Skip to main content

New Atlantic Yards housing configuration (and potential map of clustered all-market towers) reflect prescient question about balance "between developer profit and housing affordability"

As I wrote in my 7/3/14 article in City Limits, Behind Atlantic Yards Housing Deal, Some Big Shifts, "The provision of two 100 percent affordable towers, as well as emerging plans, puts Atlantic Yards on a course to depart from the promise that all rental towers would mix affordable and market-rate units."

Read the article for more but first take a look at the graphic I adapted, based on a tentative Forest City Ratner timetable. (The latter is marked "for illustrative purposes only," but conforms at least to the plans for the next four towers.)
Buildings outlined in yellow: 100% affordable. 
Buildings outlined in red: 50% market, 50% affordable.
Buildings outlined in green: 100% market-rate rentals or condos.
B4, at the northeast corner of the arena block, would include both 50/50 rentals and condos. 
B1, in black next to the arena, should hold office space, but was once supposed to include apartments and a hotel. 
The plan for Site 5, now home to Modell's and P.C. Richard, remains a question mark.

Note that only Atlantic Yards rental buildings were supposed to be 50/50. Then again, when Atlantic Yards was announced in 2003 and when ACORN signed the Affordable Housing Memorandum of Understanding (MOU) in 2005, it was to contain four office towers around the arena and eleven or twelve mixed-income towers with rental apartments.

Only after that MOU was signed—which required ACORN to publicly support the project—did Forest City announce it would swap office towers, for which there’s less of a market and depending on an anchor tenant to gain financing, for more lucrative condominiums. That also upended the pledge that 50 percent of all Atlantic Yards housing would be affordable.

Now not only condo buildings would be all-market, but so too would be some rental buildings. Also note that, in August 2007, Forest City got a "carve out" from state legislators allowing 421-a tax breaks to apply to the project as a whole, based on overall affordability, rather than requiring each building to have affordable units.

A prescient prediction

On 7/1/07, I quoted Boston-based affordable housing analyst, David Smith, after the belated release of Atlantic Yards financials, which the Times suggested showed risk in the project.
“This is an extraordinarily complex undertaking, with many moving parts,” observed Smith. “The moving parts -- the financing plan, with multiple phases, multiple property uses, and multiple potential sources including subsidy and concessionary government capital -- mean volatility.

So, he observed, “sequencing is key: what happens in what order, and who decides what changes are made to the development plan? If the developer has all the optionality -- that is, control over the responsive actions taken after unexpected favorable or unfavorable outside events -- and the city has none of the optionality, then it's very likely that the developer can navigate through all the complexity to a successful deal, and achieve this result by adjusting the affordable housing to be fewer apartments, to happen later in the development sequence, and to be redefined upwards.”

The affordable housing wasn't redistributed later in the development sequence, but the development sequence was extended to 25 years, not ten. Now the sequence has been tightened to 15 or 16 years.

“The question," suggested Smith at the time, "isn't, 'Could the developer make a lot of money?' nor even 'What is the public getting and what is the public paying?' but rather, 'As things change in the future, who decides how the gains and losses are shared between developer profit and housing affordability?'"

The results

Who decides? There was no public process, but what emerged surely is an improvement in terms of the timetable and the provision of family-size units. But there's also a retreat--at least in the first two buildings--in terms of affordability.

Those family-size units presumably cut into developer profit. There are seemingly significant penalties, $2000 per unit per month, for delays, albeit with an asterisk: an ability to claim unavailability of subsidy or financing.

At the same time, as I reported, the affordability in the next two buildings skews significantly toward the upper-middle-income cohort, who'd pay some $3000 for a two-bedroom unit. That cohort would get half the affordable units, not 20%.

Such units would be below market rates. But they're not aimed at the people who rallied for the affordable housing.


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…

At 550 Vanderbilt, big chunk of apartments pitched to Chinese buyers as "international units"

One key to sales at the 550 Vanderbilt condo is the connection to China, thanks to Shanghai-based developer Greenland Holdings.

It's the parent of Greenland USA, which as part of Greenland Forest City Partners owns 70% of Pacific Park (except 461 Dean and the arena).

And sales in China may help explain how the developer was able to claim early momentum.
"Since 550 Vanderbilt launched pre-sales in June [2015], more than 80 residences have gone into contract, representing over 30% of the building’s 278 total residences," the developer said in a 9/25/15 press release announcing the opening of a sales gallery in Brooklyn. "The strong response from the marketplace indicates the high level of demand for well-designed new luxury homes in Brooklyn..."

Maybe. Or maybe it just meant a decent initial pipeline to Chinese buyers.

As lawyer Jay Neveloff, who represents Forest City, told the Real Deal in 2015, a project involving a Chinese firm "creates a huge market for…

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…