Tuesday, February 22, 2011

ESDC in 2009 promised B2, first affordable housing tower, wouldn't be delayed; is hold-up due to search for bank financing or new subsidies?

The first tower planned for the Atlantic Yards arena block is delayed yet again, even though, when the project was re-approved by the Empire State Development Corporation (ESDC) in 2009, the agency asserted that at least that building--Building 2, at the corner of Flatbush Avenue and Dean Street--was on track.

According to the June 2009 Technical Memorandum:
These potential delays due to prolonged adverse economic conditions would not affect the timing of the development of the arena, the transit access improvements, the construction of the new LIRR rail yard, the reconstruction of the Carlton Avenue Bridge or the construction of Building 2. It could, however, delay the construction of some of the remaining buildings on the arena block as well as the Phase II sites.
It's unclear whether the delay is caused by the unavailability of affordable housing bonds, bank financing, or both.

But as of August 2009, as the Times reported, the developer was already seeking additional affordable housing subsidies, beyond the standard incentives.

A month later, Bruce Ratner told his company's favorite reporter:
“They [opponents] are 100 percent wrong about the affordable housing. It’s another red herring. We’re required to build affordable housing and it has been my personal commitment from the very beginning,” said Ratner.
If and when the building gets started, construction should take 18 months.

Bond financing


At the 7/22/09 informational meeting preceding the ESDC's public hearing, one questioner asked whether the ESDC had conducted an analysis that indicates that the bond financing would be available for the affordable housing subsidies the project would require over its life cycle.

The answer came not from the ESDC but from Forest City Ratner project leader MaryAnne Gilmartin, who deflected the question; “There are bonds being issued for the construction of the arena, and there are programs that are being accessed for construction housing, and there are two different things. 80/20 bonds, which are the bonds used to build market-rate housing with 20 percent low-income, are volume cap bonds, which are readily available in this state, because there’s an absence of construction, nothing, frankly, is being built right now, so there is not a concern about the availability of that financing for housing. The financing on the arena, which is a different form of financing, will take place by the end of 2009, as we indicated. Again, we’re optimistic we can sell the bonds necessary to commence construction on the arena."

She did not mention that the buildings with 50 percent affordable housing are supposed to be financed through a separate program known as 50/30/20, involving 30 percent middle- and moderate-income units, and 20 percent low-income units.

A week later

A week later, at the 7/29/09 public hearing on the revised Atlantic Yards plan, David Pechefsky, the Green Party candidate for the 39th Council District and a former City Council budget analyst, brought up the issue of the project's financial viability.

He noted that, at the informational meeting, he asked about Forest City Ratner’s internal rate of return--which had not been voluntarily made public by the developer, but had come through in some documents--and FCR refused to answer.

“If this is truly a public project for the public good, it absolutely should be talked about,” said Pechefsky.

(Photo by Tracy Collins.)

Back in 2006, he said, “I looked at the numbers on the rental buildings… What they suggested to me that the affordable housing was really unlikely to get built in the time frame of the project, unless there was going to be additional public subsidies.”

His point was never addressed by the pro-project affordable housing advocates who spoke later.

Lingering questions

At the 11/4/10 Atlantic Yards District Service Cabinet meeting, Gilmartin said the developer intended to release designs and start construction of B2 in the first quarter of 2011. That was not to be.

She said the developer is committed to making the building 50% affordable, but "the actual program itself is still being worked out." As I suggested, that means that subsidies from the city and state are being sought.

"We are able to build for-sale housing on the arena block. I will tell you that, based on the current state of the market, and what we think is financeable and executable, we think it's more likely these buildings will be rental," Gilmartin said.

"We as a company do like the rental product," she said. "80 DeKalb has proved to us the rental market is strong enough we can convince banks to finance the building and be successful."

However, 80 DeKalb is an 80/20 building, not a 50/30/20 building.

So, the questions remain:
  • has Forest City convinced the banks to finance B2?
  • is Forest City seeking additional subsidies for B2?
Failure to require guarantees

The Atlantic Yards Development Agreement, signed in December 2009, allows an Affordable Housing Subsidy Unavailability to be claimed for up to eight one-year periods for each Phase 1 building.

A draft of the ESDC's General Project Plan in 2006 seemed to consider city and state actions to fund the affordable housing as part of the official approval process. Such language was dropped before the ESDC approved the plan.

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