Thursday, April 21, 2011

Unpacking the "restructuring" of the MTA's Vanderbilt Yard deal mentioned in today's Times

In an article today headlined M.T.A. Is Planning to Sell Its Midtown Headquarters, the New York Times reports:
In recent years, the authority agreed to sell the development rights over its West Side Yards for $1 billion to Related Companies and the rights over its Brooklyn property that forms part of the Atlantic Yards project for $100 million to Forest City Ratner. But the money has been slow to come because of the recession and a restructuring of the deals.
(Emphasis added)

For the record

Just for the record, let's deconstruct that vague language.

Forest City Ratner initially bid $50 million in cash for the MTA's Vanderbilt Yard, while rival Extell, the only firm to respond to a belated RFP--18 months after Atlantic Yards was announced, with FCR anointed the public property--bid $150 million.

The MTA, pressured by its political patrons, chose to negotiate solely with Forest City Ratner, which contended--as the MTA agreed--that the overall value of its bid was higher. (Then again, Extell was not allowed to fully develop its bid, nor was there an assessment--as seems necessary in retrospect--as to whether which bid was more likely to come to fruition.)

Forest City Ratner in 2005 then bid $100 million. But the MTA never got the money. In 2009, the developer, arguing that its bottom line had been hurt by the recession, requested a restructuring of the deal.

The MTA, again pressured by its political patrons, agreed to take $20 million down, with the rest delivered over 22 years at a gentle 6.5% interest rate. It also agreed to accept a smaller replacement railyard, saving the developer $100 million.

So the restructuring of the deal not only promised the MTA less money upfront and, arguably, less than it might have gotten had there been a fair RFP. It also promised a lesser package of benefits.

And Forest City Ratner, should it choose to forfeit a $86 million letter of credit, could still walk away from its railyard obligation.

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