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As Belmont arena gets approved, belatedly released appraisal summaries dubiously claim lease is above fair market value; $105M spend for two LIRR stations?

If you read Newsday, which last night published State approves $1.3 billion Belmont arena project, you'd know that Empire State Development, Gov. Andrew Cuomo's economic development authority, unanimously approved the new $955 million arena for the New York Islanders, with nearly all the speakers in support, and jobs and economic activity to come.

"I've been emotional," co-owner Jon Ledecky told Newsday. "It's been a long journey and I think that the fans deserve a new home."

But you wouldn't know that his partner Scott Malkin needs some land for a luxury outlet mall, the first of its kind in the United States, as I wrote 7/24/19 for Gotham Gazette.

What about the appraisal?

Nor would you know that a small but key element of the proposal's finances got a belated, inadequate airing: long-awaited appraisals of the site were released, in summary, just less than four hours before the meeting.

See the last six pages of the Board Materials, a 396-page PDF. Closer to the top, on p. 9 of the PDF, the summary states, "The Project property will be leased for more than its appraised fair market value as determined by two separate independent appraisals."

As I had written for Gotham Gazette:
Is the land worth just $40 million (or even $50 million)? The annual payment, per acre, is but 10 percent of the cost paid for the right to build a “racino” at Aqueduct, another racetrack. In March 2018, ESD promised the Village Voice an appraisal would be done before “the conclusion of the environmental review in 2019.” 
Apparently appraisals exist. ESD, in the Response to Comments Chapter of the Final EIS released July 8, said that “The transaction between ESD and the Applicant is a fair market transaction confirmed by appraisals received by ESD.”

However, ESD has not released them. Despite that July 8 statement, Newsday reported five days later that an appraisal would be complete “in the coming weeks”—just in time for the final approval votes.
The timing was suspect. I tweeted 7/13/19 with documentary evidence of the contradiction:
Similarly, Neil deMause of Field of Schemes, as he tweeted yesterday, was told 7/18/19 that the appraisals were being completed, which suggests they were in process.
Writes deMause in a post this morning:
Now, this isn’t technically lying: The appraisals had already been completed, in one case for months, meaning they would indeed be completed by the time of the ESD board’s approval vote! It is at best, however, deceptive, since an honest answer would have been “No, we’re not still conducting an appraisal, we already have two in hand!”
It’s also pretty exceptional behavior from a press flack, whose job is usually to try to spin or stonewall reporters or sometimes call them up and yell at them when they don’t like what was written. (Sterne has done that, too, but I’m used to that.) All this, combined with the abbreviated last-minute release of the appraisal documents, is certainly enough to fuel suspicions that there’s something in those full appraisals that ESD — or Gov. Andrew Cuomo, who controls ESD — really doesn’t want anyone to see until all the t’s are crossed in the deal. We’ll find out once they process my FOIL request, I guess — hopefully before the new arena opens for its first game.
The appraisals: the summary

The appraisal issue was ignored by journalists other than deMause and me. His summary:
The ESD board meeting materials have been posted, and they include two separate appraisals — one dated December 3, 2018, the other July 3, 2019 — that estimate the public land value at between $35.9 million and $41 million. The first provides no information about its methodology at all; the second says it bases its figure on the future income that the site could produce, but says nothing about how it calculated that projected income. Lots of questions here, obviously, which will almost certainly take more than (checks clock) three hours and 10 minutes to answer.
What the documents say

The documents released were summaries, and they should have been released on July 8, along with the Final Environmental Impact Statement. So while the release hours before the meeting may meet a legal requirement, it hardly fulfills the previous promise, contradicts a public statement, and disserves transparency.

The 12/3/18 summary is from a company called PATJO Appraisal Services, regarding 41.87 acres, and sets a $35.9 million value for a 49-year lease. It describes the current unimproved nature of the land, the plans for the arena, retail, and hotel, and sets a number, with no indication of methodology, such as comparable properties (aka "comps").

The 7/3/19 summary is from The Weitzman Group, regarding a 49-year lease for approximately 43 acres. Weitzman assessed the market value based on the hypothetical condition that all development work is completed as planned, including a 715,000 square foot arena.

From the document:
In deriving the market values of the subject property, the Income Capitalization and Sales Comparison Approaches to value have been considered. The Cost Approach to value was not considered given the subject property is currently undeveloped. Given the unique income characteristics of the subject property, we have based our final valuation on the Income Capitalization Approach to value. The Sales Comparison Approach is not a reliable indicator of value due to the uniqueness of the subject property, but has been relied upon for support of the value derived from the Income Capitalization Approach...
"Based on the analyses and findings contained herein and the overall condition of the Nassau County and New York Metropolitan Area real estate market," Weitzman said that the fee simple interest--full ownership and control--is $40.2 million, while the leased fee interest--the right to receive income, then get the property back--is $41 million.

To get more on that, deMause was told, he'd have to file a Freedom of Information Law request. With Empire State Development, that typically takes many months.

Deal structure

The Board Materials (p. 8) also offer this explanation of the deal structure:
ESD Investment: Developer will net ground lease the Project Site (defined below) from New York State Urban Development Corporation d/b/a Empire State Development (“ESD” or the “Corporation”) and shall pay to ESD Base Rent aggregating $50 million and Annual Rent aggregating approximately $67 million. Base Rent will be paid in three installments: on the closing date, $20 million; on the first anniversary of the closing date, $20 million; and sixteen months after closing, $10 million. Annual rent, of approximately $2.24 million per annum will be paid over 30 years, beginning on the day before the first anniversary of the date of substantial completion and commencement of eastbound and westbound service at the new Elmont Station (described below) on the Main Line of the Long Island Rail Road (“LIRR”), and may be prepaid.
ESD will use the second Base Rent payment to pay for infrastructure improvements related to the ESD-owned Project Site that the Developer will make. It is expected that promptly after receipt of the other Base Rent and Annual Rent payments, ESD will transfer such payments to the State of New York (the “State”) for funding the design and construction the new Elmont Station and track improvements for the Belmont Park Station.
(Emphases added)

As previously indicated, this confirms that only $20 million of the Base Rent will go into expected infrastructure, while the other $30 million of Base Rent, plus the cumulative $67 million in Annual Rent, will help fund the new Elmont Station and--this I hadn't noticed--track improvements at the Belmont Park Station.

Note, while the cost of the new Elmont Station has been estimated at $105 million, the cost of Belmont Park Station improvements has been unspecified. The combination of the two projects has gotten little attention--for example, Newsday 7/13/19 called it the "$105 million Elmont train station."

The Response to Comments Chapter in the Final EIS document stated:
The Applicant is funding 90 percent of the cost to construct the new LIRR Elmont Station and improve the existing spur to the LIRR Belmont Park Station with the remaining 10 percent provided by the State.
Let's just say that the "90 percent" statement ignores the value of financing, and also ignores that, as even Newsday acknowledged, the use of lease payments for needed infrastructure essentially means the site is rent-free.

Note that the "initial term of the lease is 49 years with one possible 50-year renewal," with the latter cost unstated.

LIRR station improvements

Here are the descriptions, from Board Materials, of the LIRR projects:
LIRR Belmont Park Station Service Improvements. Due to concerns raised by the MTA and LIRR, the Project plan included the replacement and automation of the spur switches for the Belmont Park station. That station is located on a spur on the eastbound side of the Main Line. Only trains traveling to and from the LIRR Jamaica station can effectively use the spur. The station is currently open only on Belmont Park race days. The Project plan considers the need for increased Belmont Park station service with two trains (each way) for each Arena Component event. The spur is currently accessed by manual switches that can only be used when switchmen are present to manually operate each switch. During the DEIS scoping process, MTA and LIRR informed ESD that reliable event service to the Belmont Park Station would require replacement and automation of the spur’s switches. Based on this concern and the community’s concerns regarding traffic and public transportation issues, ESD revised the Project plan to require the automation of the Belmont Park Station switches. 
LIRR Full-Time Main Line Elmont Station. A new full-time station to serve the Project and the Elmont community was a local need and desire expressed by many members of the public, community leaders, and elected officials throughout ESD’s planning of the Project. The principal public concerns were the effects of the Project on local traffic and highway congestion and the inadequacy of the available mass transit service (including the improvements to the Belmont Park Station) to alleviate these impacts. Following the DEIS and draft GPP comment period, ESD worked with LIRR to provide a new fulltime Main Line station that would be in addition to the improvements to the LIRR’s Belmont Park Station. The new LIRR Elmont Station would be constructed in two phases. The first phase would involve construction of a south platform that would only provide eastbound service and would be completed in 2021, prior to the opening of the Arena Component. The second phase would involve construction of a north platform, a pedestrian overpass between the north and south platforms, and extension of the south platform. Westbound train service at the north platform would be accommodated following the completion of the LIRR Third Track and the East Side Access projects (expected in 2023). In addition to Main Line service, the new station would provide a direct one seat ride from most LIRR branches, including Oyster Bay, Port Jefferson, Ronkonkoma, and Hempstead, as well as more frequent service from the west. LIRR trains are projected to be used by up to 30 and 24 percent of Arena Component patrons respectively arriving for weekday and Saturday events. The new station would also offer to the community full-time rail service with a minimum of 150 commuter dedicated parking spaces in the North Lot in the area closest to the Elmont Station.