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January 28, 2008
Is Atlantic Yards Funding in Jeopardy?
Representatives for Forest City Ratner have filed court papers claiming that ongoing litigation and turmoil in the financial markets may jeopardize Atlantic Yards funding, according to an article in today’s Post. The documents were filed on Friday regarding the appeal Develop Don’t Destroy is seeking for the lawsuit challenging the project’s environmental impact review. An affidavit (see copy on jump) submitted by Andrew Silberfein, Forest City Ratner’s executive vice president and director of finance, sheds some light on the complicated web of financing for the “more than $4 billion project,” which involves having Goldman Sachs serve as the lead underwriter for bonds that will finance the Nets arena’s construction. Silberfein’s affidavit goes on to say:
As the Court surely is aware, the credit markets are in turmoil at this time. Many lenders and bond insurers are facing financial difficulties, and are becoming much more cautious. It is not clear what the financial climate will be in several months, when the arena bond financing is made available to the public…there is a serious question as to whether, given the current state of the debt market, the underwriters will be able to proceed with the financing for the arena while the appeal is pending before this Court.
In response, an attorney for Develop Don’t Destroy said would-be financial backers know "how much of a risk" AY is.
Court Trouble [NY Post]
Anti-AY Lawsuits: And Then There Was One [Brownstoner]
Rendering from AtlanticYards.com.
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Comments
Banks want to make loans. Institutional investors want to make loans. New York City is one of the few markets where residential real estate is a safe investment. Demand for housing is stronger here than anywhere else in the US, and the housing shortage has no signs of abating.
This is exactly the kind of project a major insurance company would love to invest in, but for the past several years they simply could not compete with banks issuing low-cost debt.
I wouldn't worry. DDDB once again exemplifies their ignorance of the real estate business.
Posted by: Polemicist at January 28, 2008 9:27 AM
On the contrary, stalling to the project until a recession was probably the plan all along.
Posted by: guest at January 28, 2008 9:30 AM
What is the community benefit of stalling a project until the community is left with the site as it currently is? This is when I start to question the anti-AY people.
Posted by: guest at January 28, 2008 9:36 AM
The affidavit, as paragraph three of the Post article states, is "an attempt to speed up the appeal process." That is all; I would not read too much into this.
Posted by: guest at January 28, 2008 9:38 AM
polemicist: which commercial real estate firm are you working for these days?
the bottom is falling out of the commercial real estate market.
over the past month Fitch Ratings has warned of a tripling in the default rate, and may cut the credit rating of $8.4 billion of commerical mortgage backed securities.
Wachovia has $1 billion in losses from CMBS in the last quarter.
the market for this kind of stuff is drying up; as Citibank has warned.
Posted by: guest at January 28, 2008 9:40 AM
9:40
You're right about the national CMBS market.
That doesn't really apply here however.
AY can be reworked such that it appeals to institutional investors. Insurance companies love to fund residential rental construction, and converting the residential component to 80/20 rental apartment buildings would appeal to them.
Posted by: Polemicist at January 28, 2008 10:10 AM
Polemicist, according to the brief, FCRC is concerned with financing the arena portion of the plan not the residential(they've already secured financing for that). Why would an insurance company want to fund the construction of an arena?
The fact that the lead underwriter, Goldman Sachs aka The Kings of Wall Street is getting cold feet about the arena is telling.
Posted by: guest at January 28, 2008 10:38 AM
Good point, 10:38.
The arena is actually the part to which I'm most opposed, so this isn't any big tragedy, far as I'm concerned.
Posted by: guest at January 28, 2008 10:46 AM
I agree with 9:38.
Legal documents are typically dramatic. I'm sure that Ratner et al are painting the worst-case scenario in hopes of accelerating the appeals process.
Posted by: guest at January 28, 2008 10:51 AM
THE NETS AREN'T MOVING!!! RATNER IS GOING TO GIVE UP HOPES OF MOVING AND SELL THE TEAM.
DON'T FEEL TOO BAD FOR HIM THOUGH. HE'LL STILL GET MISS BROOKLYN AND ALL OF HER WRETCHED DWARVES.
Posted by: guest at January 28, 2008 11:04 AM
Yes, i agree, this is just a bit of drama by Ratner to shake the opposition. Come on, it's New York City, we don't pay all those parking tickets and taxes for nothing! If the funding for this looks shakey then Bloomberg can just shuttle more of our tax money over into Ratner's hands. God know's he's getting most of it already anyway. In fact maybe he can just give Ratner everyone's homeowner tax rebat instead of paying them out.
Posted by: guest at January 28, 2008 11:07 AM
10:38
Sorry, I do admit I didn't read it.
All they have to do is have the state issue tax exempt bonds. Most stadiums are funded with such instruments.
If anything, demand for tax exempt bonds will only increase if there is a recession. Also, I wouldn't say GS is getting cold feet based on that brief. They love municipal bonds.
Posted by: Polemicist at January 28, 2008 11:12 AM
The corporate welfare and abuse of eminent domain to benefit a private property owner are the aspects of the project I'm most opposed to.
Posted by: Flatbushwhacker at January 28, 2008 11:16 AM
Does this mean that all those properties that were going to be worthless once... now may not be?
Posted by: Brooklynnative at January 28, 2008 11:23 AM
Ring ... Ring ... hello? Uh, yeah, is this Mike Bloomberg? Yes, this is he, may I ask who's calling? Oh Mike, this is Bruce Ratner. Oh, hi Bruce, how may I help you? Weeeell, some of my funding for the ARENA is falling through, you know, that arena that's going to turn Brooklyn into the greatest city in the world *cough*, um, so I was wondering if you could just slide me a little more cash from the coffers to help me out. Oh, oh yeah, Pataki called me about this yesterday, I don't think the taxpayers will miss a couple more of their dollars, we'll just write a few more parking tickets and we'll give a little less to mass transsit, the MTA can just push up their fares again. oh, Mike, thanks so much, you're a great help. No, thank you Bruce ... click.
Posted by: guest at January 28, 2008 11:25 AM
11:16am - eminent domain abuse? I wish someone gave me twice what my place was worth, real abuse. This project is good for Brooklyn and good for the economy. It will create jobs. (you cannot deny this aspect).
Posted by: guest at January 28, 2008 11:26 AM
Though most people have thought of bridge tolls as a substitute to Mayor Bloomberg's plan to impose an $8 fee to enter Manhattan, the chairman of a commission considering the idea said bridge tolls could be complementary to it.
Posted by: guest at January 28, 2008 11:32 AM
11:26 - it doesn't matter what you wish, if it's not your property he's having the state condemn on his behalf.
Posted by: Flatbushwhacker at January 28, 2008 11:32 AM
Were any of you around in the late 1980s early 1990s? Go to the New York Times archives for information on the Arverne project at the time.
Posted by: guest at January 28, 2008 11:33 AM
Since the affidavit mentions PILOTs, I assume they are looking to finance this stadium using the same tax-exempt structure the Mets and Yankees used for their new stadiums. Those bond issues were insured by 3 different bond insurance companies, all of which are now having problems with subprime mortgages. The PILOT structures are very complicated and will be difficult (but not impossible) to sell directly to the public without bond insurance. These suits have to be cleared up before any bonds can be issued. That's all this is saying.
Posted by: guest at January 28, 2008 11:49 AM
"On the contrary, stalling to the project until a recession was probably the plan all along."
Oh, yes, for sure -- DDDB controls the economy.
However, as economic realities start to sink in, people are looking a little more closely, thank goodness, at where there money is going.
The more info that comes out about this project, the more it reeks of corruption, patronage, and back room dealings, and the more people realize the massiveness of the screwing FCR et al are trying to give them.
D-E-A-D D-E-A-L
Posted by: guest at January 28, 2008 12:22 PM
"What is the community benefit of stalling a project until the community is left with the site as it currently is?"
The benefits are: Lack of air pollution. Lack of traffic backed up at all hours in the surrounding neighborhoods. Sewers that work. Enough seats in school rooms for children. Not having a possible terrorist magnet in our neighborhood.
Because these are all the things that EDSC didn't consider important enough to think about when the plan was approved.
Posted by: guest at January 28, 2008 12:27 PM
Of course I meant "their money" up there, not "there money" -- sorry, this stuff just gets me too worked up!
Posted by: guest at January 28, 2008 12:27 PM
Yes, remember at some point this bubble in Brooklyn is going to burst. And it looks like there will be a lot of developers with worthless sites or buildings left - at least for a few years.
Posted by: guest at January 28, 2008 12:30 PM
What Ratner's folks are worried about is that they wanted to get their project in the ground before the market dried up. Also, what with all the housing being built in what is TRULY downtown Brooklyn, they see that as their potential buyers being taken away.
They'll be looking for those millionaire buyers... you know, the ones that would drop the big bucks to live on that stretch of Atlantic Ave, across from Pathmark and Party city and next to a sports arena...
well, when the public was real estate drunk, maybe. Now... not so much.
Posted by: guest at January 28, 2008 12:35 PM
So much for 9:38's advice, "I would not read too much into this." After losing every lawsuit to date, project opponents really seem to be grasping at straws. We'll see, I guess.
Posted by: guest at January 28, 2008 1:17 PM
it's just lawyering.
Posted by: BrooklynLove at January 28, 2008 1:29 PM
What's worries me is that I can't forget that Metrotech was meant to be done in 5 years and ended up taking 14 years. In other words, Bruce Ratner will simply delay or stretch out the construction in parallel with his ability to maintain sound financing for the project. This might be fine for FCR (albeit not what they'd wish for) but lousy for all those who live near the footprint. Bearing in mind that AY is massively larger than Metrotech, this could easily become a 20-year build out.
Posted by: guest at January 28, 2008 1:59 PM
D-O-N-E-D-E-A-L!!!
Posted by: guest at January 28, 2008 2:10 PM
D-E-A-D-D-E-A-L!!!!
Posted by: guest at January 28, 2008 2:17 PM
If only the powers that be would hand over the project to the original top bidder, Extell. Their plan was so much more reasonable: no arena (with all its obvious drawbacks), and lots of housing (just not so breathtakingly over-scaled.) A real win-win for developer and community.
Posted by: guest at January 28, 2008 2:36 PM
11:32 Is it your property that is being condemned? are you one of the poor souls being being over twice as much to move? I feel terrible for you. DDDB is full of shit, they need to stop making things up regarding this project. Financing is there this is a project that will be built in phases over a 2 decade period. This market was taken into account. poster 2:17, dead deal? i hope they build part of the arena on top of you living room
Posted by: guest at January 28, 2008 5:17 PM
Actually, it's the proximity to Chuck E. Cheese's that was supposed to draw in all those millionaire condo buyers.
Posted by: guest at January 28, 2008 5:51 PM
go nets. if ratner needs cash he'll just sell half of cleveland. peace.
Posted by: BrooklynLove at January 28, 2008 6:01 PM
Said it once and I'll say it again, this is a great deal if you happen to own a basketball team.
For the rest of Brooklyn, we're out $2 billion dollars and have congestion, pollution and a losing basketball team to show for it. Woo frikkin' hoo.
Posted by: Johnny at January 28, 2008 6:03 PM
Re Chucky Cheese and Party City, and don't forget the wing place, I never understood how they thought they could lure well to do people to live on top of that drab, hellish intersection. Were they going to shop at the Albee Square Mall? There is a lot of charm in Brooklyn, but it isn't to be found at the intersection of Flatbush and Atlantic Avenue. Most housing developments in the city are surrounded by really dreary stores - dry cleaners, card stores, grungy chinese restaurants and so on - I never saw how they were going to get high rollers to live there. There was an article today about the Oro cutting prices and I think that is why Ratner may be thinking about pulling out - It just doesn't make sense from a financial point of view.
Posted by: guest at January 28, 2008 6:52 PM
The other interesting factor is the roumours of a Jason Kidd trade. Making the Nets one step closer to being both useless and worthless . . . . until we build them a stadium of course. Then they'll just be useless.
Posted by: Johnny at January 28, 2008 7:22 PM
This is a way off topic...
But, since we're talking about FG/PH and this site is supposed to be about brownstone Brooklyn, I thought there would be locals on this thread who might know something about FG real estate. We live in FG and have been looking to buy and renovate in the nabe. I am wondering, considering the mess that is(?)/could(?) or not happen with AY, if it worth dropping 1.75 to 2m on a basic double-duplex or owner-duplex-plus-two-rentals in prime FG that needs a real reno? Is the nabe going to remain “goldenish" or at least stable through this downturn?
Can someone estimate what we should expect to offer for a 4-floor "regular" townhouse in prime Fort Greene that needs a real reno? Basically, by “prime” I mean “prime commuting walking distance and decent shopping”--anything south of DeKalb and west of, say, Clermont. By "real reno" I mean, new everything like windows, electric, heat/hot water systems, bathrooms and kitchens but the bones are decent with some details still intact…maybe new interior woodwork around windows and doors.
We have looked at a couple of places and don't want (can’t afford) the really big houses like on South Portland and the park. And we don’t like the smaller ones on Carlton between Greene and Layette…saw one and its “garden” floor was really only a cellar with windows. We’re more in the market for an in-between sized brick rowhouse like on Lafayette or something.
The backyards in most of FG are not that deep like they are in Prospect Heights but really, it is more the convenience to all the trains in FG and the feel of the neighborhood we like. And, we live here now and don't want to leave.
Are all prices in prime FG near the trains well north of 1.6 even for places that, frankly, need a real reno?
Feedback please. Thanks!
PS some of the stores in the mall at Flatbush/Atlantic are actually a plus. It's convenient to have a Target sometimes and a Pathmark too even though it's blah...and it was very convenient to run down to Old Navy last minute to get a gift card for a neighbor's 12 year old's birthday. But all that aside, we have some pretty decent eating and shopping and the green market, etc. in FG.
Posted by: guest at January 28, 2008 8:05 PM
8:05: Brooklyn will be worthless once AY is built. Duh.
PS: Free Mumia!
Posted by: guest at January 28, 2008 9:13 PM
Fort Greene is cool.
I think you can safely lay down 1.5 on a prime FG house that needs about 500K of reno.
Posted by: guest at January 28, 2008 9:33 PM
I wouldn't be surprised to hear that the "affordable" segment of this project - the carrot dangled in front of ACORN, the Rev. Daughtry, et al, in order for them to sign on - gets totally dumped. As in "We couldn't get all of the funding we needed. As it says in the fine print, the affordable units will be built last, dependent upon the success of the rest of the project. Project isn't doing too well. No money for affordable housing. So sorry."
Posted by: guest at January 29, 2008 12:02 AM
There is no meaningful penalty if/when Ratner abandons the affordable housing component of AY. The agreement with Acorn stipulates that he must pay them $500,000 if he doesn't follow through. Big f***ing deal. He is also under no obligation to build the affordable housing at AY itself. It could be off-site in Crown Heights or East New York.
Posted by: guest at January 29, 2008 6:00 PM
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