Friday, May 02, 2014

ESD CEO Adams: Draft SEIS testimony helpful; noncommittal about request for new timetable; no agency approval for Greenland deal?

This is grading on a curve, but given that past CEOs of Empire State Development never attended an Atlantic Yards public hearing--nor do board members, leaving staffers to take it in--give CEO Kenneth Adams credit showing up Wednesday, staying until the end, and enduring criticism about how he'd failed the community and how the state authority can never be an honest broker.

I caught up with Adams (at left in photo) at the end of the 4.5-hour hearing to ask a few questions.

Speaking personally, the always affable and diplomatic Adams said the testimony was "extremely helpful," noting that some concerns got a new level of emphasis.

(He didn't specify but perhaps he meant the testimony from neighbors closest to the project. If so, there may be slightly more emphasis on construction oversight.)

Of course, he noted much balance, with "lots of speakers in support" and "a fair amount of agreement around things like deliver the affordable housing as quickly as possible."

A new timetable?

So, I asked, if everyone agrees Atlantic Yards should be built faster, and economic conditions are more favorable, could contracts be changed to enforce a timetable different from the 25-year outside date for a project long billed as taking ten years?

Adams hedged, understandably. A new timetable was not proposed in the Draft Supplemental Environmental Impact Statement (SEIS) nor proposed amendments--regarding a shift in bulk from Phase 1 to Phase 2 and a reduction in parking--to the Modified General Project Plan (MGPP) that the ESD's gubernatorial-controlled board must approve.

"We're going to look at all the comments," he said, both at the hearing and in writing, and those comments will be carefully answered.

Written comments on the Draft SEIS will be accepted through Monday, May 12, 2014, and written comments on the Proposed Amendment will be accepted through Friday, May 30, 2014.

Actually, since the 25-year outside date was in the Development Agreement signed separately in the MGPP, it could presumably by changed by a contract revision signed behind the scenes, not needing approval by the ESD's board at a public meeting. 

But developer Forest City Ratner and its backers want maximum flexibility, as the testimony revealed, so such a change is unlikely.

After all, ESD already rejected a request for more time to review the voluminous SEIS beyond the 45 days allotted, a shorter time period allotted than in other steps of the Atlantic Yards review. And the ESD board has unanimously approved everything regarding Atlantic Yards, with one asterisk in the last vote, as one member expressed reservations.

No approval of Greenland deal?

Does ESD have to approve Forest City's emerging joint venture with the Chinese government-owned Greenland Group, which has agreed to buy 70% of Atlantic Yards going forward, excluding the arena and the first tower? The answer, it turns out, is unclear.

(The U.S. government, which examines only national security interests, has already approved the deal, while approval is pending in China.)

"We have found no requirement for us to take any action in approval," Adams said. (ESD has been asked simply to issue a certificate indicating that contracts remain in effect.)

A 12/13/13 staff memo, on p. 4, indicated that ESD wasn't sure if approval was necessary, but Adams said that "according to our existing agreement... the structure of the investment by Greenland doesn't trigger a review by us."

The original Development Agreement, he said, contemplated a potential new investment. "An evaluation was made on the basis on the form of the investment, and Forest City maintaining control of the project, which they do, despite what some people alleged tonight," he said, "so it doesn't trigger a review by us."

(Update: This morning I got a more ambiguous statement from ESD: "We are reviewing the proposed transaction to determine whether or not, and under what circumstances, ESD approval would be required under existing project documents, including the MGPP and the Development Agreement.")

See excerpt above right from Development Agreement (click to enlarge). It states that no Transfer of Forest City's rights (via its affiliates/subsidiaries) in the agreement is permitted without prior written consent of ESDC (aka ESD), though nothing prohibits any "Equity Interest Disposition."

A Transfer, as indicated below, is an assignment of rights, while an Equity Interest Disposition allows a financial transaction.

Joint control: who steers?

Forest City's control is, at best, partial, given the need for mutual agreement, and Greenland, according to the Times, steered the decision to build the next three towers using conventional construction rather than the modular process developed by Forest City and its partner Skanska, co-investors in a factory at the Brooklyn Navy Yard.

According to the 12/13/13 memo to the "Atlantic Yards file" by ESDC VP of Planning and Environmental Review Rachel Shatz, the Development Agreement signed in 2009 allows FCR to transfer its interest to another party. That sale would also transfer obligations in the Memorandum of Environmental Commitments.

A five-person board of directors for the joint venture would be established, with Greenland appointing the Chairman, CEO, and CFO, and Forest City Enterprises appointing Vice Chairman and President. Decisions of particular importance, including starting a new building, require a majority vote, including a vote from one appointee from both, which "in effect requires that both Greenland and FCRC agree to such decisions," according to Shatz.

Day to day operations would be the responsibility of a Management Team and a Development Team. The Management Team would consist of seven FCR executives, plus up to five additional people appointed by Greenland. The Development Team would consist of at least 14 current FCR executives, plus other members that may be appointed by Greenland. There may be overlap among the two teams.

The agreement does provide for a possible buy-out in the event of a deadlock among the members of the Board of Managers and it also provides for a dilution of a member's interest if it fails to meet certain obligations. "Accordingly, it cannot be assumed that the 30%-70% divisions of interests described above is a permanent arrangement," Shatz wrote.

If that happens, the question lingers, will ESD than have to give approval?

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