Skip to main content

Reality warp: judge in eminent domain case agrees Atlantic Yards site would've been upzoned; ESD claimed there'd be no changes without project

Remember how the Empire State Development Corporation (aka Empire State Development, or ESD), in the 2006 Atlantic Yards environmental review, claimed the project site would not "experience substantial change in the future without the proposed project... due to the existence of the open rail yard and the low-density industrial zoning regulations."

When the very reasonable possibility of a rezoning was raised, the state authority stonewalled, claiming, "While the City, if it desired, could rezone the project site, it has not."

Via Google Maps; note more capacious perspective here
before railyard excavation and also photos here
I called it one of the state authority's "least credible statements," and a judge recently confirmed that observation, denying ESD's claim that there would have been no rezoning.

In a case resolved this month regarding the value of a condemned property within the Atlantic Yards site, Kings County Supreme Court Justice Wayne Saitta agreed with the property owner's argument that the site, without the project, could have become a 12-story hotel, concluding, "Most probably, the entire M1-1 [one-story manufacturing] district in the Atlantic Yards footprint would have been upzoned."

730 Equity Corp. v New York State Urban Dev. Corp. involved an empty lot on Block 1120, Lot 35, at 730-740 Atlantic Avenue just west of Carlton Avenue. It juts into the below-grade Vanderbilt Yard.

Following that conclusion, Saitta rejected the state's claim that the property was barely worth $2 million as a gas station, and instead valued it at nearly $9.2 million, far less than the $20.6 million that the owner sought but still a major gain. (It's touted as a victory by attorney Michael Rikon of  Goldstein, Rikon, Rikon & Houghton.)

That's one layer of irony.

But developer Forest City Ratner, which pays for the land, likely still got a good deal.

On the piece of land just west of Carlton Avenue--as well as a platform yet to be built over the railyard--it plans Building 7, a 460-foot tower with 733,810 square feet. That's six times larger in bulk than the hotel, albeit over a plot that's likely twice as large and requiring an infrastructure investment, as well as payment to the MTA for the site.

The history

ESDC took title on 3/1/10, the vesting date. The court viewed the property on 9/8/11 and a non-jury trial was held on eight days in January and February, 2013. The decision was rendered 5/7/14, and reported in the New York Law Journal on 5/28/14. (Both the Brooklyn Eagle and especially the Real Deal got the story wrong, suggesting that a hotel could actually be developed.)

The sites is an irregularly shaped lot of 20,738 square feet, with a 275 foot frontage on Atlantic Avenue. At the time of vesting, the property was zoned as M1-1 and vacant. A gas station on the site had been demolished in 2001, though the owner had in June of 2001 entered into a 15-year lease--with a five-year extension--with Amoco Oil Company to operate a gas station on the site.

Competing claims

As Saitta wrote, the claimant contended that the highest and best use of the property would have been as a 12-story budget hotel, that "there is a reasonable probability that the subject property would have been rezoned from M1-1 to C6-2A absent the project." (Such zoning has a Floor Area Ratio of 6, which means a 12-story hotel could occupy half the lot.)

The condemnor, ESDC, contended that there was no reasonable probability that the property would be rezoned, and that the property could best be a gas station, parking lot, or garage. However, the condemnor's appraiser undermined that argument: the three sales she used as comparables were purchased, not for auto related uses, but to develop as hotels.

Head-spinning arguments

Saitta evaluated whether it was reasonably probable that the property would have been rezoned. He noted that the M1-1 district covers the three blocks between Atlantic and Pacific Streets, running from Fifth Avenue to Vanderbilt Avenue, as well as the block directly south of the property.

Nearby blocks are mostly zoned residential. The claimant's expert, Richard Bass, cited the city's pattern of rezoning underutilized, industrial areas, and said he believed this was not rezoned because of the announcement of the Atlantic Yards project in 2003. (Duh.)

The rezonings nearby were both upzonings, such as at the 470 Vanderbilt site across Atlantic Avenue, as well as downzonings to ensure future construction would maintain the scale of residential blocks.

Here's the most head-spinning passage:
Bass also relied on the findings in an Environmental Impact Statement that had been submitted in connection with the Atlantic Yards project, as evidence that a density as high as an FAR of 8.6 would be appropriate on the site.
In other words, the state's override of zoning--rationalized in part because a rezoning would never have happened--was used as evidence that a rezoning would have occurred.

The condemnor's zoning consultant, Michael Kwartler,  "testified that it is unlikely that the site would have been rezoned to C6-2A and that such zoning would not be appropriate for the site because the property is not in a central business district and would result in several existing uses becoming non conforming."

In other words, the ESD's own consultant, said increased bulk--as the Atlantic Yards project allows--would have been inappropriate. Bizarre.

Kwartler also cited the 2001 rezoning of the north side of Atlantic Avenue, between South Oxford Street and Clermont Avenue from commercial to residential, which demonstrated that "the City was not interested in upzoning the area around the subject property."

The judge's conclusion

Saitta wrote:
Weighing the opinions of both zoning experts, the evidence presented demonstrates that there is a reasonable probability that absent the project, the subject property would have been upzoned from M1-1 to C6-2A.
Although there remained some industrial uses such as storage facilities, gas stations, and auto repair shops, the area no longer contains significant manufacturing uses.The Environmental Impact Statement submitted as part of the Atlantic Yards project describes the site as containing "long blocks that contain mainly underutilized industrial buildings". (ex 1 tab 4, p 3-7)
Though the M1-1 district was once predominately industrial, many of the buildings have been converted to commercial and residential use. It is an area of underutilized industrial sites surrounded by the residential neighborhoods of Prospect Heights, Fort Greene and Park Slope, that has become more residential over time.
The City's policy under the Bloomberg administration was to rezone underutilized industrial sites to allow for commercial or residential development. There is little reason to keep this underutilized district zoned for manufacturing when its it has been becoming more residential and commercial on its own.
He called the C6-2A zoning proposed by Bass "appropriate for this property," noting that several properties nearby, along the Atlantic Avenue corridor from Fourth Avenue to Vanderbilt Avenue, had been rezoned to C6.

He noted that, in an earlier case, he'd found "no reasonable probability" of a rezoning to C6-2A, but that case involved a property on Pacific Street between Carlton and Vanderbilt avenues, a block "more integrally a part of Prospect Heights than Atlantic Avenue."

Adjusting the value

Though Saitta found "that absent the project, the property would have most probably been rezoned to C6-2A," he made several adjustments to the value proposed by the claimant, including an adjustment for location, extraordinary development costs, plus a discount to reflect the costs, delay and risk associated with a rezoning

That led to a valuation of $9,186,000.

In another case, the state won

In a 6/21/13 decision, Saitta found in favor of the state in Heron Realty vs. New York State Urban Dev. Corp. The site 514-522 Vanderbilt Avenue at the corner of Atlantic Avenue, is Block 1121 Lot 42, at the northeast corner of the site.

On the date of vesting, there was a gas station with a one story building and six pumps, over 11,500 square feet. The property was encumbered by a 3,506 square foot subterranean easement in favor of the Long Island Railroad and a deed restriction that limited development of the area over the easement to two stories.

The owner (via Rikon's firm) claimed a 12-story mixed use residential and commercial building could have been built, with a rezoning to C6-2A. Thus the claimant's appraiser valued the property at $10,500,000. The state said the existing use as a gas station was the highest and best use of the property, valued at $4,300,000.

While typically the judge would analyze whether a rezoning was possible, he first concluded that the deed restrictions precluded such a 12-story building. He then made a few adjustments to the condemnor's evaluation and found a value of $5,000,000.


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.