Foreclosure auction of six development sites over railyard postponed for the third time, to June 5. Don't bet on it.

The foreclosure auction of developer Greenland USA's rights to six development sites over the Vanderbilt Yard, originally announced for Jan. 11, postponed until Feb. 12, and then to April 30, has been postponed again, until June 5, according to a representative of the developer.

The postponement seemed inevitable once we learned, at the April 18 meeting of the Atlantic Yards Community Development Corporation, that state officials had no expectation that the foreclosure auction of would proceed, as the entity controlling the debt had not presented a potential developer to them.

In 2014-15, a Greenland affiliate borrowed $249 million and then $100 million in two low-interest loans, under the EB-5 investor visa program, with $500,000 investments from Chinese nationals organized by the U.S. Immigration Fund, a "regional center" or middleman. 

About $63 million of the first loan has been paid back, but the rest has languished past the due date, and a USIF entity, which apparently controls the debt (as manager!), has arranged a foreclosure sale of the collateral: sites B5-B8 and sites B9-B10, which would be built over the railyard.

Waiting for clarity

No developer has come forward, not surprisingly, because of the significant variables, notably the cost of building a platform as precursor for the towers and the looming $2.000/month fines starting in May 2025 deadline for the 876 remaining required affordable units.

Will those damages be renegotiated by Empire State Development (ESD), the state authority that oversees/shepherds the project?

Another factor, clarified last week, is New York State's new 485-x tax break, a successor to the now-lapsed 421-a, which would require, in exchange for 40 years of tax relief, 25% below-market units with average affordability aimed at households earning 60% of Area Median Income (AMI).

That's more of a challenge to developers than the now-expired provision, which offered a shorter tax break but only required 30% affordable at 130% of AMI, which, while below market at such new buildings, is aimed at middle-income households.

So any potential bidder could then factor in the costs and benefits of that tax break. Another factor: continuing to pay the Metropolitan Transportation Authority for railyard development rights.

But that doesn't resolve the platform costs and the affordable housing damages. Meanwhile, high interest rates also serve as a brake on development.

June 5 likely?

Bottom line: while the five-week difference between April 30 and June 5 is tighter than the ten-week gap between Feb. 12 and April 30, there are too many unknowns to be confident that something will proceed.

Then again, it's possible that, since the new 485-x tax break passed, some developer has indicated an interest, and discussions regarding the state's terms are proceeding.