartments in Goldstein's building:
While it looks like the developer was being generous, the enormous increase in development rights made it worthwhile--even if he had to pay, which he doesn’t.
In that case, Ratner was directly reimbursed by city taxpayers for the land purchases. In Goldstein's case, there's no more money in that specific kitty--but the developer has since found new ways to gain public concessions, and surely will continue to do so.

White's piece is headlined “$hhh!” A Thieving Developer Wants Daniel Goldstein Quiet About Its Misdeeds, Meaning the Atlantic Yards Fight Ain’t Over.

Quieting Goldstein

White writes:
The thing that was so odd in this process and about which the media yet failed to report is how important it was to Forest City Ratner to attempt to deprive Daniel Goldstein of his right to speak out against the project. Because of the way it was negotiated, with Daniel Goldstein stoutly refusing to give up his free speech rights, we will never know the exact dollar value Forest City Ratner put on his unrelinquished rights. We would have been thrilled if Mr. Goldstein had played the negotiations in a way that teased out that precise figure before he rejected it but had he been so clever he could have run the risk of appearing unprincipled and insincere to the judge.* Nevertheless, the fact that Forest City Ratner pressed hard to deprive him of his rights, enlisting the weight of the state and Judge Gerges in the negotiations to do so, has to be viewed as highly significant and startling.
Forest City Ratner wanted to muzzle Goldstein, but instead extracted an agreement to leave one lawsuit and desist from others, an agreement to avoid "active" opposition (an empty phrase), and an agreement to give up the title of Develop Don't Destroy Brooklyn spokesman (which he was likely to do so as well).

In my book, the first was the most significant concession; Goldstein told Crain's “there was nothing more I could possibly do to fight this project.” Given that he did more than anyone, it's hard to fault his decision, but the settlement, as noted, likely weakens pending litigation that already faced an uphill battle.

Groundbreaking vs. Goldstein

White contrasts the ceremonial March 11 groundbreaking with the attendant protest:
The recent ‘groundbreaking’ for the proposed Prokhorov/Ratner basketball arena involved an event with a stage, microphones, an amplified public address and sound system, elaborately produced videos projected on a screen, in addition to having Mayor Bloomberg, Governor Paterson and Borough President Marty Markowitz speak. Ratner also featured rapper-entrepreneur-Atlantic Yards-investor Jay-Z and his multi-Grammy Award-winning wife BeyoncĂ©, who in another venue was brought in to spiff up Hugh Jackman’s performance at the academy awards. It is worth contemplating, in connection with this Brooklyn-destroying appearance of BeyoncĂ©, that Forbes listed her fourth on its list of the 100 Most Powerful and Influential Celebrities in the world.
(I'd add that Jay-Z was number 32 on the list.)

While the speakers were all salaried or compensated in one way or another, the outside crowd--larger than the corps of speakers but not the audience--was admonished by the large groups of cops to avoid mechanical assistance to amplify their voices. White counted more than 100 cops and observed:
By comparison, a public town forum held by Governor Paterson the preceding Monday had virtually no police presence.
Why did Ratner care?

White writes:
So why is Ratner so afraid of the exercise of Daniel Goldstein’s comparatively small dachshund-size free speech? One answer can be found in who was not there at the groundbreaking: None of the local politicians representing the community were there. Ratner may have pocketed Bloomberg and the pathetically weak Paterson, he may have Markowitz on his payroll with contributions to his pet charities-used-for-politics, but the crowd outside protesting reflected the local community. The image we used of Daniel Goldstein-dachshund vs. Ratner’s Great Dane-sized PR machine may make Daniel appear rather outmatched but when it comes to bark and bite Daniel’s bark has the bite of truth. By contrast, the Ratner PR machine has the job of selling fictions. To see an assembled list of the pack....
The CNG papers and the money

White points to the Brooklyn Paper/Courier-Life, which published stories quoting Forest City Ratner executive MaryAnne Gilmartin as claiming the sticking point for Goldstein was the money. While White calls it a "self-confessed he-said/she-said fashion," I'd go farther.

Goldstein and his lawyer specifically denied Gilmartin's claim, on the record, and she made no attempt to call them liars. Similarly, several news outlets published a claim based on an anonymous source, which was denied by a non-anonymous source.

The Times:
According to an executive who was briefed on the negotiations but was not authorized to discuss it publicly, Mr. Goldstein initially sought $5 million. Mr. Goldstein denied that.
The Daily News:
The Ratner camp said Goldstein asked for $5 million. Goldstein denied it, but he wouldn't say how much he wanted.
The end of the fight?

White criticizes the Brooklyn Paper:
Nevertheless, the fact that Daniel was at the end of his personal options in this regard was not grounds for the editor to slap a headline on the story that said: “The Yards Fight - - It’s Over,” discouraging important further reading.
Well, it's certainly the end (more or less) of a crucial phase of the fight. Goldstein said:
At that time, with that action on Ratner's behalf, there was nothing I could any longer personally do with my home that would stop or impact the project.
And it's not clear whether DDDB will play a role going forward, joining other groups that will persist.

Political battle

White delineates the ongoing battle:
Why? Ratner doesn’t want to see the project broken up. Ratner is going to try and hold on to the development rights for this project for perhaps forty years. Support matters. Ratner can't move one foot forward without huge amounts of subsidy (which other developers will want and need for other projects elsewhere in the city). Support matters. Ratner wants to resist investigations of his actions and possible indictment both with respect to his Yonkers Ridge Hill project and with respect to Atlantic Yards. Support matters. Prokhorov is under attack in the U.S. Congress. Failing some surprises he will probably still be approved. . . But support matters. Support matters a lot and will for decades. And remember that the groundbreaking event was pretty empty of supportive politicians. Ratner’s support has been continually waning.
White thinks Sen. Chuck Schumer, who admitted under questioning the AY site wasn't blighted, might be "possibly wavering." We'll see, but I think it's more likely Schumer answered a question more or less honestly before checking the political implications--which he would check, if it really mattered. After all, just last week Politico reported:
Sen. Chuck Schumer invited Harry Reid to spend Monday morning with him in Brooklyn, where some of Schumer’s well-heeled friends opened their checkbooks to help the Senate majority leader’s struggling reelection bid.

...So, there Schumer was Monday morning, introducing Reid to the big-money developers of the New Jersey Nets’ new $4.9 billion facility in Brooklyn.

Um, it's the project--not the arena--that would be nearly $5 billion.

Bad public policy

White points to the "insultingly low figure" Goldstein was originally offered and points to his opposition to the gag order deals about which we might have never learned had he not stood firm.

He rightly points out that it was bad public policy to enforce any kind of gag order:
By the time it got to Supreme Court Justice Abraham Gerges’ court the only way Forest City Ratner was going to get its gag order agreement silencing Goldstein was if the agreement was obtained, signed and enforced by New York State as its agent. Absolutely outrageously, New York State officials assisted Ratner in the negotiations to pursue this aim. Even worse, the judge participating in the settlement negotiations pressured Mr. Goldstein to accept such a deal. Were we the judge in this case we would have done no more than perhaps stand by as such an odious provision was negotiated, see what higher price for the property was going to be paid by Ratner as a result, and then announce that the settlement deal would be enforced in terms of the amount to be paid but that the gag order part of the agreement would be voided and stripped out of the agreement as against public policy.

But apparently Gerges pressed the agreement, acting as if he didn’t understand why it should be objectionable for Goldstein to agree “not to oppose the project in any way.” Do we want a country where citizens need to be looking over their contractual shoulder when it comes to speaking honestly about how our cities are shaped and the government run?
Goldstein's deal

White points out Goldstein's difficult position:
The only way that Goldstein could avoided the above estimated $622,500 or $821,700 in attorney fees is if he had litigated the compensation issue to a final conclusion taking it through a judgement and appeal that could likely have lasted ten years. In that case he would have been allowed the attorney fees he is statutorily entitled to, but only if he had gotten sufficiently more than the last high offer from Ratner. (Again, we note we have written about how the process is weighted against those who have their property seized.)
He suggests that Goldstein’s apartment escalated in value to about $1,543,469 by early 2008 and then went down to some $900,000.

But White gives Goldstein the benefit of the doubt, because, under "the pending threat of condemnation, for almost seven years Goldstein couldn't sell his apartment." Beyond that, White cites the additional costs (e.g., mortgage, schools) that factor into a home-buying decision.

The ESDC “Upzoning”

His most important point is that the money above market value (White estimates $636,500, though that can be debated) represents far less than the value of the zoning increase:
Assuming, conservatively, that Goldstein’s apartment will be replaced by development that is four times the current density, and assuming conservatively that we should use the $850 p/s/f condo figure, this increase in density transmutes the square foot value of Goldstein’s apartments in development terms to $3,400 p/s/f ($850 p/s/f times 4). Then the gap between what Ratner is offering Goldstein and what the unit is really worth is $450 vs. $3,400 p/s/f.
White argues that all the value of upzoning should go to the owners originally in place. I'd point out that, in her book Times Square Roulette, urban development expert Lynne Sagalyn suggested owners should get a share:
What realistic and workable alternatives might offer potentially greater efficiencies and expanded equity under a standard that gives existing property owners potential long-term economic rights beyond those of ‘sure and certain compensation’?

Consider a system in which the public sector creates a legal-entity to redevelop land within a defined project area, some kind of joint-stock corporation whose shareholders include cash investors... and existing property rights interests... who are issued shares in property to the value of their property rights as determined by a fair and just system of valuation...
Such a broader sharing of benefits has been suggested, as has "supercompensation."

And what about Bertha Lewis?

White closes with this:
It is ironic and probably extremely telling that the most venomous criticism of Daniel Goldstein settlement comes from someone who sold Ratner the rights to her free speech years ago: Bertha Lewis, the head of ACORN, (now rechristened New York Communities for Change in a tactical evasion of PR shame). Ms. Lewis, theoretically a booster of Atlantic Yards, sold her rights at the very outset of the Atlantic Yards and so has been unable to criticize the project even as it became clear what it really was and even as it has degenerated with subsequent revelations into something far worse.

Comments

  1. We appreciate this coverage of our post.

    Examining Lynne Sagalyn’s suggestion mentioned above that owners should get a share of the value of the upzoning doesn’t get me around the conclusion that so long as the developer gets even a fraction of the increase it is still a destructive incentive to: 1.) abuse eminent domain, and 2.) couple inappropriate density with that increase.

    Michael D. D. White
    Noticing New York
    http://noticingnewyork.blogspot.com/

    ReplyDelete

Post a Comment

Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

Revising official figures, new report reveals Nets averaged just 11,622 home fans last season, Islanders drew 11,200 (and have option to leave in 2018)

The Brooklyn Nets drew an average of only 11,622 fans per home game in their most recent (and lousy) season, more than 23% below the announced official attendance figure, and little more than 65% of the Barclays Center's capacity.

The New York Islanders also drew some 19.4% below announced attendance, or 11,200 fans per home game.

The surprising numbers were disclosed in a consultant's report attached to the Preliminary Official Statement for the refinancing of some $462 million in tax-exempt bonds for the Barclays Center (plus another $20 million in taxable bonds). The refinancing should lower costs to Mikhail Prokhorov, owner of the arena operating company, by and average of $3.4 million a year through 2044 in paying off arena construction.

According to official figures, the Brooklyn Nets attendance averaged 17,187 in the debut season, 2012-13, 17,251 in 2013-14, 17,037 in 2014-15, and 15,125 in the most recent season, 2015-16. For hoops, the arena holds 17,732.

But official…

So, Forest City has some property subject to the future Gowanus rezoning

Writing yesterday, MAP: Who Owns All the Property Along the Gowanus Canal, DNAinfo's Leslie Albrecht lays out the positioning of various real estate players along the Gowanus Canal, a Superfund site:
As the city considers whether to rezone Gowanus and, perhaps, morph the gritty low-rise industrial area into a hot new neighborhood of residential towers (albeit at a fraction of the height of Manhattan's supertall buildings), DNAinfo reviewed property records along the canal to find out who stands to benefit most from the changes.
Investors have poured at least $440 million into buying land on the polluted waterway and more than a third of the properties have changed hands in the past decade, according to an examination of records for the nearly 130 properties along the 1.8-mile canal. While the single largest landowner is developer Property Markets Group, other landowners include Kushner Companies, Alloy Development, Two Trees, and Forest City New York.

Forest City's plans unc…

At 550 Vanderbilt, big chunk of apartments pitched to Chinese buyers as "international units"

One key to sales at the 550 Vanderbilt condo is the connection to China, thanks to Shanghai-based developer Greenland Holdings.

It's the parent of Greenland USA, which as part of Greenland Forest City Partners owns 70% of Pacific Park (except 461 Dean and the arena).

And sales in China may help explain how the developer was able to claim early momentum.
"Since 550 Vanderbilt launched pre-sales in June [2015], more than 80 residences have gone into contract, representing over 30% of the building’s 278 total residences," the developer said in a 9/25/15 press release announcing the opening of a sales gallery in Brooklyn. "The strong response from the marketplace indicates the high level of demand for well-designed new luxury homes in Brooklyn..."

Maybe. Or maybe it just meant a decent initial pipeline to Chinese buyers.

As lawyer Jay Neveloff, who represents Forest City, told the Real Deal in 2015, a project involving a Chinese firm "creates a huge market for…