BrooklynSpeaks: foreclosure sale "potentially fatal" setback & "searing indictment" of NYS oversight. My take: conditions imposed by ESD key to any sale.
The coalition BrooklynSpeaks--the only long-running community entity left to speak on Atlantic Yards/Pacific Park--has issued a statement calling the pending foreclosure sale of six development sites over the Vanderbilt Yard "a potentially fatal setback for the project, and a searing indictment of New York State Empire State Development’s [ESD] failure to oversee Atlantic Yards in the public’s interest."
Though dated Nov. 29, a day after news broke of the sale, the statement--which calls for governmental investigations of ESD's "stewardship" over the project for now owned by Greenland USA--was released today. I've reproduced it in full below, with annotations in italics.
“The public deserves a full accounting of how things have gone so wrong at Atlantic Yards,” added Michelle de la Uz, Executive Director of the Fifth Avenue Committee, a nonprofit affordable housing group that also partners with developers on affordable housing.
“We call upon the New York State Assembly, the State Senate, the State Controller, the New York City Comptroller and the City Public Advocate to investigate the failure of ESD’s 20-year stewardship of the Atlantic Yards project, and take such action as may be necessary to regain control of the site and its development rights, restart development under a new plan that has truly affordable housing, better manages supplier risk, and ensures transparent accountability to the people of Brooklyn and New York State.”
Regaining control of site?
What might regain control of the site? The BrooklynSpeaks statement left a key issue unmentioned: what are ESD's conditions, if any, on the two foreclosure sales?
The developer has to built 876 (or 877) more affordable units by May 2025, facing $2,000/month fines for each missing unit. If that obligation transfers with any sale, given that construction also depends on a costly and time-consuming platform, how many bidders would take it on.
Note that one sale is for the development rights to B5, B6, B7, and B8, and the other is for rights to B9 and B10. As I wrote yesterday, building the first three towers--putting aside affordable housing obligations--seems more likely, given the the completed payment for MTA development rights and the lower cost of the platform.
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| Projected phases for the platform |
So there's a need for Empire State Development, which lost its longstanding Atlantic Yards point person earlier this year, and otherwise has experience some turnover of project-related staff, to discuss this publicly, for example at a meeting of the (purportedly) advisory Atlantic Yards Community Development Corporation (AY CDC).
ESD has not responded to my requests for comment.
Greenland USA defaults on EB-5 debt, lender moves to foreclose on development rights over rail yards
Empire State Development greenlighted the Atlantic Yards development plan nearly 20 years ago, which would have added public open space, affordable housing, and connected long-divided Brooklyn neighborhoods
BROOKLYN, NY, November 29, 2023: Nearly twenty years after the Atlantic Yards project was announced in December 2003, it was reported yesterday that its developer is about to lose control of six development sites over the MTA rail yards between Sixth Avenue and Vanderbilt Avenue in Brooklyn. The news is a potentially fatal setback for the project, and a searing indictment of New York State Empire State Development’s failure to oversee Atlantic Yards in the public’s interest.
While the foreclosure sale has been announced, as I reported, there are significant clouds around it, including the conditions ESD might impose.
BrooklynSpeaks, the coalition formed in 2006 to hold the development project accountable, fiercely criticized this news, which follows decades of previous setbacks.
BrooklynSpeaks, in my shorthand, was "mend it, don't end it," compared with Develop Don't Destroy Brookly, now defunct, which aimed to stop the project. The two filed separate lawsuits, later combined, challenging the project's environmental review, gaining a court-ordered Supplemental Environmental Impact Statement.
“After 20 years, it is galling to see a major project be left in a state of chaos, with public commitments like affordable housing remaining unmet for many more years or decades to come,” said Gib Veconi, Chair of the Prospect Heights Neighborhood Development Council. “The State of New York took a massive gamble on Atlantic Yards, and Brooklyn lost.”
BrooklynSpeaks, the coalition formed in 2006 to hold the development project accountable, fiercely criticized this news, which follows decades of previous setbacks.
BrooklynSpeaks, in my shorthand, was "mend it, don't end it," compared with Develop Don't Destroy Brookly, now defunct, which aimed to stop the project. The two filed separate lawsuits, later combined, challenging the project's environmental review, gaining a court-ordered Supplemental Environmental Impact Statement.
“After 20 years, it is galling to see a major project be left in a state of chaos, with public commitments like affordable housing remaining unmet for many more years or decades to come,” said Gib Veconi, Chair of the Prospect Heights Neighborhood Development Council. “The State of New York took a massive gamble on Atlantic Yards, and Brooklyn lost.”
Veconi, who wears many hats in local civic activity, also is an appointed member of the Atlantic Yards Community Development Corporation. At the group's last meeting, Aug. 2, he got the board to approve a motion asking ESD to supply, in two months, a fiscal analysis of the project's future. That has not been delivered.
The Atlantic Yards project was created with the stated goal of removing blight caused by the open rail yards. ESD’s controversial finding of blight was critical to the project being approved under the State’s Urban Development Corporation Act, overriding local zoning, bypassing local review, and assembling land through eminent domain. Although Atlantic Yards was to be the largest single-source development project in Brooklyn history, ESD did not complete its own assessment of the plan’s feasibility and relied solely on original developer Forest City Ratner’s feasibility claims.
The Atlantic Yards project was created with the stated goal of removing blight caused by the open rail yards. ESD’s controversial finding of blight was critical to the project being approved under the State’s Urban Development Corporation Act, overriding local zoning, bypassing local review, and assembling land through eminent domain. Although Atlantic Yards was to be the largest single-source development project in Brooklyn history, ESD did not complete its own assessment of the plan’s feasibility and relied solely on original developer Forest City Ratner’s feasibility claims.
Well, sort of. ESD did hire KPMG to perform two reviews of the project's feasibility, but they were deeply flawed and came late in the process. Rather than assume a best-case scenario, the reviews should have been far more skeptical.
“The fact that two developers have now failed while trying to advance Atlantic Yards’ primary objective calls into question ESD’s initial due diligence on the project,” said Veconi.
“The fact that two developers have now failed while trying to advance Atlantic Yards’ primary objective calls into question ESD’s initial due diligence on the project,” said Veconi.
Not just initital due diligence but ongoing oversight.
Despite ESD’s finding of blight, Forest City was allowed to begin the project and complete the Barclays Center arena before doing any work to abate blight conditions at the rail yards. The arena, which opened in 2012, has since racked up annual operating losses in the tens of millions despite receiving an estimated $726 million in City, State and Federal subsidies.
Despite ESD’s finding of blight, Forest City was allowed to begin the project and complete the Barclays Center arena before doing any work to abate blight conditions at the rail yards. The arena, which opened in 2012, has since racked up annual operating losses in the tens of millions despite receiving an estimated $726 million in City, State and Federal subsidies.
Despite the operating losses, the arena is a win for the owner(s) of the Brooklyn Nets, since it has helped vault the team's value. Yes, the New York City Independent Budget Office in 2009 estimated a benefit to Forest City of $726 million in a combination of direct city and state subsidies, and city, state, and federal tax breaks. Given a smaller amount of tax-exempt bonds ultimately sold, I'd adjust that benefit downward by about $50 million. The arena also benefits from the ability to sell naming rights and expand its signage.
In 2014, BrooklynSpeaks reached a settlement with ESD and Forest City that required all of Atlantic Yards’ 2,250 affordable apartments to be completed by May of 2025. If the deadline was not met, Forest City would be liable for liquidated damages of $2,000 per month for each apartment left uncompleted.
In 2014, BrooklynSpeaks reached a settlement with ESD and Forest City that required all of Atlantic Yards’ 2,250 affordable apartments to be completed by May of 2025. If the deadline was not met, Forest City would be liable for liquidated damages of $2,000 per month for each apartment left uncompleted.
Crucially, BrooklynSpeaks was unable to ensure that the affordable housing would conform to the promises the developer had made. Instead, thanks to ESD's loose contracting language, middle-income housing--rather than that aimed at low- and moderate-income households--has prodominated. BrooklynSpeaks, as well as Veconi in his role at the AY CDC, have pushed for clarity on whether the deadline will be enforced.
Shortly thereafter, Forest City sold a 70% interest in Atlantic Yards to Greenland USA, the US arm of China-based Greenland Holdings, a developer controlled by the government of Shanghai. In 2018, Greenland acquired an additional 25% interest, and Forest City and its parent company were acquired by Brookfield Asset Management. There are 877 affordable apartments remaining to meet the May 2025 deadline, all of which are planned for buildings over the rail yards, along with six acres of promised public open space.
The largest chunk of the six acres of open space consists of demapped Pacific Street between Carlton and Vanderbilt avenues, which has served, and will serve, construction staging. Only when the final block of towers (B8, B9, B10) are built could that open space be completed. If only the first three towers (B5, B6, B7) are built, only a fraction of the open space would emerge.
Massing model and open space, from landscape architect Thomas Balsley
“ESD has made it clear collecting damages is not a priority for them — as they demonstrated when the May 2022 deadline for the Urban Room, a glass-enclosed atrium to be located in front of Barclays Center, was missed,” said Assembly Member Jo Anne Simon. “By signaling it won’t hold developers accountable, ESD has encouraged them to take larger risks than they otherwise would. This is the result.”
Simon has been the longest-serving elected official involved with BrooklynSpeaks. No other elected officials in the press release--I'm not sure if it was an issue of timing. In July 2022, joining Simon in a letter calling for accountability regarding fines for the missing "Urban Room" were her Assembly colleagues Phara Souffrant Forrest and Robert Carroll, State Senator Jabari Brisport, and City Council Member Crystal Hudson. I saw that criticism as a proxy for whether the state would hold the developer accountable for the affordable housing deadline.
Greenland has struggled on other projects, taking a $200 million loss when it sold its 59-story Thea at Metropolis apartment building in Downtown Los Angeles. BrooklynSpeaks does not want to see the Atlantic Yards project fail, and is calling for accountability to ensure Brooklyn actually gets to reap the benefits of this initiative.
Perhaps better to say the attenuated benefits. After all, there's a cost to the delay in delivering affordable housing, open space, blight removal, and jobs.
“The public deserves a full accounting of how things have gone so wrong at Atlantic Yards,” added Michelle de la Uz, Executive Director of the Fifth Avenue Committee. “We call upon the New York State Assembly, the State Senate, the State Controller, the New York City Comptroller and the City Public Advocate to investigate the failure of ESD’s 20-year stewardship of the Atlantic Yards project, and take such action as may be necessary to regain control of the site and its development rights, restart development under a new plan that has truly affordable housing, better manages supplier risk, and ensures transparent accountability to the people of Brooklyn and New York State.”
“The public deserves a full accounting of how things have gone so wrong at Atlantic Yards,” added Michelle de la Uz, Executive Director of the Fifth Avenue Committee. “We call upon the New York State Assembly, the State Senate, the State Controller, the New York City Comptroller and the City Public Advocate to investigate the failure of ESD’s 20-year stewardship of the Atlantic Yards project, and take such action as may be necessary to regain control of the site and its development rights, restart development under a new plan that has truly affordable housing, better manages supplier risk, and ensures transparent accountability to the people of Brooklyn and New York State.”
According to its website, BrooklynSpeaks is an initiative of civic associations, community-based organizations, and advocacy groups concerned about the future of development at the Atlantic Yards site. In 2014, Veconi and de la Uz led the negotiations, and the other organizations later signed on.
The current active sponsors of BrooklynSpeaks are The Atlantic Avenue Local Development Corporation, The Boerum Hill Association, The Brooklyn Heights Association, Brown Community Development Corporation, CNU NYC, Diaspora Community Services, The Fifth Avenue Committee, The Park Slope Civic Council, IMPACCT Brooklyn, The North Flatbush Business Improvement District, and The Prospect Heights Neighborhood Development Council.
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