State document from 2018 offers new hint of affordability strategy: towers over railyard with 50% affordable units (but that plan isn't confirmed)

See below for larger version

A newly acquired state document offers more clues regarding the ever-variable path for the Atlantic Yards/Pacific Park developer to deliver the required 2,250 total units of vaguely defined affordable housing (aka "income-restricted") by May 2025.

It indicates a plan, as of 12/21/18, to deliver large numbers of below-market units in the first four (of six total) buildings over the Vanderbilt Yard, which requires a costly deck. Three of those four towers were to have 50% affordable units.

Just yesterday, developer Greenland Forest City Partners (GFCP) --likely anticipating a public meeting Thursday sponsored by critics of the project--told the New York Post it would start that deck, or platform, in 2020, which makes it more likely that two or three buildings (B5/B6/B7) will be built in time for the 2025 deadline.

Four buildings with affordable units?

The specific configuration in the document above strikes me as very unlikely--this is a "never-say-never project"--given more recently revealed plans for the project, with a larger number of affordable units currently under construction.

Still, a variant of that strategy, relying on three or perhaps just two towers over the railyard, might deliver the needed units by the looming deadline, allowing GFCP  to avoid onerous fines of $2,000 per month per missing unit.

The new document has allowed me to update, albeit speculatively, the project schematic below, indicating plans for affordable units over the railyard, likely in several towers, but less likely in the final two towers (B9 and B10).

The graphic below reflects not only the new chart (in full, further below), but also my estimation, based on a previously-acquired document, that one tower over the railyard may have to be "100% affordable" to deliver affordable units in time. (Note: the question marks and fuzzy coloration signal uncertainty.)

Still a guessing game

All predictions remain speculative, because the developer has refused to offer a timetable and Empire State Development (ESD or ESDC), the state authority overseeing and shepherding the project, has refused to press for such a schedule, all the while saying they're confident the deadline will be met.

(I queried Greenland Forest City and ESD about the new document, but got no reply. That said, the story placed in the New York Post makes the timeline for B5 through B7 somewhat more plausible.)

Indeed, the state authority may be hamstrung from asking for more details about the developer's plan to meet its obligations, according to the document I acquired via a Freedom of Information Law request.

"ESDC shall be entitled to conclusively rely, without any requirement of inquiry or investigation, upon the last Exhibit M"--which projects the affordability configuration--"delivered to ESDC in accordance with" the larger document, the Fourth Omnibus Amendment to Leases and Development Agreement, dated Dec. 21, 2018. See p. 39 of the full document, at bottom.

Then again, the state authority could have publicly shared Exhibit M at various points since its creation, thus furthering discussion about the future buildout. (The document is not a timetable, but at least suggests how the affordable deadline might be met.)

Though the latest Exhibit M, which I annotated below, is barely nine months old, it's already outdated. Crucially, the document undercounts the number of affordable units slated for the two towers currently under construction, B4 and B15, as well as in B12 and B13, which should start next year. See my changes in blue.

Clues: no affordability in final buildings?

But the document remains illuminating, on multiple fronts. For one thing, it indicates the obvious: the project will not be completed by 2025, as was once promised. The developer has until 2035 until full completion, and has disclosed that date as likely to condo buyers.

Only the affordable units must be done by 2025, and the last two towers over the railyard--B9 and B10, with 924 units--are projected in Exhibit M to contain only market-rate apartments. So they won't be ready by 2025.

In fact, as elaborated below, I suspect that the 2,250-unit goal could be met without all three towers over that final railyard block, between Carlton and Vanderbilt avenues, and Pacific Street and Atlantic Avenue.

So the final towers may be all market-rate. Then again, tax breaks newly available at the the time may incentivize some affordable units. Note that I project, in the graphic, that B8 will not contain affordable units, despite the indications in Exhibit M. (I explain that rationale further below.)

Either way, only when the last three towers (B8/B9/B10) are finished can the open space--the source of the "Pacific Park" name--be completed. (The statement in the New York Post about "a public park" refers to the fractional green space between the first block of railyard towers--B5/B6/B7--and Pacific Street. The last three towers were ignored.)

Clues: no information on Site 5

Also, the document does not address Site 5, the parcel currently occupied by P.C. Richard and Modell's. A 250-foot, 440,000 square foot building has been approved there, but the developer seeks to augment that significantly by moving much of the bulk of the unbuilt B1 tower, once slated for what is now the arena plaza.

That could mean a two-tower project with some 1.1 million square feet. While the project has been promoted as containing office space and retail space, it could--at least as of 2016 plans--contain residential and hotel space. That residential space could be a mix of market-rate and affordable units.

That bulk transfer would require at least a one-year process, involving public hearings. If that process starts within a year, and the Site 5 tower includes affordable units, it's possible that that project could deliver a fraction of needed affordable units by 2025, as well.

Doing the math: how will 916 units be built?

As indicated with my blue annotations, more recently revealed plans for four towers show more affordable units than projected as of Exhibit M.

First, the two towers currently under construction (B4 and B15), and the two more slated to start next year (B12 and B13), all on terra firma, are slated to deliver 552 affordable units, rather than 430 as indicated in the chart. That's a significant increase: 122 units.

That still leaves a gap of 916 affordable apartments to be delivered by 2025.

How can they reach that magic number?

According to Exhibit M, the first three towers over the railyard, B5 through B7, would deliver 784 affordable units, leaving a 132-unit gap. That would be achieved by building B5 and B7 as 50% affordable, and B6 as 30% affordable.

But that strikes me as unlikely--so I didn't apply that to the map. Nor would they need B8 to deliver 255 affordable units, as suggested in the chart, since the gap would be smaller. So I don't expect it to contribute to the total.

It would be easier, given the time and cost of construction, including the deck, to find another way.

Options to reach the 916 total

Several options come to mind--and perhaps are being considered by the developer.

For example, if B6 were to be 50% affordable, instead of 30%, that adds 110 more affordable units (275 vs. 165). That would deliver a total of 894 units--22 short--in the first three towers over the railyard.

If that's the strategy, keep watch for an uptick in affordable units at B12 and B13, which start next year. Consider: if each building were 30% affordable instead of 25% affordable, that would add 40 affordable units, a significant cushion.

Even with one building 30% affordable, that would add 20 units, and the 2-unit shortfall might be made up through a small swap of square footage, or simply exchanging family-sized units for studios, which require less square footage.

But that would still require three towers over the railyard. Note that, according to plans I reviewed, the developer plans to build the deck/platform over the railyard in three sections: first for the B5 tower, then for the B6 and B7 towers, and finally for the B8/B9/B10 towers.

What about a 100% affordable building?

Alternatively, they could build one of the initial railyard towers as 100% affordable.

After all, that's the strategy I saw described in a 12/17/18 letter (excerpted at right) shared with immigrant investors, but neither confirmed nor commented upon by ESD or the developer. (That date is four days before Exhibit M.)

According to that letter, B5 and B7 would be 30% affordable, and B6 100% affordable. That's hinted at in the graphic above.

Based on the unit count for those towers in Exhibit M, that would mean 195 affordable units in B5, 550 in B6, and 176 units in B7, for a total of 921--enough to meet the 916-unit shortfall.

However, given the looming 2025 deadline, it may be simpler and faster to complete two towers rather than three. If so, a higher percentage of affordability could get them to the goal.

Consider: if B5 were 50% affordable and B6 100% affordable, that would deliver 875 affordable units (325 + 550), which would be 41 units short.

But if B6 were 50% affordable and the larger B5 100% affordable, that would deliver 925 affordable units (275 + 650), a 9-unit cushion.

Bottom line: they have options. Stay tuned.

Note that the document above suggests that B8 would start in the first quarter of 2023, thus leaving the possibility that it could be completed by May 2025 and thus contribute some affordable units by the deadline.

I find that highly unlikely. As explained, there are other paths to 2,250 units. More importantly, that building would have to start by 6/15/22 to take advantage of the current Affordable New York tax break. Of course that tax break may be extended or revised, but any prediction as of now is unwise.

A possibility: Greenland leaves/pulls out after 2025 deadline is met?

This is pure speculation, of course, but we shouldn't rule out the possibility that Greenland USA, the dominant entity in Greenland Forest City Partners, fully or significantly leaves the project after the 2025 affordability deadline is met, leaving question marks around those last three towers and the significant chunk of open space.

The could mean a full transfer to another entity, a continued series of parcel/project transfers to another entity, or even abandonment.

First, the parent Shanghai-based Greenland Holdings Group (aka Greenland Holding Group, or Greenland Group) is under fiscal pressure, with high debt levels, as well as "unearned revenue," which requires them to deliver properties in China for which they've already been paid.

The firm's ambitions in the United States, notably in California and Brooklyn, have been significantly trimmed. For the last four parcels to be developed as part of Atlantic Yards/Pacific Park, Greenland has either leased the parcels outright (B12, B13, B15) or participated in a joint venture (B4), thus raising money from others.

That reflects perhaps cash flow challenges, as well as the need to pay for infrastructure for the six towers over the Vanderbilt Yard. After building three towers, and the first two phases of the platform, they'd then have to consider a much larger platform.

Also consider that Greenland Forest City in 2016 began paying the Metropolitan Transportation Authority $11 million a year for railyard development rights, in 15 annual payments, with the final payment due June 1, 2030. 

If the affordable housing is finished by May 2025, that leaves $66 million more to pay. Sure, Greenland's considerable investment, including precursor work--the amount of which has been hinted at but not fully described--at the railyard, suggests a further commitment to reap value. 

Then again, it's a "never say never project," so questions and speculation are legitimate, especially if there's no timetable for the infrastructure and towers over the last railyard block.
Affordability: the devil's in the details

We should remember that "affordable housing" has a broad definition--participating in city, state, or federal assistance programs--and need not conform to the original promises in the Atlantic Yards Affordable Housing Memorandum of Understanding, signed by original developer Forest City Ratner and the advocacy group ACORN in 2005.

Affordability, as I wrote yesterday, is ever rising. Below are the current rent levels, which, of course, are ever rising.

Indeed, as I've written, the two "100% affordable" towers, B14 (535 Carlton) and B3 (38 Sixth), have half their units in the highest of five income bands. Those middle-income households, with incomes up to 165% of Area Median Income (AMI), were only supposed to access 20% of the total number of affordable units.

Moreover, even the one 50% affordable building, B2 (465 Dean), is skewed toward smaller units, with nothing larger than two bedrooms. Moreover, those two-bedroom income-restricted units are skewed to the upper middle-income "band," rather than distributed more evenly.

So "affordable" doesn't answer key questions regarding unit size and income level. Some if not all of the units will be governed by the Affordable New York program, which offers multiple configurations, including some with low-income units, but another with 30% affordability but all the units middle-income, at 130% of AMI.

That program either expires or must be renewed in 2022; any project building that participates in the program must start by 6/15/22. So 2022, as I've written, should be a big year for the project. Below are the current income limits.

What happened to senior housing, and affordable condos?

Note that the announced goal of directing 10% of the affordable units (225) to seniors has never been pursued or discussed. Nor was it locked into the project's guiding Development Agreement.

What about the pledged 600 to 1,000 affordable for-sale units? According to the Development Agreement, signed in 2009, the developer "shall build or shall cause the construction of at least 600 affordable homeownership housing units on the Project Site or as close to the Project Site as reasonably practicable, including but not limited to the following neighborhoods: Prospect Heights, Fort Greene, Bedford Stuyvesant, Crown Heights, Clinton Hill, Park Slope."

That, as I've written, had some caveats, since it was "subject to Governmental Authorities making available... affordable housing subsidies."

The goal was to make the units affordable to families with incomes up to 150% of Area Median Income (AMI)--middle-income, as opposed to low- or moderate-income--and to make some units available to moderate-income families with incomes below 100% of AMI.

That left a lot of wiggle room regarding the levels of affordability and the configuration and distribution of such units.

According to an agreement involving original developer Forest City and new developer Greenland USA, 200 on-site units would be an obligation of the joint venture, but the 400 offsite "Additional Affordable Units" would remain a unilateral Forest City obligation.

Nothing has been said about either of those goals, and Assemblymember Walter Mosley, who with colleagues has queried ESD about it, never got an answer.

The tax break no longer favors condos, as I wrote yesterday. And Forest City last year was absorbed by Brookfield, so it no longer exists. So for-sale affordable units seem ever unlikely.

Fourth Omnibus Amendment to Leases and Development Agreement, Dec. 21, 2018, Atlantic Yards/Pacific Park by Norman Oder on Scribd