WSJ: "Related Closes In on Deal to Rescue" Atlantic Yards/Pacific Park. Will New York State waive penalties for missing affordable housing?

So, what to make of the Wall Street Journal article today headlined Related Closes In on Deal to Rescue Notoriously Stalled Massive Housing Project, which was summarized somewhat conclusorily by The Real Deal as Related, Fortress, USIF to develop Pacific Park as joint venture?

Well, it sounds like a business deal to develop six railyard development sites, which The Real Deal had already reported was brewing, is further along. But it's yet to get--at least officially--government approval. And the only named source is a rather self-interested businessperson.

What next?

As the WSJ summarized it, "If all goes well, Related could resume construction on the site as soon as the end of 2025, a person with knowledge of the project said."

That doesn't rule out the possibility of a reconfiguration of the project, perhaps along the lines current master developer Greenland USA proposed to rescue it via a significant expansion, as I reported. That could mean new deadlines and, perhaps, more units of below-market "affordable" housing, though on an attenuated schedule.

That also could mean an astounding amount of bulk, a gift to the developers. That might help pay for the platform required for the six towers.

Unmentioned: plans for Site 5, catercorner to the arena, which was not subject to foreclosure but could result in a giant, two-tower project and is still owned by Greenland.

From the WSJ:

At Hudson Yards, Related worked with those same agencies. “Hudson Yards learned a lot of lessons” about avoiding delays, said Moses Gates, vice president of housing and neighborhood planning at the nonprofit Regional Plan Association.

Ok, they built the first half, but Hudson Yards was supposed to be done by 2024.

Is there a deal yet?

From the WSJ:

Now, New York developer Related is edging closer with a new plan to ride to the rescue. The talks involve the U.S. Immigration Fund, which helps foreigners gain permanent residency by investing in businesses through the EB-5 immigration program.

About $300 million in debt on the site is held by the U.S. Immigration Fund [USIF] and by Fortress, a big investment firm. The two debtholders are planning to foreclose on the property to take ownership in the fall, according to Nick Mastroianni, the U.S. Immigration Fund’s president.

Under the terms of the deal being negotiated with Related, the developer would join the new owners as a joint venture partner, Mastroianni said. The new plan would have to be approved by the Metropolitan Transportation Authority, which owns the rail yard.

(Emphasis added)

So there's no deal yeet.

Looking more closely

Wait a sec: haven't there been several foreclosure auctions already scheduled? 

Also, how could Related not be the majority/lead partner, given that it has experience that the other parties don't have?

We don't exactly know how Fortress got a slice of the $286 million Greenland USA owed to EB-5 investors organized by the USIF. 

We do know that the USIF did not lend the money but, thanks to extremely favorable drafting of investment documents, essentially controls the loan.

We also know there's evidence that New York State should not be dealing with Mastroianni and the USIF, given his arguable status as a "prohibited person."

NYS leverage

While the MTA must approve any developer working on the Vanderbilt Yard sites, Empire State Development (ESD), the state authority that oversees/shepherds the project, also presumably has leverage.

The current master developer, Greenland USA, was obligated to deliver 876 more affordable housing units by May 2025 or face $2,000/month fines for each missing unit. (Note: "affordable" is loosely defined as participating in a government program.)

It seems unlikely that ESD will enforce the deadline as it stands. But waiving it, as leaders of the BrooklynSpeaks coalition told the WSJ, would provoke ire. Perhaps that's why Greenland last year proposed to delay the affordable units but add 600 more, albeit if they could get 1 million more square feet.

"Another bailout"

Gib Veconi, a BrooklynSpeaks leader who's also a director of the advisory Atlantic Yards Community Development Corporation, stated on Twitter/X:

Failure to collect damages for missing #AtlanticYards #AffordableHousing deadline = another bailout, this time of foreign investors and a private equity fund. No way 4 the public 2 have confidence in any new plan.

It might be even more a bonus for Related, since it lowers their costs/obligations. 

As to a bailout of the EB-5 investors, I wonder how much, if any, they'd see of their investment, given Mastroianni's control of the investment funds and Related's dubious track record of not paying back its EB-5 investors in Hudson Yards.

Update: a note on timing

From The Real Deal:

But the original plan to finish it by 2016 proved wildly optimistic, as the project was delayed by public opposition, litigation, the Great Recession, Forest City Ratner’s retreat and new owner Greenland’s implosion. The new estimated completion date is 2035.

Nah, the "outside date," as established in 2010, is 2035, and that was acknowledged by the developer in 2018. 

Today, with delays and yet-unapproved proposals to extend the affordable housing deadline, it's likely that 2035 deadline will be extended. So Brownstoner's headline on its links roundup, Daily Links: Development Team Formed for Atlantic Yards, Completion Expected 2035, is misleading.