Skip to main content

The Greenland deal: real cost fuzzy, the case against future subsidies, the impact of a faster timetable--and the tension between affordable housing and density

Yesterday's announcement that Forest City Enterprises and the Chinese government-owned Greenland Group have reached a definitive agreement--still subject to expected approval by the respective national governments--for the latter to invest in 70% of the remaining Atlantic Yards project should have prompted some skepticism.

The real cost to the parties

First, Greenland, according to the press release, "would also make a capital contribution to reimburse Forest City for certain costs incurred to date."

[Updated and clarified] That sum was unspecified, but it certainly suggests that Forest City's paper loss on Atlantic Yards--an "impairment of $250 million to $350 million"--is not nearly as bad as announced. Or--I am told--that's a roundabout way of saying Forest City is selling its share at a discount.

The Journal reported:
The price of the stake wasn’t disclosed, but it appears Greenland is getting it for significantly less than what Forest City put in. Last week, Forest City said the $500 million it had invested in the project was worth between $150 million and $250 million, a major cut.
Still, surely both parties are expecting nice long-term returns once the project hums along. That suggests that, in the long-term, Forest City will do OK.

Note that Forest City's stock price yesterday rose 1.48%, which was ahead of the market. (The DJIA rose .82%.)

Future subsidies and government help

Thus, until and unless Forest City opens its books further regarding the Greenland deal, it would be unwise for government negotiators, especially the incoming de Blasio administration, to grant further subsidies, as Forest City undoubtedly will request.

It's likely Forest City will not so much ask for cash but simply request more generous terms, such as continued deviation--as with the first tower--from the pledge to make 50% of the affordable units, in floor area, family-sized.

It's again clear that Empire State Development, the state agency overseeing and shepherding Atlantic Yards, is more partner and enabler than overseer. After all, ESD CEO Kenneth Adams provided an effusive quote in the press release about how Greenland would bring forth the public benefits.

Also, you have to wonder whether a project mostly owned by the Chinese government--just like an arena 45% owned and a team 80% owned by a Russian oligarch--would have found it so easy to get Atlantic Yards passed, including the array of government help, direct and indirect, including eminent domain, that Forest City Ratner wrangled.

Increased pace, dampened criticism?

The combination of modular construction and Greenland's cash infusion may spur--as the parties claim--a much more rapid construction pace. (I still find it hard to believe the reported claim by Greenland that the project would be done in eight years.)

So that might dampen, but not quiet the call, by BrooklynSpeaks and numerous elected officials, that the sale be conditioned on guarantees that affordable housing be delivered when originally promised.

But they still have an argument for getting it all in writing.

The issue of scale

The project, at least in terms of renderings, does not seem to include the single largest building, the flagship tower at the corner of Flatbush and Atlantic avenues. 

Even so, there's a potential contradiction between the call for affordable housing and the longtime BrooklynSpeaks request, at least regarding the Atlantic Yards plan as approved, to scale down the project.

A 2006 argument, redux

So it's worth another look at the July 2006 shadow debate between Bertha Lewis of ACORN and Kent Barwick of the Municipal Art Society (which later spawned, and then left, BrooklynSpeaks), held in City Limits. 

Lewis wrote 'SIMPLY NOT ENOUGH HOUSING IN BROOKLYN'  and defended Forest City Ratner's decisions:
The cost of acquiring the MTA land, moving the rail yard, doing environmental remediation and building infrastructure combine to make this an extraordinarily expensive development site. These costs would need to be borne by any developer, even a nonprofit or public entity that sought to develop the site.
Let’s not beat around the bush. Forest City Ratner is not the United Way. They are looking to make a profit. You can make money building affordable housing only two ways: through direct subsidy to reduce the extraordinary cost of this project, to any developer who chose to undertake it, or cross-subsidy from the market-rate rentals and condominiums.
Any developer who built on this site would need both subsidy and cross-subsidy to make the amount of affordable housing units included in the project financially viable. None of the so-called alternative plans advanced for the site adequately address this fundamental economic reality.
That also leads to the other bogeyman of the Atlantic Yards debate: density. In order to make the cross-subsidy between market rate and affordable units work in this project, you either need to allow the developer to build more, which means taller buildings, or to replace the cross-subsidy from market-rate units with more direct subsidy from government. Currently there is no other existing model for building affordable housing in New York City.
Lewis noted that city tax dollars, via abatements like 421-a, were already subsidizing as-of-right abatements in luxury towers in Downtown Brooklyn.

Kent Barwick of the Municipal Art Society took on the issue of citywide policy, in 'FAILS TO ACCOMPLISH A DELICATE BALANCE' :
The issue is not whether the city should be pursuing aggressive policies to generate affordable housing. Justice and equity demand that we take steps to ensure our neighborhoods remain economically diverse, and create and preserve housing for low and middle-income New Yorkers. But the scale of Atlantic Yards indicates that the strategy the city is pursuing is flawed. In the rezoning of Hudson Yards and Greenpoint-Williamsburg, the city created an incentive for developers to build affordable housing by permitting them to build bigger buildings than would otherwise be allowed. Atlantic Yards follows this pattern, as the excessive scale of the project -- the developer has proposed 8.7 million square feet, the equivalent in floor area to three Empire State Buildings -- is clearly only acceptable to the project’s political sponsors because of the inclusion of affordable housing.
But Atlantic Yards will still overwhelm the surrounding neighborhoods even as it houses residents with a mix of incomes, and New York should not have to sacrifice neighborhood character to get affordable housing. The city needs a better approach to this problem. One alternative would be to create a comprehensive requirement that all new high-density development in the city include a modest proportion of affordable housing.

There would be several advantages to this. First, we could set density and height limits according to what is right for neighborhoods and the city as a whole, instead of what we think is required to get developers to build affordable units. Second, we would generate far more affordable units: if this policy were in place today, thousands of the units that are being built across the city today -- notably in Downtown Brooklyn -- would be affordable. Finally, the approach would establish a level playing field. A developer building in Queens would be required to build affordable housing just as one in Brooklyn would, and there would be no need for negotiations to establish the quantity he or she needed to build, which instead would be established by the city's zoning resolution or state law.
The real estate community has argued that such a requirement would deter development, but this has not been the case in Boston and San Diego, which require all new development to have 10 percent of units be affordable. The simple fact is that developers build if market conditions are right, and almost all of them would be able to adjust to producing affordable units, particularly given the generous housing subsidies the city offers to developers for building affordable housing.
Thing is, Barwick's solution sounds not unlike some policies proposed by Mayor-elect Bill de Blasio, an Atlantic Yards supporter.

It's just that de Blasio supported Atlantic Yards without such a public process, and now he's trying to establish a more rational policy. The density and height limits with Atlantic Yards--which still seem to be changing--were subject to the whim of the developer.

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…

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…

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…

Forest City acknowledges unspecified delays in Pacific Park, cites $300 million "impairment" in project value; what about affordable housing pledge?

Updated Monday Nov. 7 am: Note follow-up coverage of stock price drop and investor conference call and pending questions.

Pacific Park Brooklyn is seriously delayed, Forest City Realty Trust said yesterday in a news release, which further acknowledged that the project has caused a $300 million impairment, or write-down of the asset, as the expected revenues no longer exceed the carrying cost.

The Cleveland-based developer, parent of Brooklyn-based Forest City Ratner, which is a 30% investor in Pacific Park along with 70% partner/overseer Greenland USA, blamed the "significant impairment" on an oversupply of market-rate apartments, the uncertain fate of the 421-a tax break, and a continued increase in construction costs.

While the delay essentially confirms the obvious, given that two major buildings have not launched despite plans to do so, it raises significant questions about the future of the project, including:
if market-rate construction is delayed, will the affordable h…

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 …

For Atlantic Yards Quality of Life meeting Sept. 19, another bare-bones agenda (green wall?)

A message from Empire State Development (ESD) reminds us that the next Atlantic Yards/Pacific Park Quality of Life Meeting--which aims to update community members on construction and other issues--will be held:
Tuesday, September 19, 2017 @ 6 pm
Shirley Chisholm State Office Building
55 Hanson Place
1st Floor Conference Room
Brooklyn, NY 11217 The typically bare-bones, agenda, below, tells us nothing about the content of the presentation. One thing to look for is any hint of plans to start a new building on the southeast block of the project by the end of the year.

If not, ESD is supposed to re-evaluate a longstanding request from project neighbors to move back a giant wall encroaching on part of Dean Street between Carlton and Vanderbilt avenues. It's said to enclose construction activity, but, in recent months, has significantly served to protect worker parking.

Also, by the way, if you search for Atlantic Yards on Google or the ESD website, it leads to this page for the Atlantic Ya…