Skip to main content

Thinking about eminent domain: economist suggests property owners should get a share of future profits

New York State is going to court today to condemn the last seven properties needed for the Atlantic Yards project, and the big question is not whether the condemnation will be successful but how much developer Forest City Ratner--actually, Greenland Forest City Partners--will have to pay.

The tremendous gain in development rights, thanks to the state's override of New York City zoning, is a boon for the developer, which often but not always compensates the property owner for replacement value (plus a premium for speed of departure, attorneys' fees, and other costs), not the new value of the site.

Then again, as I reported in May, the state condemnation judge, Wayne Saitta, did find for the property owner in one case, declaring that evidence "demonstrates that there is a reasonable probability that absent the project, the subject property would have been upzoned."

Thus he rejected the state's claim that an Atlantic Avenue property was barely worth $2 million, 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.

An economist's take

Economist Claude Gruen is no opponent of eminent domain--he's worked on numerous major real estate projects in California and elsewhere--but he thinks compensation should be changed to make a more equitable system, allowing property owners to get a piece of future profits

In his in his 2010 book New Urban Development: Looking Back to See Forward, he cites the initial appellate division ruling rejecting the Atlantic Yards challenge, which stated:
Any incidental profit that may inure to Forest City from the remediation of the blighted project site does not undercut the public purpose of the condemnation of substandard land.
Gruen comments:
Redevelopers of blighted areas do not just make a profit by selling or renting the new space they build. By their branding--that is, by moving the area up the filtration ladder of neighborhoods--they increase land values over what they were when the area was blighted. But under eminent domain laws, the deposed owner of a condemned property is compensated by being paid the price of the land in its 'as is' condition... both state and federal laws specifically disallow the condemnation valuation to include any value increase that might be bestowed on the property by the project for which it is condemned.
Two policy changes

He recommends two changes, one to block holdouts, the other to share the wealth:
First, private parties who have acquired 80 percent of the properties within a blighted project area will be granted the power of eminent domain to acquire the remaining 20 percent of the property under the condition described next. Second, upon taking title, the private redeveloper will pay the owner of taken property the fair market value of the property in its "as is" condition. When the project or a significant portion of it is completed, the project's developer must make an additional payment to the former owner equal to the difference between the original fair market value of the condemned property and the proportionate share  of the property's value after the project has been completed and is 90 percent occupied...
I do not know if they would have been satisfied... But giving them a proportionate share of the profit made from the use of land they had possessed seems fairer than simply paying them what the property was worth in the blighted neighborhood.
Well, private parties can't exercise eminent domain themselves, but there is an argument--at least when a neighborhood is truly blighted and that has been established through a truly public process (both very dubious in the case of Atlantic Yards)--to allow assemblage of large sites for public purposes.

That policy change might be easier to achieve than the second one.

After all, that one proposal, rejected by the board of the Metropolitan Transportation Authority as it considered a deal proposed by developer Forest City Ratner to lower its upfront cost for the Vanderbilt Yard, was a tradeoff: in exchange for concessions, the state to get more of future profits.

Comments

  1. Anonymous10:11 AM

    Bingo. We have a winner. If something that isn't truly a public infrastructure project uses eminent domain, pay the owners as partners. And if the bigger guys want to, buy them out. Ruleset would be hairy but at least those with insider knowledge (Ratner) would be less able to screw a property owner.

    ReplyDelete

Post a Comment

Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

Barclays Center event June 11 to protest plans to expand Israeli draft; questions about logistics

At right is a photo of a poster spotted in Hasidic Williamsburg right. Clearly there's an event scheduled at the Barclays Center aimed at the Haredi Jewish community (strict Orthodox Jews who reject secular culture), but the lack of English text makes it cryptic.

The website Matzav.com explains, Protest Against Israeli Draft of Bnei Yeshiva Rescheduled for Barclays Center:
A large asifa to protest the drafting of bnei yeshiva in Eretz Yisroel into the Israeli army that had been set to take place this month will instead be held on Sunday, 17 Sivan/June 11, at the Barclays Center in Downtown Brooklyn, NY. So attendees at a big gathering will protest an apparent change of policy that will make it much more difficult for traditional Orthodox Jewish students--both Hasidic (who follow a rebbe) and non-Hasidic (who don't)--to get deferments from the draft. Comments on the Yeshiva World website explain some of the debate.

The logistical questions

What's unclear is how large the ev…

Atlanta's Atlantic Yards moves ahead

First mentioned in April, the Atlantic Yards project in Atlanta is moving ahead--and has the potential to nudge Atlantic Yards in Brooklyn further down in Google searches.

According to a 5/30/17 press release, Hines and Invesco Real Estate Announce T3 West Midtown and Atlantic Yards:
Hines, the international real estate firm, and Invesco Real Estate, a global real estate investment manager, today announced a joint venture on behalf of one of Invesco Real Estate’s institutional clients to develop two progressive office projects in Atlanta totalling 700,000 square feet. T3 West Midtown will be a 200,000-square-foot heavy timber office development and Atlantic Yards will consist of 500,000 square feet of progressive office space in two buildings. Both projects are located on sites within Atlantic Station in the flourishing Midtown submarket.
Hines will work with Hartshorne Plunkard Architecture (HPA) as the design architect for both T3 West Midtown and Atlantic Yards. DLR Group will be t…

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…

So, Forest City has some property subject to the future Gowanus rezoning

Writing yesterday, MAP: Who Owns All the Property Along the Gowanus Canal, DNAinfo's Leslie Albrecht lays out the positioning of various real estate players along the Gowanus Canal, a Superfund site:
As the city considers whether to rezone Gowanus and, perhaps, morph the gritty low-rise industrial area into a hot new neighborhood of residential towers (albeit at a fraction of the height of Manhattan's supertall buildings), DNAinfo reviewed property records along the canal to find out who stands to benefit most from the changes.
Investors have poured at least $440 million into buying land on the polluted waterway and more than a third of the properties have changed hands in the past decade, according to an examination of records for the nearly 130 properties along the 1.8-mile canal. While the single largest landowner is developer Property Markets Group, other landowners include Kushner Companies, Alloy Development, Two Trees, and Forest City New York.

Forest City's plans unc…