Skip to main content

Huge deficit in tax-exempt bonds suggests Atlantic Yards delay

Atlantic Yards may have been approved by the Empire State Development Corporation (ESDC) and the Public Authorities Control Board (PACB) last December, but the project faces a significant hurdle over which the agencies had no control. Nor did they apparently consider it in their deliberations.

The city and state agencies that fund affordable housing are drastically oversubscribed with developers seeking to draw on a limited pool of tax-exempt bonds. Testifying on May 24, city Housing Preservation and Development (HPD) Commissioner Shaun Donovan drew a stark picture before the House of Representatives’ Ways and Means Committee:
New York City is facing an immediate crisis in private activity bond volume cap, which we expect to deplete before the end of June. Without additional volume cap, 6,700 units of housing in our pipeline will not be built.

And those units precede the 2250 units promised for Atlantic Yards, involving $1.4 billion in bonds, a figure developer Forest City Ratner and government officials didn't reveal until after the project was approved.

Congress is considering proposals that would increase the “volume cap,” which limits the amount of bonds that can be authorized by state and city agencies around the country.

For now, a warning from Forest City Enterprises, parent of Atlantic Yards developer Forest City Ratner, grows in importance. In its latest annual report, the developer acknowledged several factors contributing to potential “increased costs and delays to the project,” including “our inability to obtain tax exempt financing or the availability of financing generally.”

Negotiations unfinished

Forest City Enterprises' annual report also acknowledged that “final documentation of the transactions are subject to the completion of negotiations with local and state governmental authorities.”

The ESDC's General Project Plan states:
Affordable housing is expected to be financed through tax-exempt bonds provided under existing and proposed City and State housing programs, such as the City’s 50-30-20 program.

Affordable housing in the city and state is furthered by low-cost mortgages, thanks to tax-free bonds issued by the New York City Housing Development Corporation (HDC) and the New York State Housing Finance Agency (HFA). In New York City, the state generally funds projects with 80% market-rate housing, while the city agency funds projects geared to a greater mix of incomes, such as that planned for Atlantic Yards.

About volume cap

Volume cap is allotted nationally on a per capita basis, $85 per person. The federal government limits the amount of bonds a city or state can authorize, because the tax-exemption represents foregone federal revenue.

In New York State, it adds up to about $1.6 billion a year, distributed by four agencies, two state and two city, two of which support economic development and two of which support housing. The issue was first raised by the New York Observer's Matthew Schuerman, who reported in March on the stress facing the HFA, which has an even deeper pipeline than the city's HDC.

The Observer reported last week:
The state and the city [housing] agencies say that, together, they are facing about $6 billion worth of requests for tax-exempt bonds over the coming years, and normally receive just $560 million to $900 million a year in bond cap.

In the city’s pipeline alone, there’s $1.8 billion in projects, which precede the yet-unrequested $1.4 billion for Atlantic Yards. Given the scarcity of city funding for such developments, some affordable housing supporters have begun to express dismay that Atlantic Yards would suck up a significant portion of the pool.

While HDC’s volume cap has ranged from $178 million to $708 million in recent years, this year the agency was assigned $195 million in volume cap, and expects it to be depleted by the end of June, according to HDC spokesman Aaron Donovan. (It’s possible some volume cap can be transferred from state agencies later in the year.)

Given that Forest City Ratner has not yet applied for financing, it could, for example, also take advantage of HDC's taxable financing, Donovan said. Such bonds would offer a break compared to the open market but likely would not be as attractive as tax-exempt financing.

Possible reform

Before Congress, HPD’s Shaun Donovan offered two proposals to increase funds available to the city; one would “allow for 'recycling' or 'refunding' of multi-family bonds after principal repayments or pre-payments of the bonds.” The second would involve “raising the allocation of volume cap for high cost areas” like New York. (As HPD commissioner, Donovan also serves as chairman of the HDC.)

The Ways and Means Committee seemed receptive to the technical fix involved in the first proposal, which could provide an additional $500 million immediately, according to The Bond Buyer's 6/4/07 report . (After that first year, Youssouf told the Observer, the fix could provide $200 million a year after that.)

Those additional sums could help the city and state housing agencies fulfill more of the pending requests, but not, apparently, all of them.

Raising the allocation, however, would be tougher, The Bond Buyer reported, because Congress would have to find new revenue to offset lower tax receipts. Then again, it costs more to develop housing in New York City than elsewhere, and not all states use up their volume cap, so there’s an argument for adjusting the volume cap.

This is a challenge for New York developers in general, so representatives of the city's real estate industry, along with city government officials, are already lobbying in Washington. Forest City Ratner, with so much at stake, may be especially watchful--and participatory.

Comments

Popular posts from this blog

Barclays Center/Levy Restaurants hit with suit charging discrimination on disability, race; supervisors said to use vicious slurs, pursue retaliation

The Daily News has an article today, Barclays Center hit with $5M suit claiming discrimination against disabled, while the New York Post headlined its article Barclays Center sued over taunting disabled employees.

While that's part of the lawsuit, more prominent are claims of racial discrimination and retaliation, with black employees claiming repeated abuse by white supervisors, preferential treatment toward Hispanic colleagues, and retaliation in response to complaints.

Two individual supervisors, for example, are charged with  referring to black employees as “black motherfucker,” “dumb black bitch,” “black monkey,” “piece of shit” and “nigger.”

Two have referred to an employee blind in one eye as “cyclops,” and “the one-eyed guy,” and an employee with a nose disorder as “the nose guy.”

There's been no official response yet though arena spokesman Barry Baum told the Daily News they, but take “allegations of this kind very seriously” and have "a zero tolerance policy for…

Behind the "empty railyards": 40 years of ATURA, Baruch's plan, and the city's diffidence

To supporters of Forest City Ratner's Atlantic Yards project, it's a long-awaited plan for long-overlooked land. "The Atlantic Yards area has been available for any developer in America for over 100 years,” declared Borough President Marty Markowitz at a 5/26/05 City Council hearing.

Charles Gargano, chairman of the Empire State Development Corporation, mused on 11/15/05 to WNYC's Brian Lehrer, “Isn’t it interesting that these railyards have sat for decades and decades and decades, and no one has done a thing about them.” Forest City Ratner spokesman Joe DePlasco, in a 12/19/04 New York Times article ("In a War of Words, One Has the Power to Wound") described the railyards as "an empty scar dividing the community."

But why exactly has the Metropolitan Transportation Authority’s Vanderbilt Yard never been developed? Do public officials have some responsibility?

At a hearing yesterday of the Brooklyn Borough Board Atlantic Yards Committee, Kate Suisma…

No, security guards can't ban photos. Questions remain about visibility of ID/sticker system.

The bi-monthly Atlantic Yards/Pacific Park Community Update meeting June 14, held at 55 Hanson Place, addressed multiple issues, including delays in the project, a new detente with project neighbors,concerns about traffic congestion, upcoming sewer work and demolitions, and an explanation of how high winds caused debris to fly off the under-construction 38 Sixth Avenue building. I'll have more coverage.
Security issues came up several times at the meeting.
Wayne Bailey, a resident who regularly takes photos and videos (that I often use) of construction/operations issues that impact residents, asked representatives of Tishman Construction if the security guard at the sites they're building works for them.
After Tishman Senior VP Eric Reid said yes, Bailey asked why a guard told him not to shoot video of the site, even though he was on a public street.

"I will address it with principals for that security firm," Reid said.
Forest City Ratner executive Ashley Cotton, the …

Barclays Center event June 11 to protest plans to expand Israeli draft; questions about logistics

At right is a photo of a poster spotted in Hasidic Williamsburg right. Clearly there's an event scheduled at the Barclays Center aimed at the Haredi Jewish community (strict Orthodox Jews who reject secular culture), but the lack of English text makes it cryptic.

The website Matzav.com explains, Protest Against Israeli Draft of Bnei Yeshiva Rescheduled for Barclays Center:
A large asifa to protest the drafting of bnei yeshiva in Eretz Yisroel into the Israeli army that had been set to take place this month will instead be held on Sunday, 17 Sivan/June 11, at the Barclays Center in Downtown Brooklyn, NY. So attendees at a big gathering will protest an apparent change of policy that will make it much more difficult for traditional Orthodox Jewish students--both Hasidic (who follow a rebbe) and non-Hasidic (who don't)--to get deferments from the draft. Comments on the Yeshiva World website explain some of the debate.

The logistical questions

What's unclear is how large the ev…

Atlantic Yards/Pacific Park graphic: what's built/what might be coming (post-dated pinned post)

Click on graphic to enlarge. This is post-dated to stay at the top of the blog. It will be updated as announced configurations change and buildings launch. The August 2014 tentative configurations proposed by developer Greenland Forest City Partners will change, and the project is already well behind that tentative timetable.


Not quite the pattern: Greenland selling development sites, not completed condos

Real Estate Weekly, reporting on trends in Chinese investment in New York City, on 11/18/15 quoted Jim Costello, a senior vice president at research firm Real Capital Analytics:
“They’re typically building high-end condos, build it and sell it. Capital return is in a few years. That’s something that is ingrained in the companies that have been coming here because that’s how they’ve grown in the last 35 years. It’s always been a development game for them. So they’re just repeating their business model here,” he said. When I read that last November, I didn't think it necessarily applied to Atlantic Yards/Pacific Park, now 70% owned (outside of the Barclays Center and B2 modular apartment tower), by the Greenland Group, owned significantly by the Shanghai government.
A majority of the buildings will be rentals, some 100% market, some 100% affordable, and several--the last several built--are supposed to be 50% market/50% subsidized. (See tentative timetable below.)

Selling development …

Atlanta's Atlantic Yards moves ahead

First mentioned in April, the Atlantic Yards project in Atlanta is moving ahead--and has the potential to nudge Atlantic Yards in Brooklyn further down in Google searches.

According to a 5/30/17 press release, Hines and Invesco Real Estate Announce T3 West Midtown and Atlantic Yards:
Hines, the international real estate firm, and Invesco Real Estate, a global real estate investment manager, today announced a joint venture on behalf of one of Invesco Real Estate’s institutional clients to develop two progressive office projects in Atlanta totalling 700,000 square feet. T3 West Midtown will be a 200,000-square-foot heavy timber office development and Atlantic Yards will consist of 500,000 square feet of progressive office space in two buildings. Both projects are located on sites within Atlantic Station in the flourishing Midtown submarket.
Hines will work with Hartshorne Plunkard Architecture (HPA) as the design architect for both T3 West Midtown and Atlantic Yards. DLR Group will be t…