Skip to main content

Behind the revision of the railyard deal: MTA says it leaves agency whole, won't try to put a dollar figure on work so far, says disruptive work to meet deadline not expected

As noted on June 7, the Wall Street Journal broke the news that developer Forest City Ratner, which successfully revised the Vanderbilt Yard development rights deal to build a smaller, cheaper replacement railyard and to attenuate payments, has managed to save cash flow by renegotiating another aspect of the schedule with the Metropolitan Transportation Authority.

Instead of beginning the permanent railyard this June 30, as indicated in an MTA Staff Summary dated 6/22/09, the official start date has been moved back 18 months to 12/31/13, with terms disclosed to the MTA board members on June 4.

Now that I have the underlying documents and posed questions to the agency, I can attempt answers at some of the lingering questions:
  • Does Forest City save money? Probably.
  • Does it leave the MTA where it wanted? Yes, but thanks in part to the agency's own delays.
  • Will a concentrated schedule mean noisy late-night work? No, they say.
  • Can the schedule be extended/relaxed again? Surely.
  • Does Forest City have the upper hand? Looks that way.
By building the arena, Forest City Ratner had to move the railyard functions (storage and cleaning) to a smaller temporary yard east of the arena block, and to build an upgraded yard--though not as large as originally promised, and smaller than its predecessor-by 9/1/16.

Note that Forest City Ratner in 2005 agreed to build a nine-track yard that can accommodate 76 train cars but, with the 2009 renegotiation, got the MTA to agree to a seven-track yard holding 56 cars, valued at $147 million, perhaps $100 million less than the larger yard.

The temporary railyard has capacity for only 42 cars. It was once supposed to last 32 months after construction, but could last six years and eight months, or 80 months.

Little changing?

The Journal reported:
Forest City spokesman Joseph DePlasco said the yard will still be completed on time. The developer has already built a portion of the yard, he said, and other related work will continue.
MTA spokesman Adam Lisberg said the developer has agreed to do $10 million of additional work in the interim, and the LIRR is using a temporary rail yard meanwhile.
"From our perspective, very little is changing here," Mr. Lisberg said.
Why the delay?

MTA Chairman Joseph Lhota wrote to board members:
While substantial work has been performed that progresses the new yard, Forest City has asked for an extension of the formal construction commencement date for a period of 18 months, until December 31, 2013. Forest City has indicated that it will be completing work at the arena site and in the temporary rail yard to facilitate the arena's opening. 
That's fairly opaque, since it doesn't explain why, so I asked. "I don't have an official reason why they asked, but it's sort of immaterial to us, because we don't need it [finished] until 2019," Lisberg told me. As the Journal's Eliot Brown wrote:
The delay comes as developer Forest City Ratner Cos. has struggled with higher-than-expected costs and a sluggish economy that have slowed other portions of the project.
So it seems likely that the delay, at minimum, will save Forest City some cash flow.

Delayed East Side Access means a delayed yard?

The new railyard is needed to facilitate East Side Access: service to Grand Central Station, with Atlantic Avenue to Jamaica trains as a shuttle service. Until last month, the MTA had been predicting 2016 as the start date; hence the requirement, in the 2009 revision of the Vanderbilt Yard deal, for the railyard to be finished by 2016.

But East Side Access is delayed, and the new goal is 2019. "We did not put forward a new time estimate until last month, but had backed off earlier ones," Lisberg said.

Of course, if the railyard is not needed until 2019, that gives opportunity for Forest City to further revise the deal. The year 2016 is no longer a drop-dead date, so if things are going slowly, or they need to save cash flow, why not simply ask for more time?

The amount of spending: ahead or behind?

If the new railyard costs $147 million and would take four years and three months to build, a $10 million expenditure over 18 months represents a slowdown in progress, I wrote.

Then again, presumably Forest City has already spent a portion of the overall cost.

Indeed, that's what Lhota indicated:
As background, in February of 2011, LlRR/MTA agreed to allow Forest City to enter into the existing temporary rail yard so that Forest City could begin the reconstruction of the Carlton Avenue Bridge -a road connection over the rail yard that the City and the Empire State Development Corporation (the Project Sponsor) required for the opening of the Barclays Center in September 2012. To construct the bridge, Forest City Ratner has had to excavate within the rail yard in order to ensure adequate clearance over LlRR trains using the yard. Because this excavation would also be required in connection with the construction of the permanent yard, this early work has advanced the construction of the permanent yard before the official "commencement of construction" and has been achieved without Forest City being permitted to draw down on the $86 million letter of credit. Thus, LlRR has received the benefit of the excavation without any diminution of its security. 
(Emphasis added)

So, can that benefit be quantified? No. Lisberg said "we are not, as a matter of policy, giving any estimates on the value of work done so far."

He noted that the additional $10 million letter of credit protects the MTA, so if Forest City backs out, the agency would get a letter of credit worth $96 million to construct the new railyard, and have the opportunity to sell new development rights.

Disruptive work?

If the deadline is met, I asked, how much disruptive late-night and overnight work will be necessary? That's a very relevant question, given that late-night railyard work to finish the Carlton Avenue Bridge has proven quite disruptive to nearby residents.

The LIRR engineering staff examined the proposed schedule, and said--according to an internal memo Lisberg quoted to me--that the work for the permanent yard could be completed without "resorting to extensive multiple shifts over time, night time work, or other extraordinary measures."

That suggests that railyard work would not be as disruptive as the current work. But it also looks like they have a time cushion to extend work.

Delegated decision

As Lhota's memo indicates, the board did not have vote on this, because in 2009 they delegated authority to:
the Chairman and Executive Director and their designees "to negotiate, execute and deliver contracts and any other necessary or appropriate agreements, leases, deeds, documents, and other instruments, and to take any other necessary or appropriate steps, to implement the Atlantic Yards Project." 
Lhota noted ESDC concurrence:
MTA/LIRR have been coordinating closely with the Empire State Development Corporation, who supports this amendment to the permanent yard construction agreement. 
Vanderbilt Yard Agreement, 6/4/12, MTA & Forest City Ratner

Comments

Popular posts from this blog

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…

Is Barclays Center dumping the Islanders, or are they renegotiating? Evidence varies (bond doc, cash receipts); NHL attendance biggest variable

The Internet has been abuzz since Bloomberg's Scott Soshnick reported 1/30/17, using an overly conclusory headline, that Brooklyn’s Barclays Center Is Dumping the Islanders.

That would end an unusual arrangement in which the arena agrees to pay the team a fixed sum (minus certain expenses), in exchange for keeping tickets, suite, and sponsorship revenue.

The arena would earn more without the hockey team, according to Bloomberg, which cited “a financial projection shared with potential investors showed the Islanders won’t contribute any revenue after the 2018-19 season--a clear signal that the team won’t play there, the people said."

That "signal," however, is hardly definitive, as are the media leaks about a prospective new arena in Queens, as shown in the screenshot below from Newsday. Both sides are surely pushing for advantage, if not bluffing.

Consider: the arena and the Islanders can't even formally begin their opt-out talks until after this season. The disc…

Skanska says it "expected to assemble a properly designed modular building, not engage in an iterative R&D experiment"

On 12/10/16, I noted that FastCo.Design's Prefab's Moment of Reckoning article dialed back the gush on the 461 Dean modular tower compared to the publication's previous coverage.

Still, I noted that the article relied on developer Forest City Ratner and architect SHoP to put the best possible spin on what was clearly a failure. From the article: At the project's outset, it took the factory (managed by Skanska at the time) two to three weeks to build a module. By the end, under FCRC's management, the builders cut that down to six days. "The project took a little longer than expected and cost a little bit more than expected because we started the project with the wrong contractor," [Forest City's Adam] Greene says.Skanska jabs back
Well, Forest City's estranged partner Skanska later weighed in--not sure whether they weren't asked or just missed a deadline--and their article was updated 12/13/16. Here's Skanska's statement, which shows th…

Not just logistics: bypassing Brooklyn for DNC 2016 also saved on optics (role of Russian oligarch, Shanghai government)

Surely the logistical challenges of holding a national presidential nominating convention in Brooklyn were the main (and stated) reasons for the Democratic National Committee's choice of Philadelphia.

And, as I wrote in NY Slant, the huge security cordon in Philadelphia would have been impossible in Brooklyn.

But consider also the optics. As I wrote in my 1/21/15 op-ed in the Times arguing that the choice of Brooklyn was a bad idea:
The arena also raises ethically sticky questions for the Democrats. While the Barclays Center is owned primarily by Forest City Ratner, 45 percent of it is owned by the Russian billionaire Mikhail D. Prokhorov (who also owns 80 percent of the Brooklyn Nets). Mr. Prokhorov has a necessarily cordial relationship with Russia’s president, Vladimir V. Putin — though he has been critical of Mr. Putin in the past, last year, at the Russian president’s request, he tried to transfer ownership of the Nets to one of his Moscow-based companies. An oligarch-owned a…

Former ESDC CEO Lago returns to NYC to head City Planning Commission

Carl Weisbrod, Mayor Bill de Blasio's City Planning Commission Chairman and Director of the Department of City Planning, is resigning,

And he's being replaced by Marisa Lago, currently a federal official, but who Atlantic Yards-ologists remember as the short-term Empire State Development Corporation CEO who, in an impolitic but candid 2009 statement, acknowledged that the project would take "decades."

Still, Lago not long after that played the good soldier at a May 2009 Senate oversight hearing, justifying changes in the project but claiming the public benefits remained the same.

By returning to City Planning, Lago will join former ESDC General Counsel Anita Laremont, who after retiring from the state (and taking a pension) got the job with the city.

Back at planning

Lago, a lawyer, in 1983 began work as an aide to City Planning Chairman Herb Sturz, and later served as the General Counsel to the president of the NYC Economic Development Corporation, Weisbrod himself.