To Prospect Heights group, key advocate describes Atlantic Yards as a "dire situation." As May affordable housing deadline looms, will penalties be enforced?

Who's keeping track of the complicated situation facing Atlantic Yards/Pacific Park? 

It's barely entered the mayoral race--more on that tomorrow--and few civic groups and elected officials keep up.

So the BrooklynSpeaks coalition, which relies significantly on Gib Veconi of the Prospect Heights Neighborhood Council (PHNDC) and Michelle de la Uz of the Fifth Avenue Committee, has become a key vector for local response, given the demise of project opponents Develop Don't Destroy Brooklyn.

BrooklynSpeaks organized a potential lawsuit in 2014, warning that delays in delivering affordable housing meant a fair-housing violation, that led to a settlement, including the new 2025 deadline for the project's 2,250 units of affordable housing, with $2,000/month penalties for each unit not delivered. 

Back then, the deadline seemed realistic.

But 876 affordable units won't be built by May 2025, suggesting damages of $1.75 million per month, and as Veconi said at a Feb. 26 annual meeting of the PHNDC, the project's in a "dire situation," given doubts about who might want to develop the six towers (B5-B10) over the Metropolitan Transportation Authority's Vanderbilt Yard, and what plan was buildable. 

Flashback, October, 2024

Thus Veconi's outline was more brief than the one last October 15, when he shared a presentation that the coalition had given some elected officials. The takeaways:

• don't let New York State give the developers a pass on fines for not delivering the 876 more required units of affordable housing by May 2025
• given the project's skew toward more expensive "affordable housing," future income-targeted apartments should be aimed at low-income tenants
• the arena operators who control the "temporary" plaza should pay for a publicly operated quality of life enforcement unit
• given the history of the project, which has kneecapped two developers, any proposed changes--including an expected request for increased density and bigger buildings--merit a third-party analysis of their financial feasibility

As I wrote, those are laudable goals, though I see a potential tension between scale and affordability; think the arena operators could be asked for even more; and think third-party analyses are needed for more than financial feasibility.

The recent update

Veconi, who's probably the best-informed advocate on the project, is also a key member of the Atlantic Yards Community Development Corporation (AY CDC), which is supposed to advise parent Empire State Development (ESD), the state authority that oversees/shepherds the project. 

The AY CDC, which is supposed to meet quarterly, last met Nov. 14, and should meet this month to approve the annual budget. That should offer the opportunity for ESD to be queried on the May deadline and more. 

On Feb. 26, as shown in the video below, Veconi first reviewed the complex challenge of ownership: original developer Forest City Ratner, which announced the project in 2003, in 2014 formed a joint venture with Greenland USA, the arm of a Shanghai-based company. 

  

That joint venture built three buildings "and then decided to borrow some money and use as collateral the development rights over the railyards," Veconi recounted. 

By the time the loan was due, "Greenland had acquired virtually all of the interest in the project and Forest City was itself was acquired by Brookfield, so Forest City ceased to be a part of the project."

Greenland has failed to repay $286 million of the $349 million lent by immigrant investors under the federal government's EB-5 investor visa program, in which investors lend money at no or little interest to purportedly job-creating projects and get green cards for themselves and their families. 

The loans are controlled, thanks to an advantageously written contract, by an affiliate of the U.S. Immigration Fund (USIF), the manager of the loans, which recruited the investors. 

Now: limbo

The unpaid loans shifted control of the railyard sites "into a limbo," Veconi said. "So at this point the railyard sites"--or, at least, the development rights--"are still owned by Greenland but they have no ability to develop them." 

I'm not sure Greenland still controls the railyard sites. As I've written, a USIF affiliate made last year's payment to the MTA for air rights. I've suggested that legislators and the AY CDC should clarify the ownership issue. 

Those six towers require an expensive two-block platform--one block each for three towers--before construction. That platform protects Long Island Rail Road operations.

BrooklynSpeaks presentation, Oct. 2024

As Veconi explained, the railyard sites "can't be developed by the EB-5 investors" because a "permitted developer," with a decade of experience, is required. 

"So we have kind of a deadlock where this area here over the rail yards is blocked from development because the rights have been foreclosed by the lenders, but the lenders don't have a developer on the team," he said.

Note: somehow the private equity fund Fortress, which has periodically worked with the USIF, has a piece of the debt. But it's bad shorthand for the USIF to be described as the "lender," since it controls the loan without--as far as I can tell--having put any money up.

So as I wrote, it's unclear if they have any skin in the game, other than the managerial fees they expect, and thus faces little pressure. 

Who'd pay damages?

As of October, Veconi noted, it was believed that Related Companies, developer of Hudson Yards, would join the joint venture to develop the sites. But Related pulled out.

The May 2025 affordable housing deadline, negotiated in 2014, now looms. He continued, "So without the 876 affordable units completed, the owner of these sites, which is now Greenland" will be responsible for nearly $1.8 million a month in liquidated damages.

As noted, I'm not sure Greenland is still the owner of the railyard development rights. Could ESD impose the penalties--in part?-- on Greenland via its remaining interest in the project: the rights to the B1 and Site 5 parcels, which it plans to combine in a giant, two-tower project at Site 5. 

Could those penalties be imposed on the USIF affiliate? That's another question that legislators and the AY CDC could address.

What's buildable?

"So this is kind of a dire situation," Veconi said. "The exit of Related makes it look like the development plan for the railyards, which is 20 years old, may not be economical anymore." 

That's likely an understatement. The proposal by Greenland to supersize the project in 2023--adding 1 million square feet of valuable bulk, while extending deadlines--confirmed that it no longer saw the original plan as viable. Related lobbied state officials for months and, for whatever reason, pulled out.

"In other words, it's not worth it for a developer to build," Veconi said. "ESD on the other hand, has stated that it won't negotiate changes to the development plan until a new developer takes ownership of the sites."

Behind the scenes?

It might not be that cut-and-dried. If ESD could negotiate with Greenland over the railyard plan, and previously endorsed changes at Site 5, it certainly can negotiate changes before telling the public.

And if it was meeting regularly with Related, surely those discussions included the project's future contours. ESD just wasn't ready to publicly discuss it.

"Now you can see why it would be difficult to find a developer who'd be willing to accept that transfer not knowing if they'd be able to get changes that would make the project feasible for them," Veconi continued. "So this is the situation that that Empire State Development finds itself in now."

He noted that the USIF apparently has a new capital partner, Cirrus Real Estate, which has announced a plan to build workforce housing in partnership with the Building and Construction Trades Council, but "they don't yet have a developer on their team."

The exchange in Albany

Veconi then noted the exchange that day, at a State Assembly hearing, when local Assemblymember Jo Anne Simon queried ESD CEO and Chair Hope Knight about Atlantic Yards.

After Knight said they had not been presented with a developer, Veconi recounted, Simon asked "will you have time to approve a developer before the May deadline and I believe that Ms. Knight also replied no." 

That's imprecise. As I reported, Knight hedged: "At this time, we continue to wait for the lender to present us with a qualified developer. We have not had one come forward as of this time, and so, you know, we have until the deadline to, uh, see if that happens."

Will penalties be enforced?

Veconi continued, "And so Assemblymember Simon asked what will happen after the May deadline if you don't have a developer presented and Chair Knight said we'll have to enforce. So that's that's a very significant development... because we've been very concerned that ESD will will not enforce the liquidated damages that were part of our settlements."

BrooklynSpeaks, Oct. 2024

I'm not as sanguine, since I thought ESD's record, and Knight's unsteady tone, suggest reason for doubt. "So we continue to have dialogue with the lender," Knight told Simon. "Like I said, to the extent that does not come forward, we'll have to enforce, y'know, what we have with respect to our contract."

After all, ESD had already been asked by Greenland to modify the plan for the railyard sites in 2023, and separately in 2021 agreed to support a giant, two-tower project at Site 5.

For now, it's up to legislators and the AY CDC to seek more clarity.