Guess what? Democratic mayoral candidate Bill Thompson, according to a report in the New York Observer on a speech he gave Thursday, suggests that Battery Park City provides a better model for real estate development than the Bloomberg administration’s mega-projects.
The reason: at Battery Park City, each parcel was developed separately. (I'd add that the park space came first, not in the second phase, as with the Atlantic Yards plan.)
Of course, the UNITY plan for the Metropolitan Transportation Authority's Vanderbilt Yard--the key public land within the Atlantic Yards footprint--would do just that, but Thompson has never acknowledged it.
Pros and cons
The Observer's Eliot Brown weighs the pros and cons:
Giving a big site to a single developer all at once—such as the 22-acre, $4.9 billion Atlantic Yards project—could bring a higher bid given, among other reasons, that the developer would benefit from economies of scale and increased values as it fills out the site. But, as has been seen in these strained times, these projects are also quite prone to failure or renegotiation as the developers struggle to get off the ground amid the cyclical economy.
While one site per development could bring a higher bid, in the case of the Metropolitan Transportation Authority's Vanderbilt Yard, the initial cash bid from Forest City Ratner was well below both the bid from rival Extell, which itself was well below the appraised value.
The MTA, under political pressure, agreed to negotiate only with Forest City Ratner. And--as hinted by Brown--this June the MTA, under political pressure, agreed to renegotiate the deal on terms more favorable to the developer.
The reason: at Battery Park City, each parcel was developed separately. (I'd add that the park space came first, not in the second phase, as with the Atlantic Yards plan.)
Of course, the UNITY plan for the Metropolitan Transportation Authority's Vanderbilt Yard--the key public land within the Atlantic Yards footprint--would do just that, but Thompson has never acknowledged it.
Pros and cons
The Observer's Eliot Brown weighs the pros and cons:
Giving a big site to a single developer all at once—such as the 22-acre, $4.9 billion Atlantic Yards project—could bring a higher bid given, among other reasons, that the developer would benefit from economies of scale and increased values as it fills out the site. But, as has been seen in these strained times, these projects are also quite prone to failure or renegotiation as the developers struggle to get off the ground amid the cyclical economy.
While one site per development could bring a higher bid, in the case of the Metropolitan Transportation Authority's Vanderbilt Yard, the initial cash bid from Forest City Ratner was well below both the bid from rival Extell, which itself was well below the appraised value.
The MTA, under political pressure, agreed to negotiate only with Forest City Ratner. And--as hinted by Brown--this June the MTA, under political pressure, agreed to renegotiate the deal on terms more favorable to the developer.
(Comment on the Eliot Brown Story: Multiple Parcels Should Actually Increase Developer Bids)
ReplyDeleteWe agree that the Battery Park City model of dividing up large development into separate parcels is the best way to go. Yes it allows for staged development which can be good, but, when appropriate, it also allows for multiple parcels to go forward simultaneously notwithstanding the fact that a single developer would not have the wherewithal to proceed on multiple fronts at the same time. (For instance the city was getting strong advice not to try to advance the new phases of Queens West as a single-developer site given this kind of incapacity.- Queens West had already wound up delayed already under the Bloomberg administration due to the Bloomberg/Doctoroff preoccupation with the Olympics bid.)
There is one thing in this post, that we think misleads in the impression it coneys: “Giving a big site to a single developer all at once—such as the 22-acre, $4.9 billion Atlantic Yards project—could bring a higher bid given, among other reasons, that the developer would benefit from economies of scale and increased values as it fills out the site.”- -
- - We think that it need to be understood that `giving a big site to a single developer all at once—such as the 22-acre, $4.9 billion Atlantic Yards project’—could bring a MUCH LOWER bid.
No doubt everyone has heard the expressions “You didn’t pay retail for that, did you?” and “I can get it for you wholesale.” Suffice it to say, retailing sales, RAISES the prices a seller can charge. Furthermore, dividing huge sites into multiple parcels increases the number of capable bidders in the game and that raises the price the government will receive. Another benefit is that it mitigates risk for the government allowing for more flexible Plan Bs (and Cs). Finally, when it comes to sites as large as Atlantic Yards there aren’t actually any economies of scale for the developer because you’re way past the point where they max out and developers never gear up to that scale.
If there were, in fact, actually economies of scale you would see it in developers putting out the highest bid for multiple parcels all at once or on a running basis. That didn’t happen at Battery Park City although some developers did bid successfully to build more than one site.
Government also ought to feel chagrined if it wholesales megadevelopments to (no-bid or low-bid) developers like Forest City Ratner and then those developers then retail out sub-parcels to other developers at a marked-up price. This is something we may see at the West Side’s Hudson Yards.
Not mentioned above is that single-developer development produces listless monoculture and monopoly.
Michael D. D. White
Noticing New York
http://noticingnewyork.blogspot.com/