BROOKLYN, NY -- Today The New York Times reports that developer Bruce Ratner's (pictured) stated Atlantic Yards groundbreaking date is a fantasy given numerous financial and legal obstacles. Despite the rather misleading headline, the Atlantic Yards deal is coming undone.
Three key issues are spread throughout the article.
The first is that the $400 million naming rights deal with Barclays Bank has a contract that requires "Forest City to close on the land and the financing by the end of November." As DDDB spokesman Daniel Goldstein states in the article, it is impossible for Forest City to close by that date. (Amongst other major financing and legal problems for Ratner, there is an eminent domain legal challenge in NY State Court that won't even be argued until 2009, a pending legal appeal on DDDB's challenge to the project's environmental review. Neither of these cases will allow Ratner to own the land he wants to take from private owners and renters, or the MTA land or finalize his financing "by the end of November.")
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It is confirmed that Ratner is actively seeking $100 million more in taxpayer subsidies. This is going to be unacceptable to nearly all local elected officials.
Congressman Kucinich's probe into IRS tax exempt bond regulations (a Congressional hearing on "Gaming the Tax Code: Public Subsidies, Private Profits, and Big League Sports in New York" is scheduled for September 18th) is breathing down Ratner's neck and jeopardizing his ability to gain those tax-exempt bonds.
The Atlantic Yards project is hanging by a thread, yet Ratner continues to demolish a whole section of Prospect Heights and spend taxpayer dollars on project-specific infrastructure work. It's time for that to stop. It's time to move forward with a new, feasible and superior vision to develop the rail yards -- The UNITY Plan.
More from the Atlantic Yards Report: "Times: Barclays naming deal has November deadline; FCR seeks $100M in subsidies" and from NoLandGrab.
The Times article follows below, in full, with emphasis added (the article is on page B3 in the print edition):
Brooklyn Arena Builder Plans to Break Ground in December After Delay
By Charles V. Bagli
The developer Bruce C. Ratner has told state and city officials that he plans to break ground in December on his long-delayed $4 billion Atlantic Yards project in Brooklyn, which will feature thousands of apartments and offices in 16 towers built around a glamorous basketball arena for the Nets.
But it is unclear whether Mr. Ratner will be able to meet his own deadline to start one of the most ambitious projects in Brooklynin decades, given the softening economy, the crisis in the debt markets, rising costs and a persistent group of opponents who have filed one lawsuit after another.
The developer has been rushing to have a November closing on his deal with state officials and the Metropolitan Transportation Authority, which owns a section of the 22 acres he plans to use for the project.
Mr. Ratner, who is the chairman of Forest City Ratner; his bankers at Goldman Sachs; and David Stern, commissioner of the National Basketball Association, also met last week with bond-rating agencies to discuss the proposed financing for the $950 million arena, which was designed by Frank Gehry. (Forest City Ratner was the development partner for the new Manhattan headquarters of The New York Times Company.)
But that financing plan for the arena, known as BarclaysCenter, is dependent on a favorable ruling by the Treasury Department in the coming weeks that would allow Mr. Ratner to use tax-exempt bonds and a final victory over court challenges. If he is barred from using tax-exempt bonds, his costs will increase substantially for what would already be the most expensive arena in the world.
Either way, bankers and real estate executives say it will be difficult to sell bonds for an arena at a time when New York's real estate boom has quieted and investors and lenders are wary of backing large-scale projects.
Indeed,
Mr. Ratner has asked government officials recently for as much as $100
million in additional cash for the project, citing rising costs and
problems in the bond markets, according to two officials who
would speak only on the condition of anonymity because they were not
authorized to discuss the negotiations. The city and the state have
already agreed to provide $300 million in subsidies and tens of
millions in tax breaks.
Still, in a conference call with stock analysts on Tuesday, Charles Ratner, the chief executive of Mr. Ratner's parent company, Forest City Enterprises, said that Atlantic Yards was the biggest project in their development pipeline and that he was confident that "we can make it happen" by the end of the year.
Joseph DePlasco, a spokesman for Bruce Ratner, said his company had drawn up documents for a tax-exempt bond offering that would enable them to move quickly after the Treasury Department issued its ruling. But, he said, Forest City and Goldman Sachs were also confident that they could obtain taxable financing, if needed.
"While it is a tough market, we have secured more than $1.5 billion in construction loans this year so far," Mr. DePlasco said. "And this is the most exciting project in the country and the most exciting arena in the world."
One reason Mr. Ratner may be forging ahead is his deal with Barclays Bank, which officials say provides him with $20 million a year for naming the arena after it. The naming rights contract requires ForestCityto close on the land and the financing by the end of November.
Mr. DePlasco declined to discuss the company's arrangement with Barclays.
But opponents, who object to the size of the project, its impact on the surrounding neighborhood and the use of eminent domain by the state, said that Mr. Ratner would fall short of his goal.
"There's no way they'll get control of the land they need, get the financing, end the litigation and break ground by December,"
said Daniel Goldstein, a spokesman for Develop Don't Destroy Brooklyn,
the project's primary opponent. Andrew DeSouza, a spokesman for the
Treasury Department, declined to comment on whether a decision
concerning tax-exempt financing for stadiums and arenas was imminent.
The Internal Revenue Service issued proposed regulations in 2006 that
would make it more difficult, if not impossible, for tax-exempt bonds
to be
used for private sports teams.
The Treasury Department has been soliciting comments ever since. Both the city and the state have lobbied on behalf of the Atlantic Yards project, as well as for the Yankees and the Mets, which are already building stadiums with tax-exempt bonds.
It is unlikely that Mr. Ratner will be able to get more cash from the city or the state, but he is also negotiating for tax subsidies to ensure that at least 30 percent of the 6,000 apartments in the complex would be affordable for low- and moderate-income families. Talks are also continuing with the Metropolitan Transportation Authority.
