Wednesday, May 11, 2016

Can Atlantic Yards survive a 1% sellout (as is happening in some projects)? Gilmartin invokes 421-a, EB-5 help

The Real Deal had an interesting piece yesterday, headlined “We’re going to see some real distress”: Witkoff, quoting developer Steve Witkoff as saying a glut of inventory in new developments means there are:
at least 15 new projects in New York that sell just one percent of their units per month.
“That’s a 100-month sellout. Unless you’re [Forest City Ratner CEO] MaryAnne Gilmartin or Larry Silverstein you can’t withstand a 100-month sellout.”
It's hardly clear that Forest City Ratner, or its joint venture Greenland Forest City Partners, can withstand such a slow sellout. In fact, the clouds over the development market are likely one reason why GFCP has put up for sale three building sites.

(By the way, an executive at Forest City Realty Trust said Friday that the buildings include "market-rate rentals," though the B12 and B13 site have long been described as condominium sites. At an affordable housing information session last night, Forest City Ratner executive Susi Yu again described B12 as a condo building. Maybe the parent company had it wrong.)

Forest City wants some help

The Real Deal cited rising construction costs and tighter financing, and closed with a quote from Forest City:
Gilmartin bemoaned a lack of government support for new development in New York, pointing to the expiration of 421a and uncertainty over the future of the EB-5 visa program, both programs Forest City has made repeated use of.
“The debacle over 421a will have far reaching implications for ground-up residential construction,” she said.
Of course, the EB-5 immigrant investor visa was not designed to help developers game the system, as they consistently do. As to 421-a, for years it did assist housing in neighborhoods where the tax break was unnecessary, but now there's more discussion over the need to revise and harmonize an inequitable tax system.

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