Wednesday, March 25, 2015

Atlantic Yards down the memory hole: LIRR improvements being delivered "free of charge," declares Newsday

I'm coming a little late to this Newsday article posted 3/22/15, headlined LIRR to get improvements in Brooklyn, part of Barclays deal.

But it clearly represents the phenomenon I've dubbed "Atlantic Yards down the memory hole," since the indubitable improvements have been part of renegotiation and delay:
The $100 million real estate deal that led to the Barclays Center being built over a century-old rail yard is beginning to pay dividends for the Long Island Rail Road and its Brooklyn commuters, officials said.
Seven years into the construction of a state-of-the-art new storage facility to replace the original Vanderbilt Yards, workers will soon punch through a 171-year-old rail tunnel to provide trains, for the first time, a direct path between the yard and Atlantic Terminal.
It's one of many improvements to the LIRR's Brooklyn operation that are being delivered to the railroad free of charge by Greenland Forest City Partners, a joint venture between Greenland and Forest City Ratner, developer of the Barclays Center and adjacent Pacific Park residential project.
"A project like this has to be a win-win for everybody," said Ratner vice president Thomas Bonacuso, who heads the project. "Brooklyn has become a brand. Brooklyn is hot. We and the railroad capitalized on that and were able to bring improvements to their rail yard that wouldn't have been possible under their own resources."
Well, wait a second. It's not free. The improvements are part of a deal in which the MTA/LIRR sold 3.6 million square feet of development rights to Forest City at a figure well below the appraised value of $75 per buildable square foot. 

That said, the appraiser surely undervalued the cost of the replacement railyard and deck needed to build housing, subtracting $56.7 million to reach an appraised value of $214.5 million.

The deal was renegotiated in 2009 to allow a smaller permanent railyard, an initial payment of $20 million, and a new deadline, giving the developer until 2031 to pay off the additional $80 million, at a gentle 6.5% interest rate. 

Since then, the timetable for the affordable housing has been moved up to 2025, which means the railyard parcels will be purchased faster than allowed in the 2009 renegotiation, but still slower than originally promised.

Since then, the value of the development rights has skyrocketed, to perhaps $350 per square foot. The MTA, despite advice from the mainstream Regional Plan Association, refused to consider any clause in the renegotiated contract to take advantage of any upswing in the market.

According to Newsday, "Ratner officials declined to disclose the project's cost." What we do know is that, in 2009, the MTA said the new railyard would be valued at $147 million, while Dellaverson said the previous iteration could be worth $250 million, after inflation.

So it's tough to measure the cost of the infrastructure against the value of the development rights. But the process was never clean, and the improvements surely aren't free.

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