Skip to main content

Latest estimate halves cost-savings from (best-case) modular construction, but delays make it worse; platform cost mitigated by leap in land value

Even before we learned that Forest City Ratner's modular construction gambit was not working as planned, a revised New York State document estimated that the cut in costs/wages from a best-case modular buildout would be only 11%-12%, rather than the 22% previously estimated.

Why? The previous document had left out a key element in Phase 2 of the Atlantic Yards project: the platform over the railyard.

The revised estimate translates into a 12% cut in tax revenues--half the previous projection--compared to conventional construction. On this specific metric, it would be not as bad a deal for the public than previously estimated.

Overall, the revised estimate suggests that, in the best case, the savings from modular would be far less than the 25% Forest City was projecting only a year ago (or 15-20% less, in other projections).

Without more detail, we don't know exactly why the projection changed so much. Either the savings were overstated from the start, or two estimates, issued this year as part of the court-ordered Supplemental Environmental Impact Statement, were already acknowledging that the first tower was taking long than assumed.

Cost overruns/delays change the picture

For now, however, any cost estimate is suspect, since the best-case projection of the modular buildout is unlikely, given the news of extensive cost overruns for the first modular tower, B2, and the bitter legal dispute between Forest City and Skanska.

Forest City's new partner/overseer on Atlantic Yards/Pacific Park, the Chinese government-owned Greenland Group, has decided that the next towers will be built conventionally.

So we won't be hearing the much-promoted claims that modular construction, shifting most work to the factory at the Brooklyn Navy Yard, would mean fewer trucks, less waste, and safer working conditions.

Modular construction was supposed to save time, but hasn't. B2, which broke ground in December 2012, was originally said to take 20 months (though Forest City in one earlier interview hoped for 14 months!), The delivery date then became December 2014, a two-year buildout.

As of April 2014, it was slated to open in the fourth quarter of 2015, a three-year buildout. Now there's no projected opening date. Savings evaporate with delay, and clearly the cost projections are altered by increased, unanticipated costs.

Error in environmental review leads to recalculation

This article revises what I wrote on 3/31/14, Revealed: Atlantic Yards modular construction means 22% drop in costs/wages, 10% cut in jobs, 24% loss in tax revenues.

I didn't miscalculate. I was merely reporting on the data in the Draft Supplementary Environmental Impact Statement (Draft SEIS), released by Empire State Development after preparation by the ubiquitous consultant AKRF.

It  seemingly contrasted with the Forest City Ratner statement, as shown in the slide at right, that modular construction would require the same amount of person-hours as conventional construction (though with lower wages).

Yes, my doubt was unfounded, it turns out, but Forest City had not released detailed information to bolster its statement. (When it comes to statistics, well, the developer's record is less than stellar.)

When ESD accepted and approved the Final SEIS on 6/12/14, the Executive Summary indicated an error, though without a clear admission: "The numbers included in this FSEIS have been revised to reflect inclusion of the costs associated with the platform work, which were not included in the DSEIS."

That led to the recalculation: "the investment for construction of Phase II of the Project using modular construction methods is estimated to equal about $2.15 billion in 2013 dollars. This would represent about a 12 percent reduction from costs using conventional construction methods."

That also means an 11% cut in wages, and only a 1% cut in job-years.

The statistics, from Final SEIS

From Final SEIS
Direct employment would be about 9,051 job-years, a cut of 97 job-years. The use of modular would generate 7,538 job-years in the state, bringing the total direct and generated jobs from construction of the projected development to 16,589 job-years, a cut of about 176 job-years.

Direct wages and salaries would be $653.20 million, in 2013 dollars, an 11% reduction from conventional construction. In the broader New York State economy, total direct and generated wages and salaries from construction would be about $1.11 billion, again an 11% cut.

The total $153.41 million in tax revenues for New York City, MTA, and New York State, in 2013 dollars, is about 88% of the total estimated for conventional construction, or, a 12% cut.

The statistics, from the Draft SEIS

As I wrote, the Draft SEIS stated:
Based on the preliminary estimates, the investment for construction of Phase II of the Project using modular construction methods is estimated to equal about $1.90 billion ($1,895.66 million) in 2013 dollars. This would represent about a 22 percent reduction from costs using conventional construction methods.
From Draft SEIS
The cost of the platform, and who's paying

The Final SEIS estimates the total cost of Phase 2 at $2,145,650,000, while the Draft SEIS estimate was $1,895,000,000. The difference is just about $250 million, or $249,990,000.

That $250 million sum apparently represents "costs associated with the platform work," which may or may not include spinoff costs.

The cost of the platform has been estimated at between $200 million and 300 million. In March 2010, then-Daily News columnist Errol Louis wrote:
State agencies and the Ratner company haven't been blameless. We still don't know who will pay to create an expensive deck over the Vanderbuilt railyards, the section of the project area where thousands of units of housing are supposed to be built.

The expected cost - as much as $200 million to $300 million by some estimates - may get picked up by Ratner, or the bill may get handed to the city or state a decade from now, long after human and institutional memories of the original deal have faded.
May get picked up by Ratner? That's the developer's responsibility, and part of why the cash payment for the 8.5-acre railyard--$100 million, with a gentle interest rate--was so little.

Now Greenland Forest City Partners, the new joint venture, is responsible for the platform. They may use current or--I'd bet--future EB-5 funds to pay. If they get the city or state to pay, well, that would great for their shareholders, less so for the public.

The value of development rights: more than $1 billion?

As I wrote, development rights for the 8.5-acre Vanderbilt Yard, after a MTA-requested appraisal, were appraised in 2005 at $75/square foot, for 3,615,790 developable square feet.

That appraisal estimated the platform cost at between $54 million and $72 million and thus arrived at a value of $214.5 million.

But development sites in downtown Brooklyn are now valued at $350/square foot, a broker stated this past April. (The Junior's site got a bid of $450/sf, as noted by Noticing New York, which analyzed land values at some other development sites.)

If we calculate platform development rights at $300/square foot, the value would be $1,084,737,000. At $350/square foot, the value would be $1,265,526,500, and at $400/sf, the value would be $1,446,316,000. 

If Forest City and partner are paying some $500 million--a rough estimate if you add the cash, the (higher-cost estimate) platform, the cost of the new subway entrance and carrying costs--that looks like a very good deal.

How much will railyards support?

It's not clear, the development rights over the railyard may cover more than than 3,615,790 developable square feet. 

The six towers north of Pacific Street east of 6th Avenue--B5 through B10-- would total 3,487,392 square feet, though they would not be coterminous with the railyard. They would be built partly over what is now private property jutting south Atlantic Avenue, but they likely cannot be built without the platform. (See first graphic below.)

Add in part--40%--of the 670,000 square foot arena that sits over the railyard, as well as much of B4, which should have 824,629 square feet. It deserves a recalculation.
From Develop Don't Destroy Brooklyn

Two recent versions of  Atlantic Yards/Pacific Park 


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 …

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

This graphic, posted in February 2018, is post-dated to stay at the top of the blog. It will be updated as announced configurations change and buildings launch. Note the unbuilt B1 and the proposed--but not yet approved--shift in bulk to the unbuilt Site 5.

The August 2014 tentative configurations proposed by developer Greenland Forest City Partners will change. The project is already well behind that tentative timetable.

How many people are expected?

Atlantic Yards/Pacific Park has a projected 6,430 apartments housing 2.1 persons per unit (as per Chapter 4 of the 2006 Final Environmental Impact Statement), which would mean 13,503 new residents, with 1,890 among them in low-income affordable rentals, and 2,835 in moderate- and middle-income affordable rentals.

That leaves 8,778 people in market-rate rentals and condos, though let's call it 8,358 after subtracting 420 who may live in 200 promised below-market condos. So that's 5,145 in below-market units, though many of them won…

The passing of David Sheets, Dean Street renter, former Freddy's bartender, eminent domain plaintiff, and singular personality

David Sheets, longtime Dean Street renter, Freddy's bartender, eminent domain plaintiff, and singular personality, died 1/17/18 in HCA Greenview Hospital in Bowling Green, KY. He was 56.

There are obituary notices in the Bowling Green Daily News and the Wichita Eagle, which state:
He was born in Wichita, KS where he attended public Schools and Wichita State University. He lived for many years in Brooklyn, NY, and was employed as a legal assistant. David's hobby was cartography and had an avid interest in Mass Transit Systems of the world. David was predeceased by his father, Kenneth E. Sheets. He is survived by his mother, Wilma Smith, step-brother, Billy Ray Smith and his wife, Jane all of Bowling Green; step-sister, Ellen Smith Alexander and her husband, Jerry of Bella Vista, AR; several cousins and step-nieces and step-nephews also survive. Memorial Services will be on Monday, January 22, 2018 at 1:00 pm with visitation from 10:00 am to 1:00 pm Monday at Johnson-Vaughn-Phe…

Some skepticism on Belmont hockey deal: lease value seems far below Aqueduct racino; unclear (but large?) cost for LIRR service

As I wrote for The Bridge 12/20/1, The Islanders Say Bye to Brooklyn, But Where Next?, the press conference announcing a new arena at Belmont Park for the New York Islanders was "long on pomp... but short on specifics."

Notably, a lease valued at $40 million "upfront to lease up to 43 acres over 49 years... seems like a good deal on rent for the state-controlled property." Also, the Long Island Rail Road will expand service to Belmont.

That indicates public support for an arena widely described as "privately financed," but how much? We don't know yet, but some more details--or at least questions--have emerged.

An Aqueduct comparable?

Well, we don't know what the other bid was, and there aren't exactly parcels that large offering direct comparables.

But consider: Genting New York LLC in September 2010 was granted a franchise to operate a video lottery terminal under a 30 year lease on 67 acres at Aqueduct Park (as noted by Gov. Andrew Cuomo).

As…

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…