Your Atlantic Yards Update
Less ambitious than previous designs, and missing that Green Roof and public space so lovingly touted in the initial brochures (pdf), Bruce Ratner’s Atlantic Yards development seems to be hitting some… snags, like every other large scale development in the sputtering economy.
…concerted efforts [to stop Bruce Ratner’s Atlantic Yards development] proved largely unsuccessful, key components of the development are now on hold — not because of public outrage, but rather due to increasing construction costs, a slowing economy sliding toward recession and a tightening credit market.
To different degrees, the very same economic challenges facing Atlantic Yards confront real estate projects both big and small throughout the five boroughs.
As the economy turns toward recession, developers, community groups and city officials alike are questioning whether these projects will go through at all — or at least in the way many had previously imagined.
While much of Atlantic Yards project is sliding to the back burner, the $950 million arena is moving forward and slated for completion in 2010 for one main reason: The financing for it is already in place. Unlike the private financing needed for the commercial and residential buildings, Forest City Ratner already has secured $670 million in tax-free bonds to cover the costs of the arena’s construction beyond the $200 million in subsidies already in place ($100 million from both the Empire State Development Corporation and the city).
Additionally, unlike the commercial tower centerpiece known as Miss Brooklyn, the stadium already has its anchor tenant lined up (the Nets) and Barclays has ponied up a reported $400 million specifically for the stadium’s naming rights.
Miss Brooklyn has been redone and renamed “B1”; it now looks like lego blocks, all twisted:
Furthermore, investors are generally wary of mixed-use projects as the Atlantic Yards was designed to be – arena, high and middle-income (“affordable”) housing, and commercial space. Sole use properties are easier to get loan funding for; the easy money, fast-development days are over.
Where are the tenants for these buildings going to come from? The athletic part of the equation is easier to figure out; the funding is pretty much in place. But is the stadium a viable project for the developer without the money-making residential and commercial space? Let alone new Governor David Patterson’s opposition stance on eminent domain when he was a state senator.
For his part, Bruce Ratner will not speak of how the project might be scaled down. Instead, in this editorial in last week’s Daily News, he chooses to speak of difficulties and obstacles:
In recent weeks, some have rushed to write the obituary of Atlantic Yards, the multi-billion dollar, 22-acre development my company is building near downtown Brooklyn.
But rumors of Atlantic Yards’ demise, stirred by opponents, have been greatly exaggerated. The project is moving forward in its entirety, and in the coming years it will bring jobs, housing and an improved quality of life to Brooklyn.
…the delays have pushed us into a time when the economy has slowed, and both financing and tenant commitments are more challenging to obtain. But contrary to rumors, large deals are still getting done, and in the past year alone we have closed on the two largest construction financings in our company’s history, totaling over $1.3 billion. Atlantic Yards will be no different.
The stakes are high. As other major developments around the city face challenges, Atlantic Yards has become even more important to our economy than when we first announced it. That’s why we have tried so hard to work through each obstacle we’ve confronted. If more unforeseen hurdles appear, we will tackle them with the same resolve. Working with our public sector partners, I am confident we will continue to overcome all obstacles to complete this project.
So, what’s next?
Our first goal is to break ground on the Barclays Center later this year. Shortly after that, we will break ground on the first residential building, which includes a significant amount of affordable housing.
An aside on rhetoric: I like how he uses “rumors… stirred by opponents.” You’re either with us, or with the economic terrorists (who live in Brooklyn and have issues with the project).
As for the project; breaking ground doesn’t mean “finished” by 2010? The infrastructure – covering the existing train yards – hasn’t even been done yet! Opponents call his time estimates “not credible.” And let’s talk about the costs of the Barclays Center:
…the estimated cost of their proposed new building — the Barclays Center in Brooklyn — has soared to $950 million, or more than twice the price of any pro basketball or hockey arena ever built in the United States.
And where in the world would they find much of the money to build that arena?
Europe, it turns out.
Nets Chief Executive Officer Brett Yormark has just returned from London and Turin, Italy, where he has begun attempts to entice foreign companies into becoming major contributing sponsors for the new Brooklyn arena.
Yormark already stunned the sports business world last year, when he persuaded British-based Barclays Bank to pay an unprecedented $20 million annually for naming rights to the Nets’ planned new home. That’s four times the amount that Prudential is paying for naming rights at the $380 million home of the Devils hockey team in Newark.
Renowned architect Frank Gehry — who is designing the Barclays Center — is revered in Europe, Yormark said. Gehry’s creations include the Guggenheim Museum in Bilbao, Spain, and the “Dancing House” in Prague, the Czech Republic.
“We’ve never pitched this as an arena — we’ve pitched it as a landmark,” Yormark said.
That sounds like some wishin’ and hopin’ to me. What would entice foreign sponsors to invest? Because the dollar is weak? The “landmark” building? Outside of Barclay, where will their names be seen and spoken? As far as landmarks go, they are nice to have – and if there is an arena, it would be interesting to have an architecturally interesting one – but that landmark isn’t going to pay anyone’s bills, is it?
And in fact, the Nets might move a little closer to their Meadowlands home…
Nets are currently losing an estimated $40 million a year playing in the Meadowlands, and are stuck there at least another two seasons before a Brooklyn arena could be ready. And they’re facing an increasingly tougher financial road there as well, despite heavy public subsidies. As George Zoffinger, former head of Jersey’s sports authority, told the Star-Ledger: “When you start to spend north of $500 million for an arena, you can’t generate the cash flow necessary to generate a decent return on the investment. If the number is $900 million, it’s absolutely, positively not viable from an economic standpoint.”
The NJ Sports and Exposition Authority might waive the penalty in the Nets’ contract that previously did not allow them to move within the Garden State. But a NY arena might bring in more fans (more central location than Newark’s Prudential Center, where the Nets would move if they stayed in Jersey), and more importantly, might attract more investors and luxury box purchases by simply being in NY and close to the financial district.
By the way, about that architect Frank Gehry… the incoming head of the Port Authority has some misgivings about sticking with him.
Chris Ward, due to take over the Port Authority this month, suggests to us that he thinks Bruce Ratner should consider recruiting architects other than Frank Gehry for the Atlantic Yards. “Flatbush and Atlantic is a totally underused area and a major transportation hub, and I hope we don’t lock ourselves into a design that does not allow other architecture or public space,” says Ward. That design is entirely Gehry’s; even after Ratner admitted his multi-tower vision might not attract financing, public officials have kept the architect front and center…. this warning should hearten the project’s opponents: Ward will have a lot of influence over state spending if the developer needs a cash influx.
I highly doubt that this scale of project will come in under budget. And the aspects of the plan that are not being talked about – dealing with traffic and congestions, water provision and electric load issues, will probably be costly as well… and those will come out of the state’s pocket in one way or another; Forest City Ratner is already asking for more subsidies.