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

Low interest rates might fuel construction, but coronavirus crisis mode might stall all but crucial work. "Unavoidable Delays" at Pacific Park?

There are two big trends, at least, impacting the big picture for projects like Atlantic Yards/Pacific Park, given the coronavirus crisis.

First, it should be easier to get financing, given lower interest rates.

However, concerns about worker safety, or shifting construction work to public health facilities, could slow or pause conventional construction. And that, I suspect, would suspend some Atlantic Yards/Pacific Park deadlines.

Interest rates = easier financing?

Interest rates have plummeted. As Bisnow reported 3/15/20:
The Fed said its moves Sunday were aimed at supporting the flow of credit to both households and businesses, which could also benefit commercial real estate companies looking to refinance loans. “The Fed cutting its rate to near zero is a major ‘gift’ to owners of commercial real estate,” O’Connor Capital Partners President Joel Bayer said via email. “This will result in rates on real estate loans being lowered to interest rate levels which we have never seen in our lifetimes. Every existing loan that can be refinanced at a lower rate will be processed as soon as possible. This will translate into lower interest rate expenses and more net cash flow to the asset owner.”
That would make it easier to not only refinance loans, but to get them for upcoming projects like the construction of B12 and B13, as well as the platform over the first of two railyard blocks, Block 1120, between Sixth and Carlton avenues.

(Then again, note the comment below on whether certain projects will be deemed worthy of financing.)

What if construction shut down, or shifts to health capacity?

But there's another issue: worker safety. As ENR reported 3/16/20, Boston's mayor, a former construction worker, is taking action:
Starting March 17, contractors and builders across the city will be required to shut down all work on construction sites, in some cases leaving skeleton crews to secure materials and monitor the sites, Boston Mayor Marty Walsh announced in an afternoon press conference. At press time, it was the first such shutdown in the nation.
That will be revisited in two weeks. In New York Council Member Carlos Menchaca called for a shutdown as well, and was endorsed by colleague Brad Lander
Similarly, an argument from author Robert Neuwirth for a focus on essential construction:
Yesterday, in The Real Deal published Construction groups urge Cuomo to spare industry from virus rules, noting that the Building Trades Employers Association had asked state and city officials to consider construction and “essential” business exempt from the rule requiring half the workforce to be halved.

The rule is assumed to apply to offices, thus exempting outdoor work like construction, but the employers group wants a formal designation as essential, as in San Francisco and Las Vegas.

In The City, Rosa Goldensohn reported on the plight of immigrant day laborers:
Groups representing workers say there is fear not only of the virus, but also a total loss of income. One challenge: Many nonunion laborers in the city are undocumented immigrants who do not have access to unemployment benefits.
Before then, there was tweet from a New York City construction worker (unclear where he works):
Can construction workers practice social distancing? Many, perhaps, but surely not all--they have to work together. Some take public transport, as StevePlum91 indicated.

Unions OK with work, so far

Unions weren't mentioned in The Real Deal story, but as Goldensohn reported for The City:
The Building and Construction Trades Council of Greater New York, which represents various union workers in the field, has not called for a shutdown. But the group released safety protocols Tuesday that included adding handwashing stations, limiting the sharing of tools and reducing the number of workers in confined areas.
Previously, a tweet from The Center for Construction Research and Training and North America's Building Trades Union suggests that safeguards are possible:
There may be an added layer of concern in New York.

Unavoidable delays?

I suspect that delays related to COVID-19 might qualify as allowing for extensions regarding previously contracted obligations.

For example, the 2025 deadline for 2,250 affordable units is "subject to extensions set forth in the Development Agreement and the General Project Plan," according to a June 2014 letter from Empire State Development to principals of the BrooklynSpeaks coalition.

I'm not sure what extensions are available in the General Project Plan.

But the Development Agreement (excerpted at right; in full below) allows for "Unavoidable Delays caused by, among other things, "acts of God," "explosion or other casualty," and "failure of transportation, public utilities or public infrastructure," all of which might presumably be invoked in the case of coronavirus.

Related: real estate brokers have asked StreetEasy to stop the clock regarding days on the market for sales, in light on the coronavirus, according to The Real Deal, and the city has paused all rezoning applications.



Comments

  1. Very interesting. Lower interest rates do not necessarily translate into easier financing - they translate into more affordable financing for those WHO CAN GET IT. In deciding whether to finance a project, banks will look at that project's ability to generate sufficient revenue to service the debt (with an appraisal of the underlying asset value should the need to foreclose). If some of the more extreme unemployment projections pan out, rent moratoriums are declared, etc, it is hard to imagine banks deploying their (possibly diminishing) capital on new projects absent some government incentive to do so. Very hard to say how this all plays out given the amount of moving pieces...

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    Replies
    1. Point taken. Many moving parts.

      Delete
    2. Thanks for posting through all of this - nice distraction to look at your page.

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    3. Thanks, but it can't be a complete distraction if much of the news seems to be coronavirus-related!

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