At Atlantic Yards meeting, state officials acknowledge project is stalled, with neither new plans nor developer proposed. Will foreclosure auction happen next month?

This is the first of three articles about the Atlantic Yards Community Development Corporation (AY CDC) meeting March 26. The second concerned the issue of affordable housing. The third concerned oversight of EB-5 spending.

Atlantic Yards/Pacific Park seems stalled, as state officials acknowledged that they have been presented with no specific plans regarding the project's future, nor any possible developer.

That's the main news that emerged from the AY CDC meeting, which was called, in part, to get the directors to approve the annual budget for the year beginning April 1. That didn't happen, because the unexpected absence of one director meant there was no quorum.

However, the informational aspect of the meeting--held at the Manhattan offices of the parent Empire State Development (ESD)--proceeded anyway for the five directors present.

Master developer Greenland USA, which did not send a representative to the meeting, has not paid back some $286 million in loans (out of $349 million total) from immigrant investors under the EB-5 program. So the rights to develop six towers over the Vanderbilt Yard are supposed to be sold in a foreclosure auction April 30.

However, that auction has already been postponed twice, and it's unlikely any bidder would proceed without negotiating other terms, including the obligation to build a platform as precursor to the towers and the pending $2,000/month fines for each affordable unit--876 remain--not delivered by May 2025.

 

The Site 5 connection

The project's future was discussed in the segment above, as Director Gib Veconi first brought up the issue of Site 5, catercorner to the arena and currently home to the big-box stores P.C. Richard and the now-closed Modell’s.

Last year, ESD was considering hiring a consultant for a community engagement exercise, related to the developer’s long-floated plan to shift bulk from the unbuilt B1 tower (aka "Miss Brooklyn"), once slated to loom over the arena at Flatbush and Atlantic Avenues, to Site 5, creating a giant two-tower project.

Instead of a 250-foot building with some 440,000 square feet, the new project could be--as of 2016, and perhaps more ambitious today--785 feet and more than 1.1 million square feet.

From 2016 presentation by Greenland Forest City Partners

That would require a modification of the state's guiding Modified General Project Plan and could provide some affordable units otherwise missing from the project. While that process would take at least a year, including an environmental review, the site is on terra firma, not requiring a platform, unlike the railyard sites.

Has there been any further discussion of Site 5, asked Veconi, who helps lead the coalition BrooklynSpeaks, which advocates for changes in the project.

Anna Pycior, Senior Vice President, Community Relations at ESD, which oversees/shepherds the project, offered this update: "We have met with the lender and developer and in the course of regular business about the timeline and action items within the plan. There are no specific plans at this point."

"You're talking about Site 5, not the railyard," he said.

No, she said, "I'm talking writ large... the whole project."

The Site 5 tradeoff

AY CDC Chair Daniel Kummer asked Veconi if he envisioned a tradeoff with deeper affordability in exchange for allowing the density to be transferred.

Veconi noted that there was no market for B1, an office tower, nor a commercial building at Site 5.

"So I think people who’ve been watching the project, perhaps might expect that, if there was to be a modification to the project plan, the density that has been previously approved for those buildings," he said, "could be could be reprogrammed for residential... and potentially offer the ability to address relative lack of affordable apartments. It's certainly possible."

That's not just an idle thought. That was a key subtext, in my assessment, of the early 2022 Crossroads sessions held by BrooklynSpeaks, aiming to shape the project's future.

Looking north on Fourth Ave. to 17-story 375 Dean and P.C. Richard (Site 5)

If that's contemplated, it deserves a lot more discussion. Does the need for housing justify a building (or complex) with nearly twice the density as approved in the Downtown Brooklyn rezoning? 

Does it justify a building three or four times taller than the new, 17-story 375 Dean (above) two blocks away?

The auction

Regarding the railyard, Veconi asked, with respect to the planned auction, "Have there been any bidders qualified by ESD yet to bid now?"

"No developers has been presented to ESD," said Pycior. Her colleague, Joel Kolkmann, Senior Vice President, Real Estate, said, "There has never been anyone presented to us."

That suggests that the project, as currently constituted, is "not economical," Veconi observed. (That might also depend on the penalties.)

It also suggests that the auction won't proceed as planned.

Next steps murky

"So I guess the next question might be, what's the path going from here?" he asked. "It’s challenging to see how we get there, we could schedule another auction but if we’re offering something that’s not marketable, it’s not going to get us anywhere."

The situation is a challenge, Veconi suggested, because the state doesn't know what it must offer to get a developer.

"You framed our issues very well," Kolkmann said. "When we get into very high level conversations with the lender, they do say they're going to present us with somebody. So that is something that we are waiting for."

"I think the lender has articulated that they're aware of the type of development entity that is necessary to execute that kind of project," he added.

Note that the lender is a special purpose fund organized by the U.S. Immigration Fund (USIF), a "regional center," or middleman, that recruits immigrant investors under the EB-5 program. However, the USIF as manager controls that fund, even though they didn't put the money up,

Veconi suggested that, if a bidder came to ESD with requests for changes, that could provide an inside track--or would ESD then bid out the project?

ESD attorney Richard Dorado said the current Development Agreement is in place, and "the developer that steps up is subject to that. If they propose something different, then it will be something to consider in our process," A modification would require an environmental review and board approval.

Even so, Veconi suggested, it would still put the project in the hands of that new bidder. "I don't think that's ideal. But I understand... the limitation and being bound by the existing Development Agreement."

A proactive authority?

AY CDC Director Ron Shiffman, a veteran advocacy planner and Pratt academic, asked ESD, with exasperation, "Why aren't you preparing an alternative at this point that is proactive that begins to think through how you would deal with this if the developer’s forced to walk away, or if developer comes in with an alteration which is acceptable?"

He said the state authority isn't living up to its initial mandate to build housing, which it did when established as the Urban Development Corporation. (Since then, however, those powers have been used more for economic development.)

Finishing this project, he said, would help heal the division between Prospect Heights and Fort Greene--the two-block railyard--and deal with the "blight" used as an excuse for eminent domain.

Veconi said he agreed, noting that the Development Agreement "that we're kind of yoked to you right now is in place because two master developers [Forest City Ratner and then Greenland USA] over-promised. And if we sign a third one, a third one might also overpromise and that strategy hasn't worked very well so far."

The issue of ESD acting proactively didn't really get an answer. Does it even have the capacity?

(Nor, as I will describe tomorrow, is it clear whether ESD would enforce penalties for absent affordable housing, potentially forcing the developer's hand.)

Does the Governor know?

Veconi asked if the project's current situation had been communicated to the ESD board, controlled by Gov. Kathy Hochul, and to her. "This is a project where everybody understands that we're in a housing crisis and the governor is certainly very interested in trying to build more housing in New York City right now."

"I can't speak to the Governor," Kolkmann said, but "we certainly speak with our colleagues in the [executive] chamber about this project, often weekly. So I think they're well aware."

Does the ESD board know about the foreclosure, asked Veconi. 

Arden Sokolow, Executive Vice President, Real Estate Development & Public/Private Partnership, responded that ESD head Hope Knight is on the board and thus informed. However, as I'll describe in tomorrow's article, Knight's public statements have been curious.

From the Real Deal yesterday:

It is bananas how little this project gets talked about publicly (especially now that everyone seems focused on housing) and how difficult it is to figure out what the heck is going on. Here are six sites, plus the former “Miss Brooklyn” tower site, where housing could be built. We’ll keep you posted!

No committee action

Kummer, leading off the meeting, noted Veconi's previous suggestion that the AY CDC  explore the formation of a board committee to brainstorm about the project's future in a less formal setting.

However, he said, his own research and input from ESD staff suggests that it might run afoul of the state open meetings law. But he said to stay tuned on the issue.

Board issues

Shiffman noted that "there are supposedly 14 members of this advisory group, nine of which are appointed by the governor," but the absence of a quorum means the governor has created "a pocket veto over this group."

There are three vacancies on the AY CDC, so six people were needed for the quorum. They got five, with absentees including both gubernatorial appointees and those appointed by local officials. (I believe the three vacancies are gubernatorial appointments, as well.)

Of the five present, Veconi was the most vocal, followed by Shiffman, with Kummer periodically intervening with questions and clarifications. Directors Tamara McCaw and Anand Amin hardly participated--par for the course for most of the AY CDC directors. 

But at least they showed up and listened. After all, it's not easy to get volunteers to a weekday meeting in Manhattan.