Monday, November 07, 2016

After bombshell about delays: What's new schedule? Affordable housing by 2025? Tower reconfiguration?

The evidence for Atlantic Yards/Pacific Park delays has been glaring, as the headlines at right from this blog indicate.

But not until last Thursday did Forest City Realty Trust, in a press release, announce that "the company, as part of a formal strategic plan update, made the decision to revise the overall project schedule to delay future vertical development."

That raised some significant lingering questions, only a few of which were touched on during the conference call the next day with investment analysts.

But they need to be answered, and the Nov. 14 meeting of the Atlantic Yards Community Development Corporation (AY CDC), the body set up to advise Empire State Development (the state authority overseeing/shepherding the project), should offer an opportunity.

Project timing: when is it finished?

As I wrote, Forest City CEO David LaRue did not reveal the new schedule. But surely the development team--Greenland Forest City Partners--has a new schedule (or schedules) and they should share it.

Company CFO Bob O'Brien said in the conference call that the firm's financial model "extends to 2035, 20 years from now."  That doesn't necessarily mean a completion date by 2035, but it does suggest that the project won't be done by 2025, the time by which the affordable housing is supposed to be completed.

The 2035 date may represent stabilization of income, but presumably that's no more than five years--maybe less--after which the project should be finished. That suggests delays in fighting the "blight" of the open railyard and delivering the much-promoted "open space," which the developers call a "park" (not really).

(Remember, the 2035 date was the shocking "outside date" agreed to in a 2009 project revision, which in 2014 was dialed back to 2025 for the affordable housing.)

Note in below map significant delays: for example, the two unbuilt sites on the southeast block, B12 and B13, should be under way, but aren't, and are rather for sale, as is B4.

My October 2016 annotation of 2014 tentative schedule
Affordable housing deadline

As I asked Friday, what happens to the June 2014 agreement, reached by New York State and some community community negotiators, to guarantee--with penalties--the 2,250 units of affordable housing by May 2025, "subject to extensions set forth in the Development Agreement and the General Project Plan"?

None of the investment analysts asked about this affordable housing commitment and, perhaps because of that, the issue didn't make into any of the mainstream coverage (Cleveland Plain Dealer, The Real Deal).

On Twitter, Gib Veconi, who in 2014 on behalf of BrooklynSpeaks helped negotiate the 2025 affordable housing deadline (after the project was given an "outside date" of 2035, a 25-year buildout), seemed reasonably confident that penalties will enforce the 2025 date.

So I have my doubts, given the pattern of this project.

One way, perhaps, to meet that 2025 deadline is to build more "100% affordable" rental buildings. Note that, in the original plan, all the rental buildings were to be 50% market, 50% subsidized--though that's actually 50/30/20, given the breakdown of moderate- and middle-income units, as well as low-income units.

Now we have two "100% affordable" rental buildings, which in turn will be matched by "100% market" rental buildings. That deviation from the more egalitarian model was justified as delivering affordable housing sooner.

That justification might be heard again, and result in buildings with distinctly different profiles: a project divided mostly into market-rate and affordable buildings.


What about the railyard?

The new Vanderbilt Yard to store and service Long Island Rail Road trains was supposed to be finished by December 2017. Now it looks to be 2018, according to O'Brien's remarks last Friday.

It's worth finding out when in 2018 the completion is projected.

Other questions

As I wrote, several other questions remain:
  • will covering the railyard for vertical construction be delayed? And doesn't that prolong blight?
  • how much tension is this causing between Forest City and its Shanghai-based partner?
  • beyond the three sites already up for sale/new investment, how much more might be sold?
  • will the developers seek more subsidies, or relaxed terms regarding the affordable housing?
Indeed, it was fascinating to hear Forest City use language that left the impression this was a unilateral decision, and to hear the investment analysts fail to press regarding Greenland's role.

Greenland surely had to concur with such decisions, but surely is not happy with a project it once claimed could be built out in eight years.

There are larger retrospective questions, of course, about what went wrong--a series of factors, I'd say--which likely will surface for analysis shortly.

How things might get better/worse for developers

Atlantic Yards, as I've said, is a "never say never" project, and there are multiple ways the scenario might change. Here are a few speculations:
  • a new 421-a law makes building apartments more attractive, and starts the timetable again
  • additional subsidies, or relaxed terms, make the affordable units more profitable
  • an approval to move bulk from the B1 site at the arena prow to Site 5 across Flatbush Avenue unlocks a huge new project
  • new investors inject capital into the project
  • Forest City and Greenland clash (and sue each other?) and/or buy each other out (and then sell to others)
  • the deck over the railyard gets delayed 

Another tentative timetable showing delay

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