Atlantic Yards in Trouble?

The MTA is facing similar problems with cost in all their projects.

well said bill c. if this project does fall apart, and I'm still skeptical that will happen, who is responsible for all that has been dismantled? buildings have been demolished, apartment buildings vacated and stores shut down. certainly it's early to be wondering about that, but a small ghost town has been created and I worry that if the deal gets squashed, we'll be left with the mess.

Subject: Get a piece of Marty

Check this out. Get a piece of Marty! The Brooklyn Paper has put Mr. Markowitz's cast (what was broken? Oh, Brooklyn.) up for auction on Ebay to raise charity.

http://cgi.ebay.com/ws/eBayISAPI.dll?ViewItem&item=280197010864

Subject: Re: Talk?

prospectus wrote: Well, the project is years behind schedule, and in those years the cost of steel and concrete for high-rise buildings has risen sharply.

http://www.housingfinance.com/ahf/articles/2007/oct/UP1007.htm

Many condominium projects in weaker markets have been shelved. Many other condo projects have been turned into rental apartments, even right here in Brooklyn.

The question for Forest City is whether the price of condos in this prime corner of Brooklyn has gone up enough to make up for the rising cost of the construction plus the cost of its financing as the project drags later and later. If condo prices plateau but steel and concrete prices keep rising, it could be tough on the project.

How much longer can DDDB stretch out its appeals?

Yup.

And what also gets lost in all of this is that all the "promises" that were made about "affordable housing" are OUT the door. As a matter of business, the developer will not be able to provide the units as promised (they never planned to BTW - they never really do).

The people who were supporting this project mainly because of the affordable housing element are going to find themselves ass-out if/when this project is built.

It will mostly (90-95%% or more) be market rate housing by the time AY is completed - if ever. They may offer rentals units when it first opens (also market rate) but they will file the apartment projects as condominiums with the Attorney General's office. And you will not be able to buy them - ever. They will make their money back through years of rentals but hold on to the properties indefinitely. When the timing and market is right, they may even sell the buildings to another developer - WHOLE and outright. There is nothing you can do about it, the lawyers will see to that in the beginning.

Whatever is left as affordable, will not be available to many of the residents in the area (or on this board because of qualifications or lottery). They can still look forward to the hot dog and pretzel stand jobs in the new arena though.

Welcome to the game.
Better late than never.

Subject: Re: Atlantic Yards in Trouble?

rogersma wrote: There are still two strong legal challenges in state and federal court

News on that:
Federal appeals court says Atlantic Yards project can go forward

In fact the commercial mortgage backed securities (CMBS) market had no issuance in January -- something that hasn't happened since 1995 (when it was just getting its start).

I don't know whether FCR was thinking of tapping the CMBS market for funding or the loan market, but either way, this is a problem for any significant sized development that does not already have the money it needs to start a project.

Goldman Sachs in a equity research note about FCR a few weeks ago (maybe December?) said FCR would have trouble raising the money to start the project... and in an odd twist, if the one media report I have read is true... Goldman is Ratner's banker.

What does this mean? Another delay at a minimum. He does not need $4 bln to start, he likely needs less than $1 bln. He may also be able to tap the municipal bond market to build the arena itself (he sold munis to help finance the NYT building I beleive.. using post 9/11 Liberty bonds -- god knows how the NYT HQ relates to 9/11... but thats something else all together.) The muni market is doing OK these days - much better than any mortgage market for sure.

The funding delays could kill the project, but more likely, they will shrink it. He'll get money in the next 6-12 months, but not as much as he wants and at a far higher price. It doesnt help that FCR carries a low credit rating. FCR has a solid history of finishing projects through thick and thin... this time however, the 'thick' is an unprecedented breakdown in real estate capital markets.

Not sure how much trouble they are in. FCR just announced that they got another $150 million added to their bank line (bringing the total to $750 million). As f the end of Jan they had no draws on the line. They also just bought 2,500 building lots in Texas from Standard Pacific...indicating they have the cash to bottom fish for land around the country. The Goldman deal is a municipal deal. Depending on the security structure they may or may not have trouble getting it done in this market although they will most surely have to pay a much higher rate than they originally anticipated. At a higher rate the deal may not work well enough to find the buyers. One thing I'd bank on though is that FCR won't be on the hook for any of that deal.

Meantime, I found this article about the Hunters Point Shipyard development in San Francisco. It is an eerily similar development project to AY, right down to a proposed stadium for the 49ers, back office political deals, a questionable review process and community promises by the developer. (Ironicaly, they picked Lennar for this project over FCR.).

http://www.sfbg.com/printable_entry.php?entry_id=3084

I don't know anything about this paper but it still makes interesting reading. It's a really long article but worth reading. The main gist of the article is how Lennar got away with no oversight during site work and ended up spewing asbestos into the air in the neighborhood and then this...

"Sure, Lennar has provided job training for southeast San Francisco residents, set up small-business assistance and community builder programs, and invested $75 million in the first phase of development. That's the good news.

But on Lennar's watch, a subcontractor failed to monitor and control dangerous asbestos dust next to a school at the Hunters Point Shipyard, potentially exposing students to a deadly toxin — despite promising to carefully monitor the air and control the construction dust.

And when the homebuilding industry took a nosedive last year, Lennar reneged on its promise to provide needed rental housing on Hunters Point — saying that its profit margins were no longer good enough to make rentals worthwhile. All of which raises questions about whether this company, which is working with Mayor Gavin Newsom to build a stadium at the shipyard to keep the 49ers in town, really has San Francisco's interests in mind."

I wonder if FCR promise to provide low income housing is as iron clad as Lennar's promise to build the promised rental housing in their project?