Wednesday, January 25, 2017

Timing the buildout: (not-so-specific) progress in near term, murky in longer term

This is the first of a few articles based on the 1/24/17 Atlantic Yards/Pacific Park meeting.

Three towers in the Atlantic Yards/Pacific Park project are either open or about to open. “We're in serious finishing-up-buildings mode,” said Forest City Ratner executive Ashley Cotton last night at the bi-monthly Quality of Life (formerly Community Update) meeting, held at 55 Hanson Place.

But some details around them remain fuzzy, as do projections regarding the rest of the buildout.

I asked if 2025--a date set in 2014 a deadline for the 2250 units of affordable housing, among 6,430 total apartments--remained a realistic date to complete the full project.

Yes, replied Cotton.

Despite what Forest City Realty Trust executives said in November—after disclosing unspecified delays—about the financial horizon for the project lasting to 2035?

Yes, she said.

That’s just not credible.

My October 2016 annotation of an August 2014 tentative schedule
461 Dean (B2)

Move-ins have begun at the 461 Dean modular tower, with leases signed for both the affordable and market-rate units, Cotton said.. Forest City—which developed this building separately from the Greenland Forest City Partners joint venture—has a Temporary Certificate of Occupancy (TCO) through the 20th floor, of 32.

However, Cotton wouldn’t estimate how many of the 363 units have tenants, nor offer an estimate—though I pointed out hearsay ranging from four to eight months—of how long it would take to allot the 181 affordable units.

“Every single applicant has to be approved by the government,” she said, “and then it turns into a lease, and a move-in… We are working as fast as possible.”

Facade work on the building’s exterior might be finished by February, which would allow the developer to move back fencing that encroaches on the sidewalk and Dean Street. (Note that the whole idea of modular construction was to deliver modules with facades in place, but that didn't work well enough.)

535 Carlton (B14)

Regarding the “100% affordable” 535 Carlton tower, the joint venture has a TCO (as I also reported) regarding floors 1 through 6. “We are currently showing people apartments, and signing leases,” Cotton said. “People are going to start moving in really soon.”

The big fence around the building on Carlton Avenue should come down in February, though a portion of the fence on Dean Street will remain, to protect the public from construction of the related open space.

550 Vanderbilt (B11)

Regarding the 550 Vanderbilt condo tower, they have a TCO (as I also reported) for floors 1 through 6. “We're working on scheduling closings,” Cotton said, suggesting that would happen within weeks. “It’s a rolling process.” Then move-ins must be scheduled.

The sidewalk bridge on Vanderbilt Avenue could start coming down today (Wednesday), she said, but they don’t have the exact timing for the Dean Street side of the fence.

38 Sixth (B3)

The 38 Sixth Avenue tower (B3) under construction just launched the lottery for some 300 below-market units, Cotton noted.

For potential applicants, there will be public information sessions on Jan. 31 at 6:30 pm at PS 9, 80 Underhill Avenue, and on Feb. 16 at 6:30 pm at Pfizer Auditorium, NYU Tandon School of Engineering, 5 Metrotech Center. RSVPs are requested.

No progress on 664 Pacific (B15) and the school

Cotton offered little clarity on the rest of the project. Regarding 664 Pacific, aka B15, the market-rate rental tower, with a public school at its base, remains in limbo. “We’re re still patiently waiting on the completion of our litigation issues with our neighbor,” Cotton said.

(The developers need access to a neighboring site before they can dig, and the two parties have disputed the safety precautions. That seems to have delayed the school opening to at least 2021.)

From Site 5 presentation to Dept. of City Planning;
note that plaza isn't green, and bulk of two towers
would be three times that of Williamsburgh Bank
building (aka One Hanson) catercorner
No progress on Site 5

Nor did she have any update on Site 5, currently home to P.C. Richard and Modell’s, and bounded by Pacific Street and Fourth, Flatbush, and Atlantic avenues.

Last year, Forest City indicated it aimed to move the bulk of the B1 tower approved on the arena block across Flatbush, thus replacing an already approved 250-foot, 440,000 square foot building with a behemoth potentially 1.5 million square feet in bulk.

Last night, Cotton again characterized the move as protecting the arena oculus and preserving the plaza as public space—not, of course, more self-interest reasons like the cost and disruption of B1 construction.

“We have not moved forward as fast as we thought we would,” she said, as the litigation with P.C. Richard, which has stalled eminent domain while arguing it was promised space in a replacement building, is ongoing.

It could take some 18 months to go through the public process, including public hearings and a vote by the unelected board of Empire State Development. (No City Council vote is required.) The environmental review would also include analysis of the developer’s plan to change the B4 site at the northeast corner of the arena block from a residential building to an office building.

Interestingly enough, though a spokesperson for the developer last year said, "We think the time is right for the borough to have an iconic office building for the new Brooklyn economy,” Cotton didn’t use that rhetoric. “We've made public our intent to try for a mixed use building, nothing has been determined. You could imagine residential, retail, office. All sorts of different uses.”

Indeed, Cotton’s boss MaryAnne Gilmartin has talked about the need for a mixed-use building for the numbers to work. And, as I wrote last year, plans shared with the Department of City Planning suggested a two-tower project with multiple configurations, but in three of four options with more residential space than office space.

(The Department of City Planning's role is only advisory. The presentation shared last year may or may not indicate evolving plans. The decision is up to the board of ESD, and the process, including public hearings, has not yet begun.)
Asked how tall the building would be, Cotton demurred, saying “you could design that building many different ways” and “I hate to create more anxiety, which I guess there already is… by guessing at something that isn't really a plan.” But the developer has already considered parameters, as I reported, with a two-tower project at 1.1 million square feet and up to 785 feet tall.

615 Dean (B12) and the 421-a question

Prospect Heights resident Gib Veconi asked about B12 (aka 615 Dean), the site next to 550 Vanderbilt, for which there’s a condo design but no activity.

It’s “still sort of low key, not very fast moving,” Cotton replied. “As we watch the markets... 421-a is up in the air… there’s a lot of economic factors.”

Veconi (like me) believed that the 421-a tax break, which offers significant discounts over at least 15 years, was not fully up in the air for Atlantic Yards. “You were grandfathered for 421-a even without affordable housing,” he said, “but you need it in effect at the time of construction start.”

He was referring to the notorious 2007 state legislative “Atlantic Yards carve-out." While the legislature required all buildings to include at least 20% lower-income affordable housing if they appeared within a "geographical exclusion area" (which included the Atlantic Yards site), Atlantic Yards got an exemption. See "UDC Large Scale project" in this link. (Here's the Real Property Tax Law: go to Article 4, Title 2.)

Any building in the project--such as the condo building 550 Vanderbilt--could get the 421-a tax benefit as long as the overall project contained at least 20% of units that rented for less than 90% of Area Median Income, or AMI. (That’s by no means all the below-market units, but includes the low-income and some moderate-income ones.)

“The site-wide exemption for 421-a that enabled you to build an all market-rate building with 421-a on the theory that there would be more affordable housing on other parts of the project—that went away for you?” Veconi asked.

“Sure,” Cotton responded. “There is no 421-a law today at all... If you haven’t started a building, you don’t know what 421-a law you’re under.” The four buildings either finished or nearly finished qualify, while 664 Pacific and 615 Dean also qualify, since they purportedly have footings.

Assuming Cotton’s correct--and this may be a moving target--that raises a pretty significant question. There could be at least three, maybe more, market-rate buildings for which the developer surely wants the tax break. Some version of the carve-out would have to be restored to make that work. That means lobbying.

Contingency plans if project stalls?

Dean Street property owner Jimmy Greenfield asked about the contingency if the project were delayed, or if the developers had to pay the $2,000 per month fine per unit of affordable housing delayed after 2025.


“So 2025 is still nine years away,” Cotton said. “421-a is certainly critical... but building this platform [over the railyard] has to come first [before building six towers over the railyard], and that's still proceeding... there's no reason to have an emergency backup plan... so we're not in emergency planning at all... We're absolutely aware of and focused on project requirements.”

Greenfield pointed out that the B12 and the neighboring B13 site on the southeast block of the project site were supposed to have gotten started a while ago.

Cotton said the tentative schedule (top) was not meant to be firm. “That plan isn't necessary to hit our commitments.” she said.

“But what happens if this, the whole project does not work out?”

“I have no reason to think it’s going to go bust,” Cotton said, “but what you should know is default by the state, they default us.” In other words, the state could take back the land.

“I don't know why you're focused on the doom and gloom,” she said, citing the nearly 800 units of affordable housing and the condo building about to open. “There's a pep in our step. I get that it’s not fun to live across the street. Greenland's a committed partner, they have financial wherewithal. our company has taken many financial hits, that are very, very public, and still stayed in it.”

Well, Greenland’s commitment may have diminished somewhat, since it and Forest City are marketing stakes in three towers (B12, B13, B4).

550 Vanderbilt sales

“What percentage of the units at 550 Vanderbilt have been sold?” Greenfield asked.

“We're really pleased with the sales,” responded Greenland USA executive Scott Solish. In July, the developer reported the building was 50% sold, but nine months earlier, it was said to be more than 30% sold.

That leaves a lot of wiggle room.

Update: indeed, in November, Forest City Realty Trust, parent of Forest City Ratner, acknowledged in an SEC filing, "Over the last quarter, the condominium market in New York has also softened, causing the projected sale schedule for 550 Vanderbilt to be adjusted accordingly.

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