Skip to main content

Real Deal on Pacific Park clouds: delays threaten 2025 housing deadline; may be tough to find investors

It's an opportune time, indeed, for the Real Deal (via Konrad Putzier) to ask, Is Pacific Park in trouble again?, subtitled "Brooklyn’s biggest development has been plagued by internal and external woes over the year and a half."

Some of the evidence is partial, but it adds up to clouds, at the very least. Some evidence is more clear. The project is clearly behind schedule, since two towers, 615 Dean (B12) and 664 Pacific (B15) have been announced but not launched.

The effort to market stakes in three construction sites (B12, B13, B3) has gotten nowhere, as I recently reported. (TRD merely said that Forest City "did not confirm" whether or not the joint venture had found a partner.) Forest City New York recently suffered layoffs, unmentioned in this article.

Forest City--the sole owner of 461 Dean, while the joint venture is a partner in other built/pending towers--has been forced to offer discounts on rent at the latter building. And sales have slowed at the 550 Vanderbilt condo tower, prompting the JV to switch brokers. Tonight's the (re)launch event.

Missing the 2025 deadline?

Perhaps the most interesting--and alarming--quote comes from real estate developer and former city official Seth Pinsky, who opines, without being asked about the penalty, that he wouldn't be shocked if the joint venture does not meet the 2025 deadline to build 2250 units of affordable housing. He doesn't have insider insight, but he does know the market is cyclical.

Three buildings, with about 782 units, are finished or nearly finished. I wouldn't be shocked either, given the difficulty in getting that much construction done. But what about the $2,000/month penalty required under a 2014 deal signed with neighborhood advocates?

If they're 500 units behind, that's $1 million per month. Is that the cost of doing business? Will they be able to revise the deadline? Or will the city and state come up with money or relaxed terms to ease the burden? I'd say don't count out Forest City's lobbying clout, but, then again, they managed to lose some very helpful 421-a benefits, which extended the tax break to the entire project--including 100% market-rate buildings--as long as the overall affordability met a threshold.

Tensions at the JV?

And despite the effort of Forest City New York CEO MaryAnne Gilmartin to spin it, the joint venture partners are not exactly on the same page:

Discussions over specific buildings or how much risk to take are “deliberate collisions that we intentionally knew we would be facing” and lead to a better project, she claimed.
"Claimed" is the right word. As TRD noted, Greenland USA leader Hu Gang "told TRD that the joint venture would likely break ground on one or two buildings by the end of the year," just a few days after David LaRue, CEO of parent Forest City Realty Trust, said the joint venture would wait to see how the market would shake out.

I wish TRD had asked Forest City if it had cleared its announcement last November of a Pacific Park pause with its joint venture partner/overseer, since Greenland was not mentioned as making a joint decision.

Putzier cites "persistent rumors of discontent.... Several sources claim Greenland is unhappy about Pacific Park’s slow progress and that both partners would sell if they found a taker." The problem is, finding such a taker isn't easy and one source suggests Forest City may be required to keep a stake. (I'm not sure about that.)

Keep in mind that Forest City does have a history of conflict with partners, such as Skanska USA, its one-time partner on the modular factory, or the Blumenfeld Development Group, its one-time partner on the Nassau Coliseum project. So a conflict with another partner wouldn't be a shock.

What about Greenland?

Putzier notes that Greenland--which I recently pointed out has slowed in its rise on the Fortune Global 500--faces new Chinese capital controls, which could make it harder to raise money. In other words, it once had deeper pockets, now it doesn't.

Gilmartin called Greenland "perhaps one of the most capitalistic enterprises I have ever partnered with.” She explained, in TRD's paraphrase, that meant "Greenland understands the American way of business better than most."

Or, perhaps, Greenland is bringing aggressive Chinese practices to the USA. As Forest City's Susi Yu once said, "I think there’s definitely a little bit of an educational process in learning that in New York you can’t just do everything because you say so."

421-a questions

Given the expiration of the 421-a tax abatement, TRD suggests that new buildings must include affordable units to get the replacement program. 

I'm not so sure. Yu has said that B12, at least, has footings in to preserve the old abatement, and I believe B15 has it too. Gilmartin told TRD--as her deputy Ashley Cotton said at a recent public meeting--that the new abatement may offer different opportunities.

That may be true, and lead to buildings with 25% affordability. But Cotton acknowledged that a full market-rate building is no longer likely, and the joint venture had planned three condo buildings (one grandfathered in) and two 100% market rental buildings.

This portends far fewer--if any--50% market/50% rental buildings, which was the foundation of the 50/50 plan that made Atlantic Yards so attractive to advocates and public officials.

The cost, and the future

TRD raises the question of whether Forest City will continue to build new project. Gilmartin sounds upbeat. An investment analyst suggests that real estate investment trusts (REITs), as Forest City's parent has become, are risk averse. Note this:
Still, [analyst Paul] Adornato thinks it’s unlikely Forest City will abandon Pacific Park. For one thing, the firm has already spent around $725 million on the project’s residential portion and has written its investment down to zero on its books, according to sources. From now on, any money it makes “is all positive” from an accounting perspective, the analyst said.
So the worst is over? They're not expecting any return from previous expenditures, so a low return is OK since it's all positive? Or does the possibility of lowered returns for any future building also mean that they'd have to offer further concessions to get a buyer to bite?


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 January 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 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't be so cheap.

As …

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).


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 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…