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Atlantic Yards/Pacific Park infographics: what's built/what's coming/what's missing, who's responsible, + project FAQ/timeline (pinned post)

AY CDC: with developer absent, questions persist; platform delays blamed on LIRR negotiations. Will ESD collect fines for affordable housing delay? Will there be a public bailout for the platform?

This the first of four articles on the 4/11/23 meeting of the Atlantic Yards Community Development Corporation (AY CDC). The second concerned the timing and affordability of the income-targeted housing. The third concerned plans for the Urban Room and possible new public engagement. The fourth concerned AY CDC transparency.

Yesterday’s meeting of the (purportedly) advisory Atlantic Yards Community Development Corporation (AY CDC) didn’t answer key questions about the future of Atlantic Yards/Pacific Park: with representatives of master developer Greenland Foreset City Partners (GFCP) absent, there were no substantive updates on the future of the project nor plans for the two-block platform over the Vanderbilt Yard, crucial to six future towers and the majority of the project’s open space.

Moreover, there’s no evidence that Empire State Development (ESD), the gubernatorially-controlled state authority that oversees/shepherds the project, knows if the project is currently viable or whether Greenland USA, which owns nearly all of the project going forward, is financially sound.

Then again, Tobi Jaiyesimi—ESD’s Atlantic Yards Project Director and also AY CDC executive director—pledged that the board’s next meeting, in some three months, would include officials who can answer some of the big questions, notably regarding the developer’s discussions with the Long Island Rail Road (LIRR) regarding the platform.

For the first time, the board floated the notion of a taxpayer bailout to construct the platform, potentially in exchange for deeper affordable housing.

If so, that would constitute a significant irony, given that original project developer Forest City Ratner was awarded railroad development rights, at a seeming discount, in exchange for its project promises, including affordable housing and an arena. 

Moreover, as I'll describe further tomorrow, New York State relaxed the definition of affordable housing for the project, giving the developer the ability to deliver income-targeted housing far more expensive than originally pledged.

Teetering project, no transparency

While the meeting addressed several aspects of the project, director Ethel Tyus made a comment early on, almost as an aside. “I don’t know if this is a good time to bring this up,” she said, “but there’s some extra work that needs to be done to get this project moving.”

Responded Acting Chair Daniel Kummer, with a slight chuckle, “I think we’re going to be starting that conversation this morning.”

Jaiyesimi noted ”a request to have the LIRR present for this meeting,” but blamed “scheduling conflicts” for that not happening.

Also, executive Scott Solish, who has represented the project on behalf of Greenland USA, wwhich owns nearly all of GFCP, recently left the company, Jaiyesimi noted. (Not mentioned: no replacement has been announced.)

“We are coordinating with the developer to ensure representation moving forward,” Jaiyesimi said, also citing “a scheduling conflict on their end.”

False start for the platform

Jaiyesimi noted that, starting last May, Greenland’s Solish made public presentations indicating the developer’s plan to commence platform work on Block 1120, bounded by Sixth and Carlton avenues and Atlantic Avenue and Pacific Street. (He spoke to the North Prospect Heights Association, to the ESD's bi-monthly Quality of Life meeting, to and to the AY CDC.)

The announcement included plans for fencing and traffic changes. The developer already had contractors in place, later revealed as China Construction  America and Plaza Construction.

From Greenland USA, 2022: plans to constrict Block 1120 for platform work

“However, the developer continues to be in negotiation with the Long Island Rail Road with respect to commencement and permits,” Jaiyesimi said.

That raises some questions: was Greenland jumping the gun, trying to get the (gubernatorially-controlled) MTA on board regarding a plan that wasn’t fully baked? Was the LIRR being unreasonable?

The developer certainly had some incentive to move forward. As part of the renegotiation for Vanderbilt Yard development rights in 2009, original developer Forest City, no longer willing to pay the full $100 million in cash pledged for development rights over the Vanderbilt Yard, agreed to pay $20 million for the parcel destined for (part of) the arena, then pay the equivalent of $80 million for the remaining air rights—at a gentle interest rate of 6.5%—through 2030. 

After paying $2 million a year from June 2012 through June 2015, the developer would then pay 15 annual installments of about $11 million starting in June 2016. That would total about $173 million, with some $85 million paid so far.

At least some of that money likely came from a low-interest loan from EB-5 investors.

Jaiyesimi, in response to questions submitted by directors before the meeting, said the MTA agreement had not been modified, and the developer was current on payments. 

Progress made and start imminent?

Greenland, said Jaiyesimi, is “in ongoing discussions” with the MTA about the platform work. “We are encouraged by the progress in the negotiations, even though it has taken quite some time,” she said, without elaborating on specifics.

Asked about a forecast for start and completion of the work, Jaiyesimi responded, “That’s a good question.” (She offered that cagey response at least six times in the meeting, plus at least one version of “interesting idea,” “interesting point” and “good point.”)

Citing construction permits received (presumably from the New York City Department of Buildings), she said, “The developer is ready to commence work as soon as they wrap up negotiations with LIRR and receive the necessary permits.”

That strikes me as doubtful until further substance emerges. Surely technical and permitting issues are part of the equation. But questions remain about Greenland’s financial fortitude, while rising interest rates and the absence of the 421-a tax break for residential construction make it harder for a building to pencil out..

Veconi asked about the nature of the negotiations. “ESD isn’t privy to the full details of the negotiations,” Jaiyesimi said, but indicated they involved “various engineering questions,” the phasing of the work, and the “financial structure” of the agreements.

The housing deadline--and a cagey answer

Veconi noted that, according to a 2014 agreement (unmentioned: negotiated by the coalition BrooklynSpeaks, which he helps lead) negotiated by the state when original developer Forest City sold 70% of the project going forward to Greenland USA, the developer must complete 2,250 affordable housing units by May 2025, with 877 left to start, with “very significant liquidated damages” of $2,000/month for each missing units.

(That new deadline averted a threatened lawsuit based on the theory that a delayed buildout, until the project's 2035 "outside date," would discriminate against Black residents who'd be displaced before they could take advantage of affordable housing preferences for residents of the four nearest Community Districts. So the new deadline aimed to ensure the affordable housing would be built within 16 years after the project was re-approved, a term still well beyond the original pledge of ten years.)

“The only thing I was been able to find”—unmentioned, from my 2019 coverage—regarding platform construction "is that the first block of the platform would take three years," Veconi said, rendering the deadline impossible to meet.

Citing “$1.8 million a month in liquidated damages"--destined, unmentioned, into the New York City Housing Trust Fund, for affordable housing--Veconi asked, "What’s ESD’s position about collecting those remedies?”

ESD representatives, he noted, had previously claimed that the remedies were non-negotiable, so he asked if that was “still the agency’s perspective?”

“The project documents haven’t changed, so the requirements on the project are still the same,” Jaiyesimi stated carefully. “We recognize where we are with the developer’s ongoing discussion with the MTA as it relates to the platform… but at this time there have been no changes to the project documents, so those obligations are still standing.”

(Emphasis added)

That does not rule out a future change to project documents regarding the fines.

Kummer proposed that representatives from both the MTA and the developer brief the AY CDC board at its next meeting regarding their discussions and “a firm timeline for when they’ll be completed, and when the permitting will be issued… because, right now, it’s a bit of staring into a black hole.”

Developer viability

New board member Ron Shiffman, a longtime advocacy planner (and former City Planning Commission member, now Pratt Institute emeritus professor) raised a question, echoed later in the meeting, about Greenland’s viability, given the market in the United States and abroad.

Veconi later returned to the issue, noting that Greenland had replaced original developer Forest City Ratner/Forest City Enterprises, which “effectively… went under, in large part because of this project.” (I’d say it was clearly a significant part in the chain of causality.)

Greenland, he added, “has an extremely difficult financial situation,” given the parent company’s significant debts (also: low credit rating), and its decision to sell its shares of all but one completed buildings in Atlantic Yards/Pacific Park. (Also: sales of buildings in its Metropolis project in Los Angeles, taking a loss.)

“The only interest they have today,” Veconi said, is “a part-interest in the B5 building.” He meant B4, 18 Sixth Ave. (marketed as Brooklyn Crossing), which Greenland built in partnership with The Brodsky Organization, which has handled all the marketing.

Decking the rail yards still viable?

Beyond “real questions about capacity,” Veconi said “we have to kind of learn from what's happened…and really be sure that the strategy of having a private party deck over the rail yards and building on top of it works. Because it doesn't look like it's working for the last two firms that have tried.”

Has ESD, he asked, “done an independent analysis of the economic viability of having a private developer deck the rail yards. Do we know that that's still viable?”

Jaiyesimi said no.

Note that, before the project’s first approval in 2006, ESD (then ESDC) commissioned the firm KPMG to analyze the project’s viability.

The consultant notably punted on the issue of “infrastructure, LIRR track re-location, land acquisition, MTA air rights, and masterplanning costs…. Since these costs have either been negotiated or are in the process of being negotiated, coupled with the uniqueness of the site issues, we have considered them reasonable.”

Upon the project’s renegotiation in 2009, ESD commissioned another study from KPMG, limited to a market analysis of the residential units.

KPMG’s conclusion was spectacularly wrong: “Given the information provided in this report, it is probable that when the Subject Property’s units are schedule to come online it will be the ideal time for apartment renters/condominium sellers in the market place.”

Instead, given delays from Forest City’s ill-fated project to build the project via modular construction and the glut in competitive units unlocked by the Downtown Brooklyn rezoning, Forest City wound up declaring a unilateral pause on the project in 2016, until Greenland acquired nearly all of the firm's remaining share in 2018.

By then, Forest City had built the modular tower, 461 Dean, and the joint venture had built the 550 Vanderbilt condo building, and two “100% affordable” rental towers, 535 Carlton and 38 Sixth, both of which have since been sold to Avanath Capital. Forest City sold 461 Dean to Principal Global Investors.

KPMG’s 2009 report did come with a large caveat, that “[e]xternal factors not foreseen” could affect the findings the findings.

What next?

Jaiyesimi asked Veconi about the alternatives he contemplated.

He noted that ESD's agreement with Forest City was single-source, as was, effectively, the current one with Greenland.

“That's a lot of risk on one party,” he said, suggesting that an alternative be studied. “The fact that we don't know if it's viable or not is not a reason to assume that it is.”

Jaiyesimi asked if he was proposing new partners, or a new structure.

“Certainly having multiple development partners would spread the risk and would make the project more more resilient,” Veconi said, citing pressures in the Chinese market affecting Greenland’s parent company, Shanghai-based (and significantly state-owned) Greenland Holding Corp.

“It also could be the case that the cost that we end up with for development over the rail yards,” he said, “is not one that can be borne by a project that's strictly privately financed, and we might need to see if there's an opportunity for some type of other subsidy."

“Hear, hear,” chimed in Tyus, an ally of Veconi on Community Board 8.

“We have to know if there's a gap—and it doesn't seem like we do,” Veconi said.

A 2010 prediction about a public bailout

The discussion reminded me of a column then-Daily News columnist Errol Louis, a longtime project supporter, wrote for the 3/11/10 New York Daily News, as a preview to the arena’s groundbreaking.

Though Louis first criticized “a hard-core anti-development faction,” he acknowledged that state agencies and Forest City “haven't been blameless. We still don't know who will pay to create an expensive deck over the Vanderbilt 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 estimate--may get picked up by Ratner,” he wrote, “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.”

That, perhaps, was prescient. The original package deal, of course, involved enormous state assistance, direct and indirect, to build an arena for what is now the NBA’s Brooklyn Nets.

As I’ve written the big winner in the project so far is Russian billionaire Mikhail Prokhorov, who sold the team and arena company to Alibaba billionaire Joe Tsai at an enormous profit.

Why couldn’t New York State have ensured that any deals involving the arena—starting with naming rights—require some payment to public entities to support other aspects of the project? That could’ve ensured additional funding for infrastructure, or deeper affordability.

At the time, Louis expressed support for “a special Atlantic Yards development district with appointees from the city, the state, community organizations and the developer”—a variation on a proposal from the BrooklynSpeaks coalition.

That didn't fly, but the BrooklynSpeaks proposal by 2014 had turned into the gubernatorially controlled AY CDC, which has mostly (but not always) been a lapdog.

Going forward, and reasons to vet any study

Shiffman noted that, in past deals, ESD or its predecessor agencies have invested in infrastructure to increase the affordability of housing. He cited the potential to deploy federal infrastructure funds.

“What happens if the Chinese government pulls the entire rug out of their entity?” he asked.

Veconi added that the looming affordable housing deadline means they need to understand the project’s viability.

Jaiyesimi said she recognized the importance of drilling down at the next AY CDC meeting.

Veconi asked if “we can ask ESD to commission the type of feasibility analysis that will help inform our decisions about this project.”

Jaiyesimi said it was “something that we'll take into consideration,” referring to “complexities around the nature of the discussions that the developer's having with the MTA.”

“There are certainly professionals in New York City who have prepared such an analysis,” Veconi said.

“We'll take that into consideration,” Jaiyesimi said.

I’d note that feasibility studies, at least in the past, have been used to uphold the ESD’s “rational basis” for its approvals of the project. That's a low bar: sufficient evidence for a judge to consider the state authority’s position reasonable, if not convincing.

As shown by the record, a convincing feasibility study would require some public vetting.