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Atlantic Yards/Pacific Park FAQ, timeline, and infographics (pinned post)

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At legislative hearing, ESD CEO Knight claims they're seeking new developer (how?) out of foreclosure, punts on fines for absent affordable housing.

During yesterday's joint Legislative hearing on the gubernatorial administration's budget proposal, Brooklyn Assemblymember Jo Anne Simon (video here, also below) queried Hope Knight, President, CEO and Commissioner of Empire State Development (ESD), the state authority that oversees/shepherds Atlantic Yards/Pacific Park, about the troubled project.

Knight hardly offered candor, but she did hint--as seemed likely--that ESD has not merely been standing by while master developer Greenland USA faces a foreclosure action that would lead to the loss of its ability to develop six parcels (B5-B10) over the Metropolitan Transportation Authority's Vanderbilt Yard.


Still, however much ESD hopes a new developer may step in, that doesn't make it likely.

Nor does it resolve some knotty questions, including one Knight essentially dodged regarding the master developer's obligation to pay $2,000/month fines for each unit of affordable housing--876 (or 877) in total--not delivered by May 2025.

The exchange

Simon, who as an active supporter of the BrooklynSpeaks coalition is probably the legislator best informed about the project, started by asking about ESD's plans to collect those liquidated damages, given that Greenland has defaulted on its debt and seems likely to lose control of those development rights.

"How do you plan to make up for the affordable housing that hasn't been delivered?" she asked.

"As you know, we've been working with the developer of Atlantic Yards as well as its lender to figure out a way forward," Knight responded. 

(Note: the "lender" is an entity formed and managed by the U.S. Immigration Fund, or USIF, a private "regional center" approved to package such loans. The actual money comes from green card-seeking immigrant investors under the EB-5 program. However, the manager of the funding entity is in control.)

"There is a default on the debt and we're working with the lender to figure out who will step in as a designated developer," she said. "ESD has to approve that person or entity as a designated developer and we are waiting to have those folks step forward."

Not a simple process

Those "folks" might be skittish, even at a bargain price, given that the complexities of Atlantic Yards, including the large upfront investment for infrastructure and land, have so far stymied two developers: not just Greenland, but original developer Forest City Ratner.

Forest City announced the project in 2003, and after building the arena, sold 70% of the project (excluding the arena and the B2 tower, 461 Dean St.) to Greenland. After building three towers as a 70/30 joint venture, Forest City in 2016 declared a unilateral pause. 

By 2018, Greenland had taken over all but 5% of the project going forward. By the end of that year, Forest City was no more, its parent company, Forest City Realty Trust, having been absorbed by Brookfield Asset Management.

So it's not merely a matter of some white-knight--or white-shark?--company stepping forward. There are some complex financial transactions at issue. For example, any developer would have to spend several hundred millions dollars on a two-block platform over the railyard, between Atlantic Avenue and Pacific Street, as a precursor for tower development.

That said, the platform over the first block (Block 1120), between Sixth and Carlton avenues. would be less costly to build, given the presence of terra firma jutting south from Atlantic Avenue, than the platform over the second block (Block 1121), between Carlton and Vanderbilt avenues.

Beyond that, the new developer would have to be approved by the MTA and continue annual payments of $11 million a year, through 2030, to the MTA for the railyard development rights. (As I've written, Greenland is current on those payments, so surely it would want to be compensated.)

Some skepticism

As seen in the Twitter/X exchange above, Gib Veconi, a leader of BrooklynSpeaks and a member of the advisory Atlantic Yards Community Development Corporation (AY CDC), commented, "My understanding is that Greenland has pitched this to every developer in NYC and got no takers. That means either the project as approved is uneconomical, or Greenland wants too much for what value there is."

The value is unclear. As I responded, Greenland has a debt obligation that comes with development opportunities, but the latter require building a platform and completing payments to the MTA for development rights.

Greenland also has an asset--the parcel at Site 5 catercorner to the arena block.

From 2015-16 developer presentation

But the real value there would be not in building the currently approved tower, at 440,000 square feet, but to add much of the bulk of the unbuilt B1, the tower once slated to loom over the arena plaza, creating a two-tower project with more than 1.1 million square feet. That would require a public approval process.

Liquidated damages?

At the legislative hearing, the ESD CEO was circumspect about pressuring the developer.

"With respect to liquidated damages," Knight told Simon, 'that default provision would kick in next year. And so we intend to pursue liquidated damages if those units are not produced at that time."

Oh, come now. Buildings take two-three years to complete, so those units will not be ready. They know the bridge won't be ready to cross.

Knight's avoidance tactic, in keeping with previous similar statements by ESD staff, suggest that the state authority is considering offering some sort of waiver, delay, or renegotiation of those penalties, which could be $21 million a year.

Note that former Deputy Mayor Alicia Glen believes those $2,000/month penalties should be enforced.

More muddiness

Simon followed up, asking about the likelihood of the platform being built "and how quickly we can replace that affordable housing that may not, from our perspective, with a developer that can't perform, may not ever be built. So how do we remedy that?"

Knight didn't offer much, noting that the current developer has a lease "until 2035." (Well, a Development Agreement that allows for creation of leases for each parcel.) "And so we do have to work with the current developer and the lender to determine if we can get a developer that ESD approves to step in."

What she didn't say--as some of have speculated--is whether the state would help build the platform to accelerate completion of the project. Greater public subsidies and/or financial commitment would necessitate a greater public role in the project.

What next?

ESD, commented Veconi later, "needs to stop waiting for Godot. It needs to come up with a real plan for completing #AtlanticYards that the public can believe in." That could imply a greater role for the public authority.

"In the meantime, collecting LDs [liquidated damages] for the missed Urban Room deadline would be a good place to start," he stated.

That refers to the unbuilt atrium attached to the unbuilt B1 tower, source of a 2022 deadline, largely ignored, and $10 million in liquidated damages that ESD made no attempt to collect, apparently unwilling to challenge the developer and claiming that the "temporary" (but surely permanent) plaza was as valuable. 

As I wrote, the kerfuffle was a proxy for the larger question of whether ESD would enforce the fines for the unbuilt affordable housing. Based on Knight's responses, they're not keen on that either.
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