Forest City's Gilmartin on "owning" air rights they haven't paid for, and a reminder of the bargain they got
Of course it helps when, in the case of Atlantic Yards/Pacific Park, you're partnered with a foreign majority owner, the Greenland Group, which owns 70% of the project going forward (excluding the Barclays Center and B2 tower).
Um, they don't *own* the 3.6 million square feet of air rights over the Vanderbilt Yard yet, because Forest City, instead of paying the full $100 million in cash originally promised, in 2009 got to put down $20 million for the portion of the railyard needed for the arena, then could pay the rest over 22 years, at a gentle 6.5% interest rate, for 3.6 million square feet.
A new appraisal in 2010 of Atlantic Yards land, which included some land over the railyard, valued development rights at more than $179/square foot. The market has continued to rise. At $350/square foot, 3.6 million sf is worth $1.26 billion!
Forest City--now Greenland Forest City Partners--has/had hundreds of millions of dollars in additional costs for the new railyard, deck, and new transit entrance that were part of the deal and required to get vertical development started over the railyard segment
But even if that cost hits $400 to $600 million--now, with increased construction costs, a sum far more than Forest City ever estimated--it still looks like a huge bargain.
In total, the rail yards have a whopping 4.5 million square feet of development rights sitting above them. While most air rights cost whatever the market deems them to be, the MTA controls the rights above the eastern rail yards, according to the DCP report. Instead, the price of air rights transferred is determined by a ratio that’s calculated at 65 percent of what the property under development is appraised. When the Moinian Group bought 240,156 square feet of rights from over the rail yards last year for 3 Hudson Boulevard, the developer paid about $350 per square foot, according to DCP.
Pacific Park—formerly Atlantic Yards—which is currently being carried out by Forest City Ratner and Greenland. Brooklyn is arguably the most exciting “new” urban location in the country and this project has been one of the catalysts in establishing a real focal point in place within the historic neighborhoods.