Thursday, June 16, 2016

Yes, Atlantic Yards/Pacific Park is well behind the (previous, tentative) schedule; still no answers re affordable housing

Beyond the not-quite-comforting explanation of how high winds caused debris to fly off the under-construction 38 Sixth Avenue building, the bi-monthly Atlantic Yards/Pacific Park Community Update meeting June 14, held at 55 Hanson Place, addressed multiple issues, including a new detente with project neighbors and concerns about traffic congestion.

The project is clearly delayed, at least as compared to a tentative schedule revised in August 2014 and once circulated publicly. One reason may be the attempt to sell a piece of the project; another may be the delayed public process to change the use of one tower and shift the bulk of another.

Another looming factor--hardly discussed in detail--remains the renewal of the now-expired 421-a tax break. (The renewal is down to the wire in the state legislature.) 

And while it's still very early in the buildout, at least as measured from the June 2014 agreement that resulted in a new 2025 timetable for the project's 2,250 units of affordable housing, it's not too soon to wonder if the domino effect of delays might affect that affordable housing.

Nor is it too soon to question--as Gib Veconi of the Prospect Heights Neighborhood Development Council has done insistently, without answers--whether developer Greenland Forest City Partners' planned changes in the project can accommodate the specific schedule for the planned affordable housing.

Looking at the schedule

That overall tentative project schedule, below, has already proven to be over-optimistic, as the next two buildings, B11 (550 Vanderbilt) and B14 (535 Carlton), won't open in July 2016 as once predicted but perhaps six months later.

The B12 condo building, one of three sites being marketed to outside investors by the joint venture Greenland Forest City Partners, was supposed to be finished by February 2017 but hasn't gotten off the ground, though the design was unveiled last September.

"The fact it’s being marketed is not impacting the construction schedule?" asked Veconi.

No, said Forest City Ratner's Ashley Cotton.

Veconi asked about a forecast for completing the building.

"We do not have a revised forecast," Cotton responded.

The B13 condo, according to that 2014 schedule, was expected to break ground in July 2016, Veconi noted. "We didn’t hear anything about it, I'm assuming that's no longer planned."

"There is no plans to break ground on that condo," Cotton said. "That’s all subject to change."

Changes in the project plan?

The giant B4 building on the northeast flank of the arena, once planned to contain both mixed rental and condo apartments, was once expected to break ground in March 2017.

However, Greenland Forest City Partners now wants to convert the use to office space, which will require a public process. That will presumably be coupled with the approvals needed to move the bulk of the permitted B1 tower over the arena plaza across Flatbush Avenue to Site 5, currently occupied by Modell's and P.C. Richard. (I call that giant planned tower the Brooklyn Behemoth.)

"Our intent to move forward with the state"--which oversees the project--"and request a change to that building," Cotton said of B4.

"What's the status of the request to change the project plan?" asked Veconi.

"Obviously it's slower than we first thought," said Cotton. Forest City had previously predicted that the new public process would begin this spring.

"The state is not in receipt of a formal request and a formal change to the project plan?" asked Veconi.

"Correct," said Marion Phillips III of Empire State Development, the state authority that oversee/shepherds the project.

"Public agencies have been briefed on our interest," Cotton stated, but was not able to offer a forecast on timing. One significant roadblock, if likely a temporary one, is a lawsuit from P.C. Richard that has stalled condemnation, as the retailer contends it was promised space in the replacement building.

What's next?

Asked if the joint venture had a tenant for either office building, Cotton said no.

"Is that necessary?" Veconi followed up. (It is highly unusual, but not unprecedented, to build office buildings on spec.)

"We have a year long public approval process," Cotton said. That could mean they'd be looking for a tenant as the approval process continues.

Affordable housing

Veconi brought up the issue he's raised several times before--the significant challenge to the developer in meeting an obligation to deliver a required minimum ratio of affordable housing without the affordable units once planned for B4. (The issue has also been raised by Barika Williams of the Atlantic Yards Community Development Corporation.)

As part of a new timetable Veconi helped negotiate in 2014 as part of the BrooklynSpeaks coalition, the developer agreed that 35 percent of the completed units at the site would be affordable housing units until 1,050 affordable housing units are built. The tentative scenario below shows why B4 units are key.

Asked how affordable housing would be redistributed from B4, Cotton demurred, saying "we haven't advanced to the next step." 

(The solution isn't clear, but affordable units could be added to already planned buildings, perhaps creating smaller units, or perhaps to the office+condo tower planned at Site 5, which is not on the program listed above.)

"Well, it's something that I think would be at least a schematic-level consideration, at this point to figure out where those units would be redeployed," Veconi said with a touch of exasperation, "and how the phasing schedule would work. I know your firm spent some time in 2014 to work out that original phasing plan. I can’t believe it isn’t being contemplated at this point."

"I think I'll be ready to show you all the plans when we've taken that next step," Cotton said.

Veconi's request was completely reasonable, and Cotton's response was somewhat disingenuous. Surely they're assessing various scenarios. They just don't want to talk about it.

The 421-a impact?

The state's failure to reform and renew the 421-a tax break may have an impact on the joint venture's plans. As I wrote in May, David LaRue, CEO of parent Forest City Realty Trust, said that Greenland Forest City Partners had engaged CBRE "to recapitalize the project, taking advantage of demand for residential buildings," marketing particularly "our market-rate rental opportunities, two that have 421-a tax benefits entitled at this point."

As I wrote, none of the three sites for sale--the B12 and B13 condo sites, as well as B4--are actually supposed to be market-rate rentals. However, all the buildings were supposed to take advantage of 421-a benefits, thanks to a 2007 legislative deal that allowed the site to be looked at as a whole, even if some buildings were all market-rate.

According to a 6/14/16 profile of union leader Gary LaBarbera in The Real Deal, Forest City CEO MaryAnne Gilmartin said that future affordable buildings would be unlikely to rise without the 421-a tax break. The program, she said, “is essential for the further construction of the affordable components.

At the same time, the developer is obligated to build the affordable units by 2025. If 421-a is not renewed, will the developer be able to claim a lack of subsidy and avoid being in default?

Lawsuit status

At the meeting, resident Robert Puca asked about the status of the lawsuits between Forest City and Skanska, its former partner on the ill-fated modular factory.

Cotton said she didn't know. (As far as I know, they're still percolating.)

He asked about the status of the P.C. Richard lawsuit. (I reported that the discovery process could last until the end of March 2017.)

The next court appearance "is several months out," said Phillips, but "they can't talk about it with me present."

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