Friday, November 16, 2012

Flashback: at MTA board meeting and in affidavit, agency officials misleadingly suggested that platform over railyard was prerequisite to Forest City reaping revenue

Forest City Ratner's plan to build four towers on the southeast block of the Atlantic Yards site before constructing a platform for construction over the Vanderbilt Yard not only raises questions about whether the project would remove blight in a timely fashion, as I wrote 10/23/12, it also places litigation over the railyard in a new light.

After all, one justification for a revised 2009 deal for the railyard, as detailed in an affidavit from the then-Chairman of the Metropolitan Transportation Authority (MTA) Dale Hemmerdinger, was that the platform must be built before Forest City could start earning revenue.

That was misleading then, because there were other places for Forest City to build. And it's even more misleading now.

Current plans

As I reported last month, one investment analyst asked if, given the rents today, whether building a platform for towers over the railyard works. (The far western segment of the railyard, perhaps one-fourth of the 8.5 acres, has already been used for part of the arena block.)

Platform designs, executive MaryAnne Gilmartin said, "have become quite sophisticated and simplified at the same time," given other developers' plans to build on the West Side Yards in Manhattan and other projects.

While Forest City has planned scenarios "where we build the platform at certain estimated costs," she said, "certainly the focus of the day is the arena block... There's a second block, 1129, which is terra firma... These four buildings here... we have seven buildings that we we will build before we commence construction on any platform buildings. And so, we're working on it, but I can tell you that the focus today is on the arena block."

The MTA lawsuit: platform crucial?

Several groups, led by Develop Don't Destroy Brooklyn, sued unsuccessfully to annul the 2009 revision of the Vanderbilt Yard deal, in which Forest City, instead of paying $100 million for railyard development rights up front, would put $20 million down and have up to 21 years to pay the rest, at a gentle interest rate. It also could build a smaller permanent replacement railyard than originally approved.

In an affidavit, Hemmerdinger stated: "The board also took into consideration the 'tremendous up front investment by the buyer to actually build the platform' over the VD [Vanderbilt] Yard, which must be made before the developer can build the revenue generating portions of the proposal."

His statement pointed to page 4 of the transcript, which referred to comments by board member Mark Page
So, what we are selling is the space above [the rail yard] and to have an opportunity to actually realize value for the space above our land requires a tremendous up front investment by the buyer to actually build the platform which comes in up front expensive major investment before the buyer can then move on to building whatever they are going to build which would ultimately enable them to realize revenue to pay for all of this."
Misleading statements

The statements from both Hemmerdinger and Page, though not quite the same, are misleading. But both leave the impression that, only only after building the platform could Forest City realize value from its investment.

Not so.

Yes, only the platform would produce revenue from the air rights directly above it.

However, the MTA deal unlocked the revenue-generating potential for the entire project, including the arena; the towers around it on the arena block; and towers on the rest of the project site outside the Vanderbilt Yard.

Those latter towers include the southeast block; Site 5 (on the west side of Flatbush Avenue); and even the site just east of Sixth Avenue between Dean and Pacific streets.

What's different now?

What's different between then and now?

Now we know for sure that Forest City plans to build on the southeast block before building a platform, rather than proceeding--as once suggested--in a more methodical clockwise fashion, building on both the railyard and adjacent land.

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