Saturday, June 27, 2015

DBP's Reed: land values in Downtown Brooklyn go from $80/sf to $500/sf (so MTA should've driven harder bargain); the perils of BK = "Silicon Valley" prediction

"I think the speed and pace and scale of what's happening in the borough now is why I think everyone's pinching themselves, and find it hard to believe," says Tucker Reed of the Downtown Brooklyn Partnership in the video below, produced by the Brooklyn Eagle, part of its coverage of Make It In Brooklyn: Inaugural innovation summit attracts top business leaders.

"Land values in Downtown Brooklyn alone, over the last 18 months, have gone from $80 a square foot to 500 [dollars]," he continued. "That pace of change is hard to get your mind around." (I'm not sure those numbers are average, as opposed to the outliers.)

Such change is part of why it has become more cost-effective to build Atlantic Yards/Pacific Park using conventional construction, despite developer Bruce Ratner's past claim that it was impossible (though that's what he proposed, and got approved).

And it's also why, as I wrote, the expected prices for condos now exceed Forest City Ratner's optimistic projects from 2009.

It's also why the public should get more of the upside, but, because the Metropolitan Transportation Authority was under the sway of the governor and mayor--themselves doing the bidding of Forest City Ratner--the MTA didn't ask for more.

Looking back at the RPA arguments

As I wrote in May 2014, in June 2009, the Regional Plan Association (RPA) advised the MTA, which was set to give Forest City Ratner more generous terms regarding the Vanderbilt Yard--21 years to pay, with a gentle interest rate-- to seek a better deal.

“While there has been little time to digest the proposal, several considerations are clear,” the RPA's Neysa Pranger testified, suggesting that project was now far different from the one approved in 2006, with “greatly diminished” public benefits.

She also said that “it is likely to be years before the market recovers enough to attract new developers”--a statement I thought worthy of debate and now, with hindsight, see as silly.

However, Pranger and the RPA wisely observed that it “is almost inevitable that it will need to be redesigned and renegotiated over several business cycles before it’s complete."

“Does this new agreement retain enough benefits for the MTA and the city to proceed with a scaled-back plan?” Pranger asked. “Based on the information available, the answer is no."

Rather than open up the site to new bids, she made four recommendations for any revised deal with Forest City Ratner, including granting the MTA more future project revenues, conducting a new cost-benefit analysis and creating a new ESDC subsidiary to oversee the project and review design elements.

Specifically, the RPA said: "The MTA should either receive a larger upfront settlement or an opportunity to realize much greater long-term revenue, possibly by negotiating a share of future revenues from the project that could exceed annual payments for development rights."

The MTA board didn't bother to discuss those suggestions. It should have done so.

More on the Brooklyn boom

From Capital New York, 6/25/15, Get ready Sunset Park, ‘Brooklyn’ is coming:
“Is Brooklyn done?” Brooklyn Chamber of Commerce president Carlo Scissura asked a morning panel of corporate executives who have made money marketing “Brooklyn.” “Or is it just, like, forever? Or is it the beginning?”
Airbnb’s New York manager, Wrede Petersmeyer, suggested that as long as Brooklyn neighborhoods continued to package themselves so well, there was no end in sight.
“I don’t think you can separate our growth in the city from the growth of neighborhoods having brands,” he said. “I think 20 or 30 years ago, you couldn’t imagine the idea that someone living in Paris would want to not go to New York, but go to Williamsburg, spend time in Red Hook, visit a neighborhood that has an identity.”
Reporter Dana Rubinstein rightly called that "boosterism." Some neighborhoods have much more strength than others--and Red Hook, despite its charms, is transportation-challenged.

The conclusion:
...What’s the next great frontier in Brooklyn?
“I have no idea,” said Walentas. “You know, Bushwick is now gentrifying. I don’t know. Jed, do you have any idea?”
His son, Jed, said “Brooklyn is still very early” in its upward trajectory.
[Developer Bruce] Ratner agreed.
“This borough will be known in 10 or 20 years as the equivalent of Silicon Valley,” he said. “I really believe that.”
The perils of prediction

Hold on. Bushwick is gentrifying. It's also huge, full of parts that are very much not gentrifying, or not gentrifying much.

As for Silicon Valley, well, Brooklyn's tech scene is not nearly equivalent, nor does it promise to be that. Remember how MetroTech was once supposed to be Silicon Valley?

From the New York Times, 6/22/97, A Dream Grows in Brooklyn:
''The original concept was developed by George Bugliarello, who wanted to build a research and development facility modeled on Silicon Valley,'' said Mitchell Moss, director of the Urban Research Center at New York University. ''The developer had a better feel for the for the market, but the idea was George's.''
...''We looked at it and determined the area was not appropriate for another Silicon Valley,'' said Mr. [Bruce] Ratner, who was backed by Forest City, his family's development company, which is based in Cleveland. ''We did find that what tenants really wanted was lots of high-tech space for back-office operations. And we also found that 30 to 35 percent of the people who work in downtown Manhattan are from Brooklyn.''

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