As state extends suspension of affordable housing penalties, citing revised development proposal (& teams) now involving Site 5, advisory group presses ESD. Project contours (& ownership stakes) unclear.
The second discussed why valuable Site 5 is key to the project. The third addressed whether Greenland has a case to protest the penalties. The fourth addressed plans for "community engagement."
State officials acknowledged yesterday that they have not collected more than $5.2 million in seemingly required damages for missing Atlantic Yards/Pacific Park affordable housing because they are waiting for information about a newly revised "permitted developer"--led by the funding entity Cirrus Real Estate Partners and the development firm LCOR--for an expanded list of parcels, including Site 5, catercorner to the Barclays Center.
They said that they were aiming for September, but did not set a hard deadline.
A permitted developer must include a firm with at least ten years of experience in large-scale projects.
The ownership shares in the various development sites remains unclear as does--of course--the big question of what concessions, in terms of timetable and bulk, the developers would seek, and how that might be reciprocated with public benefits like affordable housing.
(Also see coverage in Gothamist, Yet another delay in Atlantic Yards housing plan. Developer still skirts millions in fines., and The Real Deal, Cirrus, LCOR go after Site 5 as part of Pacific Park takeover bid.)
A "bailout" for Greenland?
ESD officials also acknowledged another reason: fear of litigation from current master developer Greenland USA, which had previously contended that it had faced Unavoidable Delays, as construed in state contracts, and thus should avoid penalties.
(ESD had not previously discussed Greenland's contentions publicly, though presumably it should have consulted with the advisory body. I did report on the issue in an Aug. 5, 2024 article, based on documents received via a Freedom of Information Law request.)
In fact, ESD officials acknowledged that, not only had they suspended enforcement of the $2,000/month damages for each of the 876 affordable housing units (of 2,250) not delivered by May 31, as seemingly required in a 2014 settlement agreement, they were not even letting the damages, more than $1.75 million a month, accrue.
The money is supposed to go to a city affordable housing trust fund.
AY CDC Director Gib Veconi, who as a leader of the BrooklynSpeaks coalition helped negotiate that 2014 settlement, moved that ESD present to the developer a notice of damages due, rather than let accrual be "deferred to some indeterminate date in the future."
"If there is any cost, it means Greenland will get less," Director Ron Shiffman, a veteran advocacy planner and academic. "Greenland's going to walk away with more money from the deal" to sell its embedded investment in the remaining parcels.
"It's a bailout," Veconi commented.
"It's a bailout,""Shiffman chorused, "and we should not reward them for what they have not met."
(Updated) The motion passed with five votes from the six directors present. (It was hard to tell, watching on the video, as I was unable to attend.) AY CDC Chair Daniel Kummer abstained.
It's unclear whether the advisory board's motion would have any effect, as ESD officials said they might have to discuss the issue in a future executive session.
Cirrus and LCOR move in
So a joint venture led by Cirrus and LCOR will not only pursue development of the six parcels (B5-B10) over the Metropolitan Transportation Authority's (MTA) two-block Vanderbilt Yard, but also Site 5, the parcel across Flatbush Avenue catercorner to the arena.
Though Site 5 was approved in 2006 for a 250-foot tower, for more than a decade the developers have proposed a much larger, two-tower project, involving a transfer of bulk from the unbuilt B1 tower (aka "Miss Brooklyn") once slated to loom over the arena.
In 2021, ESD in an Interim Lease agreed to support two towers, the larger rising 910 feet, and 1.242 million total square feet, allowing for housing, a hotel, and retail. A public process is needed to formalize that.
Other players
Current master developer Greenland USA has since November 2023 been on the verge of losing the rights to develop the six railyard parcels in a foreclosure action led by an affiliate of the U.S. Immigration Fund (USIF).
The USIF was the middleman organizing $349 million in loans from immigrant investors under the EB-5 program, which grants green cards in exchange for purportedly job-creating investments. Of that, about $286 million remains unpaid.
Fortress Investment Group, a periodic USIF partner, owns a piece of the debt, as does--apparently--a USIF affiliate.
However, it was revealed, Greenland also retains a share in the railyard parcels: its investment in the early stages of the platform, the deck needed for vertical development. (Unmentioned but likely: Greenland also retains value from annual payments, required through 2030, to the MTA for development rights.)
In the case of the railyard parcels, the AY CDC was told, the permitted developer package would include not just Cirrus and LCOR, but the USIF and Fortress, and Greenland. (While not specified, the syntax used suggested that USIF and Fortress comprised a specific entity.)
The ownership shares were not specified.
Cirrus and LCOR would be in charge, with the other entities passive partners. "They re basically putting up their investments that they've already provided to the project," said ESD's Joel Kolkmann, Senior VP, Real Estate and Planning.
In the case of Site 5, Greenland would be a passive partner, while USIF and Fortress was not cited as having a role.
Who they are
Kolkman described Cirrus is a labor pension fund-backed real estate investment firm. Indeed, it last year announced, with Mayor Eric Adams, a plan to pursue workforce housing, and just recently, with LCOR, was awarded by the city development rights to the Flushing Airport site, planning more than 3,000 apartments.
LCOR, he said, has a portfolio of more than 10,000 units.
Kummer asked about their most prominent development in the city.
Kolkmann said they didn't know, but did visit a project in Coney Island, 1515 Surf Avenue. "It's about 30 stories," he said. "It's very nice." (It's 16 and 26 stories, with the shorter tower containing affordable units. At 463 units, it's LCOR's largest single residential project in New York City.)
In response to a question about affordability, Kolkmann said 1515 Surf, which benefited from the now-expired 421-a tax break, has 25% affordable units at 130% of Area Median Income, or AMI.
That's incorrect. If all affordable units were at 130% of AMI, the percentage would be 30%. In this case, there are 25% affordable units, with 93 at 80% of AMI and 46 at 130% of AMI.
What next?
Will USIF follow through on the long-pending foreclosure action, asked Kummer.
For the platform sites, yes, responded Kolkmann.
He explained that, when ESD discussed this earlier with the AY CDC board, it had not gotten a submission for Site 5, but recently got a permitted developer application for Site 5 that was presented by Cirrus, Greenland, and LCOR.
"Our documents have separate approval processes for these two portions of the project," Kolkmann said. The platform sites will involve a foreclosure, while Site 5 will be a transfer to an entity consisting of Greenland, Cirrus, and LCOR.
If Greenland's entities for platform development are facing foreclosure, what, asked Kummer, does it have to contribute?
"All the investment in the platform work," Kolkmann said. "Hundreds of millions of dollars." That total is a bit vague, but maybe it includes the annual payments to the MTA, which were first made by Forest City Ratner, then the joint venture Greenland Forest City Partners, then by Greenland, and lately by a USIF entity and/or an unknown entity.
The MTA, he added, has its own permitted developer approval process. "We're coordinating with them."
Asked by Veconi who would assume the role of master developer under state documents, Kolkmann said "I think it would be an entity consisting of Cirrus and LCOR."
Timing and transparency issues
Though ESD had articulated an Aug. 1 deadline for the platform sites joint venture, the advent of the Site 5 plan means they're aiming to review the permitted developer packages by the end of September, Kolkmann said. The parties have been responsive, he said.
Veconi expressed "my extreme frustration that our [AY CDC] meeting of May 29"--before the affordable housing deadline--"was canceled," asking who decided that.
He noted that the AY CDC was established in 2014 to review project changes and advise the ESD, aiming to increase transparency.
"Two days before the affordable housing deadline, we could've met and could've gotten advice from this board," he said. "Instead, we were told you'd already made the decision not to seek collection of liquidated damages... This is not transparency."
The board, he said, represents a public commitment of Empire State Development: "It's not a nice thing we all get together and do once in a while. This was agreed on in exchange for community agreeing not to litigate" regarding delayed affordable housing.
ESD's Arden Sokolow, Executive VP, Real Estate and Planning, said "we wished the proposed permitted developer submission came in way in advance." ESD, she noted, did not have enough information at the time even to describe what Kolkmann had outlined.
"At a minimum, the Chair should have some discretion," Veconi said. "The meetings can't just be canceled by the agency."
He later noted that he was previously told of a June 30 deadline, then Aug. 1, and now it's sometime in September.
"It's our target and intention to do this by the end of September," Kolkmann said.
ESD lawyer Matthew Acocella advised against setting a hard deadline. "We want to get it right, rather than make a deadline we'd have to potentially tweak."
What might be built
Veconi noted that board minutes said ESD would have a permitted developer package, an engagement plan, and contours of the developer's request. "Have you received that?"
"The contours of their request?" Kolkmann said. "No."
That means that the biggest questions surrounding the project--how much additional bulk might the developers seek, on what timeline, and with what public benefits like affordable housing--remain in question.
Note that, in 2023, Greenland sought to rescue the project by supersizing it, as I reported. It also promised more affordable housing, under extended deadlines.
Would it work?
The purpose of having the contours of the developer's requests, Veconi suggested, was so "ESD would do a sniff test on whether this was going to work...if it hung together to make it worth holding off on collecting the liquidated damages for affording housing."
"What we're hearing now is no, we don't have that, and we're going to figure that out during [future] community engagement," he said.
(I'll write separately about the community engagement discussion.)
"In theory, I'm for community engagement," Veconi said, "but there has to be some financial underpinnings to give it validity."
"We intend to kick all of these tires," Sokolow said. "We wanted to be deferential to the stakeholders, the community... hearing how the community would respond."
That strikes me as a trifle disingenuous. After all, "form follows finance," which means the developers' expectations shape the program.
Shiffman said he agreed that the project needed to be financially sound, "but I also believe there has to be a qualitative basis....who's going to benefit, what are the family sizes, is it truly affordable?"
I'd note that there are tradeoffs between scale and affordability. They can offer more affordability if they build ever bigger, but at some point a development can be overwhelming, which is why, for example, Greenland in 2023 sought to convert a public street to project open space.
The debate
ESD's Acocella said the authority believes that, under project documents, it can implement certain delays. "I know people don't agree with it."
So ESD will let the process play out, "also factoring in the claims that the developer has made, which we don't agree with, but which we acknowledge are out there [and] pose legal complications and risks.".
Then Veconi made his motion that ESD present a notice of damages accrued, as of Aug. 1.
The right forum for an ESD response to the motion, Sokolow said, was unclear, given issues of litigation. That might require an executive session, which Kummer later suggested might be in early September.
A "credibility problem"
Veconi noted that the issue of damages reflected on the other issue before the board: community engagement. "I think we have a real credibility problem with community engagement at this point," given the failure to enforce the penalties.
"The alternate path might be that we can't move forward with anything," Sokolow warned. "We could wind up mired in a major stall while things are litigated."
"I think we need to honor the commitments we've made in order to make new commitments to the public," Veconi said.
"We would be hard pressed to speak to them at all if we were mired in litigation," responded ESD's Anna Pycior, Senior VP, Community Relations.
Two paths?
Kummer said they were choosing between scenarios. "We can choose one path that has the potential to move this project forward. There''s another path that may satisfy the commitments but will essentially stall the project."
He asked if staff thinks they could proceed on both tracks.
"Probably not," said Sokolow, noting that the developers--perhaps now Greenland with Cirrus--"control Site 5, under the documents."
That, however, didn't fully address the issue. Only new ESD approval would allow the bulk of B1 to be transferred to Site 5, rewarding Greenland, as well as BSE Global, owned by Joe Tsai and the Koch family, which controls the arena site and would get the plaza made permanent.
In other words, ESD has more leverage than acknowledged.
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